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Obstacles to health insurance

Q. I applied for an individual medical insurance plan and was declined.  I was shocked.  I only take two medications at 10 mg:  Lipitor for cholesterol and Norvasc for blood pressure.  I haven’t had any other claims in years.  Why would I be declined?  What do I do now?

A. Underwriting for individual health insurance is a real issue for our clients. The companies are very conservative.  They use a point system that evaluates the risk, as well as some subjective criteria.  The AWP (Average Wholesale Price) of your Rx might be about $225 per month.  While you are used to only paying your copay, the insurer is already on the risk for something close to $2,800 for the year.  Since you must be monitored, you will have a couple of office visits per year.  They know they are “buying a claim.”  This makes you a higher risk than someone who has none of these problems. If you are overweight, you are prone to more problems.  Check out this link for more information on AWP:  http://www.pdrx.com/ss/pdrxawp

The best analogy I can give you is to look at it like buying fire insurance.  Your underwriter looks at the house and sees you have a small fire in the corner of the kitchen.  You tell the agent, “Don’t worry.  I water it every day and keep it under control.” But what happens if you don’t?  Once the insurance company takes the risk in health insurance, it can’t cancel you.  So if your health deteriorates, it can’t charge a higher premium or cancel you.  That being said, most agents I know are frustrated with underwriting and we are working with the companies to review their practices in hopes that we can insure more clients.

There are several options for someone who is declined.  Most are pricey but not as costly as an extended hospital stay.

First, you or your agent should contact the insurer to see if there is any other plan that might be offered to you. Be cautious about buying plans that cover only generic drugs.  Following is a list of options to explore:

1) MRMIP (Major Risk Medical Insurance Program). This is a state-run program that offers coverage to declined individuals. Over half the total cost is provided by subscriber premiums.  The balance is funded by Prop 99 funds.

2) If you have recently exhausted your COBRA coverage, your insurer will offer coverage in their Guaranteed Issue plans, assuming you meet the criteria.

3) If you are low-income, you can apply for coverage under MediCal.

4) If you own a small business you may be able to qualify for guaranteed issue group insurance.

Q. I’ve heard that health-care fraud is a big issue these days.  Is that true or just a sham to get us to choke down these high premiums?

A. Sadly, health-care fraud is a huge issue.  The total costs are estimated in the BILLIONS of dollars.  These costs range from the simple practice of billing for a service that was never rendered to the more complicated areas of unnecessary procedures.  The additional human cost of this level of fraud is immeasurable when you examine the way in which lives are changed.  It can include such things as “upcoding” an office visit to obtain a higher fee.  Other types of fraud include withholding material information such as medical history, dependent status, etc., to obtain coverage that would otherwise not have been issued.

It is my opinion that the public has become anesthetized to big numbers because they hear them so often.  For example, the total settlements in the RMC cases were about $100 million.  That translates to about $1,250 for each of Redding’s 80,000 residents. Imagine 80,000 people lined up to receive $1250.   This is only one case.  There are countless others.

As consumers are faced with higher deductibles and premiums, I hope they will be more aware of these issues and understand that they play a part in this system.  Most insurers, as well as Medicare and MediCal, have fraud reporting tools for consumers to alert them to investigate. The California Department of Insurance has a fraud investigation unit.

A word of caution:  If you are tempted to withhold material information on a health insurance application, remember that the company has the right to rescind the policy if it is discovered.  Your premiums would likely be refunded and it would be as if no insurance had been in place.  This is often discovered when you have a big claim and the file is reviewed.  That is not the time to find out you have no coverage.

Margaret R. Beck owns and operates Affiliated Benefit Services at 1348 Market St., Suite 208 in Redding where she is a licensed CLU (chartered life underwriter), ChFC (chartered financial consultant) and CEBS (certified employee benefit specialist). She may be reached at (530) 225-8583 and mrb1348@gmail.com

Margaret R. Beck

Margaret R. Beck

Margaret Beck CLU, ChFC, CEBS started her insurance practice in Redding in 1978. She is the founder of Affiliated Benefit Services where businesses and individuals are assisted in choosing proper products, compliance with complex benefit laws and claims issues once coverage is placed.

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