Insurance World

Lack of health insurance coverage for over 41 million Americans is one of the nation’s most pressing problems. While most elderly Americans have coverage through Medicare and nearly two-thirds of non-elderly Americans receive health coverage through employer-sponsored plans, many workers and their families remain uninsured because their employer does not offer coverage or they cannot afford the cost of coverage. Medicaid and the State Children’s Health Insurance Program (SCHIP) or HAWK-I here in Iowa help fill in the gaps for low-income children and some of their parents, but the reach of these programs is limited. As a result, millions of Americans without health insurance face adverse health consequences because of delayed or foregone health care and extending coverage to the uninsured has become a national priority. -(Information taken from kff.org)

The number of people that are forced to go without health insurance is nothing less than a crisis in this country today. We have fallen into a vicious cycle over the last few decades in which health insurance premiums have become too expensive for even a middle class family to afford. This in turn results in the inability of the uninsured to cover medical costs which often times results in the financial ruins of the family, and in turn results in the continuing loss of income by the medical community, which in turn drives the cost of medical expenses higher, finally cycling back to the insurance company which then must drive the premiums of health insurance higher to help cover the rising cost of health care.

Many proposals have been tossed around by politicians on both sides of the isle ranging from socializing health care comparable to the Canadian system, to endorsing health savings accounts and cracking down on frivolous law suits against the medical community. Many of these proposals have good points, but along with whatever good points they bring they also bring major downfalls. For instance; a socialized national health care program would eliminate the need for health insurance all together and the cost would be taken on by taxes, which in theory doesn’t seem like a bad idea. However, the downfalls to this system include a deficit in new doctors willing to get into the field due to the inevitable decline in income while the demand would grow due to no personal responsibility. In short if people didn’t have to worry about deductibles or copays that would normally keep the person from seeking medical treatment for minor things, they would simply go to the doctor every time they had an ache or pain. So now we have waiting lines for people with major health problems since everyone is scheduling an appointment while at the same time we are loosing doctors due to lack of incentive.

The current battle cry by the republican Bush administration is to push HSA’s (Health Savings Accounts) which reduce premium by taking a less expensive high deductible health insurance plan with a tax deferred savings account that earns a small interest on the side that you contribute to along with your premiums each month. Any money withdrawn from the savings account for qualified medical expenses are taken “tax-free”, and unlike a flex spending account like many people are familiar with in employer based plans, you don’t lose the money you put into the account that you don’t use. Basically if you never used any of that money in the savings account you could withdrawal or roll it over into another vehicle once you turn 62 1/2 penalty free to be used for retirement. This is a viable option for some people, however for many the premiums for these plans are still too expensive, and the problem remains that if you need major treatment in the first few years of the policy you will not have a big enough amount in the savings account to help cover the gaps leaving that person responsible for a large portion of the cost out of pocket.

Now we come to what I believe is one of the biggest problems from a health insurance agent’s point of view, which is the inability for persons with pre-existing health conditions to obtain coverage. From the number of people that contact my office searching for health insurance coverage, I would have to say that about half of them have a health condition that will either result in an insurance company declining that persons application, or result in an amendment rider which basically excludes coverage for any claims related to that condition. An example of a condition that I run across constantly is hypertension or high blood pressure. This condition will sometimes result in a company declining an application all together if other factors are involved, but most generally result in an amendment exclusion rider. You may think that this isn’t that big of a deal, after all, blood pressure medicine is about the only thing they would have to pay for out of pocket, but what many people don’t realize is that this rider will exclude ANYTHING that could be considered part of this condition including heart attacks, strokes, and aneurisms which would all result in a huge out of pocket claim. Consider the fact that my father had a double by-pass surgery recently that ended up with a final bill of around $150,000. This whole amount would have had to come out of pocket had he had a hypertension rider on his health insurance policy, not to mention the added cost of 2 months off of work thrown into the mix. On a modest income of $40,000 per year this would have ruined him financially.

So what how do we fix this problem? Obviously the proposals thus far have been flawed from the beginning, and even if one of these plans gained support from the American people chances are it would never be passed into law simply due to political infighting. One side wants to keep health care privatized while the other wants to socialize it, which as we discussed before both have upsides and downsides. It seems that we are doomed on this issue and there is no real ideas or light at the of the tunnel right? Maybe not, let me tell you about a client I had in my office a couple of years ago.

A young woman came in wanting to compare health insurance plans to see if there were any options for her and her family. She had several children and had been on Title 19 Medicaid and had been going to college paid by the state. She had recently graduated from college and had gotten a job with the local school system, however for whatever reason she was not eligible for health insurance benefits. Obviously she still couldn’t afford 5 or 6 hundred dollars per month for a plan so she went back to the aid office and explained her situation. They ended up working with us to find an acceptable private health insurance plan and reimbursed her for a percentage of the cost which I didn’t even know was possible!

This got me thinking, consider how many more people would be able to obtain coverage if they could be reimbursed by the government a percentage of the premium according to their income. For example; take a young married couple in their 20’s with one child, let’s say that their family income is $25,000 and that the average premium for a $500 deductible health insurance plan for them is $450. Just as an example let’s say that the government determined that a three person family with an annual income of $25,000 is reimbursed 50% of their premium taking the actual cost to the family to $225 per month. This is now an affordable enough premium for the family to consider.

With this merging of private insurance with government assistance we get the best of both worlds. Of course the next question goes to cost, how much more would this cost the American tax payer and how much would this raise taxes? I don’t think that it would cost the tax payers much more an here’s why I think that: First off we would bring down significantly the amount of uninsured people that are unable to pay for the medical care they get in turn driving down the total cost of health care. Secondly the number of people that are forced into bankruptcy and driven to Medicaid Title 19 assistance due to medical bills stemming from catastrophic medical conditions that don’t have health insurance coverage would be significantly reduced. This is important to keep in mind considering that once someone is on Medicaid they are receiving health care basically 100% covered by the government so there is no more incentive to not seek treatment for minor or non-existing conditions. On the flip side many conditions that would have not been caught before they became severe because a person didn’t seek treatment due to not having insurance coverage would now be caught before they turned into a catastrophic claim. Finally, if the government allocated a certain amount of money to help cover claims by people that have pre-existing conditions the private insurance companies could do away with exclusions and declines due to already existing health problems, this is already done is some states such as the HIPIOWA Iowa Comprehensive Plans which insures Iowa residents that can not obtain coverage elsewhere.

You may be sitting there thinking that this is all just wishful thinking and that these ideas could never be implemented, but all of these ideas are already being implemented. The problem is that only some states do some programs and not even most health insurance agents know that some low income families can get reimbursed for health insurance premiums. If these programs were all standardized and put into effect on a national well publicized level I believe it would put one hell of a dent in the uninsured population in this country. Now I don’t pretend to know what the reimbursement levels should be for what income levels but I do know that anything is better than nothing, and in my opinion this is the best middle ground we could find. The Democrats would be happy with the socialized aspect of the reimbursement, and the republicans should be happy that health care remains privatized giving this solution a better chance at a by-partisan backing.

I have faxed this idea to several senators and congressmen but always received the same type of standard response about how they are concerned with health care and that they are working hard to find a solution knowing full well that no one really even read my letters. The only way to get these ideas out into the public is for you that read this to pass it on to others by word of mouth, by email, or by linking your websites to this webpage. If enough buzz is created than these ideas would get the consideration that they deserve, and if enough people like you and I demanded that a solution be found than perhaps enough stress can be placed on the politicians to get something done. The number of uninsured Americans is only going to go up, the cost of health care is only going to go up, and the cost of health insurance premiums are only going to go up if something isn’t done now! Until then the only thing that I as a health insurance agent can do is to compare all of the options out there and present you with the lesser of all of the evils, which in too many cases the option that is chosen is the biggest evil of going without coverage.

Health Care Crisis in America

A health care crisis is looming on the horizon for many Americans, one that could bring financial and emotional devastation that would make zooming gas prices and bouncing stock markets pale in comparison.

The problem? According to Metlife, 70% of people over the age of 65 will need some form of extended care before they die, whether it’s a visiting nurse in the home or full-time nursing home care. According to The Alliance for Aging, “nearly 9 out of 10 Americans will have at least one chronic condition” by age 65. Thanks to modern medicine, these conditions are debilitating, but not immediately fatal. Most seniors express concern about paying for necessary care in the face of such a condition, but few do anything about it.

Laura Moore, senior vice president for long term care insurance at John Hancock, says the issue is “increasingly important because Americans are living longer, care costs are rising, and company pensions are being cut back.” Moore says that Americans are “not facing the reality of what lies ahead.”

If you need extended care, but are unable to pay for it, the burden will fall to your families. The emotional, physical, and financial drain of caring for a sick parent is so traumatic that, according to the American Alzheimer’s Foundation, 60% of family care givers die before the person they are caring for! Furthermore, if you are placed in a nursing home without the funds to pay the bill, you risk not only your life long savings, but also the family home and even your life insurance.

Understanding Long Term Care

Long term or extended care refers to care that is needed beyond the time period covered by Medicare or major medical insurance. It is often provided in a nursing home, but can also be provided in a person’s home or in an assisted living facility.

The cost of assisted living, nursing home care and professional home health care is high and climbing yearly. A 2003 study conducted by Metropolitan Life Insurance found the average rate to be $180 per day or $66,000 per year for a private room in a nursing home. Care in an assisted living facility averages $30,288 a year while professional home care would cost $166,440 a year for round the clock care at $19.00 per hour. Due to inflation, by 2021, nursing homes may cost as much as $175,000 per year.

There are three solutions to surviving these high costs of extended care. You can be rich enough to pay all costs yourself, engage in a spend down to exhaust your assets and qualify for Medicaid, or you can purchase Long Term Care insurance (LTCi).

Long Term Care Insurance

LTCi is an insurance program that pays for extended care when Medicare and private major medical is exhausted, or for intermediate or custodial care which are not covered by Medicare or major medical at all. The most comprehensive programs cover home care, assisted living, and nursing homes. Simpler plans provide home care only and are also less expensive.

The care usually involves assistance with daily activities such as eating, dressing, walking, bathing, moving from bed to chair (called transferring) and using the toilet, or, in the case of cognitive impairment, simply sitting with a person to prevent him from danger to himself.

Regardless of the type of plan preferred, it’s like any other kind of insurance. You cannot purchase it once you actually need the care.

Making the Decision for Long Term Care Insurance

Two factors that keep people from taking LTCi are a refusal to accept the possibility that they might actually need it some day and the perception of the insurance as “costly.” While you may indeed never need it, if you live a long life, the odds are that you will. The cost of having it and not using it is far less than that of needing it but not having it.

The objection most people raise to purchasing LTCi is the cost. It is perceived as “expensive,” and perhaps it is, especially if you wait until you are in your 70’s to try to get it. However, when tempted to procrastinate, ask yourself if you could afford a bill of about $4000 per month on what you have today. When you retire, are you likely to have more disposable money or less? Wouldn’t it be better to pay a premium averaging $900 to $2000 per year now rather than face the possibility of having to pay twice that every month if you need care? According to Medical News Today, “LTCi can be quite affordable, especially if you buy at a relatively young age.”

Relying on Medicaid to Pay the Bill

Medicaid is a state and federal program for people who are at the poverty level, or who have certain physical conditions. According to a 2003 report by the American Council of Life Insurers, Medicaid pays only 17% of America’s LTC bill. LTCi currently pays the bill for about 5% of those with coverage. A whopping 58% of the LTC bill is being paid by private individuals who are being forced to whittle away their assets to receive the care they need.

In order to qualify for Medicaid to receive care in a state-run nursing home, you have to be below a certain income level and can own only limited property. The rules vary by state, and new laws are making it increasingly difficult to qualify. No longer, for example, can you transfer your assets to your children and then enter a nursing home. Most states have a 3 to 5 year look back period with a stiff accompanying penalty for those who have attempted such a transfer.

The Medicare Misconception

Many people mistakenly believe that Medicare will pay their nursing home bill.

Medicare covers hospitals and skilled nursing facilities for a limited time period. Medicare will pay for 100 days of skilled care in a skilled nursing facility—with a co-pay for days 21 through 100—if you are admitted to the facility within a 30 days of leaving a hospital and have been hospitalized for the same condition for at least three days. A medical professional has to certify that you need this care.

Medicare pays for skilled nursing care in your home if the care is provided by a licensed home health care agency, but you must be confined to your home, under the care of a doctor, and the care must be intermittent or part-time. Medicare does not cover housekeeping services, personal care services like help with bathing, dressing and other activities, meal delivery, or full-time nursing care in the home.

Medicare Supplemental Insurance (Medigap) and Tri-Care do not cover long-term-care services either.

Determining Whether You Need LTCi

Some experts say that only middle class individuals with over $100,000 in assets need LTCi. The very rich can afford to “self insure,” (but may prefer to pass their legacy on to their children and let a company pay for their care), while the very poor will be eligible for Medicaid. Those who are already on Medicaid are not eligible. Nevertheless, if you are forced to rely on Medicaid, your heirs may lose your home and all of your life insurance except for enough to pay for your funeral. To make matters worse, relying on Medicaid restricts your choices to nursing homes that accept it. Medicaid does not pay for assisted living and pays for only very limited home care. If independence, and location are important to you, talk to your family to see if resources can be pooled to provide LTCi.

If you have investments, IRA accounts, or savings, having built a small to moderate estate, you definitely stand to lose the most if you need care in your later years. Several strategies can make the cost of LTCi seem less intimidating.

Choosing a LTCi Policy

Companies that offer LTCi often have a wide variety of packages; the language is confusing, and comparison can be difficult. In spite of the convenience of the internet and mail-order, it is always best—when considering LTCi—to sit down with a licensed, reputable agent who will answer your questions and work with you to design a plan that fits your needs and your budget.

The policy should cover several levels of care, not just care in nursing homes. Benefits should increase along with the inflation rate. You should buy from a company that will stay in business for the long run and that has a solid reputation for paying claims.

Policies are priced according to your age, the length of benefit (ranging from one year to life time), and the dollar amount payable per day. According to the latest federal statistics, the average stay in a nursing home is 30 months. While five years or more is an attractive benefit, a three year policy will drastically reduce the price.

Another way to save money is to take a waiting period, usually called an “elimination period.” You can think of this as a “deductible” or number of days for which you will pay for care yourself before your policy will begin to pay. Part of your plan should include a consideration of how you will pay during the elimination period.

Lack of Planning Could Mean Disaster

According to Financial Planner, Jeffrey D. Voudrie, ignoring the potential need for LTC is the wrong decision. The National Center for Health Statistics reports that currently some 1.6 million people reside in nursing homes. “That number is likely to increase significantly when the baby boomer generation reaches their senior years.” Voudrie reports that many families are already finding themselves “caught in the nightmare of having to provide care that isn’t covered by insurance or the government. This problem will not go away, as the government is likely to cover even less care in the future.” He advises families to “take action now.”