The Center For Debt Management
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A Consumer Guide:
Questions and Answers
About Health Insurance

... Continued From Previous Page

7. Are there other types of coverage?

Other types of health-related coverage include long-term care insurance, disability insurance, and supplemental insurance.

Long-term Care Insurance

The purpose of long-term care is to provide the help you need to perform activities of daily living—such as bathing and dressing yourself. Or, you may need supervision because of dementia or another form of cognitive impairment. In addition to this custodial care, some people also need skilled nursing services due to serious illness.

You can receive long-term care in a nursing home, assisted living facility, or in your own home. The need for long-term care can arise at any time, regardless of your age. Older people use the most long-term care, but younger and middle-aged people sometimes need long-term care as well. You may need long-term care because of a chronic illness or disability that leaves you unable to care for yourself for an extended period of time.

Long-term care can be very expensive. On average, a year in a semi-private room in a nursing home costs about $58,000 (estimated annual cost in 2005). In some parts of the country, it may cost much more.

Home care is less expensive than nursing home care, but it is still costly. Home care can include part-time skilled nursing care, speech therapy, physical or occupational therapy, home health aides, and homemakers. Having the services of an aide in your home just three times a week-to help with dressing, bathing, preparing meals, and similar household chores-can easily cost $1,000 or more a month. If you add in the cost of skilled help, such as physical therapy, the costs can be much higher.

Long-term care—whether in a nursing home, assisted living facility, or your own home—usually is not covered by health insurance except in a very limited way. Medicare generally doesn't cover long-term care.

Long-term care insurance can help protect you from the high costs associated with this type of care. Most long-term care policies pay a fixed dollar amount, which can vary quite a bit-from as little as $40 a day to more than $200 a day. The daily benefit for at-home care usually is about half of the benefit for nursing home care.

In order to get the lowest rates, you should apply sooner rather than later for long-term care insurance. Your age and any medical conditions you may have will affect your eligibility for coverage and how much it will cost (the premium). Recent changes in Federal law may allow you to take certain income tax deductions for some long-term care expenses and insurance premiums. In addition, some States may give a partial deduction or credit toward State income taxes for these costs.

Traditionally, the annual rate of increase in the cost of long-term care services has risen more quickly than it has for other consumer services. This means the benefit you buy today may not be enough to cover higher costs in the future. You can choose a plan with an inflation adjustment feature so that you can be protected against the rise in long-term care costs over time until services are needed.

Long-term care insurance may be offered where you work, or you may be eligible through a union, fraternal group, or other organization to which you belong. In addition, many life insurance companies offer long-term care insurance directly to the consumer.

Disability Insurance

Disability insurance replaces income you lose if you have a long-term illness or injury and cannot work. This is an important type of coverage for working-age people to consider.

Disability insurance is not usually considered a form of health insurance, and it doesn't cover the costs associated with rehabilitation following an injury or illness. Often, these costs are covered under the major medical part of your health insurance plan. Benefits paid under a disability plan can be used for expenses at the discretion of the insured, for example, rent, utilities, or groceries.

Some employers offer group disability insurance. Check with your employer to find out if this coverage is available. Disability insurance will be less expensive if your employer contributes toward the cost. Many different kinds of individual policies are also available. Contact your insurance company to find out if it offers disability insurance coverage.

Supplemental Insurance

Different types of coverage are available to you that pay benefits when specific types of events occur, such as hospitalization or critical illness. This coverage usually will pay a cash benefit that can be used to cover additional expenses that you incur due to the event. This type of coverage may be available from your employer or directly from an insurance company.

8. What if you have a pre-existing condition?

Before passage of the Health Insurance Portability and Accountability Act (HIPAA) in 1997, people had to worry about health insurance coverage for preexisting conditions like diabetes, heart disease, or cancer. If you changed jobs and had to change insurers, you might not have been able to get some of your care covered because of the preexisting condition exclusion.

Today, HIPAA helps to assure continued coverage for employees and their dependents, regardless of preexisting conditions. Insurers can impose only a 12-month waiting period for any preexisting condition that has been diagnosed or treated within the preceding 6 months. As long as you have maintained continuous coverage without a break of more than 63 days, your prior health insurance coverage will be credited toward the preexisting condition exclusion period.

If you have had group health coverage for at least 1 year and you change jobs and health plans, your new plan can't impose another preexisting condition exclusion period. If you have never been covered by an employer's group plan and you start a new job that offers such a plan, you may be subject to a 12-month preexisting condition waiting period. Federal law also makes it easier for you to get individual insurance under certain situations. You may, however, have to pay a higher premium for individual insurance if you have a preexisting condition.

If you have not had coverage previously and you are unable to get insurance on your own, you should check with your State insurance commissioner to see if your State has a high-risk pool (described previously in this booklet). You can find the phone number for your State insurance commissioner in the blue pages of your local phone book.

9. What If You Are Insured Through Your Job and You Leave?

If you leave a job where you have had employer-sponsored health insurance, you will want to ensure that you have continued protection against the high costs of health care. Whether you leave the job on your own or you are forced to leave, there is a Federal law that may help you to maintain coverage.

Under the Consolidated Omnibus Budget Reconciliation Act of 1985 (commonly known as COBRA), group health plans sponsored by employers with 20 or more employees are required to offer continued coverage for you and your family for 18 months after you leave the job. In some cases, the COBRA period may be extended past 18 months. In order to continue your coverage under COBRA, you must notify your employer that you intend to do so within 60 days of losing your employer's health coverage. You also must pay the entire premium for the cost of the coverage.

Some States have laws similar to COBRA that apply to employers with fewer than 20 employees. To find out if this applies in your State, contact your State Insurance Commissioner. Check the blue pages of your local phone book for contact information.

If COBRA doesn't apply in your case, you may be able to convert your group policy to individual coverage. Or, you may decide to purchase a short-term policy if you plan to take another job in the near future. If you open your own business and become self-employed, you may be able to obtain health insurance through a trade or professional association.

10. In Closing

Having health insurance helps to protect us from high health care costs that most people could not meet in any other way. It helps us pay for health care, and it ensures that we have access to care when we need it. Research has shown that having health insurance is closely tied to the quality and timeliness of care.

This booklet is intended to help you sort through your health insurance options. However, it presents general information about health insurance. Before you make a decision, be sure to consult the brochures and policies of the plans you are considering for more specific information. The time you invest in researching your health insurance choices will make a big difference, not only in how much you pay out-of pocket, but also in how easy it is for you to get care and how satisfied you are with the health care services that are available to you.

If you can enroll in health insurance at work or through a group or organization to which you belong, you almost certainly have access to group coverage. Sometimes, there is only one plan, but in many cases, there are several plans from which you can choose.

In this guide, you have received general information about the various types of health insurance. You have also learned about things you should consider when choosing a health insurance plan.

It is very important to compare plans carefully to find the one that is best for your situation. Read and compare policies. You should contact each plan you are considering and ask them for a summary of their benefits. Be sure to ask questions if something is unclear. Also, ask whether your doctor or a doctor you may be considering participates in the plan. To be safe, you should also contact the doctor's office to confirm that they will accept the plan.

11. Glossary

Archer Medical Savings Accounts—Individual accounts that may be set up by self-employed individuals and those who work for small companies. Funds in the accounts are used to pay medical expenses.

Coinsurance—The amount you must pay for medical care after you have met your deductible. Typically, your plan will pay 80 percent of an approved amount, and your coinsurance will be 20 percent, but this may vary from plan to plan

Copay—The flat fee you pay each time you receive medical care. For example, you may pay $10 each time you visit the doctor. Your plan pays the rest.

Deductible—The amount you must pay each year before your plan begins paying.

Disability insurance—Pays benefits if you are injured or become seriously ill and are no longer able to work.

Exclusions—Services that are not covered by a plan. Sometimes called limitations. These exclusions and limitations must be clearly spelled out in plan literature.

Fee-for-service insurance—Traditional (indemnity) health insurance where you and your plan each pay a portion of your health expenses, usually after you meet a yearly deductible. In most cases, you can choose any physician, hospital, or other provider (non-network based coverage).

Flexible spending arrangements—Employees use pre-tax dollars to set up these accounts and draw down on them to pay qualified medical expenses during the year. Unused amounts are forfeited at the end of the year.

Formulary—An insurance company's list of covered drugs.

Group insurance—Health plans offered to a group of individuals by an employer, association, union, or other entity.

Health maintenance organization (HMO)—A form of managed care in which you receive all of your care from participating providers. You usually must obtain a referral from your primary care physician before you can see a specialist.

Health reimbursement arrangement—An account established by an employer to pay an employee's medical expenses. Only the employer can contribute to a health reimbursement account.

Health savings account—An account established by an employer or an individual to save money toward medical expenses on a tax-free basis. Any balance remaining at the end of the year "rolls over" to the next year.

High-deductible health plan—A plan that provides comprehensive coverage for high-cost medical events. It features a high deductible and a limit on annual out-of-pocket expenses. This type of plan is usually coupled with a health savings account or a health spending account.

High-risk pool—A State-operated program that offers coverage for individuals who cannot get health insurance from another source due to serious illness.

Indemnity insurance—Traditional, fee-for-service health insurance that does not limit where a covered individual can get care.

Individual health insurance—Coverage purchased independently (not as part of a group), usually directly from an insurance company.

Long-term care insurance—Coverage that pays for all or part of the cost of home health care services or care in a nursing home or assisted living facility.

Managed care—An organized way of getting health care services and paying for care. Managed care plans feature a network of physicians, hospitals, and other providers who participate in the plan. In some plans, covered individuals must see an in-network provider; in other plans, covered individuals may go outside of the network, but they will pay a larger share of the cost.

Medicaid—A Federal program administered by the States to provide health care for certain poor and low-income individuals and families. Eligibility and other features vary from State to State.

Medicare—A Federal insurance program that provides health care coverage to individuals aged 65 and older and certain disabled people, such as those with end-stage renal disease.

Network - A group of physicians, hospitals, and other providers who participate in a particular managed care plan.

Open enrollment—A set time of year when you can enroll in health insurance or change from one plan to another without benefit of a qualifying event (e.g., marriage, divorce, birth of a child/adoption, or death of a spouse). Open enrollment usually occurs late in the calendar year, although this may differ from one plan to another.

Point-of-service plan—A form of managed care plan in which primary care physicians coordinate patient care but there is more flexibility in choosing doctors and hospitals than in an HMO.

Preferred provider organization—A form of managed care in which you have more flexibility in choosing physicians and other providers than in an HMO. You can see both participating and nonparticipating providers, but your out-of-pocket expenses will be lower if you see only plan providers.

Premium—The amount you pay to belong to a health plan. If you have employer-sponsored health insurance, your share of premiums usually are deducted from your pay.

Primary care physician—Usually a family practice doctor, internist, obstetrician-gynecologist, or pediatrician. He or she is your first point of contact with the health care system, particularly if you are in a managed care plan.

Reasonable and customary charge—The prevailing cost of a medical service in a given geographic area.

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