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Health insurance rife with risks

By Barbara Whelehan · Bankrate.com
Friday, September 30, 2011
Posted: 2 pm ET

A year and a half after the Patient Protection and Affordable Care Act was enacted, health insurance remains elusive to many people because of its unaffordability. And the perceptions of health care in America haven't improved either. Most people rate the health care system as poor (27 percent) or fair (29 percent), according to the 2011 Health Confidence Survey released this week by the Employee Benefit Research Institute, or EBRI, and Mathew Greenwald & Associates.

This week the Obama administration asked the Supreme Court to make a decision about the constitutionality of the law's "individual mandate" that requires most Americans to get health care coverage or pay a penalty. While two of three federal appeals courts sided with the administration on the issue, a third, the 11th Circuit Court in Atlanta, declared the individual mandate unconstitutional. If the Supreme Court takes the case, its ruling will likely be made next summer.

Among those who are younger than 65, 18.5 percent had no coverage last year, according to a separate Issue Brief released by EBRI. The outlook for employment-based health benefits isn't exactly positive, especially since unemployment remains high and the economy continues to sputter. "Fewer working individuals translates into fewer individuals with access to health benefits in the work place, especially after COBRA subsidies have been exhausted," according to the EBRI report.

The insurance runaround

That means more people will be out on their own, trying to find individual coverage, and it's proving to be a daunting exercise -- especially for those in the 55 to 65 age bracket.

For example, the COBRA coverage for my friend Elaine, 62, expires soon, so she's been shopping for health care insurance over the past couple of weeks. She's been turned down by four or five carriers, she says. Only one accepted her for limited coverage at $750 a month, but it excludes pre-existing conditions, which in her case is hypertension and asthma/allergies.

Insurance broker Katie Boeck, who serves clients throughout Florida, says some plans may forever exclude certain conditions. "For example, asthma. If they exclude asthma coverage, then the plan may not pay for the drug, any treatment related to it, such as allergies. And if she has an asthma attack and ends up in the ER or hospital, they may or may not pay for it depending upon many circumstances at the point of claim."

Elaine has been accepted by two HIPAA plans so far. One charges $973 a month for her age in her county; the other charges $1,108 a month. That's just for premiums. Elaine can't afford to pay that much, so her only other option is to go naked for six months so she can qualify for the government plan.

"It has been a bad experience and rather depressing to realize how much of a chokehold the insurance companies in this country have on us -- the regular middle class that supports the majority of the money they make," says Elaine. "Most companies seem to be geared for group coverage. The individual has no leverage with them."

Her broker Boeck says seniors who do qualify for coverage often can't afford it unless they go to a "ridiculously high deductible of $7,500 or $10,000." Furthermore, if they take medications, their plan would only cover a small portion of their cost. And if they have two or three of the following conditions, they'll get declined: hypertension, tobacco use, elevated cholesterol or triglyceride levels, overweight. "If you have diabetes of any type, you have extremely limited options. Combine it with any of the other conditions, and forget about it," says Boeck.

"Also, if you are exhausting your COBRA and need to find a HIPAA plan because you do not qualify for a regular individual plan, you are limited to a few plans with each carrier and the rates are embarrassing and ridiculously unaffordable, in my opinion; $1,400 a month for a $2,500 deductible plan or $1,100 a month for a $5,000 deductible plan for someone 55-plus on a limited income is unacceptable to me. That is higher than their house payment and car payments put together."

The government plan

Boeck, who heads the eponymous Katie Boeck Insurance Services firm, says the government plan for those in the age 55-plus category is $376 a month, and Palm Beach County offers an affordable plan as well. But the six-month insurance exclusion requirement is a head-scratcher. She says she thinks that may be in place to discourage people who can qualify for group coverage or who can afford individual plans.

Boeck says she believes health insurance coverage should be mandatory for everyone to carry. "Many people feel that if they get sick then they can go to the emergency room like the illegals and have free health coverage. Trust me, it is not free. We all pay for it in the end and it just makes our coverage more expensive." She believes that if everyone bought coverage, "then maybe it would bring the rates down so that everyone could afford to have some level of coverage."

I have my doubts about rates ever coming down in a profit-oriented health care system.

Meanwhile, Elaine is considering an indemnity plan that isn't considered health insurance. It pays $1,000/day for in-patient hospital care and $2,500 for surgical procedures done in the hospital. It won't cover her pre-existing conditions, and it costs $300 a month.

It seems like a big risk for someone in early retirement. But it's better than nothing, and after six months she can get into the affordable government plan.

Do you think health insurance coverage should be mandatory? Have you ventured into the individual health insurance market? Share your experience.

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