Health Insurance Basics

Health Insurance Basics

The topic of healthcare seems to be everywhere in the news. More and more Americans find themselves in a difficult financial situation because of medical bills they incurred while uninsured. If you are tempted to put off buying health insurance, don’t! If you become injured or sick, health insurance can help you pay for routine medical expenses and provide you with the large financial backing you will need.

If you are still not convinced that you need health insurance, consider these four likely scenarios:

  1. Becoming seriously sick while uninsured could prove to be quite problematic. Depending on the illness, it may disqualify you from becoming insured in the future. Many “pre-existing” health conditions will automatically disqualify you for an individual health insurance policy or at least cause you to pay substantially higher premium rates.
  2. A considerable financial advantage that health insurance coverage provides to their policy holders is the “discounted” prices that are paid for medical goods, services, and other care. Since health insurance companies force doctors, hospitals, and other healthcare providers to accept large discounts off their charged amounts, people who do not have health insurance will usually pay the higher cost. They do not benefit from insurance company negotiated rates.
  3. In the event you leave your job and need to change to a new health insurance plan, you have added protections under the Federal HIPAA laws to ensure that your coverage will not be disrupted. These special legal safeguards guarantee that you can continue onto the new health plan without the threat of pre-existing conditions being applied.
  4. Every year in the United States, a leading cause of personal bankruptcy can be directly attributed to a serious accidental injury or medical illness, which resulted in financial devastation. No one wants to start off their morning by thinking this could be the day he or she will become overwhelmed by a serious injury or illness. Nevertheless, it happens to thousands of people each day.

What factors are important to know when buying health insurance?

Know Your Market

The individual health insurance market is where most people shop for health insurance online. There are several important things to consider before choosing one of these individual plans. Pricing, benefits, and other important factors vary by each geographic location. For example, in each state and in each area of the state, the competition between different insurance carriers means that you may see a wide variation in types of plans, premium rates, and other coverage options.

In addition, each insurance carrier will have different underwriting rules they follow. These rules could have a major impact on whether or not you will get coverage, the benefits your policy will include, and the final premium costs. Therefore, it is important to have educational tools available to help you determine the best way to maximize your premium dollars spent.

Lastly, understand that the individual health insurance market is different than that of the employer-sponsored market. Be sure you know what your policy covers and what it does not cover. Many individual policies offer comprehensive benefits, but it is up to you to select and pay for them.

Know Your Costs

When analyzing a policy’s cost, start by adding up the deductible, any co-payments, and the co-insurance you would pay if you incur medical expenses. These costs can sometimes be much more than we first imagined. When shopping for individual health insurance, more often than not, it will be important to balance the cost of the plan’s annual premiums with the potential costs if you become sick and incur medical expenses. Make sure you have picked the appropriate balance.

Other financial considerations important to keep in mind when choosing an individual health insurance plan are the terms, limitations, and exclusions included within the policy. For example, most individual health plans will not cover maternity care unless you added that coverage rider to the policy when you first applied. Although you may not be planning to have a child at this time, you may want to consider the costs of an unexpected pregnancy should you consider a plan without maternity coverage. Making these calculations upfront could make a big difference in the plan you choose.

Know Your Health

The current health status of everyone who is applying for an individual health insurance plan has a great deal of influence on the final outcome of the insurance company’s decision. It will directly impact the final premium rate and whether or not coverage will be offered. As part of this process, most insurance companies will review your medical history, your family’s medical history, your age, gender, the geographic area in which you reside, and other important factors.

If you have had serious medical conditions in the past, most states will allow insurance companies to use this previous information to set your premium rates and decide if they will extend coverage. If you suffer from less severe (but still significant) health problems, most insurance companies will modify your plan benefits to exclude coverage for these issues, raise your premiums, or do some combination of both.

How do I begin the Individual Health Insurance application process?

Although most every American has had health insurance at some point in their life, choosing, understanding, and applying for an individual health insurance plan on their own can be a bit intimidating. However, with the right information and with the proper guidance, navigating this process can be accomplished with little effort.

The first place to start is with the Peoples Health Insurance Web site. By entering a small amount of personal information into our individual health insurance quote engine, you will be given a list of the competitive insurance plans available in your area. Once you have selected the policy that best fits your budget and lifestyle, you just click on the apply button to begin the application process.

Many insurance carriers today allow you to complete your application online. If not, you will need to print out the insurance company forms and complete them. When the application is ready, it is then submitted and reviewed by the insurance company’s “underwriting” department.

This part of the process may take some time due to the underwriter’s need to carefully review your information and possibly request medical records from your physician. Once this evaluation is completed, the insurance company will decide whether or not to offer you coverage, and if they do, they will set the final premium rate and the terms, limitations, and exclusions of your policy.

Our Web site is designed to help you navigate though the application process so you can complete your application quickly and correctly. If at any time during the process you have questions about confusing terminology, the different plans available, or benefit options, never hesitate to email or call our office to receive guidance from one of our trained professionals. This service is part of our dedication to our customers, as we understand that applying for health insurance can sometimes be an overwhelming experience.

How does my health status affect my premium rate?

When you begin the application process, you will be asked a series of questions about your health as well as the health of any family members who are seeking coverage too. In most states, insurance companies use these application answers to determine whether they will offer you a plan and what rate you will pay. They may even request additional information, such as medical records, from your physician so they can better measure your health status.

It is very important that you disclose and thoroughly explain all the information that is being requested so the insurance company can best understand your health. If they do not have all the necessary data or are unable to obtain it on every applicant, it could have negative consequences for the application. Worse yet, anything that was seen as a “material omission” could cause you to be declined for coverage or could result in a denial of payment for your future medical expenses.

Once the insurance company has calculated your health status, you are placed into a “rate class” with a pool of other insured individuals with similar health factors. Your premiums will be based on the rate charged to that entire group of customers. Any annual renewal premium rate changes will be determined, not by your individual claims history, but instead by the combined claims history of the entire pool of people in your group.

Can a Pre-existing Condition Affect My Coverage?

Many individuals currently have (or have had in the past) a serious chronic medical condition that cannot be cured or which has left them with lingering health problems. It is important to understand how pre-existing conditions may turn into a real dilemma when applying for an individual health insurance policy.

Almost every state allows insurance companies to deny health insurance to people who have pre-existing medical conditions. This includes many common ailments such as diabetes, COPD, cancer, heart problems, or alcohol and drug abuse. If the pre-existing condition is not serious enough to get your application denied, coverage for this condition may still get excluded from your policy or cause you to pay increased premium rates.

Many times we are asked why the insurance company is allowed to treat people this way. It may seem unfair to a person who is sick and really needs a health insurance company to pay for their current medical expenses. However, this is an unsound insurance practice that can easily be understood.

The fundamental concept of insurance is that it balances cost across a large random sample of people. Insurance companies can then set low premium rates to make their plans affordable and attract a large number of individuals. If they did not exclude people who are known to be sick (i.e., over the population in general), it would upset the delicate balance of the plan, and it would become unstable. This is also known in the industry as “adverse selection.” That is why it is critically important to have your health insurance coverage in place before a serious medical illness happens.