A guide to low-cost, high-quality health insurance discusses America's transition from employer-sponsored healthcare to consumer-directed plans, and offers advice on selecting a plan that best fits individual needs.
The New Health Insurance Solution
By Paul Zane Pilzer
John Wiley & Sons
ISBN: 0-471-74715-7
Chapter One
You Are One Serious Illness
Away from Bankruptcy:
The Huge Gaps in Your
Employer's Health
Insurance Plan
Forty-five million Americans lack any form of health insurance and live in
fear of a major medical problem. Yet surprisingly, 80 percent of these
people are employed and 16 million earn more than $40,000 per family
($20,000 per single). The good news is millions of these uninsured working
Americans can now afford to buy good Health Savings Account (HSA-qualified)
health insurance for an average of $92 per month for an
individual or $272 per month for a family. If you or a loved one is in this
category, you may want to skip ahead to Chapters 2 and 4 to learn how.
Most Americans get health insurance
from their employers and never think too much about it until they or
a family member develops a serious health problem. That's when they first
learn the details of their health insurance benefits, which medical
providers they can use, and what their out-of-pocket expenses will be. In
an ideal world, this is how it should be. As a resident of the greatest nation
on earth, you should not need a book on health insurance solutions any
more than you need a book on life insurance, car insurance, or property
insurance. Sadly, this is not the case.
Healthcare costs now consume almost one-sixth of America's economy,
and, during your lifetime, medical and health insurance costs are likely to
be your largest or second largest expense after housing. That's if you're
lucky enough to have health insurance. However, as this chapter explains,
even if you have health insurance, your traditional employer-sponsored
plan is arguably the number one threat to your financial future.
This book describes great new ways you can save thousands
of dollars each year while getting better coverage than your
employer offers.
The problems with our current health insurance system are deep:
* Up to 1 million mostly middle- and upper-middle-class families file
bankruptcy each year due to medical bills they can't pay-yet amazingly,
three-quarters of these families had health insurance when they
first became ill. A family bankruptcy typically affects three individuals
and lasts for seven years-meaning up to 21 million people, including
children, are living in economic purgatory at any given time due to
failed health insurance.
* Tens of millions of Americans are modern-day slaves-unable to
retire early, or working in jobs they don't really want, just for the
health insurance they need to take care of themselves, a spouse, or a
child with a "preexisting condition."
* Health insurance is a crisis for employers as well as individuals. As I
write, GM is in serious trouble because health insurance adds $1,550
to the cost of every car it sells. The cost of health benefits now exceeds
profits for most of the Fortune 500.
* Small businesses are the backbone of our economy, yet many of them
fail because they cannot afford to pay the premiums for their group
health insurance plan. Our current employer-based health insurance
system is injuring American competitiveness in the world marketplace
and costing jobs here at home.
* Millions of self-employed and independent contractors go without
health insurance because they don't realize it has recently become
affordable and tax deductible.
* American seniors who have fought wars and saved enough money to
pay off their home mortgages now live with a new daily physical and
economic threat-their monthly prescription drug bill. The largest
monthly expense in most senior households is prescription drugs,
and many seniors make the terrible choice between buying their food
or their medicine-24 percent of the prescriptions written each year
are not filled because of price.
* Many seniors who have saved up hundreds of thousands of dollars
for retirement or for their grandchildren's education sadly live to see
their assets completely wiped out by medical or nursing care
expenses not covered by Medicare.
None of these situations should exist. Recent changes in law
and new health insurance options have made it possible for
most Americans to get high-quality, affordable health benefits
for themselves, their families, or their employees. This book
explains how.
This book also teaches you how to save $5,000 or more each year on your
health benefits and create a Health Savings Account nest egg of $200,000 to
$500,000 or more for your retirement or future medical expenses.
Let's get started.
What Would Happen If You Became Ill
and Could Not Work?
Don't despair as you start to read this chapter about the problems with
employer-sponsored health insurance. Beginning with Chapter 2, this
book is mostly about solutions that you can take advantage of now.
Have you ever thought about what would happen if you became ill, lost
your job and your health insurance, and couldn't get another job? Every
year this happens to millions of Americans, with dire consequences, and it
doesn't have to be a major heart attack or cancer to lead you to the poorhouse.
Few employers can afford to keep paying absent employees for more than
a few weeks after those employees have used up their available sick time
and vacation. Such employees are then let go, and their financial problems,
which are the leading cause of bankruptcy in the United States, begin.
Employees who lose their jobs can get government-mandated health insurance
coverage through COBRA for up to 18 to 36 months, but many cannot
afford the high cost of COBRA, or their COBRA coverage runs out
while they are still sick.
What are the chances that something like this could happen to you?
There are hundreds of circumstances in which you could exceed your
allowable sick and vacation leave, and the chances of this happening at
some point in your working life are greater than 50 percent.
Outdoor activities. Do you play sports, ski or snowboard, go boating,
or ride bicycles? Any one of these outdoor activities could cause an
injury that would prevent you from being able to work. Even without
a specific injury, many active people will require some type of knee or
leg surgery during their working lifetime.
Home accidents. Although most people feel safest at home, the home is
actually the place where you are most likely to have an accident
requiring medical treatment or one that could prevent you from being
able to work. Common causes of home accidents include falls, choking,
shootings, poisoning, and improper use of medications.
Commuting/driving. Do you commute to work? More than 3 million
people are hurt each year in auto accidents, and common injuries
include fractures, broken bones, and spinal damage resulting in
short- and long-term disability.
High blood pressure. About 65 million Americans over age 20 have high
blood pressure, a chronic disease requiring medication and one that
dramatically increases the chances of having heart disease during
your working lifetime.
The overweight/obese. Almost two-thirds of Americans are overweight
or obese; primarily because of this, 18 million Americans have diabetes
and another 41 million over age 40 have prediabetes. Most
people with prediabetes develop type 2 diabetes in 10 years. Diabetes
virtually guarantees that you will have health issues requiring time
away from work at some point in your life, and 65 percent of people
with diabetes die from heart disease or stroke.
Cancer, heart attack, or stroke. One in four men and one
in five women will develop one of these debilitating diseases
before age 65.
Most Americans will develop some type of major medical condition
at least once over a 45-year working life-a condition
that could likely lead to job termination and loss of their
health benefits. Are you and your family prepared for this
eventuality?
The Gaps in Your Coverage When You
Lose Your Job or Change Jobs
Once you lose your job, you lose your employer-sponsored health insurance
unless you elect to go on COBRA. As explained more thoroughly in
Chapter 3, COBRA is the acronym for the short-term extension of your
employer health insurance. Basically, COBRA allows you to continue your
employer-sponsored health insurance for 18 months as long as you pay
100 percent of the cost of your former employer's plan plus a 2 percent
administration fee (102 percent total).
COBRA is unaffordable for most people.
Nationally, COBRA premiums average about $700 a month for an individual
and about twice that, $1,400 a month, for a family. Since total
unemployment benefits average about $1,000 a month, only one in five
COBRA-eligible individuals elect to go on COBRA-few people can
afford to spend 100 percent or more of their unemployment check on
health insurance. Worst of all, after 18 months on COBRA you are out on
your own without health insurance. Yet, despite the enormous cost and
lack of security, about 5 million people at any given time are on
COBRA-mostly because they don't know any better or believe that they
will soon get another job with health benefits.
You can get the equivalent of free health insurance for 60 days, saving
you $1,000 or more, if you know the "COBRA loophole." Employers are
required to offer you COBRA within 14 days of termination, and to keep
their COBRA offer open for 60 days. By delaying to choose COBRA until
day 59, you can get a free 60-day health insurance option while you shop
around for a new employer or new health insurance or both. If, on day
59, you do elect COBRA coverage because you have had a medical issue,
you are required to pay for COBRA from day 1. But if you haven't had a
medical issue, you just received the equivalent of free health insurance for
60 days. (See Chapter 3 for more details on this strategy, on getting an
additional 45 days of free coverage when you change jobs, and on getting
30 days of free coverage when you come off COBRA.)
You should only go on COBRA as a last resort. It is expensive,
temporary, and if you should develop a health condition
while on COBRA, it could prevent you from getting permanent
affordable health insurance. There are much better solutions,
which are all explained in this book.
If you have recently lost your health insurance (perhaps because you
are accepting a new job), or if you aren't eligible for COBRA, or if your
COBRA benefits just expired, you need to pay particular attention to
another five-letter acronym, HIPAA, which is explained in Chapters 3 and
7. Most employers today (1) have 30- to 360-day waiting periods before
health benefits begin for new employees and (2) exclude covering
employees and their dependents for health conditions that preexisted their
date of employment. Yet, under federal HIPAA law, if your new employee
benefits begin less than 63 days after your old benefits terminate, your
new employer is not allowed to exclude you or your family's preexisting
medical conditions from your new health insurance.
In many states, health insurance carriers offering individual/family
policies are required to accept HIPAA-eligible applicants without any
exclusions for preexisting medical conditions (although typically at a
higher premium). However, if you become HIPAA-eligible you will have
to act fast-your HIPAA eligibility is limited to just 63 days from the first
day you lose your health insurance.
Do not depend on HIPAA eligibility alone if you are changing
jobs and need insurance for a family member with a preexisting
medical condition-the median length of time between
jobs has increased from 56 days in 1996 when HIPAA
became law to 70 days today. Once you know you are changing
jobs, you should apply for individual/family health insurance
immediately. If you get a new job with health benefits
quickly and no longer need the individual/family policy, you
can cancel your policy without charge before it takes effect.
What Happens When You Lose Your
Health Insurance
Once you lose your employer-sponsored health insurance, your nightmare
has begun. Not only are you going to have to worry about how to
pay for healthcare, you are also going to have to worry about how to get
good healthcare. Many medical providers refuse to schedule an appointment
for people without health insurance, and those who do agree to see
you will typically charge from 150 to 500 percent of what they would have
charged you or your insurance carrier had you had health insurance.
Since the 1980s, each year between 1 and 2 million American families
file personal bankruptcy. Until recently, the causes of these bankruptcies
were unknown, and most people assumed credit card spending, divorce,
and loss of employment to be among the major reasons. In February 2005
Harvard University released the results of its study, "Illness and Injury as
Contributors to Bankruptcy."
The study interviewed 1,771 Americans in bankruptcy courts and determined
that about half were "medically bankrupt"-driven to bankruptcy
by medical bills not covered by health insurance. Equally surprising, the
study concluded:
* Three-fourths of the medically bankrupt had health insurance at the
beginning of their illness.
* The majority of the medically bankrupt owned their own homes and
had attended college.
* Many people filing medical bankruptcy were middle-class workers
with health insurance who were unable to pay their co-payments,
deductibles, and exclusions in the employer-sponsored health insurance
plan.
This book teaches you how to avoid the insurance gaps that
drive millions of Americans into medical bankruptcy.
To protect yourself and your family, you will need to evaluate
employer-sponsored health insurance and individual plans that you
purchase yourself, paying particular attention to terms like annual
out-of-pocket maximum (OOP max)-which means the maximum out-of-pocket
expense you could incur in a given year from coinsurance, deductibles,
and exclusions.
Many employer health insurance plans have annual OOP maximums of
tens of thousands or more. You can start to see why 75 percent of medically
bankrupt middle- and upper-middle-class Americans mistakenly
think their health insurance will cover them.
Chapter 5 reveals how to make sure your employer plan does not have an
OOP max that would send you to the poorhouse if you had to pay it and
how to get disability insurance to pay your salary if you cannot return to
work after an illness. Chapter 6 shows you how to build a Health Savings
Account (HSA) nest egg to cover your OOP max plus pay your health
insurance premiums tax-free during any period of unemployment or illness,
and you learn insider HSA tricks that can add hundreds of thousands to
your HSA nest egg.
How to Avoid Losing Your Health
Insurance When You Lose Your Job
The best way to avoid losing your health insurance when you lose your job is
to purchase your own affordable individual/family policy-just as you purchase
your own auto insurance. Unlike traditional health insurance you get
from an employer, loss of employment has no effect on an individual/family
health insurance policy. Also, unlike most employer/group policies, premiums
on most individual/family policies cannot be increased, nor can the
policy be canceled, if you become ill.
As explained in Chapter 4, the best time to buy your own policy is while
you are healthy and still have your employer-sponsored health insurance.
If you have a good company plan and wish to keep it, Chapter 5 explains
how to choose the best options from your employer-sponsored plan and
how to transfer your spouse and children onto their own less-expensive
individual/family policy.
No one reading this book should ever go without health
insurance. Despite what you read in the newspapers, there are
health insurance options available for every American,
although it may take you some time, effort, and expense to get
them. In most cases, because of recent changes in the insurance
industry, you can get good health insurance for an individual
or a family for $150 to $300 per month. See Chapter 2
and Appendix A for details.
The Other Huge Gaps in Your
Employer's Health Insurance Plan
By now you understand that employer-sponsored health insurance has
some serious shortcomings:
* It offers no permanent protection when you lose your job.
* It offers only limited protection when you change jobs.
* It exposes you to serious financial risk even if you keep your
job-due to low lifetime maximum benefits, not to mention hidden
co-payments, deductibles, and exclusions that you learn about in
Chapter 5. Moreover, as you learn in Chapter 3, if your company
goes bankrupt or is taken over, federal law (ERISA) protects your
pension but not your health insurance-employers may terminate
company-provided healthcare at any time.
(Continues...)
Excerpted from The New Health Insurance Solution
by Paul Zane Pilzer Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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