I was aghast to learn recently that 62% of bankruptcies filed between January and April 2007 (note, that’s before the recession began) were tied to medical costs or causes… adding insult to injury, three-quarters of the affected individuals/families had health insurance. What kind of health insurance, a reasonable person might ask? The discouraging answer is, the same kind that most Americans have — and feel well-protected by. Unless you have carefully examined it… read between the lines… learned to ask the right questions both of your health care provider and your insurance claims representative… and trained yourself to follow instructions about pre-approvals and the like to the letter, it’s a mistake to assume you can relax in an “I have insurance” safety zone. Health insurers are a crafty lot, skilled at writing policies in such a way they can easily wriggle out of paying claims. They’ve learned they can rely on a trusting public that tends not to focus on the whys and wherefores of their coverage until it’s too late.
Could this happen to you? It’s a good question to ask. Here are some of the common traps to look for…
Chronic illness. A recent study in The American Journal of Medicine found that many of the health-related bankruptcies could be traced to costs related to chronic medical conditions, such as diabetes or multiple sclerosis. Other research shows a 3% bankruptcy rate among cancer patients. At present, lifetime spending caps on many insurance policies are as low as one or two million dollars — which may sound like a lot, but which can quickly be run through if you have a critical or chronic illness. New legislation has been introduced to raise the minimum lifetime cap to $10 million, with future increases adjusted to the consumer price index, but in the meantime, lifetime caps are an important variable to take into consideration when evaluating health insurance policies, says Jennifer Libster, MA, JD, a senior research associate at Georgetown University Health Policy Institute in Washington, DC.
Higher deductibles. According to a recent survey by Mercer (a financial and HR consulting firm) half of preferred provider organization (PPO) sponsors have an individual coverage deductible of $1,000 or more — meaning you must pay this amount out of your own pocket before your insurance begins to contribute to your medical expenses. Many other plans, such as individual and high-deductible plans, require you to cover even higher amounts — as much as $5,000 or more. If you have the option, you might consider switching to an employer-sponsored health maintenance organization (HMO) plan, which often has no deductible at all for many services — though there are tradeoffs, such as limitations in choice of physicians.
Libster advises investigating these types of out-of-pocket limitations in advance, before you sign your policy. It’s important not only to know what the stated out-of-pocket limitation is for the year, but also what types of services actually count toward it… your deductible may not count, for instance, and certain services (for example, prescription drugs or mental health) may not qualify, meaning you will continue to pay for these services after hitting your out-of-pocket limit for the year.
Limitations. New oral doses for chemotherapy medications are now available so patients can have their treatment at home, but some insurers aren’t paying for this since it’s not a “procedure” but rather is a “prescription drug” that is subject to cost limitations. Libster adds that some employers are now dropping or limiting prescription drug coverage as a means of keeping costs down. For example, the prescription drug benefit may only include coverage of generic drugs or have an annual dollar cap on the benefit. Limitations may also include how many mental health or physical therapy visits you can have (e.g., only 10 or 12 visits each year might be covered).
Pre-existing conditions and exclusions. Getting coverage for a pre-existing condition is one of the most common quandaries facing consumers and it is especially problematic at a time when so many people have lost jobs… and with them, their insurance coverage. Frustratingly, the term “pre-existing condition” can be a movable target, since anything from panic attacks to pre-diabetes to having had a suspicious mole removed can technically be so classified. Under federal law, employer-sponsored insurance must cover pre-existing conditions after 12 months, says Libster. Those under individual plans are not so lucky, however — if you have a chronic illness, insurers may reject you outright… “pre-ex” you for 12 months… or impose a rider or permanent exclusion stating that they will never cover a particular condition or system. Libster gave me an example: If you have asthma, an insurer may not only permanently exclude asthma but any condition relating to your entire respiratory system from coverage. Not only that, there are some cases in the individual market where an insurer can weasel out of paying expenses for a condition you are diagnosed with after your insurance begins, if they can find any related evidence in your record that might have predicted the problem. Other common exclusions are for new or experimental treatments and alternative therapies.
First and foremost, review your policy. As matters currently stand, this is challenging, observes Libster. Consumers typically don’t even receive copies of contracts spelling out important variables such as cost sharing, covered services and limitations until they actually purchase policies, and even then the information is couched in dense and technical legalese that is difficult to understand. Georgetown University Health Policy Institute has suggested a new information tool for consumers — a simple “Coverage Facts” label for health insurance policies modeled after the Nutrition Facts labels required on packaged foods. But until we have a better system in place, you have to read the fine print.
While health care reform is underway in Washington, chances are it will be a very long time before individuals see tangible evidence of it in their pockets. In this challenging and belt-tightening era, focus on the issues that you can control and take greater responsibility for your own day-to-day care — eat right, exercise (this will help you manage stress as well as weight), don’t smoke and get sufficient sleep. Smart lifestyle choices are usually the simplest, most effective and least expensive way to enhance health and prevent chronic disease.
