Your AARP Personal Guide to Buying Health Insurance

Your AARP Personal Guide to Buying Health Insurance
What you should know.
BA9802 (3/06)
A word from AARP
Health Care Options®
AARP Health Care Options is happy to offer you this personal guide to
buying health insurance. We are committed to being a source of user-friendly
health information for people age 50 and over — and to making products
available that can help you stay healthy. Even if you don’t purchase health
insurance through AARP Health Care Options, we want you to make an
informed decision, for your own good health.
Buying health insurance can be confusing, so this guide will help you
understand some of the issues involved. You’ll find questions to ask
insurance companies before you buy, as well as a glossary of insurance
terms. Throughout, you’ll also find the story of Alice, someone who needs
to buy her own health insurance for the first time. We hope her story will
give you insight on how to purchase individual health insurance.
Table of Contents
Starting Out
Coverage
Pricing
Research Checklist
If You Can’t Qualify
Comparison Worksheet
Glossary
Notes
Page
Page
Pages
Page
Page
Pages
Pages
Pages
2
3
4–5
6
7
8–9
10–11
12–13
AARP Health Care Options is the name of AARP’s health insurance and service program. It is not
the insurer.
1.
1. What you should know
starting out
There are some major differences between group health insurance that you typically get through
an employer and health insurance that you buy yourself. The first is that when you get insurance
through an employer, they may cover up to 85% of insurance premium costs.* Now you’ll be
paying the entire premium (the monthly bill) yourself, so the cost may surprise you.
Also, you don’t just pick a health insurance plan and enroll. The plan has to accept you. If you
are more at risk for health issues (or even have current health issues), getting coverage can
sometimes be challenging.
That aside, the process may seem familiar. You’ll still encounter deductibles and co-pays. There are
comprehensive (major medical) and catastrophic plans. This handbook explains them all in
more detail, but if you’re confused by any of these terms, there’s a handy Glossary in the back.
Ultimately, the plan you choose should fit your needs for both benefit coverage and budget.
Meet Alice. She’s 55 and ready for
Health Insurance 101.
When Alice decided to start her own business,
she didn’t know what she wanted to do about
health insurance. She knew she could continue
her current health coverage for 18 months through
COBRA (for more on COBRA, see the Glossary).
“I have 63 days to decide if I want COBRA, so
I think I’ll investigate buying my own health
insurance — it might be less expensive.
One thing’s for sure, I don’t want to go without
health coverage. It’s just too big a gamble.”
2.
*The 2005 Kaiser Family Foundation (KFF)/Health Research and Educational Trust (HRET) Annual
Employer Health Benefits Survey. Figure based on single coverage.
2. What you should know
about coverage
Once you start shopping for your own health insurance, you’ll find a choice of plans and coverage.
Types of insurance.
Traditional fee-for-service health insurance plans allow you to use any provider you’d like and
are typically the most expensive kind of plans. HMOs (Health Maintenance Organizations) and
PPOs (Preferred Provider Organizations) offer reduced costs as long as you use network doctors.
See the Glossary for more details.
Types of plans.
Comprehensive (major medical): This type of plan usually covers hospital visits, surgeries,
doctor’s visits, routine lab exams, preventive care like pap smears, prescription drugs, and more.
It typically has a deductible that you must pay before the plan begins paying benefits.
Catastrophic (limited coverage): If you want a lower monthly premium, you may decide on
“catastrophic” coverage, which usually covers hospital stays and surgeries in the event of a major
illness — but often doesn’t cover doctor appointments, preventive care, or prescription drugs.
Also, deductibles will be higher.
Hospital-Surgical: Another way to keep your premiums low, these plans pay toward the
expenses related to hospitalization, which are typically room and board plus doctor charges.
Short -Term: This is coverage that lasts for a specified length of time. For example, if you
know you’re going to be between jobs for a few months, you might buy a six-month term policy
with major medical coverage. Be aware — this type of plan typically does not cover pre-existing
conditions, and many companies may limit you to one renewal.
Services that enhance coverage.
Many insurers also offer health care resources as part of their coverage — services that help you
find physicians, learn more about health and wellness, access 24-hour assistance from registered
nurses — even order prescriptions online. Make sure you ask if they offer resources like these to
help you manage your health.
“Catastrophic or comprehensive? What’s best?”
Alice soon discovered she had a choice between catastrophic (limited) and
comprehensive (major medical ) coverage.“I spend a lot on prescriptions
because of my asthma,” thought Alice,“and there are doctor’s visits for my
allergy shots , plus my pap smears and mammograms, not to mention
my yearly checkup. I might consider catastrophic coverage because it’s a
good safety net just in case something major happens. But I think I’m going
to go with comprehensive coverage — preventive care is important to me.”
3.
3. What you should know
about pricing
The monthly cost may surprise you.
If you’ve ever had health insurance through an employer, they probably paid for most of it —
as was mentioned earlier, the average employer covers up to 85% of all employee insurance costs.*
Now the total premium will be your responsibility. (On the plus side, if you are self-employed, your
health insurance premiums may be tax deductible.) Also, with employer-sponsored plans, there are
usually lots of healthy people to offset the claims of people who get sick. With individual health
insurance, your enrollment application is reviewed through a process called “underwriting” to
determine if you qualify for coverage and what you’ll pay. Underwriting evaluates how healthy you
are now and calculates the likelihood of your needing medical treatment in the future.
Good health matters.
The bottom line is this: Insurers charge lower rates for people who are healthier. Some companies
will add a surcharge for insuring a person with potentially expensive medical conditions — it’s
called “rating up.” You might be rated higher because you’re a smoker, or because of an ongoing
condition like asthma. And many companies deny coverage to people with serious illnesses like
diabetes and cancer. Fortunately, insurance companies may only review your health history for
existing health conditions once — when you first apply. Of course, if you change companies or
want to increase your coverage, your health history may
be reviewed again.
“Look-back” periods.
When you apply, you’ll be asked questions about your
health history during the company’s “look-back” period.
Different insurance companies have different “lookbacks” — they usually range from three to ten years.
A shorter “look-back” period may be better, especially
if you’ve had some health issues. Based on what’s
happened during your look-back period, you’ll either
be accepted, accepted with pre-existing conditions
waivers, or denied coverage.
“My kidney stones could
come back to haunt me.”
Nine years ago, Alice had a series of
kidney stone attacks and an operation
to remove them.“If I have to report the
operation on my application, it might
affect my acceptance or the cost of my
coverage,” she thought.“I’ll look for a
company that has a shorter “look-back”
period — f ive years or less. Then I won’t
have to worry about it.”
*The 2005 KFF/HRET Annual Employer Health Benefits Survey. Figure based on single coverage.
4.
Waivers for pre-existing conditions.
If you do have a pre-existing condition, companies may put a waiver in your policy excluding
coverage for that condition for a certain period of time. If you have asthma, for example,
coverage may be excluded for a year or two — or permanently. Waiver policies vary, so if you
have a pre-existing condition, be sure to ask the insurance company how they’ll handle coverage
for that condition before you apply.
Evaluating rates.
Everyone wants to find the least expensive health insurance. And while lower rates may
initially be more attractive to you, less-expensive plans may not offer the specific types of
benefits you need. You may notice higher rates for plans that offer additional benefits, such
as prescription drug coverage and preventive care. That’s why it’s important to thoroughly
review all of your insurance options.
It’s also important to understand how your rate is determined and when and why rates will rise.
Your rate is usually first established based on your health history and age. Some companies
require exams to determine your current health, while others ask questions to review your
health history. Once a company sets your rate, your rate will increase based on a number of
factors. Generally, companies raise rates each year due to the rising cost of health care — more
advanced procedures, better drugs, etc. Keep in mind, your rate will also likely increase as you
get older. Be sure to ask companies when and why rates increase.
“These rates aren’t that bad after all.”
“I used to receive my coverage through my employer and only paid $51 a month. Once that
ended, I had to look for my own coverage. Boy, was I surprised by the rates.They
were so much higher than I had been paying. I looked into it a little more
and found out that my employer had actually been picking up $284 of
my monthly premium for me. I had no idea my company contributed
so much.The rates I’m seeing now suddenly make sense.”
5.
4. Your research checklist
Now that you understand a little bit more about how individual health insurance works, it’s time
to start looking for a policy. These questions and the worksheet on pages 8 and 9 can help you find
the right balance between coverage and cost.
Find the best coverage and
plan for your needs.
“I have to think of the future.”
“I have quotes from two insurance companies,”
How’s your general health?
If you tend to get sick a lot, look for a plan that
thought Alice.“I’m on a tight budget, but the plan
covers doctor’s visits and prescription drugs.
with the lower rate doesn’t offer prescription
Do you have a doctor or hospital
drugs or preventive care. I could get the low rate
you prefer?
for a year — then switch — but what if I get
If you choose a PPO or HMO, make sure those
providers are in the insurance plan’s network.
sick? Then other insurance companies might not
Do you regularly take any medications?
accept me. Sure, I’m healthy now, but if I get sick
A plan that covers prescription drugs can help.
down the road I may
Add up your annual prescription costs to
determine if the plan will meet your needs.
want that kind
Is preventive care important to you?
of security.”
Your annual checkup, blood work,
mammograms, and other diagnostic tests are
more likely to be covered under a comprehensive plan.
How you can keep costs down.
Are you in great health and want a lower monthly bill?
A catastrophic plan with limited coverage may be the right choice —
just remember you’ll probably be paying for all of your preventive care
yourself. And if your medical needs change later on, you may not be eligible to change to
a comprehensive plan.
Would you be willing to go with a higher deductible to save money?
Some people would rather pay a higher monthly premium to avoid a big deductible payment.
Others would rather pay less in monthly premiums because they have the cash reserves to afford
a substantial deductible.
Are you willing to use network hospitals and doctors to save money?
Consider a PPO (which gives you a choice between network and non-network providers) or an
HMO (which may limit you to network providers only). Remember, with an HMO, you may have
to get a primary care physician’s permission first (a referral) to see a specialist (see the Glossary
on pages 10 and 11 for more on HMOs).
6.
5. What to do if you can’t qualify
If you’re having trouble finding insurance because of a pre-existing condition, the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) may help. HIPAA laws vary
from state to state, but many states restrict the ability of insurers to exclude pre-existing
medical conditions from coverage if you were previously part of a group plan, paid your own
premiums for COBRA coverage, and applied for new coverage within 63 days after having left
the group plan.To learn more about the HIPAA regulations for your state, visit
http://cms.hhs.gov/hipaa/online.
Alice did her homework.
As she compared plans,Alice thought,“I want a plan that is
affordable and offers me the coverage I need so that I can stay
healthy while I focus on my new business.”Alice looked at plans that offered comprehensive
coverage so that her allergy shots, asthma prescriptions, checkups, and routine doctor’s
visits would be covered. She reviewed the premiums, deductibles, co-pays, and co-insurances,
as well as exclusions for pre-existing conditions. After careful consideration, Alice ended up
choosing a plan that cost her a little more but gave her the benefits and security she really
wanted. She thought,“Now that I have my health insurance taken care of, I can start
working on my future.”
Use the Comparison Worksheet on the next page
to start exploring your coverage options.
>
7.
6. Comparison Worksheet
Call at least three insurance companies and get information on several plans with varying
coverage and deductibles. Get preliminary quotes based on different “health levels” — you
don’t know how a company will rate your health, so get a range of prices. And don’t forget
to call your state department of insurance for complaints and rating reports.
General Questions
AARP PHIP*
Provider B
Provider C
AARP PHIP*
Provider B
Provider C
What kind of network and plans do you
offer? (Make sure the choices available are
right for your needs.)
Will I be required to get referrals from my
primary doctor to see a specialist? (You will
have more flexibility if referrals are not required.)
Do I have to take a health exam or submit
lab tests to apply for this insurance?
(Tests and exams indicate that a policy is harder
to qualify for. Look for plans that minimize these
requirements.)
Are there any medical service limits,
exclusions, or pre-existing conditions that
will affect me? How long is the “look-back”
period for pre-existing conditions?
(A shorter “look-back” period may be better;
page 4 has details.)
What is your company rated by
Standard & Poor’s and A.M. Best Co., Inc.?
(Look for a company rated A or higher — ratings
are indications of financial stability, so you’ll know
the company will be around to pay your claims.)
Coverage Questions
How much is the annual deductible?
After the deductible is met, what
co-insurance applies (90/10, 80/20, etc.)
for benefits and/or prescription drugs?
How much is the annual maximum
out-of-pocket cost to me?
How much is the monthly premium?
(Make sure the premium meets your budget
and the plan meets your current and future
coverage needs.)
8. *AARP Personal Health Insurance Plans are insured by United HealthCare Insurance Company.
Coverage Questions (continued)
AARP PHIP*
Provider B
Provider C
AARP PHIP*
Provider B
Provider C
AARP PHIP*
Provider B
Provider C
What is the maximum lifetime benefit
I can receive? (We suggest that you don’t
go with anything less than one million dollars.)
What types of pre-authorization or
certification procedures are included?
Will my rates go up if I file lots of claims?
Can I be singled out for a rate increase
for any reason? (“No” is the preferable answer.)
Can you cancel this policy for any reason
except non-payment of premium or
fraud? (Again, “no” is the preferable answer.)
Benefits Questions
Inpatient hospital services/outpatient surgery
Physician visits (in the hospital)
Office visits, preventive care, and checkups
Prescriptions
Medical tests and X-rays (radiology)
Skilled nursing care
Mental health care/substance abuse
Home health care visits
Rehabilitation
Hospice care
Chiropractic treatment
Other covered services
Services and Discounts Questions
Do you have any services that can give me
more control over my health decisions?
(e.g., physician/treatment locators, health and
wellness information, etc.)
What discounts are available that can help
me lower my costs? (e.g., prescription drugs,
eye care, etc.)
9.
7. Glossary
COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985): Some employers
are mandated by law to offer employees who have been let go the option to continue their health
coverage for up to 18 months. The employee will pay the full premium, up to 102% of the
employer’s cost (the extra 2% is the administration fee). You have 63 days to enroll, and when you
do, coverage is retroactive. Remember, COBRA covers ALL members of your family from the
date of termination, so if your spouse has a pre-existing condition that a new, cheaper policy might
not cover, you can elect to keep COBRA for him or her. If you’re considering COBRA, be sure to
get more information from your employer — and remember, coverage only lasts 18 months.
Deductible: The amount you have to pay for medical services before your insurance company
begins paying benefits. Typically, the higher your deductible, the lower your monthly premium.
Co-insurance: These are costs you pay after you’ve met your deductible. Co-insurance is
usually a percentage of medical expenses. For example, many insurance companies pay 80%
of medical costs and ask you to pay the remaining 20% — that 20% is your co-insurance.
Co-pays: Co-pays are usually fixed amounts you pay for a product or service, like a $10 co-pay
for doctor’s visits or prescription drugs. Often, co-pays are unlimited. For example, even if
you’ve met your deductible, you’ll still have a $10 co-pay for doctor’s visits.
HMO (Health Maintenance Organization): Typically, this is the least expensive health
insurance option, but you may be restricted to using doctors in the HMO network, or the HMO
won’t pay. In addition, you must choose a primary care physician and you may need that
physician’s permission first (a referral) to see a specialist.
HSA (Health Savings Account): The health savings account (HSA) is a tax- advantaged
savings plan (a financial account with various restrictions) that helps cover current and future
medical expenses.
“Look-Back” Period: When you apply for health insurance, you must report any medical
conditions for which you have been diagnosed or treated during the “look-back” period. For
example, if a company has a three-year “look-back” period, you have to report conditions that
you had treated in the last three years. Based on your answers, you’ll either be accepted, denied,
or accepted with a pre-existing condition “waiting period” — the time you must wait before
your pre-existing conditions can be covered.
10.
Medical Trends: The rate at which medical costs are increasing due to services being
used more frequently; an increase in the costs for these services; and/or more expensive
services being used.
Out-of-Pocket Maximums: After you meet your deductible, this is the most co-insurance you
can pay in a single year. Out-of-pocket maximums may or may not apply to small co-pay amounts.
Pre-existing Conditions: Any physical or mental conditions that you’ve been diagnosed or
treated for prior to the effective date of health insurance coverage (the day your coverage begins).
Premium: The amount you pay for coverage, usually paid in monthly installments.
Primary Care Physician: A primary care physician provides, coordinates, or arranges for
care to patients, and takes continuing responsibility for providing a patient’s care.
PPO (Preferred Provider Organization): This health plan option allows you to use
in-network and out-of-network doctors, though you’ll pay more if you use out-of-network
doctors. You do not have to get a referral before seeing a specialist. There is typically a
deductible, and you will also probably be responsible for a portion of provider bills (plans
often pay 80%; you are responsible for 20%).
Referrals: The recommendation by a physician and/or health plan for a covered person to
receive care from a different physician, specialist, or facility.
Specialist: A physician who has completed an approved residency, passed an examination
given by a medical specialty board, and has been certified as a specialist in a medical area.
Traditional Fee-For-Service Health Plans: The most flexible — and usually the most
expensive — health plans. You may use any provider you want. There is typically a deductible
and co-insurance (plans often pay 80%; you are responsible for 20%). In addition, these plans
usually only pay for “reasonable and customary” medical expenses. If your doctor charges more,
you will have to pay the difference.
Underwriting: This is a process insurance companies use to evaluate the costs of insuring you
and determining if you’re eligible for coverage. It can involve asking medical questions or
requiring health exams. If you are eligible for coverage and multiple rate levels exist, your rate
level will be assigned based on this underwriting.
11.
8. Notes
12.
13.
P.O. Box 1017
Montgomeryville, PA 18936-1017
www.aarphealthcare.com/personalhealth01