How to Beat Your Health Insurance Company

Interestingly, most people don’t know which factors to look for when they purchase health insurance. They don’t buy insurance very frequently, and they don’t get a good agent.

It is easy, but most people don’t do it. The secret is to get a health insurance plan while you are young and healthy. (Did I hear you groan?) Health Insurance is usually the last place where a young man looks to spend his money – women are much more interested in safety, security and don’t feel invulnerable to the vagaries of the world.

It isn’t too late. Even if you are older now, and didn’t get the plan you need, you can start right now. (You aren’t likely to get heathier as you age. As we age, we tend to put on weight and as we age, more things tend to go worng.)

If you are the correct weight for your height and you don’t use tobacco, you might get a preferred rate on your plan.

So, it sounds pretty easy. Just get the insurance plan early while you are young and healthy!

Another salient point. Once you have obtained a plan, and have a rating as to your health at that time, that insurance company cannot change it later. So, let’s take an example. Let’s say you get a preferred rate on a plan and two weeks later, you are diagnosed with cancer. THE INSURANCE COMPANY CANNOT CHANGE YOUR RATING based on your health, and it cannot increase your premium. You will carry this preferred rate as long as you stay with that carrier.

Your monthly premium will likely go up each year because, of course, you are a year older. Also, the general population in your area of the state will have aged. They also might have a higher incidence of disease, so your premium will increase. Remember, though, the amount of your premium increase will likely be less than someone who didn’t get a preferred rate to start with.

What do you do if you have financial trouble?

I would suggest that if you possibly can, keep your plan in force. If you have a preferential rate, don’t lose it by canceling your health insurance – simply change to a less expensive plan with your current carrier.

You might be “forced” into considering an HSA type plan. This type plan is a high deductible health plan that doesn’t have copays for doctors and drugs. You may feel that you are forced to make this decision. Surprisingly, this is the type plan you should have purchased from the start. HSA plans are not only less expensive per month, but your total out-of-pocket expenses, if you are hospitalized, are typically less than copay type plans. In addition, you have the right, but not the obligation, to open a health savings account at your local bank.

The money that you deposit into this savings account is not subject to taxes. The tax savings that you will experience will reduce your overall expense of the health insurance plan. Don’t underestimate the effect that taxes have. For example, as an individual, you can deposit $3,000 into your HSA account for 2009. The average individual is in the 28% tax bracket. Add in the state’s income tax fee, which is usually in the range of 8%, and you have a savings of $.36 of every dollar you deposit into YOUR account. That is $1,080 or $90 per month!

Let’s take an example: You find that you need to have your gall bladder removed. If you have a copay plan, you typically will have a deductible of $2,500. So, you are likely to think that you will have to pay $2,500 to have this procedure done. No, no, my friend. You still have something you may not know about, or forgot about. It is called coinsurance. Coinsurance means that you co-insure the first $10,000 of the expenses with the insurance company. The most common coinsurance proportion is 70/30. That means that you will pay 30% of the first $10,000 and the insurance company will pay 70% of the first $10,000. In other words, you pay $3,000 and the insurance company pays $7,000 of the first $10,000. After that, the insurance company pays 100% — up to the limit of the policy.

Since a gall bladder operation is at least $10,000, you will have to pay your portion of the coinsurance, 30% or $3,000.

Let’s do the math: You are going to pay $2,500 for the deductible and another $3,000 for the coinsurance. Out-of-pocket expenses in this situation total $5,500. Where do you have that much money put away? It isn’t easy to come up with the money, but you can usually work out a payment plan with the doctors and the hospital. If you don’t have any insurance, this isn’t quite as easy, and they charge you much more for the same procedure.

Now, let’s compare the out of pocket expense for the less expensive HSA plan. Most people who purchase Health Savings Account type plans choose the $2,700 deductible. In addition, they select the 100% coinsurance. That means that the insurance company pays 100% of expenses after the deductible is met. So, if you have that same gall bladder operation, your out-of-pocket expense will be $2,700. That’s it. So you see, your risk is reduced from $5,500 to only $2,700. That is a savings of $2,800 – over 50% savings in the amount YOU have to pay!

There is always a “gold standard” plan in any state. It is the plan that most people purchase. Be wary of insurance companies where the rate is lower than that plan. New insurance companies may be trying to “buy business” in your state. They will get you in with a teaser rate. Next year, you are likely to have a gigantic increase in your premium. Why? Because they don’t have a large enough insured base. If a small number of people get dread diseases, it affects the small population of insured people inordinately.

If this happens to you, you would leave and go to another insurance company. You can leave, only if you are still healthy. If your health has changed for the worse during that year, you are stuck with the expensive insurance company. Next year, the healthy people will leave and go find insurance elsewhere. . . only the sick people stay, because they have to. It is an upward spiral of insurance premiums. The insurance company will have to make up their losses by increasing YOUR premium. You don’t want to get caught in this horrible situation.

In summary:

Find the right health insurance carrier from the start, and stay with it.

* It must be one that has a history of paying claims without a hassle.
* It must be one that is accepted by all the hospitals in your state.
* It needs to be the insurance company with which almost all the doctors participate.
* Make sure that the plan covers you if you were to travel to other states or to other countries.
* Choose a high deductible health plan and open up an HSA (Health Savings Account).
* (Don’t go for the best priced plan from a company not well established in your state.