Q: I’m 23 years old and can no longer be covered by my parents’ health plan. I have to get my own insurance and I don’t understand the underwriting process. Can you give me some ideas how to start shopping? I won’t have a job with benefits.
There are two main issues: health history and type of coverage. If you are taking any expensive medications or have an on-going health issue, you may have trouble getting individual insurance. So, you want to start the application process at least 90 days before your current coverage expires. The application will ask you detailed questions about your medical history. Be sure to give complete answers with physician names, addresses and phone numbers. The underwriter who reviews your application only “sees” you on the paper, so it’s important for them to have good information. They may write to your doctors for detailed medical information if necessary.
If your medical history warrants, the individual policy may be issued with a rating (extra premium) or could be declined. If your parent’s plan is a group plan, you will have COBRA benefits available. COBRA is a law that allows qualifying dependent children to continue the group coverage for up to 36 months. If you apply within the 60 days from the “qualifying event” (age change), you can not be turned down for COBRA coverage. You don’t want to close that door until your new plan is issued.
If your parents have an individual plan, most carriers will allow you to split off on your own plan with limited or no underwriting to a plan like theirs.
The other issue is what type of coverage do you need? Most young people don’t have a lot of medical expenses. So, it makes sense to look at the high deductible plans and perhaps start a Health Savings Account (H.S.A.) This way you are protected from a big claim but don’t spend a lot for premiums. Basically, the higher the deductible, the lower the premium. The savings account allows you to be prepared for future claims.
Be careful not to leave yourself without some form of coverage. If you are on your own with low income you may qualify for MediCal though the state. For information listen to the message at 225-5777.
Q: I don’t speak “insurnaceze”. Can you please provide translations for some of the common terms?
Following is a short list. Always be sure to stop the agent and ask for an explanation of any term you don’t understand. Don’t ever be afraid of sounding stupid.
PPO: Preferred Provider Organization: This is the group of providers (doctors, hospitals, labs etc.) that the insurer encourages you to use. They do this by giving you better benefits when you go to those providers. Usually, they have pre-negotiated a big discount off the regular billed charges, which saves money for you and the insurer. You will only pay your percentage of the discounted or negotiated amount.
Deductible: This is the amount you must pay before the insurance starts paying. Typically, it is accrued on a calendar year basis. Ex. If you choose a $1,000 deductible plan, you pay the first $1,000 in medical expenses before the insurance pays.
Coinsurance: This is the split between you and the insurance company for services. If they say the plan is an 80/20 plan, that means the insurer will pay 80% and you’ll pay 20% of the expenses after the deductible is met.
Copay: These are flat dollar amounts that you pay for a covered service. Typically, these do not count toward the deductible. The insurer pays the rest of the service after the copay. Ex. $35 office visit copay means that you will pay $35 for the consultation at your doctor. The insurer will pay the rest. Note this often means the consultation only and does not include lab tests or other services you received during that visit. Many plans have a prescription drug card that only requires that you pay a copay for your Rx. A typical copay would be $10 for generic drugs and $25 for brand name drugs that are listed on the Formulary.
Formulary drugs: These are drugs that are on the insurer’s preferred list. Typically the insurer will have a better price on these brand name drugs, so will charge you a lower copay. If a drug is NOT on the formulary it will be much more expensive for you.
Out of pocket maximum (OOP): This refers to the most you should have to pay in coinsurance (your 20%) in a calendar year in the event of a very large claim. Ask if it includes the deductible and copays. Often it does not, so it’s not truly the most you will pay out of your pocket in a calendar year.
Coordination of Benefits: (COB): This is how insurers pay when you have two insurance plans. Ex. A husband and wife are both covered on each other’s group insurance plan from two different employers. Both have a $500 deductible and 80/20 plan. Typically, they will have 100% coverage between the two plans.
EOB: Explanation of Benefits: This is a record of how the insurer paid the claim. It shows if any of the charges went to the deductible or copays as well as the net amount that you should owe the provider. Be sure to review these to be sure you did not over pay the provider.
It is open enrollment time for my Flex Plan (Section 125). How do I decide how much to defer into the plan?
This is a great way to pay for unreimbursed medical expenses with a pre-tax dollar. This can include copays, deductibles, orthodontia and even over the counter medicines.
First take a look at what you spent last year for those type of expenses. Then try to estimate what you will spend this year. Will it be close to the same or are you expecting to have a big expense like Lasix eye surgery? Once you reach a total, I recommend that you reduce it by 10 percent due to the fact that the plans have a “use it or lose it” provision.
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
