Social Networking for the Insurance Industry
How to buy health insurance and why it's like gambling
Ever go to Las Vegas? If you have you know that one of the things people do there is calculate their odds of winning the jackpot. Sometimes they're lucky and other times, they barely get out with the clothes on their back. Well, buying health insurance is pretty much the same. If you have insurance and you find yourself in poor health or have an accident, you're covered, at least in part. No insurance and you could end up bankrupt.(It's the main cause of bankruptcies in the U.S.)
There is a solution to this problem. Unless your situation is dire you should consider buying it yourself. Even if you do have insurance through your employer, it might be cheaper to buy it yourself anyway.
Buying health insurance is like gambling. It's all about risk.
Figure your odds of getting sick or having an accident in the coming year, and buy protection based on your perceived risk. If you're young and don't have a chonic disease, don't smoke or drink to excess, your risk of getting sick is small. If you're middle aged and have chronic illness, or smoke/drink to excess etc., then you really need this.
What's your occupation? If you have a desk job that's different than being a rodeo rider. Do you work around electricity, fly a lot or work in a mine? Do you go to work on a motorcycle? Well, there's some risk associated with all of those factors. Once you determine your risk of actually needing to use the insurance, you can go to step #3.
How much do you want to pay out of pocket? You will need this in savings or have a certain amount deducted pre-tax for unpaid medical bills. $10,000, $5,000, $500? This is called a deductible. You pay a higher monthly premium if your deductible is low. That's because you're actually expecting the insurance company to pay for some of your expenses. If you chose a deductible of $10,000, you're saying you don't believe you'll get sick or be in an accident, but if you do, it will be a doozy! You'll pay the least monthly, but until you fork over $10,000 the insurance company is off the hook.
Do you want a copay? A copay is like sharing with the insurer. They pay 70, 80, 90% and you pay the rest. Again, your perceived risk drives this decision. If you think you won't get sick enough to go into the hospital or need rehabilitation or medical equipment, you might be comfortable sharing 70/30. This means if you have to go to the hospital, you will pay 30% of the bills you incur. If you think it is somewhat likely you will have to go to the hospital (as in, you've been told you may need surgery this year), then you might want to share 80/20 or 90/10. Hospital and doctor bills can get high quickly so even 20% can amount to a lot. Remember, the sharing doesn't start until you've paid your deductible. (See step #3.)
Do you want your prescription meds covered? If you don't take any routinely and might only need a prescription if you get a temporary illness, a prescription benefit may be too costly on a monthly basis. Some plans don't offer prescription drug coverage and your monthly premium is lower as a result. I personally think at least generic drug coverage is a good idea just in case. But then, I'm not a heavy risk taker. Still, you probably don't need all the bells and whistles if you don't take anything now and perceive your risk is low.
Do you want a health savings account? Health savings accounts are a good idea for some. You can use the money only for medical expenses that were not covered by your insurance or to pay for health related expenses. If you doj't use it, the money is still yours and you can take it with you if you change plans. It is also tax deductible. So let's say you have a $1,000 deductible in the plan you picked, you could save $1,000 by putting it in a health savings account so when and if you need it, it's there. All you have to do is write a check or access it through a debit type card. It's really a good idea. But not all plans allow it, so choose one that does if you're interested.
Do you want to upgrade the basic plan? If your plan does not allow for pregnancy related costs and you think you might want to consider starting a family, you can often upgrade the basic plan to allow for expenses related to preganacy. There are other reasons to upgrade, so read the policy and determine if you want coverage for these costs. It's unsettling to find out that while you have health insurance, it doesn't cover any surgery, pregnancy, mental health or chiropractic services-especially when you wanted those things.
What about the lifetime maximum? Each plan is different but 3 million is pretty standard. You can upgrade to 5 million if you think you will have a catastrophic illness or accident or are just really risk adverse. But once again, it's your choice and is based on your risk tolerance. You pay more for a higher maximum, so you'd want to consider it carefully.
There are always people you can talk to if you have questions and I suggest you do so when considering purchasing your own insurance. Some are employees at insurance agencies, others work for online companies like http://www.getmymedical.com or http://wwwkaiserhealthcoverage.com or http://www.assuranthealthcoverage.com.
The great thing about having your own health insurance is it's not tied to your job. It's portable and so if you have a job change, your coverage isn't effected.
My advice: have some form of insurance, company sponsored or individual. The greatest risk of all is to have nothing. That's a bet I wouldn't want to take.
There is a solution to this problem. Unless your situation is dire you should consider buying it yourself. Even if you do have insurance through your employer, it might be cheaper to buy it yourself anyway.
Buying health insurance is like gambling. It's all about risk.
Figure your odds of getting sick or having an accident in the coming year, and buy protection based on your perceived risk. If you're young and don't have a chonic disease, don't smoke or drink to excess, your risk of getting sick is small. If you're middle aged and have chronic illness, or smoke/drink to excess etc., then you really need this.
What's your occupation? If you have a desk job that's different than being a rodeo rider. Do you work around electricity, fly a lot or work in a mine? Do you go to work on a motorcycle? Well, there's some risk associated with all of those factors. Once you determine your risk of actually needing to use the insurance, you can go to step #3.
How much do you want to pay out of pocket? You will need this in savings or have a certain amount deducted pre-tax for unpaid medical bills. $10,000, $5,000, $500? This is called a deductible. You pay a higher monthly premium if your deductible is low. That's because you're actually expecting the insurance company to pay for some of your expenses. If you chose a deductible of $10,000, you're saying you don't believe you'll get sick or be in an accident, but if you do, it will be a doozy! You'll pay the least monthly, but until you fork over $10,000 the insurance company is off the hook.
Do you want a copay? A copay is like sharing with the insurer. They pay 70, 80, 90% and you pay the rest. Again, your perceived risk drives this decision. If you think you won't get sick enough to go into the hospital or need rehabilitation or medical equipment, you might be comfortable sharing 70/30. This means if you have to go to the hospital, you will pay 30% of the bills you incur. If you think it is somewhat likely you will have to go to the hospital (as in, you've been told you may need surgery this year), then you might want to share 80/20 or 90/10. Hospital and doctor bills can get high quickly so even 20% can amount to a lot. Remember, the sharing doesn't start until you've paid your deductible. (See step #3.)
Do you want your prescription meds covered? If you don't take any routinely and might only need a prescription if you get a temporary illness, a prescription benefit may be too costly on a monthly basis. Some plans don't offer prescription drug coverage and your monthly premium is lower as a result. I personally think at least generic drug coverage is a good idea just in case. But then, I'm not a heavy risk taker. Still, you probably don't need all the bells and whistles if you don't take anything now and perceive your risk is low.
Do you want a health savings account? Health savings accounts are a good idea for some. You can use the money only for medical expenses that were not covered by your insurance or to pay for health related expenses. If you doj't use it, the money is still yours and you can take it with you if you change plans. It is also tax deductible. So let's say you have a $1,000 deductible in the plan you picked, you could save $1,000 by putting it in a health savings account so when and if you need it, it's there. All you have to do is write a check or access it through a debit type card. It's really a good idea. But not all plans allow it, so choose one that does if you're interested.
Do you want to upgrade the basic plan? If your plan does not allow for pregnancy related costs and you think you might want to consider starting a family, you can often upgrade the basic plan to allow for expenses related to preganacy. There are other reasons to upgrade, so read the policy and determine if you want coverage for these costs. It's unsettling to find out that while you have health insurance, it doesn't cover any surgery, pregnancy, mental health or chiropractic services-especially when you wanted those things.
What about the lifetime maximum? Each plan is different but 3 million is pretty standard. You can upgrade to 5 million if you think you will have a catastrophic illness or accident or are just really risk adverse. But once again, it's your choice and is based on your risk tolerance. You pay more for a higher maximum, so you'd want to consider it carefully.
There are always people you can talk to if you have questions and I suggest you do so when considering purchasing your own insurance. Some are employees at insurance agencies, others work for online companies like http://www.getmymedical.com or http://wwwkaiserhealthcoverage.com or http://www.assuranthealthcoverage.com.
The great thing about having your own health insurance is it's not tied to your job. It's portable and so if you have a job change, your coverage isn't effected.
My advice: have some form of insurance, company sponsored or individual. The greatest risk of all is to have nothing. That's a bet I wouldn't want to take.
Comment
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Comment by Wayland Roberts MS CFA on July 21, 2009 at 3:41pm -
I really like Dennis Anthem's whole article and applaud the great summary of what goes on when determining health insurance needs. There is one old textbook question that I must mention so that old Dr. Hall won't have a "coronery" and have to use his health insurace. From Black's text we find the comparison and question: what is the difference between Insurance and gambling? Gambling creates risk, by the fact that the Bet or Wager is made. If horses race, there is no Monetary Risk other than who will win and who will lose; unless, a Bet or Wager is made, and now it is what we call gambling. Gambling, by the act of placing a bet, creates the Risk of monetary loss. We in the Health Insurance field help people prepare for the Risk of Monetary Loss that already exist for people living in a country with such advanced medical care, that can cost huge amounts of money, as Mr. Anthem well points out. Just to make the point that health insurance doen't create the risk of not being able to access needed medical services or the risk of bankrupting million dollar cost; it manages that risk. Check us out at http://ecurry.nationalbrokersnetwork.com,
where we provide for consultation helping people manage their risk of costly medical services. Good article Dennis!
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