BRM-101
Health insurance basics
Cynthia E. Brodrick

You're healthy and you don't have too many bad habits. You don't need health insurance ... do you?

"People tend not to want to think about unpleasant things," admits Richard Coorsh, spokesman for the Health Insurance Association of America, based in Washington, D.C. For that reason and the fact that they don't like to feel they're throwing away money, 44 million Americans do not have health insurance coverage.

Do you feel lucky? Roll snake eyes, and just one car accident or emergency surgery could set you back tens of thousands of dollars. It's bad enough having to pay your credit card bill for a dinner you ate last month. Imagine paying off an appendectomy you had three years ago.

"You just never know," explains Coorsh. "People do have accidents. Despite efforts to maintain the body perfect, people do get sick. The cost of health care in this country can easily wipe you out."

Carl Martin agrees. "[Insurance] is a financial safety net," says the spokesman for the Health Insurance Plan of California, a health care purchasing cooperative in Roseville, Calif.

OK, with our increasingly expensive and complicated health care system, it's not easy to be responsible for your health when it's coming out of your own wallet. It will benefit you to pay attention to a few insurance facts. Let's start with some basic questions:

Where can I get health coverage?

What is the difference between all these types of insurance?

Which plan is best for me?

You must get some

First things first. Let's find a source of health insurance. You do have many options.

If you're young enough or in college, you can probably still be covered by your parents' insurance. Your parents will need to check their plan to find out if you qualify. If so, cool beans!

If you're working, you can get health insurance from the No. 1 source -- your employer. Take advantage of it. This is about the cheapest way to acquire insurance. Many employers offer a selection of types of insurance, so read on to figure out what's best for you.

If you're between jobs, you can extend your coverage from your last employer. You have to foot the bill, but it is still a decent rate. COBRA is not a nasty snake, but instead is a 1985 federal law called the Consolidated Omnibus Budget Reconciliation Act. It requires employers to allow former employees and their dependents to pay for continued insurance coverage for up to 36 months.

If you are working at a small company with few benefits or are underemployed, you have a variety of options, not all of them outrageously expensive. Before depleting your bank account for an individual policy, look for other ways you can qualify for a group discount. Coorsh recommends shopping around at alumni, professional, religious or interest groups.

If you do choose to go for individual policy, you can still save some money. Consider a temporary plan if you are anticipating starting a new job or enrolling in college. You can purchase some basic coverage for a short-term, like 3 months. Also, if you qualify, ask insurance companies if they give a discount for good health. Some do.

"Ask around. Find someone who's a knowledgeable and independent broker," recommends Martin. "They can find you a low-payment stripped-down plan."

What does it all mean?

You've probably heard newscasters throwing around terms like HMOs and managed care and indemnity and PPOs and well, the rest faded away when you changed the channel. Here is a basic primer, based on information from the Health Insurance Association of America:

Indemnity: This is the traditional type of insurance that your parents probably bought when they were young. It is also referred to as fee-for-service. It is pretty simple, but not inexpensive. Basically most people can't afford this type of plan anymore, so let's move on.

Catastrophic or "hospital-only" insurance: Martin refers to this as "step-out-in-front-of-the-bus" insurance. "It has very stripped-down rates," he says. "For someone in their 20s, it would cost generally under $30 [per month]."

"I strongly recommend at least this [hospital-only policy] for someone in their 20s," continues Martin. If you're not getting insurance from an employer, he recommends: "Get in touch with an agent or broker and pick up an interim policy."

HMO (Health Maintenance Organization): This oldest form of managed care is probably the most appropriate for a healthy young person without a family, due to its low cost. You'd receive a range of health benefits for a set fee. You choose a primary care doctor from the plan's list. This doc becomes the gatekeeper you must see or contact in order to get a referral to a specialist. By the way, an HMO is not an insurance company, though an insurance company can have one.

"It feels the same, but it's not regulated the same as an insurance company," explains Martin. "You can't sue an HMO."

POS (Point of Service) Plan: This plan is an indemnity-like plan offered by many HMOs. The insured person has the option of seeing a doctor outside the plan and still get some coverage.

"As a general rule, it is priced between an HMO and a PPO," says Martin.

PPO (Preferred Provider Organization): If you have health problems or a need for special care (such as maternity), a PPO might be appropriate for you. A PPO includes some of the benefits of an indemnity, but the lowered costs of managed care. Keeping costs in line will require you to visit one of the doctors on the plan's list. You can go outside that list, but your payments would be higher.

The 3 Cs to consider

Even if an employer provides your insurance, you could end up having a choice between plans. Take some time to balance the costs, coverage and convenience of any plan you are considering.

Coverage -- Take into account your personal needs for health care coverage. Do you have any special medical needs? Insurance plans can include maternity coverage, prescription costs, annual physicals, dependent coverage, specialists coverage and more.

The more benefits you select, the greater your premium. So, if you don't have kids and are generally healthy, you probably don't want coverage you won't need.

Convenience -- HMOs and PPOs limit your choice of doctors or hospital. You have to use one of the docs included in their plan or fork over extra bucks to see your old favorite doc who's not included.

How do you define an emergency? Doesn't matter. What does matter is how the insurance company defines an emergency. Be sure to ask the plan administrator -- before you take up hang-gliding.

Also, with many plans you are required to get a referral from your primary care physician before seeing a specialist. So when an ugly rash crops up on your face, you'll have to go through your primary doc and then wait for an appointment with a specialist. A bit inconvenient.

Cost -- Whether an individual or company plan, you will still be laying some of your cash out for your medical care. Your premium (the amount you pay monthly) will depend on what type of plan you choose, the extent of benefit coverage, and the amount you accept for deductible, co-insurance and co-payment.

Consider your health and lifestyle, and consequently the likely frequency you'll seek medical care. If you are healthy and planning on staying that way, maybe a higher co-pay and a lower premium would be good. If your picture is next to the definition of hypochondriac in the dictionary, you may be better off paying a higher premium and less per visit.

Playing the game

Now for the soapbox ending: What has always bugged me about health insurance is that it is a gamble between you and the insurance company. They're betting that you'll never get so sick to need treatment that costs more than the amount of premiums you're paying. You're hoping they're right, but also betting that there is a chance that someday you'll be laid up in the hospital for a long time and be glad for all those premiums you paid. Kind of a sick deal, isn't it?

Then again, you win either way. If you get sick, you're covered. If you don't get sick, hey, you're healthy!

-- Posted: Jan. 29, 1999