Insurance Buyer’s Guide

Introduction

If you have ever been sick or injured, you know how important it is to have health coverage. But if you’re confused about what kind is best for you, you’re not alone.

What types of health coverage are available? If your employer offers you a choice of health plans, what should you know before making a decision? In addition to coverage for medical expenses, do you need some other kind of insurance? What if your employer doesn’t offer health insurance or your self- employed? What if you are too ill to work? Or, if you are over 65, will Medicare pay for all your medical expenses?

These are questions that today’s consumers are asking; and these questions aren’t necessarily easy to answer.

This booklet should help. It discusses the basic forms of health coverage and includes a checklist to help you compare plans. It answers some commonly asked questions and also includes thumbnail descriptions of other forms of health insurance.

The term health insurance refers to a wide variety of insurance policies. These range from policies that cover the costs of doctors and hospitals to those that meet a specific need, such as paying for long-term care. Even disability insurance, which replaces lost income if you can’t work because of illness or accident, is considered health insurance, even though it’s not specifically for medical expenses.

But when people talk about health insurance, they usually mean the kind of insurance offered by employers to employees or the individual policies that you would purchase that covers medical bills, surgery, and hospital expenses. You may have heard this kind of health insurance referred to as comprehensive or major medical policies, alluding to the broad protection they offer. But the fact is, neither of these terms is particularly helpful to the consumer.

Today, when people talk about broad health care coverage, instead of using the term “major medical,” they are more likely to refer to fee-for-service or managed care. These terms apply to different kinds of coverage or health plans. Moreover, you’ll also hear about specific kinds of managed care plans: health maintenance organizations or HMOs, preferred provider organizations or PPOs, and point-of-service or POS plans.

While fee-for-service and managed care plans differ in important ways, in some ways they are similar. Both cover an array of medical, surgical, hospital & prescription drug expenses. Many employer plans include coverage for dentists and other providers. Ancillary benefits can also be purchase separately on an individual basis.

The section below is designed to acquaint you with the basics of fee-for-service and managed care plans. But remember: The detailed differences between one plan and another can only be understood by careful reading of the materials provided by insurers, your employee benefits specialist, or your agent or broker.

This type of coverage generally assumes that the medical provider (usually a doctor or hospital) will be paid a fee for each service rendered to the patient, you or a family member covered under your policy. With fee-for-service insurance, you go to the doctor of your choice and you or your doctor or hospital submits a claim to your insurance company for reimbursement. If you stay within the provider network the provider will bill your insurance carrier on your behalf. Technically a PPO Plan is also Fee-for-Service as the providers get reimbursed based on services provided. Fee-For Service Plans that pay medical expenses at a UCR or R&C schedule (usual and customary or reasonable and customary) out of network are becoming increasingly rare and generally only available through large employer plans. Individual and small group (under 100 employees) PPO’s pays the out of network providers based on a “Maximum Allowed Amount” which is going to be less than if they were contracted providers. Additionally, for out of network providers the carrier will pay 50% of the “maximum allowed amount” Bottom line, if it’s not an emergency stay in network or it will cost you!
When a service is covered under your policy, you can expect to be reimbursed for some, but generally not all, of the cost. How much you will receive depends on your metal tier. Plans in higher metal tiers have higher monthly premiums but you pay less when you need medical care. . Here’s how it works:
• Bronze: On average, your health plan pays 60% of your medical expenses and you pay 40%
• Silver: On Average, your health plan pays 70% of your medical expenses and you pay 30%
• Gold: On Average, your health plan pays 80% of your medical expenses and you pay 20%
• Platinum: On average, your health plan pays 90% of your medical expenses and you pay 10%.

• Deductibles are the amount of the covered expenses you must pay each year for certain services such as hospitals before your insurance kicks in. Depending on your plan, usually Bronze, your deductible might even apply for basic services such as doctor visits and prescriptions. Gold/Platinum Plans are zero deductibles. The deductible for Silver Plans are generally about $2,250 and Bronze about $5,000. Generally, the higher the deductible, the lower the premiums. Employers make different contribution arrangements. Perhaps they might pay 100% of the cost of a Bronze plan and allow you to buy up via a payroll deduction to a higher metal plan. If you’re purchasing a policy through the Ca health insurance exchange your income can qualify you for both Advanced Premium Tax Credits (APTC) to lower your premium but also provide you with Cost Sharing Reductions (CSR’s) which apply only to the Silver Plan. The Silver 70 is the Standard Silver Plan and has a deductible of $2,250. The Silver 73 has a $1,900 deductible The Silver 87 has a $550 deductible and the Silver 94 has a $75 deductible.

• Policies typically have an out-of-pocket maximum. This means that once your expenses reach a certain amount in a given calendar year, covered benefits will be paid in full by the insurer assuming you’re within a PPO network. The individual plans offered through the Ca health insurance exchange as well as their mirrored plans out of the exchange have consistent Maximum out of pocket limits. The Maximum out of pocket for a Bronze, Silver 70 & Gold Plan is $6,500 for one person or double for a family of two or more. The maximum out of pocket for a Platinum Plan is $4,000 for one person or double for a family of two or more. The Cost Sharing Reduction Silver Plans have smaller out of pockets. For example the Silver 94 has a max out of pocket of only $2,250. The benefits for both HMO & PPO are the same but generally the HMO is less money.

• Since the Affordable Care Act (ACA) all plans have unlimited lifetime benefits and will not be subject to Pre-existing conditions. In other words, whether are not you had a specific medical condition you do not have to satisfy a period of time before your benefits kick in even if you have not had previous coverage.

The three major types of managed care plans are health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans.

Managed care plans generally provide comprehensive health services to their members, and offer financial incentives for patients to use the providers who belong to the plan. In some managed care plans, instead of paying separately for each service that you receive, your coverage is paid in advance. This is called prepaid care.

For example, you may decide to join a HMO, and your Primary Care Doctor (PCP) gets paid the same monthly capitation payment each month whether you use the plans services or not. The plan may charge a copayment for certain services, for example, $10 for an office visit, or $5 for every prescription. One of the interesting things about HMOs is that they deliver care directly to patients. Patients sometimes go to a medical facility to see the nurses and doctors or to a specific doctor’s office. Another common model is a network of individual practitioners. In these individual practice associations (IPAs), you will get your care in a physician’s office.

If you belong to an HMO, typically you must receive your medical care through the plan. Generally, you will select a primary care physician who coordinates your care. Primary care physicians may be family practice doctors, internists, pediatricians, or other types of doctors. The primary care physician is responsible for referring you to specialists when needed. While most of these specialists will be “participating providers” in the HMO, there are circumstances in which patients enrolled in an HMO may be referred to providers outside the HMO network and still receive coverage.

PPOs and POS plans are categorized as managed care plans. (Indeed, many people call POS plans “an HMO with a point-of-service option.”) From the consumer’s point of view, these plans combine features of fee-for-service and HMOs. They generally require you to choose an HMO Primary Care Provider (PCP) but you can go to the PPO network without a referral if you’re ok with greater cost sharing. Some POS plans even allow you to go to a doctor that’s neither HMO nor PPO with the greatest cost sharing. Indeed your level of benefits are determined at the “Point of Service” whether that be Tier one HMO Tier 2 PPO or Tier 3 non-contracted providers. Point of Service Plans are only available through employer plans within the state of Ca. On the other hand, PPO Plans are the most popular option for individual health insurance both in/out of the CA. health insurance exchange. With a PPO plan, unlike HMOs, you will get some reimbursement if you receive a covered service from a provider who is not in the plan for non-emergency services. The PPO Networks are much larger than the HMO’s and don’t require you to see a primary care doctor to get a referral. HMOs and PPOs have contracts with doctors, hospitals, and other providers. They have negotiated certain fees with these providers, which should allow you to pay less than the provider bills even if your deductible hasn’t been satisfied.

Always look carefully at the description of the plans you are considering for the conditions of payment. Check with your employer, your benefits manager, or your state department of insurance to find out about laws that may regulate who is responsible for payment.

Your employer may have set up a financial arrangement that helps cover employees’ health care expenses. Self-insured plans are more popular now than ever with employers now-a-days. This is because small group is defined as under 100 employees and if an employer tries to go self-insured to save money they won’t be taking the risk as in the past. The biggest risk being that the employee claims are higher than expected and the employer wants to go back into the fully insured marketplace. Bad claims experience could preclude the employer from procuring a group plan pre Affordable Care Act, but now all groups under 100 FTE (full time employees) are guaranteed issue irrespective of bad claims. Additionally, unlike pre ACA groups under 100 FTE’s can’t be charged more either. Gone are the days of the Risk Adjustment Factors (RAF’s) that would load the rates of both employer groups with larger claims and micro groups.
HMOs, PPOs, and fee-for-service plans often share certain features, including pre authorization, utilization review, and discharge planning.

For example, you may be asked to get authorization from your plan or insurer before admission to a hospital for certain types of surgery. Utilization review is the process by which a plan determines whether a specific medical or surgical service is appropriate and/or medically necessary. Discharge planning is an approach that facilitates the transfer of a patient to a more cost-effective facility if the patient no longer needs to stay in the hospital. For example, if, following surgery, you no longer need hospitalization but cannot be cared for at home, you may be transferred to a skilled nursing facility.

Almost all fee-for-service plans apply managed care techniques to contain costs and guarantee appropriate care; and an increasing number of managed care plans contain fee-for-service elements. While the distinctions among plans are growing increasingly blurred, the number of options available to consumers increases every day.

Health insurance is generally available through groups and to individuals. Premiums, the regular fees that you pay for health insurance coverage, are generally lower for group coverage. When you receive group insurance at work, the premium usually is paid through your employer.

Group insurance is typically offered through employers, although unions, professional associations, and other organizations also offer it. As an employee benefit, group health insurance has many advantages. Much, although not all, of the cost may be borne by the employer. If you don’t like your employer Plan, (perhaps only an HMO is offered) you are not eligible for Premium Assistance (APTC) through the exchange unless it’s considered “unaffordable”

Individual insurance is a good option if you work for a small company that does not offer health insurance or if you are self-employed. Buying individual insurance allows you to tailor a plan to fit your needs from the insurance company of your choice. It requires careful shopping, because coverage and costs vary from company to company. In evaluating policies, consider your metal options and whether or not you qualify for Premium Assistance. At BenefitPackages, we are a Certified Insurance Agent (CIA) for Covered California and can help you determine whether you qualify for APTC’s to lower your premium immediately.

If you have had health coverage as an employee benefit and you leave your job, voluntarily or otherwise, one of your first concerns will be maintaining protection against the costs of health care. You can do this in one of several ways:

    • First, you should know that under a federal law (the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA), group health plans sponsored by employers with 20 or more employees are required to offer continued coverage for you and your dependents for 18 months after you leave your job. (Under the same law, following an employee’s death or divorce, the worker’s family has the right to continue coverage for up to three years.) If you wish to continue your group coverage under this option, you must notify your employer within 60 days. You must also pay the entire premium, plus an administration fee.  2% for Federal COBRA or 10% for CalCobra which falls under the State of California.

The good news is that losing your group coverage will qualify you for a Special Enrollment Period known as a SEP for guaranteed issue individual coverage off open enrollment. You have 60 days after this qualifying life event http://www.coveredca.com/individuals-and-families/getting-covered/special-enrollment/  Normal Open enrollment begins in November for a January start date. To qualify for Premium Assistance your income has to be at least $16,244 for an individual or you will qualify for MediCal.

Q: What is the first thing I should know about buying health coverage?

A: Your aim should be to insure yourself and your family against the most serious and financially disastrous losses that can result from an illness or accident. If you are offered health benefits at work, carefully review the plans’ literature to make sure the one you select fits your needs.

Q: Can I buy a single health insurance policy that will provide all the benefits I’m likely to need?

A: No. Although you can select a plan or buy a policy that should cover most medical, hospital, surgical, and pharmaceutical bills, no single policy covers everything. Moreover, you may want to consider additional single-purpose policies like long-term care or disability income insurance. If you are over 65, you may want a Medicare supplement policy to fill in the gaps in Medicare coverage.

Q: I’m planning to keep working after age 65. Will I be covered by Medicare or by my company’s health insurance?

A: If you work for a company with 20 or more employees, your employer must offer you same health insurance coverage offered to younger employees. After you reach age 65, you may choose between Medicare and your company’s plan as your primary insurer. If you elect to remain in the company plan, it will pay first, for all benefits covered under the plan, before Medicare is billed. In most instances, it is to your advantage to accept continued employer coverage.

Most likely it will make sense to enroll in Medicare Part A, which covers hospitalization and can supplement your group coverage at no additional cost to you. You can save on Medicare premiums by not enrolling in Medicare Part B until you finally retire. Once you leave your employer coverage you will have an 8 month Special Enrollment Period (SEP) to enroll in Medicare Part B. Keep in mind that COBRA doesn’t count as employer coverage. Medicare decisions can be complex. This is why we have a website designated toward Medicare education called www.camedicare.com. Walk through our Medicare Wizard to help you determine the most appropriate plan for your specific needs https://camedicare.com/medicare-made-simple/

Q: One of my medical bills was turned down by the insurance company (or health plan). Is there anything I can do?

A: Ask the insurance company why the claim was rejected. If the answer is that the service isn’t covered under your policy, and you’re sure that it is covered, check to see that the provider entered the correct diagnosis or procedure code on the insurance claim form. Also check that your deductible was correctly calculated.

Make sure that you didn’t skip an essential step under your plan, such as pre admission certification. If everything is in order, ask the insurer to review the claim.

With the Affordable Care Act benefits have been standardized. Generally HMO and PPO plans have the same cost sharing now-a-days. Checking that your doctors are part of the plans network is more important now with the shrinkage on in-network providers. If you have an individual plan don’t let it lapse as you won’t be able to reenroll until next open enrollment.

With the Affordable Care Act not having insurance can cost you the greater of 2 ½ % of your income or $695 per person. http://www.coveredca.com/individuals-and-families/getting-covered/the-tax-penalty-for-remaining-uninsured/ Of course this pales compared to the cost of not being covered for an enormous hospital bill or even worst not being able to access the care that you need when you need it.

In addition to broad coverage for medical, surgical, and hospital expenses, there are many other kinds of health insurance.

Medicare supplement insurance, sometimes called Medigap or MedSup, is private insurance that helps cover some of the gaps in Medicare coverage.

Medicare is the federal program of hospital and medical insurance primarily for people age 65 and over who are not covered by an employerýs plan. But Medicare doesn’t cover all medical expenses. That’s where MedSup comes in.

All Medicare supplement policies must cover certain expenses, such as the daily coinsurance amount for hospitalization and 90 percent of the hospital charges that otherwise would have been paid by Medicare, after Medicare is exhausted. Some policies may offer additional benefits, such as coverage for preventive medical care, prescription drugs, or at-home recovery.

There are 10 standard Medicare supplement policies, designated by the letters A through N. Plan E, H,I & J  were phased out as of June 2010 as a result of the Medicare Modernization Act.  Plans M & N are available as new plan offerings. With these standardized policies, it is much easier to compare the costs of policies issued by different insurers. While all 10 standard policies may not be available to you, Plan A must be made available to Medicare recipients everywhere.

Insurers are not permitted to sell policies that duplicate benefits you already receive under Medicare or other policies. If you decide to replace an existing Medicare supplement policy, and you should do so only after careful evaluation, you must sign a statement that you intend to replace your current policy and that you will not keep both policies in force.

People who are 65 or older can buy Medicare supplement insurance without having to worry about being rejected for existing medical problems, so long as they apply within six months after enrolling in Medicare. Unlike Medicare Advantage Plans and Prescription Drug plans there is no annual open enrollment period.

Long-term care policies cover the medical care, nursing care, and other assistance you might need if you ever have a chronic illness or disability that leaves you unable to care for yourself for an extended period of time. These services generally are not covered by other health insurance. You may receive long-term care in a nursing home or in your own home.

Long-term care can be very expensive. On average, a year in a nursing home costs about $50,000. In some regions, it may cost much more. Home care is less expensive, but it still adds up. (Home care can include part-time skilled nursing care, speech therapy, physical or occupational therapy, home health aides, and homemakers.)

Bringing an aide into your home just three times a week, to help with dressing, bathing, preparing meals, and similar chores, easily can cost $2,000 a month, or $24,000 a year. Add in the cost of skilled help, such as physical therapy, and the costs can be much greater.

Most long-term care policies pay a fixed dollar amount, typically from $100 to $300 a day, for each day you receive covered care in a nursing home. The daily benefit for at-home care is usually half the benefit for nursing home care. Because the per-day benefit you buy today may be inadequate to cover higher costs in the future, most policies also offer an inflation adjustment feature.

Keep in mind that unless you have a long-term care policy, you are not covered for long-term care expenses under Medicare and most other types of insurance. Recent changes in federal law may allow you to take certain income tax deductions for some long-term care expenses and insurance premiums.

Disability insurance provides you with an income if illness or injury prevents you from being able to work for an extended period of time. It is an important but often overlooked form of insurance.

There are other possible sources of income if you are disabled. Social Security provides protection, but only to those who are severely disabled and unable to work at all; workers’ compensation provides benefits if the illness or injury is work-related; civil service disability covers federal or state government workers; and automobile insurance may pay benefits if the disability results from an automobile accident. But these sources are limited.

Some employers offer short and long-term disability coverage. If you are self-employed, you can buy individual disability income insurance policies. Generally:

    • Monthly benefits are usually 60 percent of your income at the time of purchase, although cost-of-living adjustments may be available.
  • If you pay the premiums for an individual disability policy, payments you receive under the policy are not subject to income tax. If your employer has paid some or all of the premiums under a group disability policy, some or all of the benefits may be taxable.

Whether you are an employer shopping for a group disability policy or someone thinking of purchasing disability income insurance, you will need to evaluate different policies. Here are some things to look for:

    • Most policies pay according to loss of income. Make sure that you know the insurer’s definition of disability.
  • Some policies pay only for accidents, but it’s important to be insured for illness, too. Be sure, as you evaluate policies, that both accident and illness are covered.
  • Benefits may begin anywhere from one month to six months or more after the onset of disability. A later starting date can keep your premiums down. But remember, if your policy only starts to pay (for example) three months after the disability begins, you may lose a considerable amount of income.

Benefits may be payable for a period ranging anywhere from one year to a lifetime. Since disability benefits replace income, most people do not need benefits beyond their working years. But it’s generally wise to insure at least until age 65 since a lengthy disability threatens financial security much more than a short disability.

If you get health care coverage at work, or through a trade or professional association or a union, you are almost certainly enrolled under a group contract. Generally, the contract is between the group and the insurer, and your employer has done comparison shopping before offering the plan to the employees. Nevertheless, while some employers only offer one plan, some offer more than one. Compare plans carefully!

If you are buying individual insurance, or any form of insurance that you purchase directly, read and compare the policies you are considering before you buy one, and make sure you understand all of the provisions. Marketing or sales literature is no substitute for the actual policy. Read the policy itself before you buy.

Ask for a summary of each policy’s benefits or an outline of coverage. Good agents and good insurance companies want you to know what you are buying. Don’t be afraid to ask your benefits manager or insurance agent to explain anything that is unclear.

It is also a good idea to ask for the insurance company’s rating. The A.M. Best Company, Standard & Poor’s Corporation, and Moody’s all rate insurance companies after analyzing their financial records. These publications that list ratings usually can be found in the business section of libraries.

And bear in mind: In some cases, even after you buy a policy, if you find that it doesn’t meet your needs, you may have 30 days to return the policy and get your money back. This is called the “free look.”



Interesting Fact:

There are 393 general acute care hospitals operating in California

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