Health Insurance: The Road Less Traveled

I'm a big Stephen King fan. For those of you who know him, he is the, um, King (sorry) of the macabre. You may know him from his movies or his novels. He wrote one of my favorite short stories called "Mrs. Todd's Shortcut." It was about a woman who loved to drive and find ever-faster ways to get to her destination. She found that the best way to get somewhere isn't necessarily a straight line. So, what does this have to do with health insurance? It serves to illustrate that there are always options other than the obvious. Last column we dealt with laws that allowed uninsurable people to get health insurance. The problem is it's usually very expensive. So, like Mrs. Todd, we're going to explore off the beaten path in search of affordable alternatives to last week's topic of COBRA and HIPAA.

It's helpful to know that health insurance companies may decline to insure someone NOT because they're sick or unhealthy, but because they feel they can't make a profit on that one person. Knowing that, leads us to our first option.

1) Group Insurance route: If the insurance company had more than one person (or family unit), they would have more diverse people to spread the risk of using their insurance around. Over ten years ago, the federal government made it illegal for insurance companies to decline businesses with between 2 and 50 employees due to health issues. Also when you start with a company, after you've worked there for a period of time (usually 90 days), you can automatically go on their health plan. So, getting ON a health plan through a new employer or STARTING a health plan if YOU are the employer is a guaranteed way to get health insurance. If you're a really small company or self-employed you could also get into an association plan if your state allows it. These are plans where everyone in the association is there because they have an affiliation (Pet Sitters of America, for example). Also, depending upon your state, you may be able to join a number of small employers who have banded together. These are typically called MET's or MEWA's. Why can't you just get the parents on your kids' soccer team to band together and form a group plan? Two reasons:

a) It usually has to be employment-based (Pet Sitters, etc.)
b) It is illegal to form a group for the sole purpose of obtaining insurance

2) Government route: If you don't have a company or aren't self-employed, you may be eligible for a state risk-pool. They are usually subsidized by federal matching funds, grants, and cigarette taxes. Benefits are usually provided by a non-profit insurance company like Blue Cross/Blue Shield. These can be costly. Other state government-sponsored programs are just for kids. In Nevada, for example, it's called Nevada Check-up and it includes not only medical, but also dental and vision. It is based on income, but they are typically very generous. I had a client a number of years back that was a single mother with three children and made a respectable $35,000 a year. As a family of four, she was eligible to purchase health insurance through this program for her children at $75 a year per child. The day she called me crying with tears of joy is etched upon my mind and remains one of my proudest moments.

3) Individual Insurance route: This is perhaps the most difficult way to get health insurance if you're not healthy. The key is to know the policies. While you may be able to research price and benefits online, intangibles like the approval criteria usually isn't made available to the public. Insurance companies typically have different rules when it comes to accepting new insureds. As an example, most companies in states that allow declines won't cover insulin-dependent diabetics, but asthma may be looked at favorably by one company and be a flat-out decline by another. Some tricks of the trade is to look at higher deductible plans; oftentimes insurance companies will be looser with their underwriting if the risk of paying out is lower. A high deductible accomplishes that. Lastly, there are short-term policies that are minimally underwritten (usually just 3 or 4 questions). However, one of the questions is typically "Have you been declined?" If you answer yes, then you're sunk. They also typically last only 6 months at a time and don't cover pre-existing conditions.

As is often the case with Stephen King's stories, Mrs. Todd eventually found herself in completely uncharted territory. Likewise, our individual insurance quest doesn't stop here. Next week we'll explore some of the fringe options as well as scams and plans to avoid. Until then, be healthy!