Health Insurance - Meeting special needs



Some health insurance policies are designed to meet special needs. They tend to provide coverage for individuals with long-term medical problems or chronic health conditions who represent above-average risks for insurers. Special policies may totally exclude coverage for the specified health problem while providing all other standard benefits, or they may impose a waiting period before beginning coverage of the problem. The section below provides more information regarding preexisting medical conditions.

Some insurance policies that were initially designed to meet special needs are now common to the point of being standard. For example, dental-expense coverage is now available through a majority of group and individual insurance plans. Many group policies also make provisions for the cost of eye care.

Making Insurance More Widely Available

From its inception, the health insurance industry has restricted a number of people from obtaining adequate, uninterrupted coverage. Such coverage was denied because of preexisting medical conditions, unemployment or a change in jobs, or a host of other reasons. From July 1997, however, the Kennedy-Kassebaum bill changes the law and effectively ends most of these exclusions.

Preexisting Medical Conditions

Preexisting conditions are physical or health problems which existed before a person's health policy was to take effect. Previously, insurers would not cover claims related to these conditions at all, or at least not for a certain period of time. Now, provided the medical problem has existed for 12 months or more, coverage cannot be denied. It is, however, important to note that people with preexisting conditions may still have to pay higher rates for individual health insurance policies. This is simply because they are above-average risks, and insurers might stand to lose money in paying their claims.

Unemployment and Job Changes

Because most health insurance is a job-related benefit, many people find their coverage terminates when they become unemployed. After July 1997, this can no longer happen, as long as individuals have had insurance for at least 12 months prior to losing their jobs. For those who become unemployed, their former employer's insurer must provide an individual health insurance policy. For those who change jobs, their new employer's insurer must accept them into the group health insurance policy. Individuals who previously did not have insurance, or who had it for fewer than 12 months before losing their jobs, still face being uninsured while unemployed.

Remaining Problems

Even with the improvements of Kennedy-Kassebaum, satisfactory health insurance is not universally available. The mentally ill may find their insurance policies inadequate because the laws regulating coverage of physical ailments do not extend to mental health problems. Additionally, those who depend upon their spouses for coverage in a group plan may find their insurance terminated upon divorce. Many states have enacted laws to provide continued coverage for a short period following the divorce, but as the federal government has not yet addressed this question, laws and policies vary widely.

“Medigap Insurance”

An estimated 95 percent of all Americans over 65 are protected by Medicare. Yet this government program covers only a portion of all possible physician and health expenses. To help bridge the gap between Medicare and the 100 percent coverage that most people want, private insurance companies have developed “medigap” policies.

The terms of these policies vary, but most simply expand existing Medicare coverages. Few offer even partial protection against hospital and medical costs that Medicare does not cover in full or at all. Areas not covered by many medigap policies include hearing tests and hearing aids, most dental care and vision care, and long-term care in-home or at a nursing facility. Clearly, policies with such exclusions still leave people vulnerable. Those trying to supplement their Medicare coverage must search out more complete policies, such as Blue Cross/Blue Shield's.

When considering a medigap policy, consumers are well-advised to first research the reputation of the insurer by calling the Better Business Bureau. Understanding all the terms of coverage before buying the policy will prevent unpleasant surprises later. Basing decisions on premium levels is rarely wise: rates can and do increase at all companies. Finally, older people should make sure they have both parts of Medicare coverage (medical insurance and hospitalization) before purchasing additional policies.

Five Innovative Plans

Pressures to cut the costs of medical care have given rise to basic changes in the methods of delivering such care in the United States. Most people no longer call their family physicians and, if so advised, go to the nearest hospital. Insurance plans and programs now offer both more choices and more restrictions. Five programs in particular are changing the face of health insurance.

Health Maintenance Organizations (HMOs)

Operating clinic-style facilities, HMOs require that their subscribers pay a set monthly premium. In return, the HMO provides full medical care. However, members have to select their physicians from a list provided by the HMO. If hospitalization is necessary, the subscriber goes to a hospital selected by the organization.

Charging premiums that are lower than those for equivalent insurance coverage, HMOs provide incentives to avoid unnecessary expenses or treatments. They generally encourage subscribers to make use of preventive care to stay healthy. Thus, most HMOs offer eye and hearing check-ups, as well as podiatric and dental services, at little or no cost beyond the monthly fee.

There are drawbacks for HMO subscribers. Most HMOs try to keep costs low by regimenting the length of hospital stays for specific health problems, i.e. two days for pneumonia, and disregard the individual circumstances of each patient. In some cases, HMO physicians under great pressure to minimize costs have failed to recommend expensive treatments even when they were the most promising options.

HMOs already account for a large share of the health care market. As they grow in number, new and better regulations will be developed to ensure a higher standard of care for subscribers. Many state and federal laws passed in recent years have already contributed to notable improvements in HMOs, and the future is similarly promising.

Preferred Provider Organizations (PPOs)

In the PPO, subscribers receive care at a discount if they go to physicians and hospitals recommended by the insurer. Generally, the insurance company underwriting the PPO allows employees in insured groups to go to a nonparticipating physician. But in such a case the costs of care rise considerably, sometimes to twice those charged by the listed physicians.

Under the PPO arrangement, physicians, hospitals, and insurers work together to keep down overall costs. A PPO hospital provides care for insured persons at reduced rates. In exchange, the hospital enjoys increased utilization of its facilities.

Managed Care

Unlike the HMO and the PPO, a managed care program gives members the freedom to pick the physicians and hospitals they prefer. But severe cost-containment rules apply. The restrictions may include the following:

  1. • Preadmission reviews of hospital stays by panels of physicians and nurses. A panel would have to agree in all cases, except for maternity care and emergencies, that hospitalization and the proposed care are necessary.
  2. • Reviews during hospitalization to ensure that continued inpatient care is necessary.
  3. • Mandatory second opinions before some operations to make certain a particular procedure is necessary.
  4. • As in some newer group plans, surgery is performed on an outpatient basis where possible.

Companies adopting managed care plans may offer HMO and PPO plans as well. An eligible employee in such a firm then has a choice of program.

Hospital Chains

Competition among health care providers has led to still another approach to both cost control and hospital utilization. Some for-profit hospital chains have bought insurance companies to obtain insurance licenses, then provided health insurance programs that required the insured to use the chain's facilities.

A variation on the HMO and PPO systems, the hospital chain approach makes possible insurance costs that are 10 to 15 percent lower than those of traditional plans. Chain officials contend that the lower charges are justified by more efficient hospital operation.

Insurance experts note characteristics of the hospital chains’ programs that appear to justify caution on the part of the potential buyer. For example, the policies sold by the chains usually impose limits on lifetime benefits. Unlike the plans of such nonprofit groups as Blue Cross/Blue Shield, the chains’ policies provide for the termination of certain benefits at specified ages.

Long-Term Care

Increasingly, major insurance companies have begun to devise policies that cover the costs of long-term care for the elderly, in-home or at a nursing care facility. The terms of these policies vary, and a number of them fall short of expectations. For example, rather than providing a live-in companion as soon as health begins to decline, many insurers will provide in-home care only after a stay in the hospital. Even individuals who have specific in-home care policies find that their insurers use their own stringent guidelines to determine if and when that care is needed.

Such specialized plans face a double financial difficulty. First, the insurance company needs to make a profit. Second, the costs of nursing home and in-home care ranging from $15,000 to $50,000 and more per year raises the possibility of enormous claims that could continue for many years. Some companies work through organizations like the American Association of Retired Persons (AARP). The memberships of such groups are usually large enough to reduce the premiums for the buyers and the risks of major claims for the insurers.

With long-term care policies in particular, it is important for people never to buy more insurance than they can afford, as they may never need to make a claim. They should also plan ahead as far as possible: purchasing coverage for the retirement years in advance of need tends to secure lower premiums and better benefits. And, as with all policies, individuals should understand all the terms of coverage and the exclusions before purchase.



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