Basic Health Plan Types

Your guide to Understanding Health Plans

Fee-for-Service

Under a typical Fee-for-Service plan, the doctor or hospital will be paid a fee for each service rendered to the patient. In other words: You go to the doctor or hospital of your choice and you (or your doctor or hospital) submit a claim to your insurance company for reimbursement. You will only receive reimbursement for the "covered" medical expenses listed in your policy.

More about that reimbursement

When a service is covered under your policy guidelines, you will be reimbursed for some -- but rarely all -- of the cost. How much you get depends on the specific policy provisions, on coinsurance and on deductibles. How does it work?

The portion of the covered medical expenses you pay is called "coinsurance." There are some deviations, but usually Fee-for-Service plans reimburse doctor bills at 80% of "reasonable and customary charges" -- in other words, the prevailing cost of a medical service in any given geographic area. Who pays the other 20%? You do. That amount is your coinsurance.

What if charges are higher than "reasonable and customary"?

This is where things can get sticky ... and not just from a bandage that needs changing. If you are covered by a Fee-for-Service plan and your medical provider charges more than the reasonable and customary fee, YOU will have to pay the difference.

What about hospitalization?

Some Fee-for-Service plans pay hospital expenses in full. Most, however, reimburse at the 80% level as described above. (Lesson? Read your policy carefully!)

So what, exactly, are "deductibles"?

A deductible refers to the amount of covered expenses you must pay each year before the insurer starts to reimburse you. It goes something like this:

Let's say you have a $300 deductible

The first time you visit a doctor, you are required to pay the cost of the examination: $110. Several months later, your doctor recommends that you have your cholesterol and triglycerides checked. You go to the lab, have the blood drawn and pay the lab fees: $80. You return for the results of your tests and your doctor tells you you're healthy as an ox. Then he sends you away with a pat on the back and a bill for another $110. At this point, you have met your deductible of $300. After that, your insurer will reimburse you for each doctor visit or hospital stay - usually 80%, as mentioned above.

Deductibles vary. A typical deductible is $250 per person, but it can be lower or much higher. Some folks opt for a deductible as high as $10,000 (that's right, $10,000) to reduce premiums or to be used in conjunction with a medical savings account. The maximum family deductible is usually three times the individual deductible. As a rule, the higher the deductible, the lower the premiums.

Wait a minute ... what are "premiums"?

Premiums are the monthly or quarterly payments paid for health insurance. They don't count toward deductibles.

Keep a few things in mind about Fee-for-Service plans

Fee-for-Service policies typically have an out-of-pocket maximum. This means that once your covered expenses reach a certain amount in a given calendar year, the reasonable and customary fee for covered benefits will be paid in full by the insurer. If your provider bills you more than the reasonable and customary charge, however, you may still have to pay a portion of the bill.

You may have lifetime limits on the benefits paid under your Fee-for-Service policy. Look for a policy whose lifetime limit is at least $1 million. One major illness or extended hospital stay could easily use up a smaller lifetime limit, and nothing is worse for your healthy recovery than worrying about medical bills.


Choosing the Right Doctor

What's up with your doc?

Whether you are choosing from a managed care list of physicians, going out of a network on a POS plan or seeking a private doctor, look for the following attributes:

  • Experience
    Find out about the doctor's training, accreditation, board certification and experience.
  • Reputation
    Several online resources can help:
  • Healthgrades.com offers quality-of-care report cards on physicians as well as hospitals. Visit them at http://www.healthgrades.com/
  • AMA Physician Select provides authenticated information on virtually every licensed physician in the United States. Browse the files at http://www.ama-assn.org/
  • Past Problems
    If you want to find out about past complaints or disciplinary actions against a specific doctor, you may call your state medical licensing board.

Closing the deal:

Meeting with your potential physician

After you have done your homework, you will have a list of potential doctors to choose from. Since nothing beats face-to-face interaction, it's a good idea to set up an appointment to meet with each physician to become better acquainted. This allows you to interview the doctors and determine whether or not you feel confident placing your health care needs in their hands. While you're there, find out if each one has experience with your particular health conditions. Keep in mind that you will probably have to pay for these appointments, so be sure to find out what the cost will be in advance.

The importance of a healthy attitude

If a physician balks at the idea of a preliminary interview visit, take it under consideration when making your final decision. Are you sure you want to partner with a doctor who doesn't have time to listen to your concerns?


Choosing the Right Plan

How to Choose
the Right Health Plan

If your employer has offered you a selection of plans to choose from, and you are unclear about which one is right for you, take a look at these pointers ...

The answer is in the details

Most plans provide some variety of basic medical coverage. Whether you have an HMO or straight Fee-for-Service, you'll be covered in the event of an emergency and have someone to call if you come back from your ski trip with a nasty case of bronchitis.

But why settle for coverage that might not be the best for you? The ideal plan covers most of your health coverage needs at the most reasonable cost to you.

First, look for the basics

Find out how a plan handles the following fundamental health care services:

  • Office visits
  • Hospitalization -- both elective and emergency
  • Emergency room treatment
  • Hospital Services -- outpatient
  • Surgery -- inpatient and outpatient
  • Treatment by a specialist
  • Prescription drug coverage
  • Diagnostic X-ray/lab
  • Next, find out about the extras
  • Obstetrical or gynecological care
  • Mental health counseling and care
  • Substance abuse services
  • Physical therapy and rehabilitative care
  • Home health care
  • Skilled nursing facility
  • Hospice care
  • Chiropractic care
  • Private-duty nursing
  • Maternity care
  • Well-baby care
  • Durable medical equipment
  • Vision care
  • Dental services

Narrowing your choices down even more

When you choose a plan, you will undoubtedly have to make a few concessions. Maybe you'll pay a little more out-of-pocket to have the flexibility and scope of coverage you want, or the ability to go to any doctor. Or perhaps you'll give up a few plan benefits in order to enjoy a lower monthly premium or smaller copay. As you pare down your options, ask yourself the following questions:

  • Am I healthy?
    If you are reasonably fit, you will not be spending as much time with a doctor as someone who manages a chronic health condition like heart disease, high blood pressure or diabetes. For you, annual screenings and emergency care will be your insurance priorities.
  • Do I want limits on my choice of doctors or hospitals?
    Can't stand for someone else to be in control? Perhaps an HMO is not your first choice. (Remember, HMOs require a primary care physician and confine your ability to choose the doctor of your choice.)
  • How convenient does my care need to be?
    Don't mind traveling across town to a managed care facility where most services are conveniently located in one place? Then a staff-model HMO is worth looking into. Absolutely need to be able to see your favorite private practice physician down the street? You'd better look at a plan that includes your doctor in their provider network.
  • How important is the cost of services?
    If your employer offers a choice of plans, make sure to study them carefully. You may be required to pay copays, coinsurance or prescriptions out-of-pocket. Consider the plan that is easiest on your wallet.
  • How do I feel about keeping receipts and filing claims?
    Obsessively organized? Then the paperwork involved with most Fee-for-Service plans probably won't bother you. If, however, you can barely make a pathway from your door to your desk, you might prefer a less form-intensive plan, like an HMO. (Take note: If you lose receipts or fail to turn in forms, your claims will not be paid.)
  • Do I or my family members have a chronic health condition?
    If you or a loved one requires continual medical attention, consider your health plan very carefully. How much can you afford to spend on your condition? How convenient is the treatment facility? Do you want the freedom of choosing your own specialist?
  • Will I or a family member be traveling extensively or spending a significant amount of time away from home?
    Make sure you understand the out-of-town rules on your choice of plans.

Don't forget to tally the potential costs to YOU

To get a realistic idea of what your costs will be for each plan, take a look at how much you will pay for your premium, deductibles, copays and other costs. Check out the following:

  • Must you pay deductibles before the insurance begins to cover your care? How much are these deductibles?
  • After you've met a deductible, what part of your medical costs are paid by the health plan? Does this amount vary by the type of service, doctor or health facility used?
  • Must you pay copays for doctor visits?
  • If you use an out-of-network doctor, how much will you have to spend?
  • If a plan does not cover certain services or care that you think you will need (like a yearly gynecological exam, for example) how much will you have to pay to get the service?
  • Arethere limits to how much you must pay in the case of a catastrophic illness?
  • What is the yearly or lifetime limit on how much the plan will pay for your care?

Exclusions in Coverage

What's not covered

Remember, HMO benefits are generally more comprehensive than those of traditional Fee-for-Service plans. No health plan, however, will cover every single medical expense. Here are some common exclusions in coverage:

No matter how much you want that nose job, very few plans will cover it -- or any other elective cosmetic surgery, for that matter. Exceptions occur when the procedure is needed to correct damage caused by accidental injury, but check your plan to make sure!

Few plans cover hearing aids and eyeglasses, because these are considered "budgetable" expenses.

Some Fee-for-Service plans do not cover routine medical checkups. Women should take careful note of which plans cover annual gynecological exams -- pap smears and mammograms, for example.

Women should also note that some individual plans will cover complications of pregnancy but won't cover normal pregnancy or childbirth.

Want to try acupuncture for your hypertension? Your plan might not cover it. Procedures that are considered experimental or non-traditional are usually not covered.

Believe it or not, mental health coverage is not offered in many health plans. Others offer limited coverage for acute conditions only.

Procedures the health plan determines are not medically necessary.

Other exclusions

Insurers will definitely not pay duplicate benefits. You and your spouse may each be covered under a health insurance plan at work, but under what is called a "coordination of benefits" provision, the total you can receive under both plans for a covered medical expense can never exceed 100% of the allowable cost. So while you won't be able to pull a fast one, you can rest assured that this provision benefits everyone in the long run. How? By helping to keep overall insurance costs down.


Getting the Most from Your Health Coverage

How can you utilize your care benefits most effectively? Be an active participant in your own health and health care by:· Remembering the importance of preventive care

Find out about health screenings and see that you get them.

Eating well

There's a shred of truth in the old adage, "an apple a day keeps the doctor away." A healthy, balanced diet can help you avoid a multitude of health problems (like obesity, heart disease and adult-onset diabetes), and helps with many pre-existing conditions (like high blood pressure and depression).

Exercising NOW, not later

Studies show that even moderate exercise three times per week can offset an adult's risk for heart attack, stroke and certain cancers.

Always asking your doctor questions, and listening for clear answers

Know what prescriptions you are taking, when to take them and what not to mix with them. Ask about the risks and benefits of each test and treatment. Make certain that you understand your doctor's responses. Go ahead and take notes, if necessary.

When in doubt, writing it down

While we're on the subject of taking notes, remember to keep a log or diary of symptoms, concerns or unusual problems that occur. That way, you have a clear record when it comes time to meet with the doctor. Also, make sure to keep a record of treatments, vaccinations, lab tests, drug reactions and side effects.

Knowing your policy

Read your coverage policy and member handbook -- particularly the information on benefits, coverage, exclusions and limits. If your plan has a newsletter or magazine, make sure to read it as well. You can keep abreast of policy changes and new services that may affect your care.

Knowing how to obtain care

Don't wait until it's 4 a.m. and you are having a bizarre reaction to the shellfish you had for dinner -- learn coverage specifics like urgent-care hours and how to schedule appointments now, while you feel good. Don't forget to find out how (and where) to get lab tests, as well as what number to call in an emergency.

When you're sick about the treatment you received

If you have a bad experience with your managed health care provider, you have the right to complain. Contact the member services division of your plan immediately for more information on how to register a complaint. Health insurance plans have grievance or appeal processes. While in the complaint process, be sure to save records of all correspondence, claim forms and copies of bills. Also keep a log of phone conversations and names of the people you speak with.

If this process doesn't solve your problem, you might consider bringing the matter to the state insurance commissioner or state department of health. Medicare or Medicaid recipients may file a grievance with the state's Medicaid program as well as the state medical peer review organization.

Things to remember as a patient

You have the right to change your primary care doctor, switch plans during open enrollment, ask for copies of your test results and medical records, refuse treatment, disagree with your plan's decisions and use their appeals process. After all, it's your health at stake.


Health Insurance Overview

What is health insurance?

The term refers to a variety of insurance policies, ranging from those that cover the costs of doctors and hospitals to those that meet a specific need -- like long-term care or dental coverage. When most of us talk about health insurance, however, we refer to the kind of plan that covers doctor bills, surgery and hospital costs.

You may have heard terms like "managed care," "Fee-for-Service" and "indemnity." These words define different types of coverage or health plans widely used by today's consumers. Confused? Don't worry. HealthInsurance.com will help you make sense of the lingo.

In a nutshell

Fee-for-Service (also known as indemnity or traditional) plans generally offer complete freedom to choose your own doctors (including specialists) and hospitals. These plans, however, tend to be more expensive to the consumer. In addition, many employers do not even offer a Fee-for-Service option. (It's expensive!)

Managed care plans, on the other hand, have agreements with certain doctors, hospitals and health care providers to give a range of quality health services at a reduced cost. The secret? Patients have to stay within the plan's network of providers and health facilities to get the best benefits. HMOs, PPOs and POS plans are all types of managed care.


Health Savings Account

Combining a qualified High Deductible Health Plan (HDHP) to cover catastrophic illness and injury with a Health Savings Account (HSA) to cover routine expenses may be your answer to lower premiums for health insurance. Health Savings Accounts (HSAs) are becoming increasingly popular because of their flexibility and immediate tax savings.

Who is eligible?

  • To be eligible to establish a health savings account an individual must
  • Be covered under a high deductible health plan
  • May not be covered under any health plan that is not a high deductible health plan
  • Not be entitled to benefits under Medicare
  • Not be claimed as a dependent on another person’s tax return

Who can contribute and how much is deductible?

Contributions are 100% tax deductible up to the size of the HDHP deductible within certain limits. This means a tax-deductible contribution of individuals ranging between $1,000 and $2,600 and between $2,000 and $5,150 for families. HSA’s allow for catch up contributions for individuals age 55-64.

Advantages

  • Contributions to the account are tax deductible
  • Amounts in an HSA belong to the individual and are fully portable
  • Amounts in an HSA earn tax-free interest
  • Unused amounts in the account at year-end remain available for future years
  • Distributions are not taxed if used for qualifying medical expenses

HSA funds not withdrawn accumulate tax-free interest until age 65. At age 65 you have the option to withdraw them for any purpose and pay ordinary income taxes.


Managed Care

Your guide to Understanding Health Plans

The term "managed care" has become a buzzword -- and not everyone knows what it means. Simply stated, managed care refers to health care insurance plans designed to provide care at the lowest possible cost. In order to make coverage affordable, managed care plans require that patients follow certain rules. (We'll get to those rules shortly.) The three major types of managed care plans are:

Preferred Provider Organizations (PPOs)

Health Maintenance Organizations (HMOs)

Point-of-Service (POS) plans.

What do each of these plans offer? Take a look ...

Preferred Provider Organizations (PPOs)

This plan type closely resembles a Fee-for-Service plan. A PPO has arrangements with a network of doctors, hospitals and other providers who have agreed to accept lower fees from the insurer for their services. As a result, your cost sharing should be lower than if you go outside the network. In addition to the PPO doctors making referrals, plan members can refer themselves to other doctors, including ones outside the plan. This makes it a best-of-both-worlds option for many patients: lower costs in the network, but flexibility to leave the network if necessary.

If you go to a doctor within the PPO network, you will probably pay a copay (a set amount for certain services -- like $15 for a doctor visit or $10 for a prescription). Your coinsurance will be based on lower charges for PPO members.

If you choose to go outside the network, you will have to meet the deductible and pay coinsurance based on higher charges. You might also have to pay the difference between what the provider charges and what the plan will pay.

Health Maintenance Organizations (HMOs)

HMOs offer members an array of health benefits -- usually including preventive care -- for a set monthly premium. The rule? You must use the health care providers and facilities within the HMO network in order to receive coverage, unless it's an emergency. Most HMOs require a small copay for each visit to a doctor or plan facility. Some require no payment when you visit doctors. (These plans usually have slightly higher monthly premiums.) HMOs generally provide preventive care like annual check-ups, flu shots, hearing tests, etc., at lower out-of-pocket costs to you. This makes them highly preferred for many people who don't want to pay huge fees for an annual physical, a cholesterol check or other necessary tests.

There are several types of HMOs:

The Staff Model HMO

Here the doctors are actual employees of the health plan, and you see them at a central medical center or office.

Individual Practice Associations (IPAs)

This type of HMO contracts with outside physician groups or individual doctors who have private practices, and you see them in their own offices.

Primary Care Physicians:

A partnership with your doctor

An HMO will typically provide you with a list of physicians. From that list, you choose a "primary care physician." This doctor will serve as your chief medical officer. He or she will coordinate your care, see you when you are sick and make any decisions about whether you should see a specialist.

What kind of doctors are primary care physicians?

Usually, they fall into one of the following specialties:

  • Family practice doctors or general practitioners
    These doctors are trained to diagnose and treat a variety of health conditions. If you are young and in good health, a general practitioner is your best bet. Many HMO members select the same general practitioner for their entire family.
  • Internists
    Specializing in internal medicine, these physicians are trained to treat health conditions like diabetes and cardiovascular disease. If you are managing high blood pressure, heart disease or diabetes, an internist is a wise choice.
  • Pediatricians
    These doctors only treat children, usually under the age of 12.
  • OB/GYN
    Some plans allow women of childbearing age to select an OB/GYN as their primary care physician.

Other types of doctors

Some plans may allow a specialist to be selected as a primary care physician. For example, a diabetic may elect to have an endocrinologist (in the HMO plan, of course) as his primary care physician.

How do you pick a primary care physician?

Most HMOs only offer a list of doctors' names. How can you find out more about them?

If you know others in the plan, ask for recommendations.

Make appointments to meet with doctors in your area to find one who is right for you.

If the plan's doctors are located in the same facility, ask the staff nurse for recommendations.

Can you use your current doctor?

If he or she does not belong to the HMO, you will have to switch to a doctor who does. But don't worry that once you pick a primary care physician, it will be set in stone. Most plans allow you to switch your primary care doctor several times a year. If you don't like one, select another.

Point-of-Service (POS) Plans

A hybrid of the HMO and PPO is known as the POS plan. Here, the primary care doctors in the plan usually make referrals to other providers within the plan. However, if a member wants to go outside of the network, the POS plan will pay for a predetermined amount of the bill. POS plans generally cost more in monthly premiums than straight HMOs, but they give you the flexibility to call a doctor on your own if you feel the need -- or if your primary care physician doesn't.

Blurring the lines of Fee-for-Service and managed care

While Fee-for-Service and managed care are different, the differences can get a little fuzzy. Many managed care plans now contain Fee-for-Service elements. Conversely, almost all Fee-for-Service plans apply managed care techniques to contain costs and guarantee suitable patient care. What does this tell you? Read the different plan descriptions carefully! You may find that you get Fee-for-Service options through your local HMO at a substantial savings. Or you may discover that with all the caveats, your Fee-for-Service plan walks and talks more like a restrictive managed care plan and is not worth the extra out-of-pocket expense.

Guidelines in every plan

Whether you choose a Fee-for-Service plan, a PPO or an HMO, you will find that your plan has certain rules you have to follow.

Let's say you fall and break your leg while rock-climbing on vacation, and you are rushed to a hospital that is not part of your HMO network. Your emergency medical coverage is most likely included in your plan. After you've been patched up, however, the medical team feels you would be best served by tricky follow-up knee surgery. Chances are, either you or your doctor will have to call your insurance provider to get the go-ahead for the non-emergency treatment. This is known as "pre-authorization." It occurs when your insurer must approve a procedure before you actually have it.

Utilization review

Utilization review is a fancy term for the process used by plans to determine whether a specific medical or surgical service is appropriate or medically warranted. For example: You believe your severe neck pain will be alleviated by a new cervical disk surgery you read about on the Internet. You've talked to your physician about it, and he's familiar with the procedure, but the practice is not regarded as absolutely necessary for your condition. The Medical Review Specialist may be brought in to make the final decision about whether or not your insurance will cover the cost of the operation.


Other Types of Insurance

Your employer may offer the following types of coverage as supplemental or alternative plans. Here's a breakdown of what they are, and what they can do for you ...

Hospital-surgical policies

Also known as "basic" health insurance policies, these plans provide benefits when you have a specified condition that requires hospitalization. Benefits usually include room and board and other hospital services; surgery; physicians' non-surgical services performed in the hospital; and diagnostic X-ray and lab expenses, as well as room and board in an extended care facility. Some policies contain a small deductible, but most provide "first-dollar" coverage. That means you don't have to pay a deductible for a covered medical expense. These policies are NOT a substitute for broad medical coverage, because the benefits are limited in amount and relegated to specific illnesses. This type of policy may not be available in all states.

An important caveat

The majority of hospital-surgical policies do not cover lengthy hospitalizations and costly medical care. If you find that you need these types of services, you may rack up huge medical bills unless you have other insurance.

Catastrophic coverage

This type of policy pays hospital and medical expenses above a certain deductible and provides additional protection if you have either a hospital-surgical policy or a comprehensive policy with a lower-than-adequate lifetime limit. Catastrophic plans usually have extremely high deductibles -- $10,000 and beyond -- and a maximum lifetime limit that may be high enough to cover the costs of major catastrophic illness. The bad news? You foot the first $15,000 of a disastrous illness. The good news? You may save yourself from owing the millions in medical bills you would accumulate without any insuranceat all. These policies are NOT a substitute for broad medical coverage because the benefits are limited in amount and relegated to specific illnesses. This type of policy may not be available in all states.

Specified or dread-disease policies

These policies provide benefits only if you get the specific disease or group of diseases named in the policy. (For example, a policy may cover only medical care for cancer or complications from diabetes.) These policies are NOT a substitute for broad medical coverage because the benefits are limited in amount and relegated to specific illnesses. This type of policy may not be available in all states.

Hospital indemnity insurance

This type of policy pays you a specified amount of cash benefits for each day you are hospitalized, up to a designated number of days. These cash benefits are paid directly to you, and can be used for any purpose you choose. (This is useful for meeting out-of-pocket expenses not covered by the other insurance.) Some contain limitations on pre-existing medical conditions that you may have had before your insurance takes effect. Others contain an elimination period, which means that benefits will not be paid until after you have been hospitalized for a specified number of days. These policies are NOT a substitute for broad medical coverage because the benefits are limited in amount and relegated to specific illnesses. This type of policy may not be available in all states.

Medicare supplement insurance

Are you over 65? Have you signed up for Medicare within the last six months? If so, you are eligible for guaranteed issue on this type of policy, sometimes called Medigap or MedSup. This private insurance helps cover the gaps in Medicare coverage. (Medicare is the federal program of hospital and medical insurance primarily for people age 65 and over.) Ten standard Medicare supplement policies currently exist, and they are all PPOs. Any insurance company that offers medicare supplements must offer all 10 standard plans. MedSup HMOs are also available.

Long-term care policies

These plans cover the medical care, nursing care and certain in-home care (home health aides or physical therapy, for example) that you might need if you ever are unable to care for yourself due to an extended illness or disability. Most long-term care policies pay a fixed dollar amount, typically from $40 to $200 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 of nursing home care.

Keep in mind

Some state insurance departments may require a face-to-face meeting with an agent who has received special certification to sell individual long-term care plans.

Disability income insurance

If an injury or illness prevents you from working, this plan will provide you with an income. While there are other possible sources of income for the disabled, the amounts paid are often limited and many restrictions apply. Disability income insurance benefits are usually 60% of your income at the time of disability, although cost-of-living adjustments may be available on certain policies. When shopping for disability income insurance, read the fine print! Some policies only pay benefits if someone is unable to perform the duties of their occupation. Others pay only if the person cannot work at any job.Make sure you also look for policies that cover both accidents and illnesses.

Dental insurance

Paying out-of-pocket for yearly dental checkups probably won't break your bank. But what happens if you need more serious dental work? A root canal or crown can easily cost over $1000. Some health insurance plans include dental coverage as part of your benefits package. If not, you have the option of purchasing separate dental insurance. Dental indemnity or Fee-For-Service plans allow plan participants to visit any credentialed dentist or dental specialist they wish. The participant pays the dentist at the time of service and gets reimbursed according to the plan's coverage. This is the plan for those who enjoy the freedom of provider selection and don't mind a higher monthly premium and greater out-of-pocket expense. Dental Maintenance Organization (DMO) plans require members to seek all services through their assigned dentist. These affordable plans offer preventive services at little or no cost to the member. (The plans differ in premium and copay levels.) Dental PPO (Preferred Provider Organization) plans offer patients the choice of an indemnity plan and the affordability of a managed care plan.

Vision insurance

Vision coverage also might be included in a health insurance benefits package. If not, it may be purchased separately -- and is usually provided in the form of a Vision Maintenance Organization (VMO) or PPO network. Coverage generally includes yearly eye exams and a percentage of the cost of eyeglasses and contact lenses. Some plans cover all or a part of the cost of laser corrective surgery as well.


What Happens When You Leave Your Job?

COBRA

Under a federal law known as the Consolidated Omnibus Budget Reconciliation Act of 1985 (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. The same law dictates that following an employee's death or divorce, the worker's family has the right to continue coverage for up to three years.

What if you can't afford individual coverage?

Ask yourself three questions:

  • Are you healthy?
  • Are you not yet eligible for Medicare?
  • Do you plan to take a job that will provide health insurance soon?

Answer yes to all of the above, and the solution may be a "short-term" or "interim" policy. Typically, short-term policies are written for two to six months and are renewable only once. They cover hospitalization, emergency and intensive care, as well as necessary expenses for related services performed outside the hospital -- like X-rays and lab tests.


When and How to Get Coverage

On the job

When getting coverage through your employer, you are eligible to enroll when you first start the job. You may also enroll during specified months of the year -- a practice called "open enrollment." Once you choose a plan, however, you must stick with it for a year unless you have a change of life status -- such as a marriage, divorce, birth of a child or death in the family -- that will alter your coverage needs. Some employers offer a choice of Fee-for-Service and managed care plans -- usually a choice of HMO and PPO or HMO and POS. In addition, some group plans offer dental and vision insurance in addition to medical coverage.

On your own

If your company does not offer insurance, or if you are self-employed or work freelance, you should purchase individual health insurance. This allows you to choose a plan to fit your needs from the insurance company of your choice. But let the buyer beware! Coverage and costs vary widely from company to company. When you study policies, make sure to consider the following:

  • What medical services are covered
  • What benefits are paid
  • How much you must pay in deductiblesand coinsurance.
    (Remember, you may keep premiums down by accepting a higher deductible.)

Uh-oh ... you have a pre-existing condition!

When starting a new job, many people worry about losing coverage due to a pre-existing condition. Keep in mind:

The Health Insurance Portability and Accountability Act (HIPAA) helps ensure continued health insurance coverage for employees and their dependents. As of July 1, 1997, insurers can impose only one 12-month waiting period for any pre-existing condition treated o diagnosed in the previous six months. Not only that, but your prio group and individual comprehensive health insurance coverage or a government healthcare program will be credited toward the pre-existin condition exclusion period as long as you have maintained continuou coverage without a break of more than 62 days. More good news: Contrary to rumor, pregnancy is not considered a pre-existing condition! When it's covered, it's treated like an illness. Newborns and adopted children who are covered within 30 days are not subject to the 12-month waiting period.

If you have had group or individual health coverage or a government healthcare program for at least 12 months, and you start a new job and go to a group plan, the new health plan cannot impose another pre-existing condition exclusion period -- and if you had coverage for less than 12 months, it's prorated. So if you have had prior coverage for only six months, you may be subject to a six-month, pre-existing condition exclusion period when you switch jobs. (If you haven't been covered by any health insurance for more than 62 days, and you get a job that offers such coverage, you may be subject to a 12-month pre-existing condition waiting period.)

If you have had coverage that meets the criteria, you should get a Certificate of Credible Coverage from your previous insurance company to give to the new one.