Michelle, the former editorial director, insurance, at QuinStreet, is a writer, editor and expert on car insurance and personal finance. Prior to joining QuinStreet, she reported and edited articles on technology, lifestyle, education and government for magazines, websites and major newspapers, including the New York Daily News.
Reviewed by Penny Gusner
Penny Gusner
Penny is an expert on insurance procedures, rates, policies and claims. She has extensive knowledge of all major insurance lines -- auto, homeowners, life and health insurance. She has been answering consumers’ questions as an analyst for more than 15 years and has been featured in numerous major media outlets, including the Washington Post and Kiplinger’s.
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Hearsay and incorrect information often fuel people’s misunderstandings of health insurance. When was the last time you snuggled up with a cup of coffee and your health insurance policy?
According to the Life and Health Insurance Foundation for Education (LIFE) and the Henry J. Kaiser Family Foundation, the following myths are alive and well in the minds of most folks.
If your employer offers a group health plan, you’re likely experiencing annual hikes in premiums, reductions in what’s paid for by your employer, an increase in your out-of-pocket expenses and the possibility that you’re paying for lots of benefits you don’t want or need.
An individual health plan (the kind you buy on your own), especially for someone who’s healthy and young, can offer significant savings. Unlike individual plans, group health plans must abide by state health insurance mandates, which can require coverage for everything from autism to hearing aids to contraceptives to in vitro fertilization.
Although an individual health plan can deny your application based on your health status, Matt Tassey, spokesperson for LIFE, notes that if you’re eligible the plan can be customized to meet your specific health care needs.
“If you’re a man, you have no need to see an obstetrician. But if they have an employer-sponsored health plan, they are still paying for [the obstetrics coverage],” he says.
Brenda Weigel, spokesperson for the National Association of Health Underwriters, says this is a common misconception. “The fact that health insurance is expensive is because health care is expensive. Or there’s the common misconception that Medicare administrative costs are lower than private plans, when in fact there is quite a bit of cost shifting,” says Weigel.
When patients use a government insurance program (such as Medicare), providers of health care shift more costs to people who have health insurance.
The result is higher premiums for people who purchase their insurance on the individual market and workers who receive insurance through their employers.
Rising prescription drug costs also fuel increases.
Then what happens when you break your leg in a snowboarding accident or blow out your knee while playing soccer? If you find that your tonsils need to be removed, the cost of a tonsillectomy can start at $5,000, with another $1,500 per day for an overnight hospital stay.
“There is this idea that if they need to be hospitalized they can just go to the emergency room because they have to take you,” says Tassey. “We like to call them ‘young immortals.’ A problem arises when they have to be stabilized or, worse, have to stay in the hospital for an extended period of time. What happens if they have to be transferred somewhere else for care, or have to see a specialist? The cost could reach $100,000 once you add everything up and starting out their lives in serious medical debt can have a long-term repercussions on their financial future.”
Tassey says young people rarely think about health insurance coverage until it’s time to have a baby.
A 2009 report from the Kaiser Family Foundation, “The Uninsured: A Primer,” reveals that adults between 30 and 50 years old comprise the largest group of Americans without health insurance. The report stipulates that the reason for this trend is due to the recession. Many Americans have lost their jobs in recent years – along with their health insurance benefits.
The report states that about 19.6 million Americans between ages 30 and 54 are uninsured. The second largest group is 19 to 29 year olds, at 13.7 million. Children between 0 and 18 years follow at 8.2 million. Those aged 55 to 64 comprise the smallest group at 4.1 million.
The 2009 Commonwealth Fund Survey of Young Adults supports the above findings, as it revealed young U.S. adults between ages 19 and 29 to be one of the largest uninsured segments of the population. It estimates the size of this group at 13.2 million. Of the total young adults surveyed, about half lacked health insurance during the previous year. The recession may have also affected coverage for this group. Young adults are having difficulty finding jobs and when they do, the employers often don’t provide health insurance coverage.
The federal COBRA law allows you to continue buying your former employer’s group health plan if you are laid off. The catch is that the employer no longer has to contribute to the premiums. One alternative is buying a short-term health plan on your own.
If you are relatively healthy, a short-term plan could bridge the gap between other health insurance plans, but if you have a pre-existing condition, or need maternity care or prescription drug coverage, you may not be able to find a short-term plan.
Also, short-term plans generally require you pay high deductibles before coverage begins. This deductible can vary from $250 (for very healthy policyholders) to well into the thousands. When you consider the cost of meeting the deductible before the plan pays for medical care, COBRA may be the better choice, especially if you have a pre-existing condition. In addition, a typical short-term policy lasts a maximum of six months and the insurer is not obligated to renew your policy.
While many large employers do offer health insurance benefits to their employees, all do not. According to the Kaiser Family Foundation, 98 percent of businesses with at least 200 workers offered health benefits to their employees in 2009, but only 59 percent of companies with fewer than 200 workers offered it.
But when workers are offered health insurance, they generally take it.
