Why Do I Need Health Insurance?
What Are Deductibles?
What are Co-Pays?
What is Coinsurance?
What are Riders?
What Does It Mean to Be Declined?
What is the Out-of-Pocket Maximum?
What is a PPO?
What is an HMO?
What are Limits?
Does it Cost More to Use a Broker?
Should I Delay Getting Insurance?


Q. Why Do I Need Health Insurance?
A. Health insurance protects your health and your finances at the same time. It’s one of the most important products that you can spend your money on. It’s foundational to your physical and financial health. If you don’t have health insurance it’s very likely that you will bypass completing annual physicals and expensive screening tests. Without these exams and tests, your chances of dying from a serious illness are greatly increased. In addition, without adequate coverage, you won’t be able to afford medical care that may be considered optional but is still something you wouldn’t want to do without. For example, if you have torn cartilage in your knee you would definitely want to get this repaired. Even though it’s not life threatening, this condition will cause unnecessary pain and disability. Without health insurance, it’s not likely that you could afford to have this taken care of. Even outpatient surgery is very expensive. Take a look at a medical encyclopedia to get an idea of the huge number of medical problems that exist. You may be perfectly healthy at the present time (and hopefully, you will stay that way) but none of us ever knows what is just around the corner in life. In addition to the health concerns you also need health insurance to protect your bank account and other financial assets. Surgeries, hospitalization, and most medical treatments are extremely expensive and are costing more every day. Without health insurance how will you pay the medical bills if you have a serious accident or major illness? Many people don’t know that half of all bankruptcies and home foreclosures are due to medical bills! I’ve heard many people tell me that they can’t afford to buy health insurance but the reality is that you can’t afford NOT to have health insurance. You have worked hard to obtain your financial assets. Do you really want to lose everything when it can be prevented?
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Q. What Are Deductibles?
A. A deductible is the amount of money that you are expected to pay out of your own pocket before the insurance company begins to make payments on your claims. Some plans have “first dollar” benefits, which means that the company pays a portion of your medical bills even though you have not yet met your deductible. The deductible is usually an annual deductible and is reset each year. After you pay the deductible, the insurance company will pay either 100% or a percentage of the remainder of the depending on the coinsurance in your plan. The deductible is one of the most important ways that you can control the cost of your insurance plan. Choosing a higher deductible lowers the cost of your plan. The lower cost has to be balanced against the possibility of paying a larger share of your medical care if you have a bad year. You want to choose a deductible that you are confident that you could afford to pay if you have high medical bills in a single year. On the other hand, the cost savings of a high deductible can really add up over the years if you stay healthy.
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Q.What Are Copays?
A. Some health insurance plans have a co-pay for doctor visits, prescriptions, and possibly other services. This is a benefit to you, because the co-pay is less expensive then the normal cost of the service would be without the co-pay. Some plans have two different co-pays for office visits, one for primary care doctors and one for specialists. If this is the case, the co-pay for a specialist office visit will be higher than the co-pay for a primary care office visit, although still much less than the charge would have been without the co-pay benefit. This is also referred to as a “first dollar” benefit because the benefit is present without having to meet your deductible.
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Q. What are Riders?
A. Riders, sometimes called waivers, are exclusions that are placed on a policy to eliminate one or more medical conditions from coverage. This is one of the ways that companies can handle pre-existing conditions. This allows a company to still offer coverage to the individual without being responsible for paying claims related to a pre-existing condition. If it weren't for riders, many people would not be able to obtain private health insurance at all. Although riders are never desirable, it is better to have a policy with a rider then to have no coverage at all. This is one area where there is some variation between companies. It is possible a specific condition may be ridered by one company but not by another. On the other hand, there are some conditions that would be ridered by every company.
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Q. What Is Co-Insurance?
Coinsurance is the percentage of the bills that you have to pay after meeting your deductible. Many health insurance plans are 80/20 plans, which means the coinsurance is 20%. That means that for a large medical bill you would first pay your deductible. Then, you would pay 20% of the remaining bill and your insurance plan would pay 80%. Most plans have a stop loss or "out of pocket maximum". This means that your insurance plan will pay 100% of the bills if you have paid your deductible and have also paid an amount of money equal to the "out of pocket maximum". The "out of pocket maximum" is reset annually, just like the deductible. So both the deductible and the coinsurance apply to the total medical bills for the year. For example, suppose you had an 80/20 plan with a 2,500 deductible and a 3,000 maximum out-of-pocket limit. If you were hospitalized and the total bill came to 30,000 you would first pay the 2,500 deductible. You would then owe 20% of the remaining 27,500 limited by the 3,000 out-of-pocket limit. 20% of 27,500 is 3,500. Since 3,500 is more than the 3,000 limit you would only owe an additional 3,000. Altogether, you would have paid 5,500 of the bill and the insurance company would have paid the remainder, which is 34,500. Some plans are 100% plans. That means that after you have paid your deductible, the company will pay 100% of the remainder of the bills. Your coinsurance in this case is zero.
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Q. What Does It Mean to Be Declined?
A. When you apply for a private health insurance policy it is possible to have your application declined.  This happens when you have a pre-existing condition that, in the eyes of the health insurance company, makes offering coverage too risky for consideration. For example, having insulin-dependent diabetes will usually result in a decline. This is another area where there is some variation between companies. There are some health conditions that will result in a decline with some companies but not with others. If you already have private health insurance when you develop an uninsurable condition, you will still be covered, assuming that you were truthful when you applied for the coverage and continue to pay your premium when due. Being declined can only happen when applying for new coverage.
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Q. What is the Out-of-Pocket Maximum?
A. When you see the term "out-of-pocket maximum" in a benefit chart, it is referring to the maximum amount of money that you would be required to pay in a single year if you have medical expenses that exceed your deductible.  This amount of money is in addition to your deductible.  For example, let's assume your plan had a 2,500 deductible, a 3,000 out-of-pocket maximum and is the typical 80/20 plan.  Let's further assume that you were hospitalized and that the total hospital bill was 30,000.  You would pay the 2,500 deductible plus 20% of the remainder of the bill until you had paid an additional $3,000, which is the out-of-pocket maximum.  The insurance company would then pay 100% of the remainder of the bill.  However, there are certain expenses that would still have to be paid by you.  Co-pays for doctor visits and prescriptions, for example, always  need to be paid even if you have paid your deductible and out-of-pocket maximum for the year.

There is a little twist on this when looking at a 100/0 plan, which is a plan with a co-insurance of zero.  The out-of-pocket maximum on this type of plan is zero.  Once you meet your deductible, the insurance company pays 100% of the remainder of the bills.
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Q. What is a PPO?
A. A PPO is a Preferred Provider Organization.  Currently, it is the most popular type of health insurance plan.  You pay much less for services if you stay within the network of doctors and hospitals.  An important advantage over the traditional HMO is that you don't need to see a primary care provider (sometimes called a gatekeeper) before you can see a specialist.  If you need to see a specialist, you just call one in the network and make an appointment.
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Q. What is an HMO?
A. An HMO is a Health Maintenance Organization.  At one time, this was one of the most popular plan types due to most services being provided for a relatively low co-pay.  However, many people don't like the idea of having to see their primary care provider to get a referral to see a specialist.  You have more freedom on a PPO plan.   HMO's aren't as popular as they used to be, and they tend to be expensive, but some companies still offer an HMO plan for those that are interested.
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Q. What are Limits?
A. Limits, sometimes known as caps, limit the amount of money that the plan will pay for specific plan benefits. This is done in order to create a plan with lower premium payments. For example, some plans limit the amount of money that the they will pay for outpatient treatment in a single year. Should you consider one of these plans? It depends on your age and health. If you are younger than 35 and are healthy this can be one way to save money. However, you need to be aware that you are assuming some risk with this type of plan. If you need more medical care in the limited benefit category than the plan will pay for, you will have to pay for the care yourself. In addition, if you develop an uninsurable health condition while on this plan (or any plan) you may not be able to switch to a different type of plan. Still, many people choose this type of plan when they can’t afford a more expensive plan. Any coverage is better than no coverage at all.
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Q. Does it Cost More to Use a Broker?
A. No.  Although a broker is compensated by the insurance company, you never pay more for a policy just because you use a broker.  Whether you buy a specific policy directly from the insurance company or allow a broker to use their expertise to assist you in choosing a plan, the price is exactly the same.  When you use a broker, not only do you have the advantage of having an expert educate you and help you choose the best plan for your situation, the broker can also help you with any issues that may develop between you and the insurance company.
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Q. Should I Delay Getting Insurance?
A. Absolutely not!  Not even for a few days.  I have met with many people that had no health insurance at all.  During our meeting, we would discuss many plans that would meet their need and fit their budget.  A fairly large number of those people decided to "think about it" instead of applying for coverage.  This response always causes me great concern.  Based on my personal experience, and the experience of many of my clients and potential clients, putting this decision off could be one of the worst financial decisions you make in your life. 

I once considered going without insurance for one month because I was "in between" my old and new coverage.  Instead, I applied for a short term policy for my family, just for that one month.  In the middle of that month, my son was involved in a horrible auto accident and the medical bills totaled over $150,000.  Out of that amount, I only paid a few hundred dollars because I chose not to go without coverage.  I have met people that chose to go without insurance that have fallen off of ladders and shattered a wrist, fell while walking or running and injured themselves, and were involved in all types of accidents.   The medical bills associated with these injuries put a huge dent in their bank accounts and could easily bankrupt some people.  Even worse, some were diagnosed with diseases while uninsured that were serious enough to make them uninsurable.  If those people would have had permanent insurance at the time of the diagnosis, they would have continued to be covered.

At the very least, if you feel you need to put off the decision to apply for permanent coverage, at least obtain short term coverage.  Short term plans are available for anywhere from 1 to 12 months, depending on the carrier.  If anything does happen, you will be very happy to have the coverage.  Permanent plans are highly recommended, but short term plans are vastly superior to going without coverage.

I personally carry health insurance, life insurance, auto insurance, home insurance, and other types of insurance policies.  I know insurance premiums aren't exactly a fun way to spend your money.  Believe me, I feel the same way.  However, insurance provides the assurance that if the unexpected happens, you are covered.  With a suitable insurance policy, your assets are protected and you have one less thing to worry about in life.
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