Quick Insurance Tips

Usually a family that wants to insure both parents and a child or both parents and children will find that the best deal for health/dental insurance for their kids is to put them on the family policy.  However, insurance companies have different rating procedures for children which can create confusing and often unreasonably high prices for kids.

In general cost for medical insurance for a new born should be less than the cost to insure an adult. Newborns tend to have more medical expenses on average than two year olds, but after we get past the first year or so of life, the cost of a medical care goes up at ever age.  What this means is that companies that charge the same for children as adults overcharge for kids.

Whether you are looking for Maine child insurance or low cost health insurance for kids in South Carolina, you want your child to be charged a child rate not an adult rate.  Some companies will charge adult rates if a child is insured by him or herself.  Other companies will charge an adult rate for the child if the child is insured with one parent as opposed to two.  This means that it is easy to pay much more than the average cost of child health insurance if you don’t shop around.

Often when we see wide variance in pricing we fear that there is also a wide variance in quality. This is no different when we are shopping for health insurance for a child.  Health insurance programs can, of course can be qualitatively different.  However, now that you understand that the pricing strategies can be very different, you know that this isn’t always the case.

Government Sponsored Child Medical Insurance Programs

There may be a state sponsored program that is better for children than a private health insurance in the state of Iowa or a private Colorado health insurance plan.  However, these plans are state specific and a discussion of the pros and cons of those programs is beyond the scope of this article.

I operate an agency Connecticut and am familiar with many of the programs offered here. In State of Connecticut, the state-sponsored health care programs have the advantage of accepting children who have medical conditions that private insurers will not accept.  However, the policies are more limited than most of the plans offered in the private market.  Since children tend to cost insurance companies so much less than adults, the prices for the government plans are often in the same ballpark, as the prices for the more robust plans offered by companies like Aetna and Blue Cross Blue Shield.

You can put yourself at undue risk if you reduce your insurance coverage the wrong way. However, there is a right way to do it. You may be able to save money on your coverage while still maintaining the protection you need. Below are three strategies to that can lower your costs.

• Reduce or Eliminate Costly or Unnecessary Insurance Coverage
• Raise Your Deductible
• Shop Around

Reduce or Eliminate Costly or Unnecessary Insurance Coverage

Paying for unnecessary or overpriced coverage is both costly and common.  Often families will have maternity insurance coverage on their policies when they are no longer in the baby making business.  This can add hundreds of dollars to their monthly costs.

Dental insurance is often over priced and families may do better when they pay for their dental care out of their pocket.

Raise Your Deductible

Low deductible policies are better than high deductible policies.  This is true, but the question is how much better?  Is a policy with a zero deductible $1200 better than a policy with a $1,000 deductible?  Probably not.

When you have a year with minimal expenses, you won’t get any money back from the company that sold you the low deductible policy.  If you have more good years than bad ones, you will probably do better with a high deductible policy.

When comparing low deductible health insurance policies with high deductible health insurance policies, you should look at the total cost.  That is the cost of the policy and the cost of the uncovered medical expenses added together.  Compare the total costs in a typical as well as the costs in a worst case scenario year.  Often you will find that a low deductible policy will be more expensive in both the typical year scenario and the worst case scenario.

Shop Around Frequently

Many people fail to shop around for coverage.  Most health insurance policies change their price approximately once a year.  Spending an hour with an agent once per year may save you thousands of dollars.

Medical insurance can be very costly today. Buying the wrong health insurance policy can be even more costly. There are certain health insurance types to avoid.

Healthcare insurance policies that list dollar amounts for each procedure may seem to offer more coverage than policies that don’t. Usually the opposite is true. A long list of things that are covered may be impressive, however better policies will state what is not covered. Also the dollar amounts are not adjusted for inflation so, even if the plan offers good coverage when the policy was issued, it can quickly become inadequate coverage.

Policies that cover the little things but not the big things are often purchased by unsuspecting people. While you may want to have everything covered, if you are forced to make a choice, I’d imagine you’d want the insurance company to pay the larger expenses. These policies often appear to be good ones until someone has a large expense. Then they are shocked to find how limited the coverage is.

Medical insurance policies that only cover you in the hospital can leave you holding the bag for tens of thousands of dollars. While hospital bills tend to be bigger than doctors’ bills, you can spend thousands and thousands of dollars in the doctor’s office and for labs, x-rays and other expenses that don’t involve the hospital. A hospital only policy can cost you money and it can also cost you your health if you are unable to pay for the doctors visits that you will need after surgery and for the preventative care you need to avoid going to the hospital in the first place.

Misunderstanding how COBRA works often costs families hundreds of dollars in premiums and tens of thousands of dollars in uncovered medical expenses.

COBRA is usually not cheaper than a comparable individual health insurance plan.  Many people assume that since their COBRA plan is offered to them from their former employer any other plan would be higher than their COBRA cost.  Health insurance plans that are less expensive are often available from the same company that provides your COBRA plan.  You may find that a Blue Cross’ individual or family plan is half the price of your Blue Cross COBRA plan. Insurance plans are offered direct to consumers from many quality carriers.  Consider one of these plans for a COBRA insurance replacement. It pays to shop around instead of assuming that your COBRA plan is the best option.

You don’t have to keep your COBRA plan for the full 18 months.  You can cancel your COBRA plan at the end of any given month.  The mandated Cobra length of coverage is imposed on the carrier, not the consumer.  You can change your coverage at any time.  There is no reason to pay for a less desirable COBRA plan for the full eighteen months if there are better options available to you.

You may not be able to get a good health plan if you develop a pre-existing condition while covered by your COBRA plan.  The people who get hurt the worst by making the wrong decision about COBRA are those who are healthy when they leave their employer, but develop a serious medical condition while covered by COBRA.  This can mean that when cobra coverage expires their protection ends.  This can wipe out the savings of a lifetime.

It makes sense to switch to a permanent solution to your health insurance problem sooner rather than later.  An individual or family health insurance plan can typically be kept in force until you reach 65 if you need it.  You also have the option of cancelling your policy at any time should you get a job with insurance coverage or a better deal from another company.

Accepting COBRA without looking at the options available from your local Blue Cross Blue Shield, or other quality companies available in your area, can be a costly mistake.  Be sure to shop around and compare the different options available to you.  Most consumers will find that an individual non-group health insurance plan offers better protection at a lower price.

Not properly coordinating the cancellation of your old medical insurance policy with the effective date of your new policy can cost you a lot of money and heartache.  Failing to do this properly can lead to your holding the bag for an uncovered expense or paying longer than you should for an unnecessary second policy.

If your new policy goes into effect after your old policy has ended, you expose yourself to the potential of having a major expense uncovered.  Also you expose yourself to the possibility of acquiring a pre-existing condition that makes you uninsurable.  If your old policy overlaps with your new one, you are paying unnecessarily for the second policy.

Ideally your new policy should go into effect the minute your old policy is terminated, but not a minute sooner.  This is not as hard to do as it sounds.

Individual health insurance companies will typically allow you to apply as early as two months before you need coverage.  This is true for most other lines of insurance.  If you complete a Missouri individual health insurance application or apply in any other state, you will probably be asked for the first month’s payment in advance.  However, since you are merely paying in advance, you are not really double paying.  You can expect the subsequent billing to start the second month of your new policy.  You will make up for paying in advance by skipping a month of paying.

What you want to happen is to find out that your new policy is approved at least a week before it is effective.  This way you can contact your old company and cancel the old policy before you get billed for the next month.

An insurance policy cancellation letter is typically what is required to terminate a policy.  Most companies will allow you to fax a signed request.  Although many companies will have a form that you can use, they are also likely to handwrite your request so long as it is dated, signed and includes your policy number and the date you want your coverage to end.  Most companies prefer that your request be faxed, although all will take your request by mail.  A few companies will allow you to cancel by phone.

If you have a health condition that might make it hard to find coverage, applying as early as possible may allows you to explore more than one option and find coverage before your deadline.

To avoid having a lapse in coverage, apply as early as possible, but request that your policy start at a later date.  This can help reduce the chance that you will be exposed to unnecessary risks because the new policy can’t be approved in time.  It also makes it easier to make sure that you don’t pay two different insurance companies for coverage for the same day.

In many cases, there are no discounts for group health insurance, when compared to individual health insurance!  This is a very common misconception.  When you buy more of something, you usually get a better price.  This isn’t always true with medical insurance coverage.

A private medical insurance application is usually medically underwritten.  A medically underwritten application is one that is subject to screening by the insurance company. This can make the price lower because the insurance company has the right to deny applications for those who have medical conditions that they expect to generate more claims and cost them more money. 

If an insurance company in Maryland can’t eliminate less healthy applicants from consideration for a group policy, but they can do so for an individual plan a Maryland group health insurance plan will cost more than a similar individual policy.

Group insurance plans are less frequently medically underwritten.  This means that the insurance companies have higher expenses for these plans and therefore have to charge more because they are often insuring people who are less healthy. People who are less healthy file more claims and cost more money.

If you are self-employed and only have yourself and your family to be concerned with, you should look at individual health insurance as an option.  These policies are often more comprehensive than the plans that you will be offered through your business. 

You may not have the same tax benefits when you purchase a non-group or private health insurance policy.  However, the price savings may be more impactful than the tax savings would be. 

It always pays to crunch the numbers before making a final decision, but in many instances group health insurance discounts are more apparent than real.  The policy you purchase as individual as opposed to as a business owner will often be less expensive and provide better coverage.

More and more insurance companies are recognizing domestic partnerships and are allowing non married couples to be covered by the same insurance policy.  In some situations there are advantages of sharing the same health care policy in some situations there aren’t.

Domestic partners can be the same sex or opposite sex.  They must show evidence of having a committed relationship.  Typically the evidence requested is a legal document such as a will with the other partner named as a beneficiary or a deed in the names of both partners.  Different insurance companies will ask for different types of proof.

Advantages of Getting Health Insurance with Your Domestic Partner

Sometimes there are no advantages of purchasing health insurance with your domestic partner.  Some health insurance companies will price their policies for couples to equal the sum of the rate for the two individuals.  If there are only two people to be insured, there may be no difference aside from the benefit of being billed more conveniently.  Some companies will price your policy based on the age of the older spouse and this can make your policy cost more than the total cost of two separate policies.

Health insurance is sometimes priced based on the age of the younger spouse.  If that is the case, being on the same policy may lower your cost for health insurance.  In other cases an insurance company will give a discount for couples who are on the same policy.  Obviously if it is cheaper to be on the same policy than to be on separate policies, there is an advantage to buying from a company that will recognize your domestic partnership.

Another advantage may be the how your deductible is applied.  This may only affect you if there are more than two people to be insured.  Typically a health insurance company will charge no more than two deductibles per policy.  This can give a family an advantage if they are, for example, in the same car crash.

Health insurance for domestic partners may be available from a local carrier.  In Connecticut Anthem Blue Cross and Connecticare recognize domestic partnerships.

A carrier that recognizes domestic partnerships may or may not offer you the best price or coverage.  Look at all of your options before making a final decision.  You may get a better deal by buying separate policies.

Here is a simple strategy to help you through these hard times.

1. Review your spending
2. Reduce or eliminate unimportant items
3. Save or invest what is left over

Review your Spending

You’ve probably heard this before. The reason you have is because it works. Keep track of your spending for a month. Write down every time you spend a penny. Use that information along with information from your check book and credit card statements to determine what you spend on a regular basis. Put everything into logical categories. If you are using a credit card to pay for some of your expenses don’t put the amount of your credit card payment on your list. Put the cost of the individual items you used the credit card for. You should also create a category called “credit card interest” and put the amount of interest you pay for your credit cards.

Reduce or Eliminate Unimportant Items

When you’ve determined where your money goes, put the items in order. Put the most costly items on the top and the least costly on the bottom. Your mortgage may be the item that is on top. You probably can’t eliminate that cost. However, you may be able to reduce the figure by getting a better interest rate. If you do, make sure that you don’t wind up paying more in the long run because you have delayed the date when your mortgage will be paid off. Look at each item on your list and decide whether you can reduce or eliminate the costs. Look especially hard at reducing or eliminating things that cost more than just money such as cigarettes.

Eventually you will get to items that involve insurance. You may find that another company can give you a lower rate on quality auto insurance, home owners insurance or medical insurance. Shop around and look for the best deal. If you pay for your own medical insurance, ask your agent about high deductible health plans and health savings accounts. You may save a lot of money if you use those programs properly.

If you can, leave some fun stuff in your budget. But not everything that is a lot of fun costs a lot of money. If you reduced the number of nights out with your family, I hope you can replace them with walks on the beach or more fun times at home or something else that appeals to your family. Maybe you can invest in a popcorn machine and save money by having a stay-at-home family night watching DVDs. Maybe you can trade DVDs with co-workers or borrow them from the library and further reduce your costs.

Save or invest what is left over

If you are one of the fortunate ones and have some money left over to invest or save, congratulations! Before you get involved in a long-term plan first make sure that you have ready cash available to take care of the small stuff that pops up from time to time. Once you have taken care of that, look at the interest that you are paying on your credit cards and other debts. It makes no sense to me to pay 18% on a credit card and invest money at 2%. Pay off your high interest debt before you get involved in any significant investment program. Remember to pay of the credit cards in reverse order of their interest rates regardless of the amount of the balances.

If you are comfortable with where you are financially and more importantly, where you are headed, please help someone else who isn’t. This may mean that you give money to family members or a charitable organization like FoodforThePoor.org. Your electric or heating utility company may participate in Operation Fuel. You can add a small amount, like two or three dollars, to your monthly gas bill and make a difference to someone who really needs it.

A consumer who has a health insurance policy that is no longer being sold by their insurance carrier will typically pay more for coverage than they should. This is something known to many insurance agents, but many consumers are unaware of this fact and wind up holding on to more expensive policies.

Discontinued Medical Insurance Policies Cost More

This is because the claims history for a particular policy series drives the price for that policy series. If there are more medical claims for the old policy series verses the new one, the new one will cost less. Almost invariably the discontinued health insurance policy series will have more claims.

More Benefits Myth

Often consumers will want to hold on to the old policy because it has more benefits. A logical assumption to make is that if the new one cost less, it must cover less. Sometimes this will be the case. However, state governments tend to add to the things they require in an insurance policy, this is usually not the case. Even if the old policy is more robust the added cost will often not be justified by those benefits. Also the cost difference between the older policy and the newer one will almost definitely increase as time goes on.

Change Health Plans Now or Risk Paying More Forever

When it gets to the point where you are ready to switch you or a family member may not be healthy enough to qualify for a different policy, so switch as soon as possible.

If the Insurance Carrier Pays More You will Too

Newer policies series cost the health insurance company less because they insure healthier people than discontinued policies. When you apply for an underwritten medical insurance policy, you will be asked a series of questions about your medical history. You may be asked to have a medical exam and your medical records may be requested from your doctor or doctors. If you pass the screening and have your health insurance policy approved you are unlikely to have a significant claim in the next year or two.

Of course some unlucky individuals will have significant claims the day after they purchase their policies. But if you look at a random group of 100 people who qualified for an underwritten health insurance policy 12 months ago and compare their claims for the last year with the claims of 100 people who were approved for the same policy 12 years ago, you will find a big difference in what they cost their insurance company. They have had 12 years to gain weight, to develop health problems that would be preexisting conditions if they applied for health insurance today.

People who have the old policy and people who have the new policy are aging at the same rate. However, their underwriting is getting older. A twenty year old woman who hasn’t been underwritten in five years may be significantly more costly to the insurance company than a sixty year old man who was just checked out by his insurance company and found to be in excellent health.

If you are healthy and can find another health insurance policy that meets your needs, switch to that other policy when your current policy is no longer offered to the public. The cost for both insurance policies will probably rise over time, but you may find that the discontinued one will rise twice as quickly. If you wait until the price goes up you may find that you are less healthy at that time and your pre-existing condition forces you to stay with the more expensive plan.

A good insurance broker can often save you a lot of time and money. An agent who works with several companies that offer the type of insurance that you are interested in can do the shopping for you. You will only need to tell your story once. Your agent can then eliminate most plans and companies from consideration.

A broker who represents several companies is usually much less biased than the agent who works with one company. Often brokers will get higher commissions from bad companies, but I’d like to think that most agents have their clients’ interests at heart. And frankly most of us are more interested in making a sale than we are in making an optimal commission. So although an agent who works with multiple companies won’t always lead you to the right policy, there is a much greater chance that he or she will.

Agents will typically look at several factors before they make recommendations. These factors include the client’s needs, coverage price, and the stability of the insurance carrier. Often an agent has a better perspective on these criteria than the client will. For example Tonik health insurance in Connecticut is very popular. It is a program that is very rich in benefits. However, a good agent will know that a client who is taking medications may not be a good prospect for this product because the prescription limit is very low.

Working with someone who can answer your questions is a very good thing. Working with someone who will ask you questions is even better. For most people buying insurance is something they do very infrequently. They may not know all of the questions to ask. A professional agent can help here.

Of course as an insurance broker, I’m biased towards insurance brokers and believe that a good agent saves his clients time and money. I hope that if you are looking for insurance that you will let a broker help you. When you work with one company, you will be forced to see their products in the best light. Working directly with several companies is time consuming and often confusing. By working with a broker who represent several companies you can work with multiple companies without all of the hassles.