It's complicated, health insurance in Arizona. But if you've done any investigating, you know that already. Premiums...co-pays...out of pocket maximums...what do all those terms mean? Guaranteed issue and declinable conditions...how do I know if I'm eligible for the first and how can I avoid being pegged with the second?
And beginning in January, 2014, it's going to get even more
complicated as the major provisions of the Affordable Care Act swing
into effect (see our section on Health Reform on the web site for more
details as to what to expect).
Many of the points below are going to change beginning with the new year. If you have a plan in effect before then, it should carry through 12 months from the effective date. However, you may want to look at one of the "metallic" (Gold, Silver and Bronze) plans when rates and benefits are rolled out in September. You may want to switch to one of those plans at that time, or possibly stay with the plan you secure now, depending on cost and benefits. You will have some flexibility to do either.
TYPES OF PLANS
HMOS (health maintenance organizations) HMOS were introduced
in the 1970s as an answer to rising health costs. The idea was that you
would see a family doctor first for minor ailments and for initial
evaluation, and then be referred by that doctor to a specialist if
something more serious was involved. These plans may have been popular
with the bean counters at the insurance companies, but they generally
weren't favored by the consumer, who chaffed at not being able choose
her or his own specialist. Gradually these plans faded away until now,
among the carriers that we deal with, there is only one that offers an
HMO plan (and this plan happens to be the only one at the present time
that offers maternity coverage!).
HSA (health savings account) This type of plan is basically a health insurance policy attached to a savings plan. As long as the money remains in the account, it is tax deferred, tax deductible and generates interest. The money in the account can be used to pay medical bills (and dental or vision charges as well) approved by the insurance companies, but not the premiums themselves.
In general these HSA plans have leaner benefits than the PPOs (preferred provider organizations), but often relatively lower monthly premiums. Since there are few co-pays involved for things like doctor visits, the HSA is probably not the plan of choice for a family with small children, who expect to go to the doctor for things like ear infections or sore throats that most adults have outgrown.
PPOs (preferred provider organizations) This is generally considered the most popular type of insurance plan. Under this type of plan, the carrier has contracted with a provider network that the customer will be able utilize at negotiated rates. With the PPOs you have flexibility as to which doctors you see, as long as they are part of the provider network. You do not have to get a referral to see a specialist. Usually there is an office visit co-pay and a prescription benefit, although there can be some big differences here from one plan to another. This plan may be attractive to families with small children because of the office visit co-pay feature.
The deductible is the fixed amount you are responsible for before the
insurance pays anything. The size of the deductible becomes important
where major medical events such as hospitalization are concerned.
Deductibles come in different amounts and range as low as $1000 all the
way up to $12,500. The lower the deductible, the higher your monthly
premium, all other things being relative. (Which makes sense, because
the carrier knows that with a higher deductible you're going to be
paying more of any given medical bill). Deductibles are annual amounts,
so at the beginning of the year, you start all over again.
For a family deductible , two people (sometimes three) have to meet the individual deductible in the calendar year and then everyone else in the family is covered as far as the deductible is concerned. When you're looking at the deductibles for the PPO plans, and more than one person is going to be covered, it's a good idea to double the figure for the deductible quoted, because the amount given is usually for the individual.
Once you've met the deductible, you pay a percentage of the remainder
of the bill until you reach a maximum amount (the out-of-pocket maximum)
at which point the insurance pays 100 percent. Co-pays are typically 20
percent, 30 percent and 40 percent. The higher the percentage of the
co-pay, the more you will pay as long as you haven't reached the maximum
For example, let's say you have a plan with a $10,000 deductible, a 20 percent co-pay and a $5000 out-of-pocket maximum. You go into the hospital and come out with a $100,000 bill. First you pay your deductible and now your bill is $90,000 (gulp).Twenty percent of $90,000 is $18,000, but that's not the amount you owe because your out of pocket maximum is $5000. So your total bill is $15,000 for the $100,000 bill and the insurance company pays the rest. A lot of money, but at least you have insurance and you don't have to mortgage your house to pay for the hospitalization.
Where the co-pay percentage really comes into play is on smaller medical bills. Let's say you have a $5000 deductible and your medical bill is $6000. Now you have a $1000 to deal with. If your co-pay is 20 percent, you only owe an extra $200; but if it's 40%, you owe $400.
The first concern that most people have when shopping for insurance
is being covered for hospitalization, but they should also take a long,
hard look at the prescription drug benefit of whichever plan they are
interested in. While many drugs are available in inexpensive generic
forms, there are brand-name drugs that are $300 and up for a single
While you should be able to get a better price when you visit a pharmacist in the provider's network, the richer plans have a tiered prescription benefit, where drugs are assigned to groupings that have a specific price points, whether it be $20, $40 or $60—a far lower price than you would pay if you walked in off the street to get a prescription filled.
It is not uncommon for a plan to have a separate prescription deductible for any drug above generic. These prescription benefits run from $200 up to $1000, depending on the carrier and the plan . In general the carriers don't publicize this second deductible for prescription drugs, so it is good to be aware of it.
The whole landscape related to declines and waivers changes
dramatically in January when the Affordable Care Act plans go into
effect. Remember under the ACA, there will be no more preconditions;
everything will be guaranteed issue. However, it is still several months
before these plans go into effect, and if you currently need health
insurance, preconditions are still a factor (A current exception is
children who can be added to their parent's family plan under guaranteed
issue no matter what preconditions they suffer from).
There are some conditions, such as HIV/AIDS, being in remission from cancer, and multiple sclerosis that currently are likely to result in an automatic decline. Others fall more in a gray area, and may depend the severity of the condition, whether or not the patient is still undergoing treatment for it, or how it is combined with other conditions the applicant has. For example, someone with high cholesterol may get underwritten, but if she or he suffers from its high cholesterol combined with high blood pressure, approval becomes more problematic.
The carriers are very strict on people who are either extremely overweight or underweight. Jut being a pound or two outside the carrier's weight/height/age table can result in a decline. If you feel this may be an issue, consult with your broker before completing an application.
Before health reform, carriers would sometimes waive a condition on an application—in other words, they would cover the application for everything else but the condition involved, but if anything came up related that specific designated precondition, they would not cover it. Now a carrier is more likely to rate up (increase the monthly premium). This can result in some unpleasant "sticker shock", but at least you know you have coverage for everything, including the precondition.
The carriers negotiate contracts with specific hospitals and doctors.
These providers make up the carrier's network. You'll get your best
pricing and pay your lowest co-pay if you visit physicians and hospital
that belong to this network. Since we only deal with national carriers,
their networks in Arizona are extensive.
If you have a specific doctor that you are really impressed with, we recommend you check with that physician's office and see what insurance company he or she is contracted with, then look at plans from that carriers first.
For most people, knowing when the health insurance coverage is going
into effect is important. Usually they want the effective date to match
the termination of their previous group or individual coverage, so there
will be no gaps in coverage. If they presently have no coverage, they
want it to get it into effect as soon as possible.
Most carriers will honor a requested effective date if they receive the application before that date, even if it is not approved until later. One exception is United Health One. The effective date can not be any sooner than 14 days after they receive the application.
There is a push among carriers to have clients pay for their premiums
with automatic check withdrawals. Obviously there is an advantage for
them to do this is terms of cash flow, but there is a benefit for the
consumer as well. You don't have to worry about missing a premium notice
in the mail, or receiving it and having it buried in a stack of mail
until its past due.
Carriers usually allow the initial premium to made on a credit card, particularly if it's an on-line application, but after that it needs to be either an automatic bank withdrawal or paper check. Charging a service fee for a paper bill is becoming more and more common, and the fee tends to be very high when available as the carriers try to discourage clients from going that route. Billing is either monthly or, in some cases, quarterly.
Each application is evaluated on an individual basis in the company's
underwriting department. Each carriers has its own rules for approval
and decline. If you are approved, there is a possibility that your
premium will be rated up based on information in your medical history.
You will not know this until the policy is approved.
If you decide at that point that you don't want the coverage, you have a specific period of time (the free look period) to withdraw the application or make changes (such as raising or lowering the deductible, or adding a rider, such as accident insurance or dental coverage). If you withdraw it before the end of the free-look period, your initial premium will be refunded in its entirety. If you wait until after the policy has gone into effect, it will be prorated before it's refunded.
After you've been approved, you will receive an ID card within 7-10
business days, followed by your policy documents.
Hopefully this little essay has answered some of your questions, but you probably have more. Don't hesitate to call us along the way to ask them. That's what we're here for.
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