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California health insurance  -  Understand Health Coverage  -  Concept of Health Insurance

Understand the Concept of Health Insurance to Maximize Your Savings

 

We're going to get into the weeds of how health insurance actually works but first...

 

Let's give you the behind the curtains tricks on how to actually save money while having the best coverage.

It may surprise you.

The health insurance market has changed significantly since the ACA law and so has the strategy on how to survive it!

Let's get started.

 

A quick overview of health insurance from the perspective of how to get the most out of it (and not the other way around!)


Today's Strategy for Saving on Health Insurance

Below, we really explain what health insurance is and how it works.

 

How can we use that to our advantage?

 

First, understand how the ACA law had changed the market entirely!

 

1.  Tax Credits

 

There are now tax credits based on income. We're written extensive on them here but the next effect is this...

If you qualify for tax credit, it's found money. Take it. Avoid the penalty.

This is an actual credit...real money. Not just a tax deduction.

It comes right off the monthly insurance premium.

We can find out if you qualify for one in 5 minutes. Call us at 800-320-6269 or run your quote here:

 

 

There's no cost for our services as Certified Covered Ca agents.

That's the free money pitch (and it's a real one).

 

What about the other effects...

 

2.  Guaranteed Issue and health insurance rates

 

Here's the deal.

Individual family coverage is now guaranteed issue.

This means...

They can't decline coverage based on health
They can't increase rates based on health
They can't have waiting periods for pre-existing conditions

 

All good things.

 

On top of that, the plan benefits are now standardized by +/- 2%

 

So how can we use this?

 

Think of it this way.

 

If a person has serious health issues and they can reduce their deductible by $2000 (which is about the amount as we go up the scale) for another $100/month...

 

They're going to do it!

 

They'll save $2000 in out of pocket by paying $1000 in premium.

Slam dunk.

What then happens is that the premium difference keeps going up as claims start to come in.

 

Eventually, the difference in premium is about $2000/year.

 

Like magic...it offsets the benefit difference.

 

This is especially true as we get older. Less so for younger people.

 

This means that for healthier people, it makes sense to focus on the Bronze/Silver side of things (less rich benefits - less premium).

 

This is also true for older people since the premium difference offsets benefit difference...even for very sick!

So maybe younger, less healthy people look at richer plans (Gold/Platinum) but it really depends.

 

Of course,we're happy to go through your situation at 800-320-6269 or run your quote here:

We can quickly find the "Sweet Spot" in terms of premium and benefits based on your situation.


 

 

Those are the key take-aways from recent market changes. For those who really want to understand how health insurance works, let's dig a little deeper.
 

 

It is pretty clear from questions we get about health insurance in California that a good explanation of insurance and how it works is needed. You don't want to spend $100's or $1000's each year on a policy you don't really understand. Let's answer the common complaints we hear from people so we can make a good decision.

Spread the Risk (of injury and illness)

Insurance (including health) is all about spreading risks. Risk doesn't mean that something will happen but that there is a chance of it happening. We all individually have a risk or chance of a major illness. Our behavior, life style, and genetics may affect that risk but it is never zero and rarely 100%. We tend to be somewhere in between. Very common misconceptions of insurance can be found in questions that are frequently asked to us. The whole concept of insurance is that you will take your individual risks and spread them among many other people so that if they actually occur, you will not be overwhelmed financially. You can either pay a $50,000 surgery bill once or pay a few hundred dollars a month in level premium. You're essentially spreading your risks over a longer period of time.
The questions we receive can help clear up the concept of health insurance

I am healthy...Why should I get health insurance?

Like the stock market, past experience is no guarantee for the future. Some things are out of our hands. Accidents are a common example. You may exercise regularly, eat well, and in general...take good care of yourself. This does not mean that a car accident or some other type of injury can be avoided. Insurance is there to cover the "What If". Some people incorrectly assume the "What If" will never happen to them. On average, each person will have a significant medical injury/illness every seven years. It may never happen to you (rare) but the odds are not in your favor. With each passing decades of a person's life, his/her medical expenses double on average. This is why rates go up as you get older with age 60-64 being the most expensive time to insure (Medicare takes over at age 65 which helps reduce your out-of-pocket). People, in general over-estimate their health and under-estimate their risk. They also do not understand the costs involved. Simple surgeries such as ACL repair (pretty common knee surgery as the result of injury) can run $20,000-30,000. More involved procedures can be $100,000+. The question is this...if that happens to you...can you afford to pay it? Or more importantly, would you want to. Will you lose your house or be in debt to the hospital for ever? In California, one half of all bankruptcies are the result of a sudden illness or injury.

I don't have any claims...Why do my rates keep going up? 

Again, you are spreading your risks among many other people in your general area, age band, and plan selection. Your premium changes as a direct result of claims for that group of people (including you) and legislation passed by the State (such as mandated benefits). By law, each carrier has to state their Loss Ratio which essentially says for every dollar of premium, how much goes directly to pay for medical services (i.e. doctor/hospital re-imbursements, RX re-imbursement, etc). This number tends to stay pretty stable for the major health carriers and runs around 85%. This means that for every dollar of premium, 85 cents is going directly to pay for claims. The other 15% would be overhead, expenses, marketing, and profit (the non-profits have about the same Loss ratio which is interesting). Rates are going up because the total medical expenditure has skyrocketed over the last 10 years. Increasing advanced diagnostics (MRI's, PET scans, etc), hospital cost-shifting (for the un-insured), and brand prescriptions have been a big part of this. In general, medical care is becoming more expensive relative to the rest of economy. Medicare validates this and is under increasing pressure.

If I get sick, I will just get insurance then. 

California health insurance is no longer medically underwritten but that doesn't mean you can just enroll anytime.  There are now open enrollment windows or special triggers that allow people to get coverage now.  Small Group and company insurance is guaranteed issue which means you do NOT need to qualify based on health.   The best time to get insurance is when you're healthy. This is especially common for maternity coverage. We receive may inquiries from people who have found out they are pregnant. Health Reform will make coverage guaranteed issue but you will need to enroll during the open windows. If you miss them and do not have a qualifying event (coming off of group coverage for example), you may be out of luck.

The carriers just raise rates to increase their profits.

 Again, the profit margin of the large companies run around 4% (for those that are for-profit). That rate changes very little. What has changed is the way people use healthcare. Keep in mind that a recent statistic estimated that 50% of health care costs are preventable or the result of lifestyle choices. Lung Cancer and Diabetes are two of the mostly costly illnesses to treat and a large percentage are due to smoking and obesity (the latter is rapidly expanding in the U.S.)

Government sponsored or Single Payer health care would be better. 

There are pro's and con's to every system. Ultimately, the only thing that will reduce costs is if people collectively take better care of themselves (HSA's address this with an individual financial incentive...typically the only thing that works) or if care is rationed. For example, in Canada, if you want an MRI, you go on a waiting list which typically runs 6 months. There are more MRI's in Minneapolis-St Paul than all of Canada. The question with our current system is whether we can (or are willing to) afford this access to care. The interesting thing is that people who are strongly in favor of Single Payer typically despise HMO's. What they don't realize is that they are one in the same. The reason Single Payer plans ration care is because they are fixed dollar. You have an allotted budget for health care for the year. You divvy up that budget ($25,000 million for MRI's, $1 billion for hospital, etc). Let's say in our example, the $25m of MRI's affords 10 million MRI's. That's the number...no more. They ration care based on that. HMO's are also fixed dollar plans. Each doctor is given a certain amount per enrollee and he/she (or the medical group) works within that budget.

Our system increases the premium based on the claims but there is no rationing of care (although some management on behalf of carriers). If a person medically needs 6 MRI's in a year (say to watch the advance or status of cancer), then that's what they get. The issue with our system is cost (escalating) and uninsured. Something must be done about the uninsured and the individual States will probably lead the way there. Ultimately, there's no free ride in the universe. You either must reduce medical costs or ration care in any system. France has double the tax and unemployed we have. Something has to give in either system and most likely, the best approach is in the middle.

In conclusion, health insurance is about spreading risks

Just to recap, Insurance, whether health, life, or disability is used to take your individual risks and spread over a large number of people and a longer period of time. Instead of paying $50,000 one month (which would bankrupt many people), you pay $200 monthly. We are taking out the peaks of medical costs and making it more manageable with a more stable monthly premium. The health insurance carrier is essentially the entity that manages the incoming monthly premium and outgoing medical reimbursement for all the people in the risk pool.

You can run your Health Plan Quote here to view rates and plans side by side from the major carriers...Free.

Again, there is absolutely no cost to you for our services.  Call 800-320-6269 Today!

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