Illustration/Jennifer Shontz

Illustration/Jennifer Shontz

Every now and then, in a moment of intense frustration, I ask my boyfriend to marry me. What drives me to this brink? The difficulty of obtaining affordable medical insurance. My boyfriend lives in the cloistered world of the large group policy. He works in a “low-risk” profession and has never seen the inside of a hospital. He has union representatives and their crafty lawyers protecting his interests, demanding (and getting) free insurance for all employees and their families. I, on the other hand, am self-employed and have been sick a time or two in my life, Like salon professionals, I am the only one looking out for my interests. We don’t have it so easy. We face rapidly rising premiums, limited options, and the rigors of a bureaucratic and often unfair screening process.

Your occupation is a major factor considered by insurance companies to determine their potential risk to insure you. For various reasons, insurers believe that members of certain professions are more likely to cost them money than others, and systematically deny coverage to anyone in these professions. Doctors, lawyers, and even cosmetologists are frequent victims of this practice. Explains one insurance industry veteran, “With AIDS reaching epidemic proportions, more and more industries are being blacklisted.” A recent article in the Los Angeles Times reported that beauty salons have been blacklisted because insurers presume that a high percentage of gay people work there and subsequently are at a higher risk for contracting AIDS.

Despite these difficulties, good basic coverage is available for almost everyone, although often for a hefty premium. “Health insurance is a game. People need to learn how to play it,” says one insurance agent.

The first step towards mastering the game is to familiarize yourself with the types of plans out there so you can make the best choice for your individual situation. A good agent can guide you through these occasionally treacherous waters, offering a variety of plans to choose from and advising you at every step.

The most complete coverage available is called major medical. A good major medical plan will cover all your basic health care needs, such as hospital stays, doctor visits, lab tests, and prescription drugs. You can get major medical coverage with health maintenance organizations (HMOs), preferred physician organizations (PPOs), and traditional indemnity plans. Blue Cross/Blue Shield is by far the largest provider of individual and small business health insurance. An insurance agent can put you in touch with a variety of other commercial insurers also offering plans for individuals or small businesses.

HEALTH MAINTENANCE ORGANIZATION (HMO)

As a member of an HMO or pre-paid Plan, you pay a monthly premium for which you receive complete care. You must use a medical facility or group of doctors that you select at the start of your coverage. The advantage of this type of policy is clear: There is no deductible and you can anticipate no out-of-pocket expenses beyond your premium, except for prescription drugs. If you have a family or you require more frequent doctor visits, HMOs are especially good. There are, however, a few disadvantages to consider. You have a limited choice of physicians, and you may have to leave behind a trusted family doctor. HMOs offer fewer treatment options, rarely providing non-essential or less traditional services such as chiropractic, acupuncture, or psychological counseling. You may also encounter more bureaucratic, less personalized service. For instance, an HMO may restrict how often a healthy pregnant woman may see her obstetrician

PREFERRED PHYSICIAN ORGANIZATION (PPO)

A PPO is a group of health care providers who have contracted with an insurer to provide their services at a predetermined discounted rate. PPOs have become very popular in the last few years because they allow an insurance company to control its costs while providing more options to the patient than an HMO.[PAGEBREAK]

The specifics of a PPO type policy can vary greatly. There is usually no deductible. Some plans require nominal fees to be paid by the patient each time a services is rendered, but others pay 100%. For example, many PPOs require a $5 payment at every doctor visit and $20 for a hospital visit. Others may cover 80%, leaving you responsible for 20%. A modified policy might cover 80% of your expenses if you see a preferred physician and 50% if you see a doctor who is not a member of the plan.

Increasingly, PPOs are placing restrictions on certain medical services in an attempt to control costs. Most require “pre-approval” for non-emergency treatment. They may monitor your care at various stages or require a written referral from a general practitioner before you can see a specialist.

INDEMNITY PLANS

Traditional indemnity plans allow you the most freedom with respect to choosing your own doctor and the range of covered services. They are, however, the most costly, both in terms of premiums and additional out-of-pocket expenses. Most of these plans are based on an 80/20% share of eligible expenses, which means the insurance company pays 80% of your medical expenses after you’ve paid your deductible. But even on a good plan, many charges are not covered.

Most indemnity plans have a maximum limit on co-insurance payments – that is a maximum you are required to pay out-of-pocket before the insurer covers 100% of all eligible expenses. This amount usually ranges from $1,000-$5,000.

While you shop around for the right plan, you may want to ask your insurance agent to get you on a temporary plan to tide you over. These policies generally cost less and require less information about your medical history. Your agent can also give you information on hospitalization-only plans, which provide limited coverage in the event of serious illness or injury.

Once you decide which type of plan best suits your needs, you’ll need to learn insurance company lingo in order to evaluate and compare specific policies. Each company uses its own particular terminology, but the concepts are fairly standard to any indemnity plan and most PPOs.

Deductible. The deductible is the amount of money you are required to pay out of your own pocket each calendar year before your insurance company begins to pay its share. Some companies will allow you to apply any deductible paid in the fourth quarter of a calendar year towards the following year’s deductible.

When you first apply for coverage you will be offered a choice of several annual deductibles, usually ranging from $100-2,000. The smaller the deductible, the greater your monthly premium will be. If you never get sick and are just interested in protection yourself in the event of an emergency, you will probably want to opt for a higher deductible so your monthly rate is lower. If, on the other hand, you tend to see your doctor on a regular basis, or would not be able to handle the large unexpected expense of a medical emergency, a lower deductible would make more sense. Be wary of any policy that applies a deductible to each separate illness or injury.

Eligible or Allowable Expenses.  When your insurance carrier agrees to cover a certain percentage of your medical expenses, they actually mean that once your deductible has been met, they will cover that percentage of what they consider to be a reasonable and customary fee for a given service in your area. On a PPO-type plan this is not an issue since the providers have already agreed in advance to accept the insurer’s fee schedule. If you have a traditional indemnity plan, however, you may find that your physician will charge more than your insurer considers reasonable for a given service. The additional amount is 100% your responsibility. Let’s say you’re on an 80/20 plan and your doctor charges $100 for an office visit. It may be that your policy allows a maximum of only $80 for an office visit. In that case, your insurer would pay 80% of $80, or $64. The remaining $36 is your responsibility

It’s worth asking your doctor before you choose an insurer if he’ll accept your insurance company’s maximum payment in full. He may, but if he won’t he can at least tell you if his fees tend to line up with or exceed insurance company guidelines.

Lifetime cap. The lifetime cap, or maximum benefit amount, is the total amount of benefits an insurer will pay out for an individual over the lifetime of the policy. This amount is usually $1 million, though some policies provide unlimited benefits.

Pre-existing condition. This is a term you may well come to hate. A pre-existing condition is any illness, injury, or condition that existed prior to the beginning of your coverage. Any condition, no matter how trivial, for which you received treatment or medication prior to coverage, is suspect. An insurance company may check back 1-5 years or further. Most plans will not pay benefits for pre-existing conditions during the first year or two of a new policy.

[PAGEBREAK]

Any claims for illness made during the first few months of coverage are generally viewed with the suspicion that the claim may be for a pre-existing condition. A cautious person would wait a while before seeking any optional treatment. An extremely cautious person might even change doctors, since the bill for a “new patient” exam tends to attract less scrutiny.”

Exclusion riders. Some companies offer exclusion riders, which are agreements stating that a certain pre-existing condition or treatment to a certain part of the body is exempt from coverage, either for a specified period of time or for the life of the policy. Even minor but chronic problems such as migraine headaches or an old football injury might warrant an exclusion. This seems unfair, but the alternative is to be denied coverage altogether.

Exclusions and limitations. Every policy has a long list of exclusions and limitations to covered services. It’s well worth your time to familiarize yourself with the fine print of your insurance policy. There are some common exclusions: routine physical examinations, routine chest X-rays, cosmetic procedures, organ transplants, sterilization or fertility treatments, calluses and corns, oral surgery, orthopedic shoes, well baby care, contact lenses or eye-glasses and exams for their fitting, eye surgery to correct vision, self-inflicted injuries, and vitamins.

Chiropractic, acupuncture, and infertility treatments usually have restrictive limits or are completely ineligible for reimbursement. Benefits for psychological counseling and treatment for substance abuse, if they’re allowed, are usually paid at the rate of 50% or less, with strict annual maximum benefit limits. Unless you specifically purchase maternity coverage (at an additional cost and well in advance of pregnancy), generally only complications of pregnancy are covered. Dental coverage may be purchased separately for a small extra monthly premium.

Most insurers will not cover you for injuries that would ordinarily be covered by a workers’ compensation insurance policy. In other words, if you get hit by a truck while picking up salon supplies during work hours, you’re not covered by your own insurance, whereas if you’re hit on your way to the cleaners, you are covered. Some companies offer what’s called “occupational” or “24-hour” protection at a moderate additional cost to individuals not covered by workers’ compensation, such as part-time employees and independent contractors.

Pre-certification. In order to keep costs down, most policies require pre-certification before any non-emergency hospital procedures and some outpatient treatments cane be performed. Pre-certification means you or your doctor must call the insurance carrier in advance of the procedure to obtain approval.

Rate Increases and Termination

Unfortunately, rate increases are a certainly. At one point, my own rates tripled over the course of a year. A good insurance agent will evaluate a company’s rate history before recommending a policy, but there are never any guarantees of stable premiums.

One factor used to determine rates is your age. Unless you belong to an HMO, you can expect an increase after every “big” birthday, roughly every five years.

Theoretically, you can’t be singled out for a rate increase or termination if you become ill. However, when you are accepted for coverage, your individual policy is grouped with similar policy-holders on your plan. Periodically, your insurance company evaluates whether it is making an acceptable profit on your group as a whole. If not, it will institute a large, across-the-board rate increase. What often happens then is that healthier policy-holders are offered the opportunity to join a different plan at a lower rate. Those people with chronic or serious illnesses are forced to either pay the higher rates or change insurers (which is next to impossible when you’re currently in treatment).

Similarly, a small business owner may receive preferred rates during the first year of a policy. If the business submits a lot of costly claims, the insurer reclassifies the business with other groups whose costs are higher and then raises their rates.

Most insurers will guarantee that they will not terminate your individual coverage unless you fail to pay your premium or unless they terminate all individuals with similar policies. This offers you some protection from cancellation if you become seriously ill. Blue Cross/blue Shield providers claim they will not cancel your policy unless they discover within the first two years that you failed to disclose a pre-existing condition. And, a precious handful of insurers will guarantee not to terminate coverage for any reason other than non-payment. Two such quartered in Des Moines, Illinois, and benefit Trust Life, located in Lake Forest, lowa.

The Application Procedure

Insurance carriers weigh several factors to determine your eligibility for coverage – most important, your health history. A typical application form asks such questions as “Have you received treatment for any disease, sickness, or disorder other than colds or flu in the last 24 months?” or “Have you ever been disabled, had surgery, been confined to a hospital, nursing home rehabilitation facility, or been treated by a chiropractor?”

A “yes” to any of these questions can frequently result in denial of coverage.

The screening process is much the same for a small group (usually defined as 3-49 people) as for an individual. With a large group, the insurer can be reasonably assured that a few costly illnesses will be compensated for by a large number of healthy people and will request little or no medical information. With small group, however, insurers try to minimize their risk by evaluating the medical history of each applicant. Coverage may be denied to individuals or to the group as a whole on the basis of one serious illness.

It may be tempting to conceal a history of poor health, but you shouldn’t lie about your health on your application. For one, it’s easy to get caught; for two, you could lose all your benefits if you do. When you sign the bottom of the application form, you’re giving your potential insurer access to your medical records. Even after you have been accepted for coverage, your insurer requires authorization to investigate every claim submitted. If you submit a claim for treatment of a pre-existing condition that you neglected to mention on your application and this comes to light, your insurer may well rescind your coverage retro-actively, leaving you to pay them back for all benefits received since day one of coverage.

Remember that your medical history follows you around for life. On general principle, you should be careful and consistent about what you or your doctor commit to writing. Even a suspected diagnosis that later proves untrue can cause problems.

A Boston-based organization called the Medical Information Bureau (MIB) keeps records relating to your medical risk factor much in the same way TRW keeps an eye on your credit. If you’re curious, you can request a copy of your record free of charge.

In some states, people who have physical conditions that make them virtually uninsurable, such as multiple sclerosis, cancer, or ulcerative colitis, can apply for coverage under a state-funded high-risk policy, which works much like an assigned risk auto insurance policy. These policies cost a little more, but are absolutely invaluable for many individuals.

It takes a little time (and a fair amount of money), but you can generally make the system work for you clearly, our present health care insurance system is flawed. Increasingly it shuts out precisely those people who need care the most. Consumer groups are currently active in 35 states encouraging support for a nationalized health care plan.

Until that happens you can always consider getting married.

For reprint and licensing requests for this article, Click here.

Read more about