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How to Avoid Common Health Insurance Pitfalls

by Alicia Isero

The more you read the more complicated it gets. How can you decide which health insurance policies are vital and essential to you? Healthcare details are complex, and insurance documentation can be confusing and frustrating to decipher. Avoiding pitfalls in the insurance realm requires detailed and thorough reading and asking for clarification on any issues that do not immediately make sense. Here are six common pitfalls you should avoid at all costs:

  • Lifetime capitation. When selecting a health benefit plan, read all the details. Some insurance policies include a lifetime capitation on various healthcare features. For example, the policy might say lifetime capitation of $1,000,000 on hospitalization. Although $1,000,000 may seem impossible to reach, during one hospital stay you can rack up hundreds of thousands of dollars in a matter of a week. The problem with capitation rules is that one serious illness or extreme accident can wipe out your benefits for life and leave you with no coverage for a future incident.
  • Assume the same. People change insurance policies when they switch jobs, move homes, get married, or have a baby. Assuming you'll have the same doctor and the same benefits with your new plan is a big mistake. Insurance companies negotiate different versions of policies with various employers. Before selecting a plan, make sure the doctor and/or hospital you want is listed under the new policy.
  • Misunderstand. Analyze the difference between PPO, HMO, and other managed care organizations, and examine your own personal style of healthcare. Do you want to see your primary doctor and have he or she refer you to specialists? Or do you want to choose your own specialist? Because you are typically locked in to your selected plan for a year, research the health policy and fine details carefully before assigning benefits.
  • Miss a discount. What is a health care spending account? Don't believe that a spending account is just another way to withhold money from your paycheck. Many fail to take advantage of this major benefit. Each year, health care spending includes prescriptions, co-payments, before deductible care, and non-covered procedures (eye treatment, laser, acupuncture). Typically it's hundreds of dollars. By saving in your healthcare spending account, you actually receive a discount from the government. You are saving money from your salary before you are taxed, so then you pay less on taxes on the balance of your paycheck. For example, a friend decided she wanted Lasik eye treatment. The cost was $5,000. During benefits enrollment, she put aside the maximum allowable, around $500 per month. Her savings ended up close to 10 percent; the final amount out-of-pocket was closer to $4500. Similarly, some employers offer wellness discounts or payments. You might get paid to make a lifestyle change (i.e. smoking cessation, taking a yoga class).
  • Multiple coverage. More is probably better…but not necessarily. A couple might have the opportunity to be covered by each spouse's insurance. Typically, double coverage is not advantageous and sometimes can be frustrating when deciding which insurance company is going to pay out. In addition, you are paying monthly fees to two insurers. Some employers will actually pay you not to use your health benefits…in this case your employer would actually pay you to use your spouse's benefits. This is another possible discount on monthly rates.
  • Medical supplement plans. Use caution if a company offers to buy your government sponsored benefits. Sometimes insurance companies will offer to "manage" your Medicare or Medicaid policy. By assigning your policy to another company, your coverage can change. Analyze and understand medigap plans and benefits completely before you transition.
It's important to know the pitfalls. But better yet, it's important to know how to avoid them. The following tips can help you dodge the proverbial health insurance bullets and make an informed decision about your healthcare coverage:
  • Know your doc. You need to be your own best advocate. But having a trusted medical professional familiar with you and your family history is critical to your well-being. By getting to know your doctor, you can build a relationship in which you feel comfortable asking difficult medical questions and, more importantly, you have a partner looking out for your best interest.
  • Ask questions. If you don't understand an insurance policy, detail, or statement, ask. Call the insurer, talk to your doctor, ask a colleague. Understand the policies thoroughly before you select. Your doctor works with insurance companies every day and should have insight into the policies you are examining.
  • Use benefits advisors. Employers spend a lot of money, resources, and time providing health care benefits. Your HR office or benefits department has people dedicated to answering your questions. Call or email with any uncertainties or needed explanations. Your employer wants you to understand the complexities of health insurance coverage. You can ask about any of the above pitfalls and get a direct answer on how it applies to you.
  • Talk to a friend. Friends and colleagues can be excellent resources. Perhaps you have a friend with a primary doctor that he/she advocates and respects; ask for a referral. Maybe you have a colleague who went through a medical situation similar to what you are facing; confer about experienced and suggested treatment plans, which specialist was most helpful, and any other recommendations.
Every day, it's a challenge to keep track of all your paperwork, bills, contracts, and email. However, when it comes to your medical coverage, do your homework and be thorough. Set aside a little time to read all the policy details and choices at your disposal. Discuss issues and questions with your spouse, family, or friends. Remember to be well and live well; take advantage of the health benefits offered and select the medical coverage you need to cover an incident or accident and make you well again.

Sources
Council for Affordable Health Insurance
Insurance Information Institute
Life: A Nonprofit Organization--Healthcare Cost Estimator

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