Consumers searching for health insurance may encounter plenty of pitfalls along the way.
One strategy for the well-to-do: If you are currently insured through an employer and can afford it, Rick McGill, principal and health consultant at Hewitt Associates, suggests buying a good, guaranteed-issue policy on top of the employer-provided insurance, so you'll have it for at least two years before you leave work -- the time period during which an insurer is most likely to find a way to get around guaranteed issue if you have serious health problems. Some employers will even pay for the policy for you as part of a pre-retirement package, says McGill.
Insure for catastrophes
All health insurance isn't created equal. In the best of all possible
worlds you'd have a policy that pays all, or at least a substantial
amount, of a visit to the doctor when you have the flu, as well
as a hospital stay if you are hit by a train or felled by cancer.
But a lot of the cheap insurance that you see advertised
on telephone poles and on television, and even some of the insurance
offered hourly workers by companies, has an annual claims limit
as low as $1,000. That's chump change, especially considering that
the average 4.5-day hospital stay costs nearly $30,000, according
to the Agency for Healthcare Research, which is part of the U.S.
Department of Health and Human Services.
If you are faced with a choice between a policy that pays for routine health care -- doctor visits for flu or high blood pressure medication -- or insurance that covers hospital stays and other kinds of catastrophic ailments and leaves you paying for the smaller stuff out of your pocket, think hard.
Some 50 percent of bankruptcies are attributable to medical problems, a University of Texas study found. Most of the time you'd be better off insuring against the big stuff and paying as you go for the little stuff, especially since you can set up a tax-advantaged savings plan to pay these costs.
Health policy analyst Cynthia Saunders recommends a high deductible policy -- as high as you can possibly afford -- with a tax-advantaged health savings account as the health insurance of choice for the over-50 market. It's the most economical policy to buy, the most forgiving of health problems, and the bills don't actually have to be paid from the HSA until you want to pay them.
Beware the rescission policy
Hiding your medical problems when you fill out an application for insurance can be a huge mistake because it can result in your insurance company retroactively denying claims.
The practice is called rescission. That means the insurance company, after reviewing your condition and medical history, decides that you should have seen a doctor about your current ailment before this point in your life and before you bought insurance from them. As a result, they may deny your claim -- after you've already incurred the bills. Potentially, a financial disaster.
Some states will let insurance companies go back further than others to examine your medical history. New Hampshire only lets insurance companies examine three months' worth of records. In Alaska, Arizona, Washington, D.C., Georgia, Hawaii, Kansas, Missouri, Nebraska, Nevada, Oklahoma, Tennessee and Wisconsin, there is no limit.
Some insurers are more aggressive than others in tracking down medical history, but all will follow up if there is any reason to suspect that you didn't just experience the problem.
"As the claim gets larger, the likelihood of scrutiny increases," says attorney Kevin Lucia, an assistant research professor at Georgetown University Health Policy Institute.