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DETERMINING YOUR HEALTH INSURANCE NEEDS |
| Catastrophic Events | ||
| Everyone is well aware that health care costs have gone way
over the top. Even though many see the insurance companies as
the culprit, and there are good and bad companies everywhere,
but the real cause for the high costs of health insurance is the
ever rising high cost of medical
care. The fact is that most insurance companies are just as concerned to try and make their plans affordable as you are, otherwise no one will buy their insurance. The dilemma is that if you think you can't afford the monthly premiums now, how will your family survive if you are hit with a major medical event? A catastrophic event. There are insurance plans out there that offer lower monthly premiums. However, are they offering the coverage that you need to protect you and your family from financial disaster should a major health even strike you or your family? To know, you will need to educate yourself. Best way is to call us and let us help go over everything on the phone with you, |
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Maximum Policy Limits
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Insurance plans have maximum pay limits. The maximum the plan will pay in total, no matter what the circumstances are. Some plans have individual lifetime maximums, some have family lifetime maximums and some have annual maximums for either the family or per individual. With today's rising medical costs we
suggest looking for a plan that has $5,000,000 per person, which is
pretty much top of the line. Life Health offers plans providing you
with flexibility. |
Terminology
| Deductible | The Deductible is an annual amount that you must pay first
from your pocket before the insurance company will begin paying.
Say you have a $1000 deductible and have a minor fractured
wrist. The doctor's visits and costs may total $900.
This is below you deductible which means you will need to pay
the full amount. However, should you have another
injury in the year where the medical cost are, say, 2000.
Then you will pay another $100, bringing you to the $1000
deductible amount, and that insurance company will "begin"
paying. Please see "Coinsurance" to understand how
much the insurance company will pay at that point.
An individual only has the one deductible. For families, some insurance companies offer a single familydeductible, others have a deductible per person - which often includes a family maximum deductible. |
| Coinsurance | Coinsurance is the amount you must pay after the insurance
company begins paying (after the deductible is met). A
common coinsurance amount is 80/20. 80/20 means that after
the deductible is met, the insurance company will pay 80% of the
remaining covered costs, while you must pay 20%. Say you have a $1000 deductible, and have a covered accident where medical costs total 6000. You would pay the first $1,000, which leaves $5,000. You will still need to pay 20% of that 5,000 (1,000) while the insurance company will pay 80% (4,000). This means that in this example you would pay a total of 2,000 while the insurance company pays 4,000. We have plans that pay 100% - meaning that once you have paid your deductible the insurance company will pay 100% of the remainder and you will not need to pay any coinsurance. However, 100% plans have higher monthly premiums. We also have 80/20, 70/30 and 50/50 plans. Along with Coinsurance most plans include a Maximum Out Of Pocket limit. See below |
| Maximum Out of Pocket |
Maximum Out of Pocket is the most you have to pay for your
coinsurance obligations after the deductible has been met,
up to the maximum policy limit. Say you have a health issue with a total of 30,000 in medical costs, you have a 1,000 deductible and a 70/30 plan with a maximum out of pocket of 3,000. You are obligated to pay the 1000 deductible, plus 30% after deductible. However, once the 30% coinsurance totals 3,000, then the insurance company will pay 100% of remaining costs, up to the maximum policy total or annual limits. In this example you will pay 1000 (deductible) plus 3,000 (max out of pocket) for a total of $4,000, while the insurance company will pay $36,000. |
| Copay | Generally copay refers to Dr office visits. Copay is
the amount that you must pay per office visit. For
example, say the doctor charges $65 for an office visit.
If you have a $35 copay, then you must pay $35 and the insurance
covers the remaining fee. Most insurance plans limit the number of Dr office visits per person per year (you can always see the doctor as often as needed, but after the allowed number of visits are made you must pay the full amount to the doctor directly). Also, a number of plans no longer offer copay, especially Health Savings Accounts - which are discussed later on. The reason is to reduce monthly premiums. Many people rarely go to the doctor, so for those people they have the options of paying lower monthly premiums, with the downside that when they do need to see a doctor, they must pay the full price of the visit directly to the doctor. |
| High Deductible Plans | Many companies now offer High Deductible plans,
with some as high as 10,000 - 25,000. These plans
come with much lower monthly premiums. These plans can
make sense if used as part of an larger strategy.
Some people have sufficient liquid assets in short term CD's or
savings or other similar accounts, where if the need arouse,
they can draw from those funds to pay for that high deductible.
This saves them a considerable amount in the monthly payments,
yet, they have the peace of mind knowing that should a major
medical event occur and they are faced with large medical
expenses, they are covered. There are other ways of managing such a large deductible, one way is with an HSA plan, described below. Another way is to purchase accident and critical illness indemnity policies which when diagnosed with a covered major illness or cancer, or covered injury, those indemnity plans will pay you directly in cash. That money can then be used to offset the high deductible. Even though those additional plans have additional costs, generally the total premiums cost out significantly less then a medical plan with a much lower deductible. However, something to keep in mind is that there can be gaps in such a strategy. For instance, if the insured should contract an illness, virus related (such as influenza, AIDs, etc), most critical illness plans do not cover those illnesses, and if you should incur major medical costs that are not covered, then you will be responsible for the high deductible costs. |
| HSA Health Savings Accounts |
HSA plans generally come with a higher deductible and lower
monthly payments. These plans are becoming more
popular today, and for good reason. However,
although many agents sell them on the idea that the monthly
payments are lower, this is May Not be the case if the
plan is executed as intended. The main advantages of an
HSA plan is not necessarily lower monthly costs, but, as we will
explain, the real advantage is tax savings and the ability for
you to take more control over you health care costs. A Health Savings Account is a plan that allows you to deposit funds into a special Savings Account that becomes part of your health care costs strategy. The idea is that you can get an insurance plan with a higher deductible, thus having a much lower monthly premium. However, you should take the extra money and deposit it into your HSA account. This means that if followed properly you either will be paying the same total per month, or generally slightly less. Then, what is the advantage of an HSA if you wind up with the same or a little less monthly costs? Because the money deposited into the HSA account remains YOUR money until you spend it. And, that money has Tax Advantages. The money you pay into the HSA account is tax deductible from your gross income. You don't pay taxes on that money. And, as long as you use that money for medical expenses, you never do pay income taxes on that money. Should you, however, need to withdraw those funds for other then medical costs, then you will need to pay income tax on just those funds. If you are in good health now, and remain that way for many years, you can save up a good sized amount in the HSA. This will more then cover the high deductible cost should a major health event occur. However, you can also draw from the HSA for smaller medical costs, such as doctor visits, prescriptions, or even many over the counter medicines. (You may need to consult with a tax specialists or call the IRS to know exactly what is and is not covered as tax deductible expenses). |
| PPO's In Network and Out | A PPO is a Preferred Provider Organization, or Network.
Each insurance company has their own, or multiple, PPO's.
If you want to keep your current doctor and/or have preference
for what hospital you want to use, make sure before you finalize
on what plan you want that your doctor and/or hospital are in
the PPO. Each company has it's own policy, but, most charge a higher deductible and pay less on the coinsurance if you use a doctor or medical facility that is outside of their Preferred network. Some PPO's are limited to certain areas of the country, or states, so if you travel or plan to do so, also check to see that your plan has providers in that area. Also, a good idea before you do travel, check with your agent or insurance company and get a list of providers in the areas you will be traveling to, so that should you need medical help, you will know which facilities are in your PPO network. |
| Out Patient Services | Be aware that some plans do not cover out patient services
at all, and many others set annual limits to what they
will pay for out patient services. Also, be knowledgeable
what your plan considers an outpatient service. Some
plans may not cover or limit coverage for other out patient
services, but will pay for MRI's, Chemotheropy, and many other
costs. |