insurance can be divided into two general classes, group insurance and
individual family insurance. We are concerned here with the latter.
Typically people buy individual or family coverage when they are
self-employed, when they are working for a company that does not offer
group (or when it is offered, it is deemed too expensive by the
employee) or possibly they have lost their group coverage due to a lay
off or the company dropping it altogether as a benefit.
In general individual family/policies have less generous benefits (no maternity coverage, for example, in most cases) because the plans are tailored to deliver the lowest possible premiums based on the minimum number of benefits the consumer feels she or he must have. There are plans with a fixed number of office visits under a predetermined office visit co-pay, and more expensive plans that offer unlimited visits. Some plans have only a discount card for prescriptions, while other, more expensive plans have a tiered system where drugs are classified according to their costs.
There are three types of individual family plans.: HMOs (health maintenance organizations); HSAs (health savings accounts); and PPOs (preferred provider organizations).
An HMO requires a member to see a primary physician, or "gatekeeper," before she or he can be referred to a specialist, who must also be in the HMO network.
HSAs have a savings account attached to an insurance plan. One can add a maximum amount of money to the account on a yearly basis. As long as the money is kept in the account, it is tax deferred, tax deductible and generates interest. The money in the account can be used to pay medical, dental or vision expenses with no tax liability, but not the cost of the monthly premiums themselves. Typically one has to meet the deductible of the HSAs before the plan starts paying any benefits.
The most popular type of insurance plan is the PPO (preferred
provider organization). Many of these plans have set office visit copes
for doctor visits, a CO-pay as a percentage that the consumer pays after
the deductible is met, a large pool of doctors and hospitals (the
provider network) and typically richer benefits than the HSAs for some,
if not all plans, including things like chiropractic visits or mental
Individual/family plans provide broad coverage for health insurance needs once the deductible has been met. The deductible is a specified amount of money that is determined at the time the policy is purchased. While some plans have provisions for seeing a doctor for a regular office visit at a fixed price (the office visit copay), for most other medical procedures, the deductible has to be met. Typically deductibles with individual/family plans are higher than for group plans.
After the deductible is met, you pay a percentage of the remainder of the bill , called the co-pay. You stop paying when you reach a cap (the out of pocket maximum), and the insurance company pays the rest at 100 percent.
Annual physicals, OB-GYN checkups and other wellness type visits
are usually covered without having to meet the deductible.
The consumer has two ways to buy this insurance. She or he can buy it directly from the carrier, or buy it from an individual insurance broker or agent. The price is the same because the broker gets a small commission that is built into the premium. The advantage is going through a broker is more personalized service and, if the broker represents multiple carriers, more options to choose from, since there can be a great deal of difference from one plan to another.
The buyer coming from group coverage may be surprised to learn that benefits that she or he took for granted in his group policy do not exist in an individual plan, or are much abbreviated. A good example of this is maternity coverage. Many group plans offer maternity coverage, but it is almost impossible to find in Arizona individual/family plans at this time. The insurance companies have decided for the individual/family plans, it does not make sense to offer it based on plan rates and the cost of delivery. Substance abuse is covered as well under individual plans, but in a more restrictive form than many group plans.
The biggest difference between group and individual is the "guaranteed issue" provision. Most group plans must accept an applicant no matter what her or his preconditions. This is why group insurance is usually much higher than individual policies. Individual plans (at least until 2014, when many provisions of the Health Reform Act go into place) can decline a candidate based on the medical history. The answers on this medical questionnaire can determine whether someone is approved or declined, or some cases, have the condition waved, which means the carrier will not pay for anything related to the precondition.
You can be enrolled under a group plan with really serious conditions like rheumatoid arthritis or even HIV, but these conditions will result in a decline for individual coverage.
This is a decision that is made when the application goes through underwriting. The underwriter has guidelines to follow, and he uses the medical history that the applicant completes at the time of applying to determine which conditions will result in a decline, or waiver (nothing related to the condition will be covered) or a rate up (the applicant is accepted for coverage, but because the carrier knows that a condition will result in incurred costs from the outset, the amount of the premium increased to cover them).
Answering the questions fully and completely on the medical history portion of the application is important because there is no physical required on an application (although sometimes blood tests, cholesterol tests and other tests are required if additional medical information is need to complete the application). If the information is incomplete, or deliberately omitted, the carrier may rescind coverage, which could be disastrous if one were in the middle of a major medical procedure. It is important to be as complete and thorough as possible when answering the medical history questions.
Even if someone is declined because of a precondition, in Arizona there are other options to get health insurance. If someone has been formally declined by a carrier, and has not had any health coverage for the last six month, she or he may be eligible for the Arizona high risk pool. The high risk pool in this state is policies set up by the federal government and are similar to other PPO offerings with premiums that are relatively affordable.
Another option is a HIPAA or portability plan. Generally someone must
be coming off of group coverage, or have recently lost group coverage,
with no lapse in coverage of more than 63 days, to be eligible. The
portability plans are guaranteed issue but can be very expensive.
Because of health reform, many carriers are getting away from writing waivers on policies (such a policy would not provide coverage for any conditions related to the precondition). What is more typical now is a rate-up, in which the base premium is increased to cover future costs related to the precondition. The rate-ups and be up to 80 percent.
Once a rate has been determined, it cannot arbitrarily be changed. A
rate change is applied to a class of enrollees based on increases in
medical costs and on their age brackets. A new rate can take a effect on
the applicant's policy anniversary date.
Child only coverage in Arizona has changed dramatically because of health reform, and not necessarily in a good way. Right now no carrier is writing child-only policies for children younger than 19. The only coverage currently available is short-term coverage from one carrier. A child can be added to a family policy, though, on a guaranteed issue basis.
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