Sí, Money! Vol. 2, No. 2 April 2008
By Michael Grodsky

“In recognizing that for-profit insurance is incompatible with a caring, a moral and a high-quality health care system that provides coverage for all, Senator Kuehl is leading the fight to break the industry’s death grip on our health care system.” –Michael Moore, filmmaker

Many believe our healthcare system, especially with respect to insurance, is sadly lacking when compared to other countries. In fact, it’s sadly lacking when compared to practically anything else, from a radish to a doorknob.

Even though healthcare in the U.S. is both unimaginably costly and the least effective system in the entire developed world, there are some progressive changes underway:

“…since 2003 California State Senator Sheila James Kuehl has led the fight in the legislature to achieve true universal health care in California, and, in 2006, brought SB 840, the California Universal Healthcare Act, to the Governor’s desk, the first time in U.S. history a single-payer healthcare bill had gone so far. Although vetoed by the Governor, Senator Kuehl continues to work to bring universal, affordable, quality health care to all Californians. –Sara Rogers, 
Health Consultant (California Progress Report, February 20, 2008 (http://tinyurl.com/2vcvkn)

 

Health insurance works creating a fund from pooled, ongoing payments by large numbers of people, which prevents an individual from having to bear the sudden expenses of unforeseen illness or injury. For example, suppose individuals within a group each knew that an expensive operation was inevitable, but did not know when in their lifetime the surgery would be needed. You might better manage your healthcare budget if you could draw from a collective fund, while making relatively smaller payments over the long term.

Competition among insurers has consumer advantages for home and auto coverage, but with health insurance—which insures against the cost of healthcare rather than against the loss or damage of material possessions—competition for profits can hurt the consumer. “It is actually against their interest for insurers to compete on giving us the best care. It’s not simply that they’re not doing it, but given the structure of the marketplace, they shouldn’t do it,” writes Ezra Klein in his illuminating article Not-Their-Fault Insurers. (LA Times, Sunday Feb. 24, 2008. (http://tinyurl.com/35t2gx)

Here’s why: Say insurer ABC comes up with a better way to treat cancer patients and advertises this fact. . Over time, a greater proportion of cancer patients will join this insurer and, to cover the additional costs, premiums are raised. Eventually, the healthier people will switch to lower-costing carriers, forcing ABC to again raise rates as a greater proportion of patients require increasingly expensive care. Competing on the basis of better care can mean lesser profits, possibly causing an eventual downward spiral ending in collapse of the insurer. We can certainly learn from other countries that have incentivised competing on the basis of delivering better care. See item #2 in the resource list for details.

If you’re not covered under a employer-sponsored plan, what’s the best way to go about finding an individual or family policy that fits your financial circumstances and needs? You may find it useful to engage the services of an independent insurance broker or agent as your guide through the maze of policy choices. Charging no fees, they earn a commission from the insurer whose plan they sell. Ask friends for a reference, or obtain a recommendation from a financial planner. You’re going to pay the same price for any given policy regardless from where you obtain insurance, so you might as well take advantage of an experienced agent’s knowledge. So-called “captive agents” can sell only one insurance company’s products, whether or not that is the best solution for you. In the first few seconds of conversation an agent normally will disclose if she works for an insurance company. If you don’t know, just ask. If they are a captive agent, ask what differentiates their product from others. It may turn out that it’s a good fit after all.

In order to talk to your broker or better make your own decisions, educate yourself in three areas. This is about learning how to take care of yourself, and you’re worth the short time it will take:

1. Learn the basics of health insurance:
   • Health Insurance Overview. This quick and easy-to-read guide will enable you to understand the essentials. (http://www.agencyinfo.net/iv/medical/medical.htm)
   • Access to Health Insurance / Resources for Care. A project of the Actors’ Fund of America. Click on your state of residence and read the insurance guide. If you want a more detailed picture, this is for you. (http://www.ahirc.org/)
2. Evaluate insurance company ratings
   • The National Committee for Quality Assurance issues a monthly report card, primarily on HMO insurers (http://www.ncqa.org/). Since you already read the Health Insurance Overview, above, you know what an HMO is, right?
   • Ratings by hospitals of various insurance carriers by national public affairs firm DAVIES (http://tinyurl.com/2tlgvk)
3. Determine what coverage you need and/or want by answering these questions. Which of these statements apply to you?

• I only use basic health care services, and I don’t want to pay a lot for my monthly health coverage payments. (You want a low premium, but you’re willing to take the risk of a high deductible in return.)
• I would like to pay as little as possible out of my own pocket before my plan begins covering my medical expenses. (You want a low deductible. Premium may be higher or lower, depending on the coinsurance amount and out-of-pocket max.)
• I want to cap the amount I spend on total medical expenses each year. (Who doesn’t? The question is, what is the cap amount you want?)
• I visit the doctor and providers’ offices often and don’t want to pay a lot for these visits. (You want a fixed office visit copay.)
• I take prescription drug medications frequently and want my plan to cover part of these expenses. (Look at the Rx benefits, and estimate your yearly costs. There may be separate deductibles for brand name Rx.)
• I would like my health care expenses to be tax-deductible even if I don’t itemize my tax deductions. (Then a Health Savings Account may be for you! You can even pay for aspirin, heating pads or acupuncture visits with tax-free dollars. Most HSA plans also include preventive care with deductible waived.)

Time for Q&A!

Q: My partner and I run our own business. Do we qualify for a group health plan?
A: In 1993 the California State Assembly passed AB 1672, which provides guaranteed access to health insurance by small employer groups from 2 to 50. You must have payroll & tax records, an employer federal tax ID, and eligible employees generally must be W-2 staff working 30 or more hours per week—but two owners count as well, including married couples or registered domestic partners, as long as they work a minimum of 20 hours per week.

Q: My application for private health insurance was declined. What can I do?
A: Insurance companies have the right to decline individual coverage. Errors can happen, so examine the letter you received describing the reason. If you recently have been covered under a group plan within the last 63 days, you may be eligible for a guaranteed-issue policy under COBRA, CAL-COBRA or HIPAA regulations. If you don’t qualify for any of these and have been declined, you can apply for the State of California Major Risk Medical Insurance Program (MRMIP). For more info visit the following link or talk to your insurance broker. http://www.dmhc.ca.gov/dmhc_consumer/hp/hp_cobra.asp

Q: Is there insurance that reimburses the cost of the deductible or coinsurance, so I don’t have any out-of-pocket expenses?
A: You can purchase an “indemnity” accident or cancer policy, which can supplement an existing health plan. You are paid cash when you incur expenses as a result of a covered event. Aflac is a well-known company that provides both individual and group policies. There are also group indemnity plans available by some carriers.

Q: I’m going to be traveling out of the country soon. Does my health plan cover me in other countries?
A: Generally, yes—read your Evidence of Coverage for details—but because the medical provider in another country likely will not accept your health plan for payment of services, you’ll have to pay up front and get reimbursed later. Medical travel insurance solves this problem, and HTH WorldWide provides inexpensive coverage that is recognized in most countries worldwide.

Q: Does Medicare pay for long-term care expenses?
A:  Medicare generally does NOT cover long-term care costs. The extent to which your costs will be covered depends on the type of Medicare plan in which you enroll (visit www.medicare.gov for eligibility rules). It’s no wonder that failure to prepare for the cost of a nursing facility stay or other long-term care is the primary cause of impoverishment among the elderly, according to the American Health Care Association (http://www.ahcancal.org). But it’s not just the elderly who need it: 40 percent of people currently receiving long-term care are adults 18 to 64 years old, and about 60 percent of individuals over age 65 will require at least some type of long-term care services during their lifetime. Long-term care is costly: A 65-year-old couple retiring in 2008 will need approximately $225,000 to cover medical costs in retirement, according to Fidelity Investments’ latest health care cost estimate. (Assuming a fully insured individual retiring in 2008 at his/her Full Retirement Age with a Social Security payment based on a final annual salary of $60,000. Also assumes a 3% Social Security annual cost of living adjustment and a medical inflation rate of 6.6% each year.) These facts highlight the importance of including long-term care expenses as one component of a personal financial plan.

Q: I’ve heard that hospitals are pretty dangerous places. What can I do to protect myself in case I’m hospitalized due to an accident.
A: The inpatient care you receive has its own set of risks: if you ever require hospitalization, enlist the aid of a friend to advocate on your behalf to guard against mistakes. I was surprised to learn that many more people are killed from hospital errors than from auto accidents—about 200,000 annually, according to HealthGrades, a healthcare quality research company (source: Health Grades Inc., “Patient Safety in American Hospitals,” July 27, 2004). See the resource section at the end for “How to Survive a Stay in the Hospital.”

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Michael Grodsky is a financial advisor (aquariusfinancial.com) and insurance broker (www.aquariusLTC.com) who works with artists and business owners. He welcomes your questions, and can be reached at michael@aquariusfinancial.com. Registered Representative offering securities and investment advisory services through Independent Financial Group, LLC, member FINRA/SIPC. This column is meant to provide general information, and should not be construed as providing investment, legal, or tax advice. Links are provided herein as a courtesy, and the referenced information is from sources we believe to be reliable; however, we cannot guarantee or represent that any are accurate or complete.

Healthcare Information Resources

1. HELP: Health Consumer Alliance is a partnership of consumer assistance programs operated by community-based legal services organizations. “Our common mission is to help low-income people obtain essential health care.” (http://healthconsumer.org/)
2. PUBLIC POLICY: Every other industrialized nation has achieved universal health insurance. How do other countries do it? “National Health Insurance: Lessons From Abroad.” Century Foundation Press, 2/7/2008 (http://www.tcf.org/list.asp?type=PB&pubid=636)
3. PUBLIC POLICY: OneCareNow is a grass roots campaign devoted to educating Californians and building massive support for Senate Bill 840, “The California Universal Healthcare Act,” authored by Senator Sheila Kuehl. (http://onecarenow.org/)
4. RATINGS: America’s Best Health Plans is a collaboration between NCQA and U.S. News & World Report providing detailed ranking of over 600 managed care organizations (mostly HMOs) in America. (http://health.usnews.com/sections/health/health-plans/)
5. RATINGS: California HMO Ratings At-a-Glance. Report Card ratings concern medical care and services that affect most people. (http://www.opa.ca.gov/report_card/hmorating.aspx)
6. RATINGS: California Medical Group Ratings At-a-Glance. The information is for patients who were members of the medical groups in 2006. (http://opa.ca.gov/report_card/medicalgrouprating.aspx)
7. RATINGS: Doctors, hospitals, and nursing homes. (http://www.healthgrades.com/)
8. RATINGS: Find and compare hospitals near you. (http://www.calhospitalcompare.org/)
9. RATINGS: Insurance Company report card. The National Committee for Quality Assurance is a not-for-profit organization dedicated to improving health care quality. The NCQA seal is a widely recognized symbol of quality. (http://www.ncqa.org/)
10. RATINGS: Survey by Davis Public Affairs, a national public affairs firm for healthcare providers. The results were based on interviews with 113 executives representing more than 500 hospitals, or 10% of all U.S. hospitals. (http://tinyurl.com/2tlgvk)
11. SURVIVAL: How to Survive a Stay in the Hospital. Article at medicinenet.com (http://tinyurl.com/2apwg2)

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Image Sources

Composite image: Skull in beer glass.

• Gold Skull. 29. April 2006, Ausstellungsstück im Museum für Hamburgische Geschichte Author: Michail Jungierek. Permission is granted to copy, distribute and/or modify this document under the terms of the GNU Free Documentation license.
• The official emblem of the International Committee of the Red Cross (ICRC).
• Fuck off Bush T-shirt. Federación Universitaria Argentina, 2006. Author: unknown. Permission is granted to copy, distribute and/or modify this document under the terms of the GNU Free Documentation license.

Composite image: doorknob/radish

• Doorknob. Hotel Russia. Moscow, 2005. Permission is granted to copy, distribute and/or modify this document under the terms of the GNU Free Documentation license. Author: Dsmack.
• Radish: 07.04.2007. Author: Felixphoto. Released by copyright holder into the public domain.

Composite Image: Evil spirit with patient.

• Yoshitsuya Ichieisai, The Evil Spirit, c. 1860. Triptych. This image is in the public domain because its copyright has expired.
• Francisco de Goya. Self-Portrait with Dr. Arrieta. 1820. Oil on canvas, 117 x 79 cm. The Minneapolis Institute of Arts, Minneapolis, MN, USA. This image is in the public domain because its copyright has expired.