Traditional Health Insurance

Hello there ! I’m happy and honored to be a part of Health News. As an insurance broker for the last 18 years, I’ve dedicated my practice to helping my clients get the most from their health insurance. Join me as we navigate this oftentimes convoluted and confusing world of health insurance. You might just find yourself having fun !

There are as many health insurance plans as there are people. Like people there are similarities that can help us make sense of them. Just as certain personalities tend to get together and become friends, so, too certain health plans lend themselves to certain individual tastes and needs. If you’re fortunate enough to have health insurance, you probably have it through an employer, at which point you may not have much say in the benefits you are provided. However, just as there are ways to deal with people you work with, some of whom you may not even like, there are ways to maximize your benefits in a work situation if you don’t have much choice in your plan. If you don’t have coverage at work, you may have a little more flexibility in choice provided you’re insurable. If not, there are usually options for coverage. We will explore all this and more in future columns.

The key to utilizing your medical insurance effectively is to understand it. So, for this first column, I’d like to introduce you to the first of three (3) types of health insurance plans.

The indemnity plans are among the oldest types of insurance, and as such are the simplest. Indemnity plans are kind of like your old Grandpa Jim…. you know, the ‘meat-and-potatoes” guy who is always straightforward and to the point. They are also called Traditional plans. Traditional plans are the plans that you can use anywhere, with any healthcare provider. Any care you receive you will have to pay for up to a set dollar amount (called a deductible) before the insurance company starts paying anything.

Deductibles used to be $100 to $250. But like everything else nowadays, prices (and deductibles) have gone up (That even sounds like Grandpa Jim). Today, deductibles of $500, $1000 or more are commonplace. Most deductibles are calendar-year (January thru December) and not per occurrence. This means that once you hit your deductible for the year, you can relax a little until next year.

I say 'a little', because after your deductible, the fun doesn’t stop there. Most policies will have something called co-insurance. Coinsurance (abbreviated COINS) is where you and the insurance company agree to split the bill…kinda like going Dutch with that new date or old friend at the gym’s snack bar. Fortunately, most policies are a little more generous than that…typically they split the bill 80% to your 20%, which isn’t bad for a chicken wrap and smoothie (or that $3000 emergency room bill). It’s like having the meal paid for, but you’re asked to leave a good tip. Now let’s say you go to a fancy restaurant with your boss who doesn’t sneeze at paying $1000 for a fancy meal. He then asks you to leave the 20% tip…ouch ! Time to ask him for a raise. Now while a $200 tip might have you skimping on the granola bars, imagine if you had a $180,000 heart attack ! (Yes, they cost that much). 20% just got a whole lot heavier.

Fortunately, virtually all insurance companies have a little OOPs. And that OOPs is in your favor. OOPs stand for Out-Of-Pocket and it is the maximum that you can spend before the insurance company swoops down and relieves you of your hospital bills. Typical OOPs are $1000, $2000 or $3000. The important thing to remember is that you only pay your PORTION (20%) UP TO the OOP. A $3000 bill will only set you back $600 (assuming you’ve met your deductible). With medical costs soaring, insurance companies are now offering 70/30 and even 50/50 plans at substantial premium savings over 80/20 plans. The key is to see what your maximum OOP is.

Traditional plans are good for people who don’t go to the doctor often and want absolute freedom of choice when it comes to selecting providers. One word of caution…because you can choose ANY provider ANYwhere, providers typically charge what they want…which is fine, but the insurance companies have procedures in place to make sure that they don’t get price-gouged. The most common method in current use is something called Usual, Customary and Reasonable (UCR) charges. If your provider charges more than that, you usually are on the hook for the balance (called appropriately enough, "balance billing") unless you can persuade your doctor to accept the going rate. (A nice dinner might help). There are contractual relationships that prohibit doctors from charging more than the going rate. Those are called PPO’s and are the subject of our next column. Until then, be healthy!