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Tips for Buying Health Insurance
No insurance company is eager to insure the health of people with diabetes. In fact, they do so only when forced by competition or political dictate. Whenever possible, insurance companies attach restrictive diabetes riders, exclusions, and waiting periods to limit or eliminate their financial exposure.
Who can blame them? People with diabetes have more frequent and extensive medical claims than the general population. It’s not the costs of insulin, syringes, or blood tests that alarm insurance carriers. Rather, it’s a person’s long-term risk for serious diabetic complications — such as blindness, cuts that won’t heal, or circulatory problems — that can be hazardous to an insurance company’s financial health. While a person with diabetes in his 20’s or 30’s may be as claim-free as any other healthy person that age, the prospect of future medical problems is more than just a possibility; it’s a probability. And since insurance companies deal in probability, people with diabetes represent potentially devastating financial losses.
Even under the best of circumstances, it’s not easy for an insurance company to earn a profit from medical insurance. Hospital beds that not so long ago rented for $50 a night now cost thousands, miracle drugs priced at $100 a pill are commonplace, a simple appendectomy costs several thousand dollars, and there’s no end to this trend in sight. Insuring people with diabetes only adds to a company’s problems.
Along with the escalation of medical costs, adverse federal and state mandates have caused hundreds of commercial insurance carriers to leave the marketplace altogether. What remains is a sellers’ market in which the consumer has very little room to negotiate. The few companies that continue to underwrite medical coverage are very selective as to whom they will insure and for what types of medical benefits.
Until a cure for diabetes is found, obtaining decent medical insurance coverage will continue to represent a hardship for those who have it. Nevertheless, there is health insurance available — if people take the time and trouble to learn a few ground rules of insurance law and company underwriting practice.
Who decides what’s available
Barring any conflict with state or federal statute, the person who decides what an insurance company may or may not sell within a particular state is usually an individual known as the insurance commissioner. In some states, the commissioner is elected; in others, the job is a political appointment. Unless challenged in court, the insurance commissioner’s authority is absolute when deciding what may or may not be marketed within his jurisdiction. He determines what may be sold, by whom, at what price, and under what circumstances.
The commissioner is often regarded as a pain in the neck by insurance companies, but he is possibly the best friend a person with diabetes can have when a medical insurance claim is denied. Learn his telephone number; he is the first and best advocate a person with a chronic medical condition can have when dealing with a recalcitrant insurance company claims department. (The commissioner may be listed in the blue, government pages in the phone book. If not, call your state’s insurance department for his number, or go to the Web site of America’s Health Insurance Plans, formerly known as the Health Insurance Association of America, at www.ahip.org.)
Individual vs. group plans
In some states, the minimum group size for automatic acceptance may be mandated at five participants or even fewer. In Maryland, for example, a “group” of one is accepted without question during two annual open enrollment periods, as long as the applicant qualifies as self-employed. The same guaranteed issue privilege is extended to the self-employed person’s spouse and dependent children. Not surprisingly, otherwise uninsurable residents of nearby states who qualify as self-employed have relocated to Maryland solely to acquire group medical insurance.
Individual policies, with few exceptions, require all kinds of health questions. Rarely will a person with Type 1 diabetes pass a company’s underwriting evaluation process for individual coverage. Even a person with Type 2 diabetes may have to accept a waiver for anything related to his diabetes as a condition of acquiring coverage.
While group coverage may be easier to get, however, one insurance myth that deserves being put to rest is that group coverage is always less expensive than individual coverage. Often, it is not. Group premiums are generally based on the composite average age of the insured employees, the claims history of that group or industry, and the benefits selected. If a 20-year-old were to join a firm with nine other employees, all over age 50, and choose to join the company’s group insurance plan, he would probably pay the same rate as the other, older employees. If he purchased an individual policy, he might pay half the group rate. That’s because individual policy rates not only take into account the applicant’s age, but also his health history, height and weight, tobacco or alcohol use, as well as other personal considerations. Positive responses to health questions can favorably affect the premium rates an individual is charged.
Having diabetes, however, is not considered a positive response. So if the same 20-year-old employee had diabetes, the group plan rate might be a bargain. It’s important to remember, however, that group rates are not static: At each anniversary of the master plan, both premiums and benefits may change.
Acquiring group medical coverage at affordable premiums is a concern even for the healthiest applicant. If one cannot pay the premium, it doesn’t matter how good the insurance plan is. But annual insurance premiums — no matter how unaffordable they may appear — pale in comparison to the cost of a single day of inpatient care in a hospital. Who would imagine that a simple hip replacement, with a hospital stay of three days, would cost $50,000? Or that minor outpatient surgery could run $4,000 or more?
Self-funded plans are generally cheaper than other types of plans, but they may present a threat to a person with diabetes because they may not be subject to the insurance laws of a particular state. Since only the “excess” coverage is considered to be insurance, the designers of the plan can tailor the primary benefit formula as they choose, with little regard for the state-mandated safeguards that normally govern medical insurance.
If given a choice between enrolling in a self-funded plan or some other type of plan, a person with diabetes should carefully examine all the provisions of the self-funded plan related to preexisting conditions and benefit limitations. (A preexisting condition is generally defined as a physical or mental condition that was diagnosed or treated within the 12 months prior to the date of enrollment). If he doesn’t, he may find himself up the proverbial creek at claim time.
Indemnity vs. managed-care plans
PPOs. Indemnity plans that reward a person for seeking care from certain providers are typically referred to as preferred provider organizations (PPOs). Participating practitioners agree to accept a pre-determined fee schedule as total payment and not to charge more than that amount to a person covered by the PPO program. This doesn’t mean, however, that a person pays nothing for services rendered. Normally, the person pays an out-of-pocket expense equal to a small dollar amount or percentage of the total bill. For example, if the PPO fee schedule recognizes $100 for a specific procedure and pays 90% of that amount, a person would pay $10, the carrier, $90. If the practitioner’s normal fee for that procedure were $120, he would have to accept the $100 as payment in full. Another person with a different type of insurance would be billed the full $120.
In exchange for the discounted rate of payment, the PPO physician is assured of at least partial payment of his bill and a continual flow of new patients referred to him by the carrier’s directory listings.
HMOs. Unlike PPOs, health maintenance organizations (HMOs) actually employ the medical practitioners and require that all but life-threatening medical emergencies be treated by one of their own providers at one of their own medical centers. Some hybrid HMOs permit their physicians to treat people not in the plan, but in their original form, HMOs hired doctors and paid them a salary to treat only HMO members.
Establishing a medical center can be very costly for HMOs with relatively few members, so many small HMOs contract with existing practices to provide care to HMO members at set rates while treating non-HMO members on a fee-for-service basis. It is not uncommon to find a doctor or an entire medical practice representing several HMOs and at the same time, being an active participant in several PPO plans.
Some states now mandate that HMOs compensate nonmember physicians for at least a portion of the bill when they provide services to HMO members. In those states, the distinctions between PPOs and HMOs have become so blurred that it is often difficult for consumers to know which is which. In many cases, it makes very little difference at claim time since both PPOs and HMOs must answer to the same commissioner if a claims dispute arises.
While COBRA was a real breakthrough for employees, it has its weaknesses. For one thing, small employer groups (20 employees or less) are exempt from the law, and COBRA makes no provision for continuation of coverage if the employer cancels the group plan. Obviously, if an employer discontinues the master group policy, there is no way an individual subscriber can maintain coverage under it.
It’s important to note that the individual insurance policies whose purchase HIPAA guarantees are not the same as conversion policies, which are group policies converted to individual policies. Insurance companies have generally always offered conversion policy coverage to terminating employees and their dependents if they applied within 30 days of termination. However, the benefits available under most conversion plans are not nearly as extensive as those included in individual plans offered to a healthy buyer. Conversion plans are guaranteed to be renewable, but if a person does not choose to renew, HIPAA will not provide protection to switch from one individual plan to another.
HIPAA allows a person to purchase the same quality of coverage that would be offered to applicants capable of passing even the most demanding of insurance exams. However, while a person’s application won’t be rejected because of health problems, insurance companies can charge higher rates (with the state’s approval). Nevertheless, HIPAA is a real boon for those with medical problems: If a person is able to secure coverage under an employer-sponsored group medical plan, he doesn’t ever have to be without medical insurance again, assuming he continues to pay premiums.
The best plan for people with diabetes
A person with diabetes whose employer or union offers a variety of coverage choices may have to evaluate the pros and cons of each plan before deciding which is best. For example, people who live in large urban centers with several participating medical centers may want to explore HMOs. Generally speaking, HMOs cost a person less in out-of-pocket charges at claim time than either indemnity plans or self-funded plans. But HMOs may have more expensive premiums, and they may require a person to change from his current physician to a plan physician. That factor alone may decide the question.
Indemnity plans, including PPOs, generally give a person more freedom to choose his care givers and save him a few dollars in the premium outlay. The tradeoff, however, is that the insured person pays a higher proportion of doctors’ and other providers’ fees at claim time.
As for self-funded plans, most of them operate in the same fashion as PPOs and traditional hospital–medical programs. Self-funded plans offer a person more choices of providers, but at the same time, they encourage people to seek out certain practitioners by decreasing the person’s out-of-pocket share of the bill. And don’t forget that self-funded plans may not be regulated by the state’s insurance commissioner and that benefits that are common to traditional medical insurance plans may not be available to a person covered by the self-funded plan.
In summary, there is no such thing as a perfect medical insurance policy. Proponents of socialized medicine may disagree and point to Canada or Britain as having a perfect system, but a close examination of either system inevitably reveals some cracks. For now, American medicine remains a private, open-market enterprise, and the best method we’ve developed to pay those medical bills is adequate, private, medical insurance. In the end, while no medical system or medical insurance policy is perfect, any policy is better than no policy for people who have diabetes. For more information, see “Health Insurance Resources.”
Statements and opinions expressed on this Web site are those of the authors and not necessarily those of the publishers or advertisers. The information provided on this Web site should not be construed as medical instruction. Consult appropriate health-care professionals before taking action based on this information.