Lowering Insurance Premiums
JANUARY 28, 2009 --
Follow these tips to get the best insurance coverage for your dollar.
In 2008, the financial services sector alone shed 148,000 jobs, according to the latest figures released Friday by the Bureau of Labor Statistics. For these laid-off workers, losing their salaries had to hurt; losing their employer-sponsored health care benefits could hurt more. Whether it's paying the full cost of the premium or buying insurance independently, trying to find the right health coverage after being thrust into unemployment can be an overwhelming challenge.
There's jargon to decipher, deadlines to consider and the sticker shock of purchasing health care without an employer contribution. The costs vary greatly, with a study by eHealth Insurance finding that, when purchasing a policy directly from a provider, premiums average $158 for individuals and $366 per month for families, but with sky-high deductibles--$1,972 and $2,610, respectively. Never mind the costs, the complexity of insuring one's self can lead to poor decision making.
"If you find yourself suddenly without work," says Ellen Laden, a spokeswoman for United Healthcare's individual business, "often it's most tempting to go without health insurance. But it's the time you can least afford to have an accident or injury."
Laden and other insurance experts stress that the newly uninsured have several options, but the hard part is figuring out which solution is best for you.
Frank McCauley, head of Aetna's (nyse: AET - news - people ) consumer business segment, says that extending coverage for the right length of time and at the right price requires asking yourself three basic questions.
First, how long do you expect to go without insurance? A six-month coverage gap should be handled much differently than a 36-month gap. Second, what extent of coverage do you require? A 45 year old in perfect health, for example, will have different needs than a 60-year-old diabetic. Lastly, how much do you want to spend on a premium? A low-cost premium might be attractive in the short term, but this is often paired with expensive deductibles. If you plan to use your insurance, it's wise to pay a premium relative to the expected out-of-pocket expenses.
The Consolidated Omnibus Budget Reconciliation Act (COBRA), say both Laden and McCauley, can be an ideal solution for a worker who wants to keep his or her coverage for up to 36 months. Under COBRA, the former employee still participates in the company plan if he or she pays the full premium.
There are a few hitches, though. This alternative is only available to former employees of firms with more than 20 workers. And if the employer stops offering health insurance or if the company is dissolved in a Chapter 7 bankruptcy, COBRA may be no longer applicable. Finally, it can cost up to 102% of the plan's cost--the extra 2% is for administrative expenses.
"Employees are not used to seeing the total cost," says Laden. "You can pay three or four times more than what you're currently paying," because an employer often subsidizes 75% to 80% of the plan's cost. Coverage for an average family in 2008 was $12,680 and $4,704 for an individual, according to the Kaiser Family Foundation, a nonprofit health policy organization.
Getting the Best Deal
When investing that much, it's important to shop around. The Department of Labor maintains a comprehensive Web site on COBRA, which includes information on deadlines and life-long eligibility for coverage when COBRA expires.
McCauley also suggests that the uninsured explore obtaining coverage through a spouse. Depending on the carrier and company policy, the newly uninsured may qualify for spousal coverage. If unemployment does not count as a so-called "qualifying event," you may need short-term insurance until the once-a-year open enrollment phase.
Another option, says McCauley, is purchasing insurance through professional or membership organizations. AARP, for example, has partnered with both Aetna and United Healthcare to offer insurance to members. While AARP members buy directly from the individual market, in some cases professional organizations allow consumers to take advantage of discounted group rates.
Finally, carriers offer many short- and long-term options. United Healthcare's one- to six-month plan can be extended an additional six months if necessary. It does not cover preventive care, like an annual physical, but it is insurance against unexpected ailments and injuries.
The deductibles run between $250 and $500, but the carrier refunds unused premiums. Providers that don't offer short-term coverage--like Aetna--sometimes allow plans to be canceled without penalty and often offer a wide range of long-term options, including high-deductible and PPO policies.
To compare various policies, McCauley recommends ehealthinsurance.com, a Web site where consumers can evaluate different quotes based on their age, location and health status.
"There are options available," says Laden, "that will cover the needs of most everyone."
Doom And Gloom Ahead?
If you still have health insurance but are worried about potential layoffs, it is crucial to become proactive about your health.
The good news, according to analysts at the consulting firms Mercer and Watson Wyatt, is that most large companies are not planning to eliminate benefits in 2009. However, many have asked employees to contribute more toward their rising premiums. A Watson Wyatt survey of 117 U.S.-based companies in December showed that 20% of them had raised employee contributions for 2009.
Ted Nussbaum, director of health care consulting in North America for Watson Wyatt, says employees should take advantage of free health-improvement programs. These include health risk evaluations, routine screenings and weight management programs, and they often come with financial incentives used to encourage employees to maintain good health.
For example, the building materials company LaFarge, which is a Mercer client, has invested $6.5 million in preventive initiatives. Employees who get an annual wellness exam and routine cancer screenings, for example, receive a $75 gift card. The incentives have boosted the number of employees who participate in such programs from 700 in 2007 to 4,500 in 2008.
Philia Swam, director of health and group benefits at LaFarge, says the program has been so successful that it even led to early detection of colon cancer in a 50-year-old male employee.
It's an encouraging story, particularly for those who still have benefits.
The lesson? Get healthy while the resources are still affordably at your disposal.
Editorial: About Health Insurance --
Even before taking the oath of office, President-elect Barack Obama has gotten traction on his agenda to expand health insurance to all Americans - starting with children.
The U.S. House voted with impressive bipartisan backing to boost spending for the State Children's Health Insurance Program (SCHIP). The $32.3 billion, 41/2-year program will be covered by tobacco taxes, including a 61-cent hike on cigarette packs, to $1.
With 40 Republicans joining Democrats in the majority, lawmakers reauthorized the child health program until 2013. Beyond the seven million children from low-income families already in the program, an additional 4.1 million children under 18 who are uninsured could sign up. In a key reform, more legal immigrants' children would be covered.
In Pennsylvania, New Jersey and Delaware, more than 250,000 children would be able to receive health care under the program. No wonder U.S. Rep. Allyson Y. Schwartz (D., Pa.) - who pioneered children's insurance programs while a legislator in Harrisburg - said on the House floor that "today is a good day for American families."
Now it's up to the Senate to follow suit and approve a companion bill to the House measure. That seems entirely likely, inasmuch as Congress twice in 2007 voted to expand SCHIP - only to have both attempts vetoed by President Bush, who objected to the increased cost.
Landing this bill on Obama's desk soon would be an important early win for the administration, and also would bode well for more comprehensive health-care reform to follow.
Pennsylvania and New Jersey are poised to make the most of an expansion of the children's insurance program. Both Govs. Rendell and Corzine have worked hard to get more kids insurance, even while Bush policies worked against them.
Rendell's Cover All Kids plan last year ran up against a Bush directive that limited states in providing children's insurance. As Corzine noted Thursday, New Jersey's charity-care costs grew in caring for the state's sizable number of legal immigrant children who, until now, had to live in the country five years before enrolling in SCHIP.
By taxing tobacco for the expansion, Congress has answered critics on the cost - for now. Additional tax hikes may be needed if the program's cost increases. With unemployment rising and the economic turmoil threatening millions of workers' health insurance, though, the boost in SCHIP should be viewed in the larger context of the nation's economic rescue and recovery efforts.
In other words, it's a good investment in stabilizing families and helping to assure that America's neediest kids have a healthy future