Guest Post by Timothy L. Barnes, CLU
This post is Tim’s response to my post of June 17th, The Self-Employed Health Insurance Dilemma. As a Chartered Life Underwriter, Tim wishes to point out that there are affordable health insurance options for the self-employed–and for nearly everyone else–if you know where to look and are prepared to make necessary trade-offs.–Kevin M
In the 1939 classic, ?Mr. Smith Goes to Washington,? Frank Capra illustrated thatWashingtonD.C. had already become a place where politicians were willing to spread lies and misinformation to serve their own desire to hold onto power.
Nothing has changed in the last 60 years.? Politicians have used the media to spread rumors about health insurance that are not entirely true.? The only difference is that in 1939 the?media was dominated by newspapers.? Today, politicians prefer to smile in front of TV cameras.
The people called ?journalists? in 1939 are now called TV anchors.? Just like the ?reporters? in the 1930s, TV news tells stories that will result in more advertising dollars.? Newspapers before World War II and TV stations today honestly tells stories but with their own agendas in mind.
Most recently, politicians and pundits have told Americans that they need to be scared by the high cost of health insurance.? They are using the classical political trick that Michael Douglas exposes in ?The American President.?
They are,
- Telling Americans what to fear.
- Telling Americans who to blame.
?That is how you win elections!?
A few years before Jimmy Stewart filmed Mr. Smith Goes to Washington, a national politician reassured Americawith, ?We have nothing to fear but fear itself.?
In other words, “Don’t have a cow, man!”, “Stay cool” or “Keep on trucking.”
The difference between then and now is that the fear of The Great Depression was natural.? The fear about health insurance is man-made by politicians and the media, in many cases.
Please, do not get me wrong.? I do not live under a rock or on the moon.? I know the cost of health insurance is astronomical.? I have worked with insurance for almost 24 years.? That is about 24 years longer than the politicians and pundits, from both parties, who spent the years of 2008-2010 screaming that the sky was falling in the health insurance industry.
I am now a licensed Insurance Counselor.? As an Insurance Counselor, I am not paid by the insurance companies.? My clients pay me directly for facts regarding health insurance.? That way, when they do get ready to buy health insurance, they do not have to wonder if the insurance agent they use is giving them their best option or looking out after his/her own commission.
In the words of a former politician, ?Let me make one thing perfectly clear?? I am not an apologist for the insurance companies.? As far as I am concerned, they serve a clerical and research function for society.
Since they are a business, they will charge whatever they want to.? People who want their services will pay their prices.? People who do not want their services will pay the doctor/hospital directly.
During the presidential election of 2008, the escalating costs of health insurance premiums were a nuisance, just like the rising costs of energy.? A presidential candidate used the highest figures he could get and scared an entire nation into mass hysteria.? Health insurance is no longer a nuisance.? It is a national emergency.
Although many tragic anecdotal stories were told, Americans were not told the entire stories.? Since there are only a couple of politicians in D.C. with any background in insurance, Out of Your Rut.com has graciously allowed me to share the other side of the story with you.
State Differences
Health insurance premiums are already regulated by state governments.? All the PPACA did was take the regulation responsibility partially from the states and make it federal.? The McCarran-Ferguson Act of 1943 gives congress that right.
Currently, state regulations require insurance companies to charge premiums that are high enough to pay for the anticipated medical costs for their members in the next year.? That means that there is a relationship between what your doctor/hospital charges and you health insurance premiums.
The more your doctor/hospital charges, the more your insurance company have to collect to pay them.? It is important to remember that your insurance company is not your doctor.? They exist merely to pay the bills charged by doctors and hospitals.
Plan Differences
In order to scare Americans, politicians cited the most expensive health insurance plans available.? I would be a fool to say that they lied in every case.? There are some people who need all the health insurance benefits they can get.? There are some people who do not need those high cost plans.
For example, not everyone needs maternity coverage.? Single males of all ages do not need to pay for it.? Females who are not in their child-bearing years do not need to pay for it.? Yet maternity insurance is standard coverage for most group plans.? Some states allow employers to remove maternity coverage and others require that people pay for it whether or not they need it.
Depending on where you live, a routine maternity can cost as much as $ 12,000.? A pre-mature baby with difficulties can easily exceed $ 250,000.? Somebody has to pay those bills.? The cost is spread out among all the insured members of the group.
In my state, individual policies do not have routine maternity coverage.? They will only cover complications of pregnancy.? As a result of benefits like maternity being removed, insurance companies do not have to collect as much money to pay claims.? They can reduce their premiums by almost 40 %.
Insurance Company Differences
Each state helps determine the minimum amount of premium health insurance companies may charge. In many states this is called a ?benchmark? rate.
The maximum premium is determined by the laws of the market place.? The insurance companies know that at some point the premium they charge will be too high and people will elect to forego their claim paying services and pay for their medical bills themselves.
Insurance companies will set their rates somewhere between the two extremes.? Obviously, the higher they get from the state?s benchmark the more profit they make, that assumes they do not price themselves too much higher than their competition.
If they do, a phenomenon called, ?Adverse Selection? occurs.? ?Adverse Selection? is the fancy way to say that the healthy people will leave the insurance company if the premiums get too high and only sick people, with high claims, will remain.
When adverse selection occurs, the insurance company has no choice but to use up their reserves.? If they have not corrected the problem by the time the reserves are used up, they have no option but to close their doors and file bankruptcy.
Portfolio Differences
During the Health Care Reform debates politicians were eager to use the media to tell the sad stories of people who had to file bankruptcy even though they had health insurance.? When they told those stories they did not tell them completely.
Major Medical health insurance only pays a portion of medically necessary bills.? It does not pay other bills that continue.
For example, if a wage earner suffers a back injury he/she could be unable to work for 6 months or more.? During that time, he/she has to pay deductibles and co-insurance for his/her medical bills.
He/she also has to pay mortgage, car expenses, utilities and grocery bills while he/she is unable to work.? If he/she has sufficient savings to pay all those bills, there is not a problem.
If he/she does not have sufficient savings, there only option to avoid bankruptcy is to supplement their Major Medical insurance with Disability, Critical Illness or Accident insurance.? In many cases they are available through your employer either as part of your benefit package or stand alone ?Voluntary? benefits.
Other employers do not offer the supplements.? If that is the case, you will need to contact an insurance agent to help you.? They do exist.? If your employer does not offer them, it is your responsibility to search them out on your own.
The 4 Essential Benefit plans that are mandated in the PPACA all have cost sharing elements.? Even with the new plans you will have 4 choices if the wage earner gets sick or injured.
- Use your savings to pay bills during your recovery.
- Use insurance supplements to pay bills during your recovery.
- Reduce your standard of living.
- File bankruptcy.
Purpose
The purpose of this guest post is not to promote a political opinion or frighten anybody.? I am not running for any political office and do not need your vote.
What I want to do in this post is relieve some of the fear caused by rumors and misinformation.? You are still responsible to make your own decisions about how you are going to pay your medical bills.
If you elect to use health insurance, you do not necessarily have to budget the equivalent of another ?house payment.?? I pay $ 157 a month to cover myself and my wife and I am 51 years old.
You are free to pay more than $ 1400 a month for health insurance if you want to allow someone else to make your decision for you.? If, however, you are healthy and do not see the need to pay that much, do a little shopping around.
I cannot speak for all the states.? I only have experience in 5 of them.? Your state?s laws may mean that you have no choice but to pay ?house payment? rates.? I do know that in the 5 states I have worked, health insurance is still available at rates closer to ?car payments.?
I?m not going to suggest that you purchase the cheapest thing you can get.? After all, the old saying, ?You get what you pay for? is as true with health insurance as it is with any other commodity.
What I am saying is that when it comes to health insurance, don?t panic. ?Health insurance premiums are nothing to fear.? They are like the monster that lived under your bed when you were a kid.? Once you turned the light on, the monster disappeared and took your fear with it.
If you invest a little time in shopping and your state offers health insurance options, you can often find a better deal.? Your fear will go away.
Guest blogger, Tim Barnes, CLU is an Insurance Counselor in Richmond, TX.? He maintains a blog for retirees at www.tibtips.com and another for active workers at www.thetibbit.com.?? You may contact him through either blog or his website, www.theinsurancebarn.com if you have any insurance related questions.
Currently, he is licensed to discuss state specific insurance questions in Texas, Indiana and Michigan.? If you live in a different state he can only answer general insurance questions and direct you to someone who can answer your state specific questions.
Tim?s agency publishes a weekly newsletter.? To subscribe, click the button.)
I think Tim’s article could provide hope for many (most?) of us that are in the hunt for affordable health care.
Looking through health insurance documentation can be pretty intimidating because there are so many factors to consider, like in / out of network, co-pays, deductibles, etc.
But my main questions is where to start? Does it start with finding an insurance counselor like Tim? Are there ways that the everyday person can discover the facts on their own?
Chris,
On July 20 & 22 I ran a 2 part series on http://www.tibbits.com on “How To Pick An Insurance Agent.” (I hope to combine it and edit it for Kindle in the near future but the information is available for free on that blog.) Obviously, I am more biased for people to hire a fee-based Insurance Counselor than an insurance agent. We act as a consultant. Since we charge our clients a fee, we are not allowed to accept any commissions from insurance companies. As a result, my clients are prepared to tell insurance agents what they want and not get biased advice. (Also, in light of the PPACA, insurance companies have slashed the amount they pay insurance agents to help people with health insurance. Many people expect that this is merely the first salvo. It is anticipated that sales commissions will be eliminated totally for health insurance by 2014. If that happens, the only insurance “professionals” that can help with confusing health insurance will be government employees called “Navigators” or fee based insurance consultants.
Today, most people prefer the older system of getting advice from a traditional insurance agent. There is absolutely nothing wrong with that. Even in that system, there are good ones and bad ones. Just be advised that they are going to give you advice based on their income potential. That does not make them a bad human being. It just means that they are usually only familiar with the products that pay them. They have to eat, just like the rest of us. To minimize that risk, look at an independent insurance agent who offers products from 2 or more insurance companies. He/she has more freedom to offer true advice before you choose an insurance company than an insurance agent who is “captive” to just one company.
If you do use an insurance agent, be advised that he/she is only able to provide limited advice. Once you have made your selection and submitted an application, if he/she stands to be paid a commission by the insurance company, he/she is obligated by the Laws of Agency, to act in the best interests of that specific insurance company.
If you do not want to pay a professional and do not trust using a commission based insurance agent, you can do some research on your own. Just be aware that any product you look at is going to be biased. You can get information through sites like You Tube, blogs, etc. Health insurance is such a political topic. You will not have any problems finding information. Just beware, some of it is fact and some of it is opinion.
Insurance professionals work with this stuff everyday. Hopefully, they will know how to tell fact from opinion. If the lines can get blurred for you, get an insurance professional. If you can tell the difference, find tools that help you and not sales only tools. I have tried to make my web-site, http://www.theinsurancebarn.com a helpful and educational site. Visit the Major Medical page, watch the video and do some comparison shopping between companies.
If you have additional questions or a specific need, and want my professional input, use the contact form. Just don’t be surprised if you also get subscribed to my insurance newsletter.
Mr. Barnes, thank you for your informative and insightful post. I am writing to ask if there is any advice you can offer someone like me. I am soon to turn 26 and like many young Americans, am 1) out of work and 2) will be losing my parents’ insurance policy as soon as my next birthday arrives (if not sooner). I have given up on looking for work anymore (since I have no intent of applying for fast food or retail), and am not in a state of mind where I can or want to bother with or stress over a useless college education (in this day and age) that I can’t afford either.
I am so afraid of defaulting on welfare, because I’m not homeless or dirt poor, but as an individual have $0 income and will soon outgrow my parents’ policy and have nothing else besides welfare, because they are not able to pay for healthcare out of pocket either. Can you offer some advice as to what I (and other people in my situation, because I know there are SO many) can do?
It is definitely worth doing some research before signing up to any health insurance policy. Shopping around for different plans may seem like a bother, but only by making a proper comparison can you determine which plan can give you the best health insurance benefits at the lowest possible rate.