Health Insurance: Let the Buyer Beware

I love French food (and not just French fries); however the reality is that to lead a healthy lifestyle oftentimes means giving up those rich sauces and deep-fried spuds. The French have kindly given us much more than the famous fried potato and butter-drenched sauces, such as the concept of "let the buyer beware."

With over 40 million uninsured people in the United States, the need for healthcare has never been greater. However, with costs at record levels, people inevitably get excited when they see "coverage" at below-market premiums. We've all gotten spammed with ads to "Get your whole family covered for $89.95 a month." A good question to ask is "What exactly do you mean by covered?" A better question is "How can you cover us at $89.95 and no one else can?" Here I attempt to answer both.

Usually these plans are what we call "discount plans." If there is any insurance benefit at all it's usually something like AD&D (Accidental Death and Dismemberment). They usually throw in extra things like a 24-hour nurse hotline and other "member" benefits. What's important to realize is that while these plans may discount your current bill, you still have to use their physicians (which is usually not extensive), but more importantly, you are required to pay the bill in full at the conclusion of your visit. Now while a doctor visit may only be $50 when discounted, what about a $180,000 heart attack? If it's discounted down to $90,000...can you pay $90,000? And therein lies the rub. Discount plans don't have a cap on what you pay. When you see what they pay (nothing...you just get a discount) it's obvious why they charge so much less. Additionally, these types of plans usually don't require that your representative be licensed in any way.

Next up the ladder are association-type plans that advertise themselves as being self-employed plans. While these plans actually DO pay some claims, they are usually small claims. Larger claims have arbitrary caps on what they pay. An example is $9,000 for an emergency room or $2,500 for outpatient surgery. Don't confuse first-dollar benefits plans like those offered by employers (AFLAC is the best-known, but there are others like Colonial Life and American General that are just as good) with these other-type plans. The difference is that the first-dollar benefit plans don't market themselves as a replacement for health insurance but in addition to it. In this era of high deductibles, a first-dollar plan can be a lifesaver. While the representatives must be licensed, with non-first-dollar plans it's a good idea to check how long they've been in the business. Usually these agents are right out of the gate and there is a high turnover rate. The successful ones usually wind up at other companies once they learn what they're selling.

A good way to check these plans is to go to your state's insurance website and look up the companies complaint ratio. While EVERY company is going to have complaints (it's impossible to please everyone all the time), you should be able to see some trends. Another way is to Google the company name. If it's posted numerous times on Ripoff.com, there's your answer.

If you are a consumer who buys their insurance online, you'll want to check the insurance companies' ratings. Those can be misleading as well, as the most common ratings company-AM Best-only rates financial strength. A life insurance company may have a higher financial strength rating than a home-town health plan, but if they only market health insurance so their agents can cross-sell you life insurance, which is probably the better plan? HMO's typically don't even have a rating...instead look for a high NCQA rating (National Committee on Quality Assurance).

If you prefer the "live people" route, it's best to go with someone who specializes in health insurance. This would mean insurance brokers who usually have many companies to choose from. Beware the agent who only has one company...unless you believe in the one-size-fits-all mentality. While your car insurance agent may be the best agent you've ever had and is considered virtually a member of your family, that doesn't mean s/he necessarily has the knowledge (or time) to examine every option available to you. In this climate of increasing specialization, most agents are choosing to become the "expert" in their field and partner-up with like-minded "experts" in other areas of insurance.

Until next time, be healthy!