subject: Taking Confusion Out of Health Insurance. Which Plan is Best? [print this page] long term Medical insurance really just comes into ONE form. Yes, you read right, one form. The main idea behind medical insurance is cover your medical expenses in case of an illness or accident. The only major variations really are just, what we call, the moving parts. These parts are often called deductible, co-payment and lifetime maximum benefit. Long term medical insurance (as opposed to short term medical insurance) is meant to be a permanent type of coverage.
With medical insurance, the deductible is simply the amount you would have to pay before the insurance company pays anything. The co-payment is the shared amount you and the insurance company agreed to pay in case of a covered illness. The sharing could go as follows. If your co-payment is 80/20, then the insurance company would pay 80% of the covered medical expenses and you would pay the remaining 20%.
As an example, if you have an 80/20 plan with a $2,500 deductible and your medical bill totals $10,000 and all charges are covered by your policy (more on that in another article) then your final out of pocket (what you will need to pay) will be $2,500 (your deductible) + 20% of $9,000 (the remaining amount or $1,800) for a total of $4,300. The insurance company will pay the rest or $5,700. Hope that all makes sense. This is assuming that your plan is very basic and does not include special riders such as doctor's co-pay or prescription cards or...In which case it can get more complicated so it is worth repeating...READ YOUR POLICY AND ASK A LOT OF QUESTIONS. These special co-pays will covered in another article.
Sticking with our basic medical insurance policy, now, how to decide what deductible or co-pay to select? That is ultimately a personal decision but we can give you a few pointers. Generally, the younger you are, the less likely you will use your medical policy (that explains why a 20 year old pays much lower premiums than a 60 year old). So if you are, we would say, between 13 and 39, I would recommend a high deductible (say $5,000 or more) and a high co-pay (say 50/50). Also, we would recommend no special rider expect maybe for the accident rider (if available at reasonable rates). On the other hand, if you are 40 and over, and your family history leans towards major illnesses, then a lower deductible with an average co-pay would be recommended. Note that I mentioned family history as it can be a big indicator of what's to come. An exception may be if, for example, you have a family history of vascular issues but you tend to be much more physically active than your ancestors and thus may tend to have a lower chance of having early vascular issues yourself. As we said, the choice of co-pays and deductibles is really a personal choice and a bit of a gamble. As with any gambling though, you can try to increase the odds in your favor and save a tone or $$$ in health insurance premiums. Some clients have even selected high deductibles and placed into a savings plan, some additional money every month, to cover the higher deductible and co-pay.
Deductibles and co-pays are of main concern with all the "smaller" medical bills. Ultimately, though, health insurance is there to have the money needed to cover medical expenses in case of a major illness or accident. Although no hospital cant turn you down, it would seems that, if you come into a hospital with a policy that will pay for most of the hospital expenses, you MAY get better care than someone who has NO coverage at all or limited maximum coverage. After all, it does take money to offer some of the best health care in the world and, as unfortunate as it may be, if you come in with no money, you will not likely get the same level of care as someone with an insurance company backing your medical expenses.
This brings us to what may be the most important and probably most overlooked benefit of ahealth insurance policy - THE MAXIMUM PAYABLE LIFETIME BENEFIT. In other words, if you need major medical help, what is the maximum the insurance company is willing to spend for you? That number can vary from $100,000 to unlimited (although unlimited is becoming more rare). We recommend that your maximum lifetime benefit should be at least $5,000,000. Sounds like a lot. Here is a real life example. Father calls us, takes out a major medical policy on his 23 year old son, calls us three weeks later to tell us that his son was in a major car wreck! Final cost? Over $2,000,000. Once again, if you go to the hospital with anything major, the hospital will not care as much about your deductible as they will your lifetime maximum benefit.
Now, we did mention short term medical insurance in the title of this article. Simply put, short term medical insurance is exactly what it's title seems to indicate. It is used to cover a short term medical need. People who are most likely to use these plans are students on school break, individuals recently laid off and individuals waiting for a long term policy to go in force. Although short term medical plans price lower than standard long term medical plans, you should never, never use a short medical term policy for long term needs as short term medical policy are NOT renewable. Once the time is up, even if you still need coverage, it's over! As with Long term medical insurance policies described above, your main concern should still be with the lifetime benefit (most offer about $1,000,000. Not much but better than nothing.
We certainly hope this helped. It was basic and as always, please ask, ask, and ask more questions! Be well.
Taking Confusion Out of Health Insurance. Which Plan is Best?
By: Philippe Deray
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