Just as Republican lawmakers have been hyping the virtues of purchasing private health insurance----versus the evils of "Obamacare"----my husband Jim and I needed to do just that. I had been writing a check for $659 each month to maintain health insurance coverage under my former employer's plan, as provided by COBRA. After 18 months, it was due to expire. The time had come for us to venture into the Republicans' fantasy land of the free marketplace for health insurance. We took a deep breath and dove in.
The first thing we learned is that you don't really purchase health insurance. You find insurance providers in your state and then apply for coverage and hope they accept you. If they agree to have you as a customer, you then pay for the coverage. On some level we knew this, but it isn't until we started to fill out the LENGTHY and DETAILED application forms that it sunk in.
Jim is a smart consumer and spends quite a bit of time researching product options before buying new appliances, investing our savings, and shopping for just about anything. He's an economist and analyst by training. He'll read and collect articles, make spreadsheets, and examine long-term performance. I'm glad to have him.
For at least six months before we even identified appropriate insurance companies in our State, Jim read and saved all kinds of articles with tips for applying for health insurance and things to avoid. Several suggested, for example, filling out the applications from several insurance companies and submitting them simultaneously. These lessons came from individuals who were denied coverage by one insurer, and subsequently had to disclose that denial on all future applications. We decided early on that we would apply simultaneously to at least three different health insurance companies, and hope that we'd be accepted by at least one.
I can't tell you how many times I saw frustration on Jim's face as he struggled to make data points about the different plans fit into a spreadsheet. My husband's ability to turn any collection of information into a spreadsheet was failing him. He learned that trying to make comparisons between different health insurance options among several insurers is nearly impossible. Jim will be the first to admit after our experience, "buying" health insurance is not like buying any other good or service.
We decided to narrow our options to a high-deductible plan. It would (hopefully) save us from economic ruin if we became gravely or chronically ill, while we'd be prepared to pay large out-of-pocket deductibles for routine and emergency care, as well as prescription drugs.
As the expiration date of our current health insurance coverage approached, we began the application process. We preferred to complete the forms on-line, but had a little chuckle when we read that there would have been an additional processing fee had we decided to use the paper application form.
Another big thing we learned is that health insurance companies expect you to remember every doctor visit, every medical procedure, every presciption medication and dosage, and so on, going back 5-10 years. The applications have this scary language warning that your coverage (should you be accepted) may be rescinded retroactively, if you provide incorrect information.
"An act, practice or omission that constitutes fraud or making an intentional misrepesentation of material fact on this application may result in rescission of coverage."
It's one thing to read and understand that sentence, but it's another thing when you consider the level of detail and memory accuracy these insurance companies expect of applicants. We first answered questions like this one:
"Has any person applying for coverage been advised, counseled, tested, diagnosed, treated, hospitalized or recommended for treatment within the last 10 years for the following conditions?
(a) "Migraines; headaches; carpal tunnel syndrome; seizure disorders; paralysis; multiple sclerosis; any neurological disorder, or any other disorder of the central nervous system."
(b) "Attention deficit disorder; anxiety, depression or chemical imbalance; any behavioral, emotional or eating disorders; mental retardation; bipolar disorder or psychosis; psychotherapy; marital or any form of counseling?"
and the long list of disorders, conditions and symptoms went on and one. The next set of questions were even more broad:
"During the last 5 years, has any person applying for coverage had a physical examination (including check-ups), diagnostic tests, consulted a physician, chiropractor or therapist?"
Fair enough, but the moment you select "YES" on-line to any of them, something else happens. Another window pops up on the screen that insists you provide further details. (I say "insist" because you can't proceed with the rest of the application without coughing up the additional info.) For each "YES," the insurance company wants you to provide the following: (a) what was the specific condition; (b) date it started; (c) exact "day" of recovery; (d) was recovery complete?; (e) types of treatment, advice given, and medications prescribed including dosage and how long you took it; (f) name, address and phone number of the doctors and hospitals.
It's as if these insurance companies think we have on-line access to a lifetime of our medical records. I sure don't remember the date of my last bout of poison ivy rash, or when it finally resolved, or how much prednisone I took. Who keeps such records? Jim remembers seeing a physician for a numbness in his leg, but was that in 2007 or 2008?
It really makes me wonder about those Members of Congress (mostly Republicans) who insist our nation's healthcare woes would be fixed if more people just had private health insurance. How many of these Members have applied recently for non-employer based, private health insurance? I'd like some of them to try to dig up the name, address and phone number of the doctor who treated their wife's conjunctivitis a few year's ago, or their son's prepatella bursitis when he was a high school wrestler. I'd like them to try to remember the name of the anti-inflammatory pharmaceutical this son took, or the antibiotic prescribed to the wife.
Throughout our on-line application process (which doesn't by-the-way offer enough options to save your work,) we remarked constantly how much more time consuming the process would be if either of us had any serious health challenges. We thought about our four elderly parents who are in ill health, and proposals to eventually give seniors a voucher to help the purchase insurance. Forget about the voucher for now, how in the world would your average senior pull together 10 years of their healthcare information in the level of detail expected by insurers' for these applications? We also thought about parents with seriously ill children trying to fill out these detailed applications, or parents with just several children who experience the average number of aches, breaks and illnesses.
It was early March when Jim reserved a Saturday to use the on-line system to apply for health insurance coverage with Blue Cross/Blue Shield, Humana and United Health's "Golden Rule." It actually required most of his time on both the Saturday and the Sunday. With each application, we were required to provide our checking account information and agreed to have the estimated cost of our first month's premium deducted from our account. For the high-deductible plans we were interested in, that cost was about $400. Each of the three insurance companies wanted that money in-hand before they would begin to review our application. We realized that if our applications were approved by all three insurers, we'd have to go through the rigmarole of asking for the money back from two of the firms. But because the pre-payment is required, consumers don't really have another option. This could be a serious drain on many applicants' checking accounts. A more typical coverage plan for a family would have been several more hundred dollars per month, and the cost of submitting multiple applications could tally several thousand dollars. Again I have to wonder, how many Members of Congress have actually applied for insurance recently?
After less than a week, we received a follow-up phone call from the insurance company with our top-choice plan. The agent asked additional questions about our health histories, and thanked us for being so thorough in completing the application. We were notified within a few days that we'd been approved by this insurer and our coverage would begin the first of April. Since this was the plan we preferred, Jim immediately notified the other two insurers and asked them to cancel our applications.
Despite our predictions that we'd have to nudge these insurers to return the first-month's payments we were required to pay, at first it appeared the money would be promptly refunded. BlueCross/Blue Shield sent a letter to us almost immediately and it noted that our $400 or so dollar payment would be credited to our account. United Healthcare responded by just sending us a check. Jim deposited the $439.32 in our checking acount, organized the large file folder he'd used to maneuver through this health-insurance purchasing adventure, and tucked the file into his desk.
About a week ago, we received a letter with bold letters across the top: "COLLECTION NOTICE." The sender was Receivable Management Services (RMS), a debt collection agency that specializes in servicing nine of the top 12 insurance companies. The letter began:
"This will confirm that you have been place for collection. This communication is an attempt at resolution of this account in the amount stated above."
Here's the deal. After we cancelled our application with United Health's "Golden Rule," we received a reimbursement check for our first month's estimated premium. The check was made in the amount of $439.32. We deposited it, assuming it was the amount United Health deducted from our checking account. The collection agency's letter indicated, however, that we should have only received a reimbursement for $399.75, a difference of $39.57.
Jim and I are wise to the ways of the world, and were not alarmed by the big, bold lettered "COLLECTION NOTICE" letter. We checked our bank account to confirm the error, and sent a check for $39.57 to the debt collection firm. The mistake was not ours, but that didn't change the manner or speed in which the insurer referred their own $39.57 mistake for debt collection. Jim included a note to the collection agency saying
"It is not necessary to send us a threatening letter over $39, especially considering the mistake was made by the ironically "Golden Rule," insurance company."
Although we survived the process and were able to get approved for coverage, we know there are many, many individuals who have had nightmare scenarios of being turned down or otherwise been unable to obtain coverage. And that, sadly, is the private health insurance marketplace that many Members of Congress are so eager to embrace.
Celeste Monforton, her husband Jim and golden retriever Laredo live near Austin, Texas in the city of San Marcos. They know they are better off than many residents of Texas, which has the nation's highest rate of uninsured.
Which is exactly why federal government regulation of the Health Care industry has driven prices through the roof. I am glad you have help define the problem. The Federal Government has regulated the crap out how health care can be provided instead of letting the Free Market dictate choices and subsequent costs. I am self employed and self insured and pay about $500 per year in health care costs. In spite of this, I will die, eventually. I hope.
Jim, without regulations, you may find the Free Market (proper noun?) is very efficient at getting your money, and less efficient at paying it out.
Really Jim that's your takeaway from this post? The process above has nothing to do with regulation, and is in fact the same process I went through 5 years ago, long before any form of regulation on the healthcare insurance industry. It's their way of providing a backdoor to deny coverage when they actually have to pay out - oh you lied on your application, seeya! Why don't you take your uninsured ass somewhere unregulated and see how well the apparently god-like Free Market takes care of you when you're diagnosed with cancer - as you've predicted, no pay, no service, you will die. This isn't hyperbole, I've seen it in China.
Healthcare is not a standard commodity; outside of a few lifestyle-based illnesses, nobody chooses to become seriously sick. Furthermore, our moral compass compels us to take care of those who get sick, and not just let them die because they cannot afford their particular illness. These conditions are not amenable to a free market solution, as insurers are free to reject/price out all non-profitable potentially sick clients, and we as a society are then left with the tab when they have to go to the hospital. What benefit are we getting from the wrongly-incentivised insurance industry, versus a single-payer system that spreads the risk we are already paying for, and whose sole incentive is to provide healthcare?
And the best part is, for all your anti-government pro-market rhetoric, you're the mooch who when you fall seriously and expensively ill, will be taken care of courtesy Uncle Sam and not just allowed to die.
Excellent post, Celeste! A great example of how health insurance is indeed so different from other goods and services we buy.
Actually, most insurance regulation is done by the states, at the behest of the insurance industry. Not only do states regulate insurance, they also provide a financial backstop. Without that, no intelligent consumer would purchase any kind of long-term insurance policy, because it would constitute a bet not only on the terms of the policy, but also on the long-term health of the insurance company. Does anyone here want to tell me which S&P 500 companies will still survive in 10 years? In 20? Without state backstop, that is exactly the question you would have to answer purchasing any policy you want in effect for that long. Which includes health insurance with modern medicine, since expensive health problems can last for years or decades.
In reality, it would be worse than that, because in an unregulated market, insurance company reputation becomes a tremendous prize for predatory purchase. If RockSolid has a reputation for always paying out and managing its assets well to cover its risks, then here is a winning strategy for investors: purchase RockSolid in a leveraged buy-out, build up its revenue stream by cutting premiums, sell it short to cover holdings, sell off its assets and convert to bonuses and one-time dividends, then exit, leaving other people to worry about the long-term mess. And if it goes bankrupt in three years and can no longer pay on its policies? Well... that's an unregulated market.
Which is why insurance began in mutual societies, and why at its origins, it covered short-term events. The industry as it exists today simply could not exist without the state.
I used an insurance broker to find insurance when I was self-employed and had to buy my own. Which is probably what will happen more and more. In general people use brokers to buy homes, a separate broker for the loans for those homes, and life insurance. So more brokers for buying of health insurance/coops is not far fetched, and as things get only more complicated i can see it happening more and more.
(This is especially true if, as some predict, employer offered insurance will actually decrease under the new law)
The broker can also help you to NOT answer questions. They told my friend "how do you know you have asthma, did a doctor say that specifically? then you don't know so don't say you do" because even something benign like exercise induced asthma will skyrocket your premiums, because there is a huge range of problems under "asthma" but the companies treat them all the same: like the worst form that can kill you. The broker will say that is not lying for you do put "no", it is just being precise. (my fiance, being a lawyer, would agree).
Though, none of the article seems to me to be problems arising because of regulation. After all, are there really regulations saying companies need money up front, or need 10 years of detailed history? This article is more about the CYA practiced by companies so they can deny you coverage later. They KNOW that, with so many questions, you are bound to screw up some little point, then they can screw you. (IL did this to my fiance when she moved here, and made her take the bar again after 15 years of practice in another state).
Thanks Celeste, I'd love to see a response to your post from someone in Canada, the UK or any other industrialized nation. They must believe that we are crazy to accept such a "system" for healthcare.
You find insurance providers in your state and then apply for coverage and hope they accept you.
In fairness, this is also how it works with financing and with all other forms of insurance. However, health insurance is a particularly odd area in that nobody fights to be your insurer. The reason for this is simple, of course: there isn't that much incentive to be an individual insurer, because most people won't buy it (because it's expensive) unless they think they'll need it. After all, it's cheaper to just pay for your occasional visits than to pay premiums -- well, until you get *really* sick, or badly injured, and then it's too late. Which means that the set of people with insurance is skewed towards those likely to make expensive claims on it, which means the risk is higher with each one of them than it would be otherwise.
If we had universal health coverage of some sort, this problem wouldn't exist. Risk would be broadly distributed, and insurers would be fighting over us the way they fight over our cars. (Everybody has car insurance, after all, since the law requires it.) Insurance would be much cheaper. That wouldn't solve the whole problem; the insurance model means we are insulated from the true cost of things and thus market forces (already hampered in health care by the fact that you often have little real choice in whether or not to get a given procedure) are crippled as a means of controlling costs. As if that weren't bad enough, since ethics and the law require that ERs treat all who come, they become a final refuge for those who can't afford health care and who now must be treated more expensively than they would be otherwise, and the cost of that is transferred to everyone who *can* pay, which increases the cost of care, increases risk for insurers, who raise premiums, causing more to drop their plans, reducing the risk pool, increasing premiums more, while more newly-uninsured find they can no longer afford health care because the prices went up, pricier health care eventually makes more of them broke, increasing the ranks of the indigent who must now be treated only through the ER, and round and round it goes.
I'm not a big fan of the insurance companies, but this cannot be blamed entirely on them. They're one part of a massively broken system. (If "system" can even be fairly used in this instance, since there's nothing really systematic about it. It's a hodgepodge.) Really, this is the predictable result of not having a healthcare system at all and just letting the healthcare industries sort of develop into some sort of a thing that acts like a system. Of *course* if we allow the insurers to drop expensive customers, they will. They're not stupid. But sometimes it seems like *we're* all stupid, because we stand by and let them, all in the name of "freedom". Because somehow we have less freedom if it's our elected officials deciding this stuff rather than nameless beaurocrats buried within a private corporation, answerable to no one but their shareholders, who generally care about little more than how big their next dividend check will be. (Again, that's not evil; of course shareholders mainly care about the dividends. They're investors. Their interest is in profit; that's the whole point of most investments. And that's why it's idiotic to let our major healthcare decisions rest in their hands.)
Next time use an agent. like me!
As a Canadian, I've never had to apply for insurance. You can buy supplemental insurance to cover things like dental and prescription costs. That usually doesn't cost more than about $1000/yr. Otherwise I just register with the province (at a registry office, our equivalent of the DMV) if I move to a different province and that's that. My taxes are definitely not that much higher than an American's with the same income, and my coverage is probably better in most respects.
You're right, Mark. This is absurd. There is no justification for it.
Interesting fact for Jim H. above: the insurance industry in the US is specifically exempt from anti-trust legislation. Insurance companies actually negotiate to apportion territory and business between them. They engage directly in price fixing and other practices. And it's all legal. I'm not sure what regulations exactly you're so worried about.
I should specify, I've never had to apply for health insurance.
I thought that under HIPAA if you have totaly run out your cobra 'benefits' the insurance companies HAVE to allow you to join one of their "normal" plans. Does this differ by state?
Amazing post Celete!!! Thank you for sharing!
Private health insurance is a scam.
Instead of making people pay for advertising and insurance executives' learjets and holidays in the Bahamas, this money should be collected as tax and spent on actual healthcare.
This is how it works in countries that have proper healthcare systems and the cost to the consumer is half what your defective system is costing you americans.
"The applications have this scary language warning that your coverage (should you be accepted) may be rescinded retroactively, if you provide incorrect information."
Of course, for not giving you coverage at all, they won't actually refund the money you paid for a service they won't provide...
"I'd like some of them to try to dig up the name, address and phone number of the doctor who treated their wife's conjunctivitis a few year's ago,"
Your error proceeds from the fact that you haven't realised that even if these "movers and shakers" made such a mistake or omission, that they'd be refused coverage. They would not. They'd make a call t a friend of a friend who would talk to the CEO and the impertinent peon who refused this "reasonable request" would be fired.
I think what needs to be done away with is the notion of "group" health insurance.
When I buy other insurance I join the pool of all the other insureds of the company.
For some reason I cannot do that for health insurance because Big-Company-Group is totally different than little old me.
As a pre-Medicare retiree I was contemplating entering this world myself several months ago. The title of your post is exactly the sentiment I came away with. I have a masters degree in public health, and I was totally overwhelmed by the information we had to wade through even before we applied. I live in a state, Oregon, that is probably among the best in that the state maintains a website for comparison shopping, in anticipation of the insurance exchanges of the ACA. Upon entering our data we got back 50, 100, I lost count- potential plans for us to join. Just try to figure out how you will make out under various scenarios with varying deductibles, co-pays, HSAs- your husband has my admiration for wading through this. The notion of elderly Medicare recipients going through this process with their vouchers is preposterous. The answer is there is no way these members of Congress could have done this and thought it a reasonable process. Ideology over practicality.
We ended up biting the bullet and continuing our group insurance after retirement, paying the $1100/month ourselves. Don't get me started on how formerly solid comprehensive group insurance now itself starts to look like a catastrophic plan because of rapidly increasing annual deductibles. We can afford it only because I have another endangered species- a defined benefit pension.
Many commenters are correct- it's not a system to begin with and it is so broken it's barely standing. But by God we'll still have our freedom when the Supremes cut down the mandate.
Very good point about using a broker to help you 'negotiate' the marketplace. You might also look at policies through professional or group associations. Each question DOES need to be treated as if it could be used to cancel the policy. When filling out an app, consider it a deposition by opposing attorneys. Use terms like "various" or put in date ranges. Use paper apps to document your responses. Do not lie or make deliberate mis-statements. Good luck - the system sucks
A broker can indeed help quite a bit but they can not directly answer questions on the application. The key is this. Answer questions completely, accurately and provide detailed explanations. If you had knee surgery 2 years ago and you are completely recovered...say that! Don't just put down "knee surgery in 2010" and leave it at that.