Selecting health insurance coverage may be the most important decision you may make in regard to your financial plan. Medical problems are a leading cause of personal bankruptcy in the United States.
Health insurance is a technical and challenging issue; however, you can come to understand the different aspects of health insurance and use them to your advantage. Learn about the options for health insurance that are available to you and pick the options that will best help you to achieve your personal goals. The following are some general tips to help you select the best option for health insurance:
1. Always Compare Ratings. As you look for health insurance, consider only high-quality insurance companies. Check with AM Best or Standard & Poor’s to review ratings on insurance companies. Look for strong companies with the least expensive, yet most comprehensive, plans.
2. Protect Yourself from Catastrophic Illnesses and Accidents. Know what you are buying. Read through the policies and avoid policies with major exclusions or exemptions. Make sure you get needed coverage before you get optional coverage.
3. Buy an Individual Policy If You Are Not Covered at Work. If you are changing companies, consider using COBRA while you are between jobs. If your COBRA insurance has run out, consider joining a PPO or an HMO to reduce your medical costs. Group plans are generally less expensive than individual plans.
4. Consider Higher Deductibles to Reduce Premiums. Avoid polices that are not guaranteed to be renewable. The last thing you want is to do is purchase a policy and then have it cancelled.
Lisa Collier Cool, in the April 2006 Reader’s Digest, recommends that you ask the following questions to protect your health and your financial plan:
1. What is the real bottom line? Determine the total costs of your health insurance. Total costs include not just the annual costs, but any deductibles for lab work, emergency care, and other coverage. Make sure the deductible is annual, and not for every time you visit the doctor. Also understand what it takes to reach the family deductible. In addition, weigh co-payments for lab tests, hospital care, emergency room visits, and so on. Finally, make sure you know your annual out-of-pocket maximum, or the maximum you will have to spend each year before the health plan pays 100 percent of all additional costs.
2. How well protected are you from catastrophic costs? Check your plan to determine the limits the insurance company will pay over you or a member of your family’s lifetime. A low cap, such as $100,000, would leave you exposed to additional costs over that amount from a major accident or disease.
3. Will you be able to use your regular doctors? Check the list of available doctors and hospitals for any plan that you are considering. Since many doctors may accept a range of plans, discuss with your current doctor which plans they accept, and if they would consider working with your “prospective” new health plan.
4. How complicated is it to see a specialist? With most of these plans, there generally is a medical “gatekeeper” that you must work through to see a specialist. This gatekeeper decides whether or not the referral is necessary. Depending on your type of plan, it could be harder to see specific specialists. Make sure you understand what you are getting into before you commit.
5. Do you have a choice of hospitals? Most insurance plans are associated with specific hospitals and doctors. Check to make sure that the plan covers your doctors and the hospital they are affiliated with, as well as any nearby hospitals where you may be treated in an emergency. Also determine how your care would be handled if you were sick or hurt while traveling.
6. Are your prescriptions covered? If your plan includes prescription coverage, ask for its “formulary” or the list of prescription drugs it covers. Some plans have a tiered coverage where coverage is grouped into different groups. Some drugs may not be covered at all if the insurance company considers that group of drugs experiments.
7. What other benefits are included? In addition to health-care, some policies may also cover additional areas, such as dental and vision care, hearing aids, and other items. In addition, many also include services to keep you healthy, including discounts on gym memberships, weight loss, and smoking cessation programs.
(“7 Key Questions to Ask,” Reader’s Digest, April 2006, pp. 102-103).