HEALTH INSURANCE

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Key Takeaway 1:

If you want to get full coverage with no limitations on the 1st day of the policy, then you want ACA or employer health insurance.

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Key Takeaway 2:

The best thing is to protect oneself for the worst case scenario with the budget you have. Sometimes we can’t be insured on the smaller cots. 

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Health insurance is the most common type of insurance, which covers medical expenses. While nobody likes paying for it, the alternative of not having coverage when you need it the most, is downright scary. Yes, the hospitals will treat you without  insurance in case of an emergency, but they will usually do the bare minimum only. Then you get to deal with the medical bills following you for years. You get to fend off bill collectors and in some cases, you might even have to file for bankruptcy – just to break the collection cycle. No matter how you look at it – medical insurance is usually among the top priorities on your budget. Especially if you have young kids or elderly in the family.

All of us are consumers of health insurance. Even the agents. And we all try to save money by not overpaying for insurance we do not need.

Let’s take a look at the most important points that every insurance consumer should understand. If you have deeper questions, please reach out to a trusted agent for advice.

KEY-POINT: Health insurance can be obtained in a variety of coverages – depending on your needs. If you are employed by a company with over 50 employees – you have an option to get health insurance through work. If you work for a smaller company or if you are self-employed, you can get a small group health plan, an individual Affordable Care Act (ACA) plan through the federal health insurance marketplace, state exchange, or you can purchase short-term coverage.

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Key Health Insurance Coverage Groups

• EMPLOYER-SPONSORED – GROUP HEALTH INSURANCE – employers with over 50 employees are required to offer group health insurance coverage. Large group insurance gets less expensive with size. The bigger the company – the better the plan.

The key features of Employer Plans are:

• • They are Affordable Care Act compliant, so all the pre-existing conditions are covered.
  • Guaranteed Issue  – so you can’t be denied insurance issue and renewals. This is regardless if your health conditioned worsened.
  • Premiums are usually less than what employees would get through individual coverage.

• SMALL GROUP HEALTH INSURANCE is a hidden gem of health insurance that people are frequently unaware of.

Small Group plan has the same ACA protections as the large employers and it has very minimal qualification requirements:

• • At least one (1) employee on payroll
  • A minimum of 2 applicants

• • • EXAMPLE: A married couple, where one of the spouses is self-employed and pays themselves a salary through payroll.  Both of them apply for coverage and all the conditions are met. If the same couple applied for individual (non-group) coverage, usually they will end up paying more for it.
    • See example of Small Group Health Plan usage below

Group plan cost is similar to individual ACA premiums, but the employer pays 50% of the employee’s premiums and sometimes more.

• SHORT-TERM HEALTH INSURANCE PLANS:
  • Not ACA complaint – pre-existing conditions are not covered.
    • Some short-term plans can be “guaranteed issue”, but they still do not cover pre-existing conditions.
    • Some short-term plans may offer coverage of light pre-existing conditions on year 2 and 3. But usually not during the 1st year
  • Short-Term plans are not available in all 50 states, so check the availability with your local agent.
  • Deductible is usually high
  • Plans can be as short as 2-3 months
  • Maximum term of short-term plan is 12 months BUT you can purchase several policies back to back. How it works: You enroll in 2 or 3 plans at the same time, by filling out the applications simultaneously. But you pay for them 1 at a time.
    • • PRO: Convenience.  It locks you in for a longer term of coverage, instead of rewriting the policy every 12 months.
      • CON: The cost is usually higher than if you got a fresh application done every year.
    • Some multi-year short-term plans cover preventative visits after a waiting period.
  • Paying for a 12-month short term health insurance plan in a lump sum usually provides a discount of around 18%.

Short-term maximum plan duration is mandated by the state*:

• • UP TO 3 YEARS (3 renewals): Alabama, Alaska, Arkansas, Arizona, Florida, Georgia, Indiana, Idaho, Iowa, Kentucky, Mississippi, Montana, Nebraska, North Carolina, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, Virginia, West Virginia, Wyoming
  • UP TO 1 YEAR: Kansas, Louisiana, Ohio, South Carolina, Wisconsin

Short-term plans are frequently used by:

• • People waiting for the employer or Medicare coverage to start
  • People between jobs and, consequently without employer-provided health insurance.

Short-term coverage is very popular among the self employed, when used in conjunction with a  correct supplemental hospital indemnity coverage. Indemnity insurance is the extra coverage, to help cover the cost of high deductible in case of an emergency.

Short-term insurance is currently unavailable in California, Colorado, Connecticut, Hawaii, Massachusetts, Maine, New Mexico, New York, New Jersey, Rhode Island, Vermont (this is subject tot change – check for details with your trusted agent).

Supplemental coverage must match what you’re trying to cover:

If you have heart attack supplemental coverage – it will not help with covering the high deductible cost of an appendicitis treatment.

But if you have an indemnity plan that pays you each day that you are hospitalized, or a $10,000 hospitalization policy – then you are covered.

Short term health plans are generally best for: Healthy individuals, who rarely go to a doctor and who do not have any expected medical treatments.

You can find out more about short-term plans here.

 

• FREQUENT TRAVELER (a.k.a. REMOTE WORKER) HEALTH INSURANCE – if you travel or work away from your home, you want health coverage that will continue covering you – no matter where you are.  These plans can be configured for coverage across the U.S. or worldwide.
• MEDICARE 
  • Medicare Advantage (also known as Part C)  is a private insurance alternative to original Medicare coverage. The most common Medicare Advantage plans are:
    • HMO (Health Maintenance Organizations)
    • PPO (Preferred Provider Organization)
    • PFFS (Private Fee-for Service)
    • SNP (Special Needs Plans)
  • Medicare Gap helps fill in the gaps in the traditional Medicare coverage

Short-Term vs. ACA – EXAMPLE:

Andy, a healthy, married small business owner has a low-cost short-term policy. He visits his doctor once a year for an annual physical, which is covered through his short-term insurance. He also has supplemental indemnity hospital coverage, which helps covering the high deductible costs in case of an emergency. So, if he has a heart attack or breaks his leg, he is covered.

During one of his annual physicals he discovers that he has cancer and will need a series of treatments, with an unknown duration and price tag at the end.

If it was a sudden emergency, like an appendicitis, the short-term + indemnity combo works great. Indemnity covers the initial costs and then the short-term kicks in for the rest.  But with cancer, this will be an ongoing process of treatments.

Short-term plans last up to 12 months. At the end you must re-apply for coverage. So, if Andy reapplies for a short-term plan – he will be denied, because short term plans do not accept pre-existing conditions. Since this will be a new term of coverage, anything that happened before the start of the new coverage is considered pre-existing. So, now because of the cancer diagnosis Andy doesn’t have health coverage at the moment he needs it the most.

The only way to get coverage for pre-existing conditions is to get ACA-compliant insurance. Andy now must decide what to do. The most obvious choice for him is to get the Individual coverage from the Health Marketplace. Andy goes to the website and runs the quotes. There a bunch of options and they range from around $400 to over $1,000. This is when Andy decides to do his diligence and reaches out to his friend Ted, who is a knowledgeable health insurance agent for advice.

Ted hears Andy out and immediately suggests to try a Group Plan coverage instead.  Ted knows that Andy is married to Jill and that he uses a payroll company to pay himself salary every month. That allows Andy and Jill to qualify for a Small Group coverage and possibly save on premium cost versus buying individual plans.

Under the small group plan, just like on the individual ACA plan, Andy’s pre-existing cancer is now being covered, and the plan will automatically renew, without having to reapply at the end of each term.

… Hopefully you get the idea. Different plans serve different purposes.

KEY-POINT: As long as there are guaranteed issue employer plans or ACA individual plans available for consumer at the of the short-term – there is no downside to having short-term insurance.

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• Statistic from 2020