Although many Americans receive their medical benefits through employer-sponsored plans, there are those who either are not employed, are not eligible, or don’t want to pay for coverage. Additionally, an employer-sponsored plan may not cover an employee’s dependents because of age limitations, or it may cover them at too large a cost. For those who must go out and find their own health plan without the benefit of a knowledgeable broker, the process can be overwhelming and lead to more questions than answers.
Consumers also hold many misconceptions about the plan options, requirements, and costs of an individual health plan. The soured economy has led to many layoffs, which, in turn, has increased the demand for individual policies. Additionally, with double-digit group health plan increases, businesses continue to pass cost along to their employees, making individual health plans more of a viable alternative. Since most people “buy” their plan through their employer, many people — especially younger consumers — are unfamiliar with the process, plan options, pricing, and plan changes. Many producers may be experiencing a significant increase in those seeking affordable individual options to group plans.
As consumers demand alternatives to employer sponsored plans, however, misconceptions persist. Here are four of the most common myths about individual health insurance.
1. I’m healthy — what do you mean I can’t get coverage?
You may often come in contact with applicants who believe they are healthy because they do not have a major illness such as cancer, heart disease, or diabetes. However, when it comes to approval, those same applicants are very surprised when they are denied coverage, rated up (premium plus additional cost), or have benefit riders such as specific policy limitations applied to their coverage.
Insurance companies today use sophisticated predictive modeling tools (statistical methodology to clinical, pharmaceutical prescription, and demographic data) to forecast medical outcomes, utilization, complications, and, most importantly, cost. Companies are using the software to help set premiums for both groups and individuals who are new and those who are renewing their coverage. For years, many insurance companies have used predictive modeling applications in disease and case management, but the increased use by underwriting departments has led to more declinations, which have increased the perception that insurance companies cherry pick only from those individuals with no health history or pre-existing conditions.
2. Doesn’t my whole family have to be on the same plan?
Many people are scared off by the cost of insuring their entire family, but a mix-and-match approach can be a great way to lower monthly payments.
You may want to encourage your clients to buy a more comprehensive plan for their children or an elder member of the family while obtaining a more basic plan for family members who don’t access as much care or require many prescriptions.
Your clients can also obtain an individual plan to cover their children or a spouse. There are plans with child-only rates and other child-friendly benefits, which may cost less than dependant coverage on a group plan.
3. Doesn’t an individual health plan provide the same benefits as a group plan?
No. Individual plans are less expensive for a reason. Benefits often have more limitations, including limited office visits and specific dollar limits, and often have additional deductibles and copayments.
When it comes to benefits, the biggest difference is how post-pregnancy situations are covered — or, should we say, not covered. Very few individual plans provide maternity coverage, and when they do have an option, there are waiting periods and the cost is often seen as excessive.
#4: Good coverage is too expensive, should I go without?
No! Even having a plan with a very high deductible or a catastrophic plan that is lower in cost is better than going without. By selecting a plan through a quality insurance company with a reputable network (PPO or POS), the insured will be able to access provider discounts, meaning they will be charged the wholesale price from providers. Without coverage, your clients will be paying retail for doctors, prescriptions, and, worst of all, hospitals in the event of the unforeseen.
Without coverage, your clients may be lucky enough to remain healthy. They may pay for the occasional routine doctor visit or prescription out of pocket. However, if anything unforeseen happens, such as an accident or illness, the ensuing medical bills can — and have –literally driven families and individuals into bankruptcy, costing them everything they’ve ever worked for.
Worst of all, if your clients develop ongoing (pre-existing) conditions, either large or small, they will have an even harder time obtaining quality coverage when they need it most.
In most cases, individual health plans provide excellent coverage and a real alternative to group plans. However, those who are only looking to lower the price often get what they pay for and are often dissatisfied by increased out-of-pocket costs and benefit limitations. Take the time to learn these common misconceptions your clients may be carrying around with them so you can easily dispel them and move them toward the road of proper coverage.
Richard L. Fahn is the founder and president of Excell Benefit Group. He can be reached at firstname.lastname@example.org.