Health Insurance
Today, buying health insurance is anything but simple. With a growing array of new policy choices, the arrangements you make for funding health care expenses will directly affect the way your care is delivered. The cost of health care, and therefore health insurance, has risen significantly in recent years. And costs are projected to continue to grow by more than 10% per year for the foreseeable future.
Protecting against the negative financial consequences of large or unexpected medical bills is the main purpose of health insurance. Without adequate health insurance, your assets can be depleted if you become ill or injured. In addition, without health insurance, you may not be able to afford the medical care you need.
In the past, most people were covered by some form of health plan provided by their employer. However, in recent years many employers have stopped providing health coverage because of its costs. The percentage of Americans who receive health insurance through their employers has dropped over the last five years. For these reasons, more and more people are being forced to purchase health insurance on their own, or to purchase health insurance plans that supplement those offered by their employers.
Because of increasing medical care costs many employers have sought more cost-effective ways to finance care for their employees. This trend resulted in a movement toward "managed care" plans, which promote more efficient use of medical services in order to contain treatment costs. The two major types of managed care systems are health maintenance organizations (HMOs) and preferred provider organizations (PPOs). These organizations contract with physicians and medical facilities to control care quality and costs; create financial incentives for subscribers to use the contracted physicians and facilities; and require providers to bear some financial risk for care.
While HMOs and PPOs do reduce cost, they also reduce your choices in most cases. Most of these plans require that you attend physicians selected by the managed care companies. If you do not, your medical treatment may not be covered by the plans.
Most private health insurance is sold as group medical insurance, which is provided by either employers or certain other organizations. Because many people and their families are covered by one overall policy, insurers discount the premiums. If your employer doesn't offer group coverage, you may be eligible to join a group organized by a fraternal, professional, or trade association.
If you become unemployed, you may be able to retain your group health insurance by converting it to an individual medical expense policy. However, your coverage may not be as extensive as under the group policy. If you leave a job or switch to reduced hours, you can continue your employer's coverage through the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Under COBRA, this coverage is for you, your spouse, and qualified dependents for up to eighteen months. For your spouse and dependents only, this period can be extended for up to thirty-six months if you die or become divorced. Once you become eligible for another group plan, the continued coverage will end.
If you decide on an individual policy, coverage can be as much as 15 percent to 40 percent higher than comparable group coverage. Deductibles, co-payments, and out-of-pocket expenses also will be higher. On the other hand, you are allowed to pick the deductibles, coinsurance arrangements, and health care providers.
Before you enroll in any health plan, determine which services are covered and how much you will pay in deductibles and coinsurance. If you are unable to get an individual policy because of a preexisting medical condition, many states offer health insurance risk pools, which provide coverage for high-risk groups.
We recommend that you choose a health insurance agent to help in the process. As always, consult your insurance agent for advice.