Health Coverage: Don't Leave Home Without It
Unexpected medical expenses can destroy your financial security. People who are between jobs or working for a small company often go without coverage. But medical costs are not something you can delay until you can afford them. It's critical to have good coverage that fits into your plan, but doesn't break the bank.
How to Compare Plans
Medical insurance manages health care expenses by capping the amount you'll pay per year. Instead of facing unknown and potentially catastrophic medical costs, your expenses are limited to your policy premiums, copayments, deductible, and annual out-of-pocket cost. You pay copayments for each doctor visit or service. Your deductible and annual out-of-pocket cost limits the amount you'll pay beyond the copays. Some policies exclude some expenses or have a gap in coverage at certain expense levels that add to your cost. Be sure your policy has an unlimited lifetime benefit to protect against the cost of a long, expensive illness.
Make a comparison chart by listing last year's medical costs and activities and the total amount you spent. Compare new policies by making a hypothetical chart of what your costs would have been under that policy. Don't just look for the lowest premium.
As with any insurance coverage, health insurance is only as reliable as the company that issues it. Look for strong ratings from A.M. Best and the other rating companies, and check with your state insurance commissioner's office to be sure your company is in good standing.
With Employer Plans and Without
If your employer offers health insurance coverage, you'll be able to enroll during their annual enrollment period or when you have a life-changing event such as divorce, marriage, or a new child. Employers without plans will often contribute toward the coverage you buy on your own. Be sure to check with your state to see if you're eligible for premium assistance in this case.
Many insurers have dropped their plans for couples with no children, called 1+1 plans, in favor of individual and family plans. In this case, it's often cheaper for two-person families to buy two separate individual policies rather than paying extra for a family plan, which has been priced to include medical care for children.
Some companies and many states offer health coverage to their retirees, but most people rely on purchasing federally funded Medicare insurance directly. Workers who worked under the federal system for ten years and their spouses, widows, or widowers are eligible for Medicare starting at age 65. Medicare has three parts. Part A covers hospital expenses, and the premiums are part of your social security benefit. Part B covers regular medical expenses. Part C covers prescriptions. If you're enrolled in parts B and C, the premiums are deducted from your social security benefit check.
To minimize coverage gaps and make management easier, retirees often favor plans that include all three coverages in one policy. Senior health management plans are offered by most of the nationwide carriers and offer coordinated benefits through one premium payment.
For Kids in College
Children in college and under the age of 23 can often be carried on their parents' health plan. Many colleges also offer coverage, and if your student is working, his employer may provide plans as well. If your student doesn't start working immediately after graduation, he may lose coverage. Check with your state for young adult plans. And check with your human resources department; your child may also be eligible for COBRA under your employer's plan because of his loss of dependent status.
Self-Employed and Recently Unemployed
COBRA (the federal Consolidated Omnibus Budget Reconciliation Act of 1985) coverage is required if your employer has twenty or more employees. If you're laid off or voluntarily leave your employer, you can continue health coverage under COBRA at your own expense for up to eighteen months.
If you're self-employed, you have access to discounted group coverage through industry associations and chambers of commerce. You don't need to be running a company to be self-employed. As soon as someone has paid you for services outside of your employer, often called “being paid on a 1099” after the tax form used to report this income, you're self-employed and eligible for benefits through the associations.
States are beginning to require residents to carry health insurance coverage and some forbid insurers from denying coverage to people with preexisting conditions. In this case, the state will have information on coverages available to individuals.