Some Health Insurance items to remember

Medical insurance is a very important part of financial planning and protection for our family’s financial security. A great number of people only have coverage through an employer sponsored health plan. Below are a few things everyone should consider about their health insurance.
1. Medical insurance policies have an exclusion for work related injuries and illnesses. The reason for the exclusion is that these things are best covered by Workers’ Compensation policies. Although owners of the businesses can exclude themselves from coverage it is seldom a good idea. There are a number of reasons for this but here are a few.
a. The medical insurance might exclude any coverage if you waive your Workers’ Comp coverage and even if that is not the case your coverage will be limited compared to Workers’ Comp. For example most insurance companies only cover someone if they are actively working. If you happened to be disabled by a work related injury you could lose your health insurance coverage and then you could be stuck paying for the medical bills due to this injury.
b. For the most part Workers’ Comp pays 100% of all medical costs related to the on the job injury while a group medical policy has deductibles, co-pays and co-insurance to pay out-of-pocket. These expenses can be more difficult if you are unable to work due to the injury.
i. Work related disability is another issue to consider. Although you can buy disability policies to cover you for being disabled on the job these policies often have limits to coverage and might not pay for some things Workers’ Comp will pay for such as remodeling a home to make it handicapped accessible.
2. All medical insurance policies have a list of exclusions and limitations that need to be understood if you want to get the most out of your insurance policy and make informed medical decisions. Here are a few notable items that commonly are excluded.
a. Weight loss surgery is commonly excluded for a number of reasons. Among the reasons are that this surgery is usually considered to be voluntary and not medically necessary.  There can be significant long-term complications with these surgeries so other ways of losing weight are generally much preferred.
b. There is often no coverage for injuries that occur while intoxicated or under the influence of a controlled substance.
c. Non-emergency treatments often need to be preapproved.
d. There is often an exclusion for coverage for non-emergency admissions to a hospital over a weekend.
e. Some insurance companies do not cover pregnancy of a dependent child. Here is where we find one of the many bad affects of the “Obamacare” law. Due to the fact that someone can stay on their parents policy until they are 26 years old even if they are out of the house and even married this exclusion can have significant negative impact on a family. The problem isn’t so much for the “dependent child” because pre-natal and delivery costs are “only” around $4,000 to $6,000. The real problem is that once the baby is born there is no coverage for the baby. All medical insurance policies only cover dependents and exclude coverage for grandchildren because they are not a legal dependent. If this baby has any medical issues they are not covered under the grandparent’s health insurance policy and this can cost the family hundreds of thousands of dollars. It is almost always better for an adult to have their own coverage separate from their parent’s coverage and this includes sons as well as daughters.
3. Medical insurance is a funding mechanism for our health care. It is important to read and understand what your contract with the insurance company says so that you can make the decisions for your healthcare that best fit you and your family.

Life insurance; Is Dave right?

I took one of Dave Ramsey’s financial peace classes at our church a while back. Dave is very entertaining and makes a lot of very good points. One of the things that Dave addresses in these classes is the need for life insurance in everybody’s financial plan. To that point I have to agree that every young family should take the necessary steps to protect their family in the event of the loss of a bread-winner. He also stresses the significant value of Term-life insurance for its relatively inexpensive premiums for the high value death benefit. Again I agree.
Dave also emphasizes that whole-life insurance is a poor investment vehicle if you are trying to accumulate wealth. Well, with the taxed deferred or tax-free cash value growth, the possibility of dividends and the minimum guarantees that could be debated. It could be debated but for most people who are trying to stretch a budget I would agree that the primary purpose of life insurance is the life insurance and not the investment potential.
What I didn’t hear Dave address is the fact that term-life insurance is by definition for a temporary need and not all people have a temporary need for life insurance. One reason for this omission might be because he is speaking to a mass audience and most people do or should have only a temporary need. One of his key points is that you should be able to eventually accumulate enough assets in your life-time to self insure this need or simply age out of your financial responsibility to your family. (Like my plan to have my kids take care of me for at least as long as I took care of them) In our discussion of life insurance we should not ignore the people who have a permanent need. These would include someone who has a disabled child and need to fund a trust for the long-term care of that child. A person who owns a business and wants to fairly pass on the value of this business to several children or provide the money to care for a spouse so that the business doesn’t need to be sold. There are other varied, specific and personal, permanent needs for life insurance. When you plan for yours and your family’s financial future remember that you are unique so get good sound advice that is specific to you before you just get what is “best” for the mass audience.

Why do you ask us to pay when you wouldn’t?

I’ve been selling health insurance in Michigan for about fifteen years now and the one thing that has always irritated me was when I would hear people begging all our friends and neighbors to chip in and give money to someone who is injured or sick and doesn’t have health insurance. Really! In Michigan? Michigan is one of those states that everybody can get health insurance. You can’t be turned down. We have a carrier called Blue Cross Blue Shield that gets special tax breaks so that it can take everybody without answering health questions. Everybody can get health insurance. Whenever I point this out to people I will get an answer that is some version of health insurance is so expensive that they couldn’t afford to buy it. While it is true that health insurance is not cheap it is also true that everyone under the age of 30 can get pretty good Major Medical coverage for under $100.00 a month. If somebody really can’t come up with $100.00 per month to provide basic health insurance coverage for himself there are some good state run programs that can help.

The truth of the matter is that more often than not when someone is begging for help because they don’t have any health insurance it is because they decided that they just didn’t want to pay for it. They had other priorities like riding a dirt-bike through the wooded trails or snowmobiling at 70 miles per hour after that stop at the bar. This is certainly a better use of money than buying health insurance to protect yourself and your family from financial disaster. Right? I guess that’s why congress finally decided that they also have had enough of this and passed a law that says that everybody must have health insurance. I agree! Everyone should have health insurance. Although Congress doesn’t have the authority to require every American citizen to purchase insurance, it might actually be a good idea.

There is one thing though that I noticed as a result of the new law that congress passed. My taxes went up and so did my health insurance premiums. I guess, despite this new law, I still have to pay for that guy who refused to be responsible and buy his own health insurance. Only now I just don’t have a choice in the matter. Oh, and by the way, here’s a $50.00 bill for that fund to help that guy who didn’t go along with the new health care law and wrapped his bike around a tree.

Travel Insurance

When most people think of travel insurance they think about protecting their travel investment.  Most good travel insurance will protect you from your financial loss in the event of your trip being cancelled or delayed or the delay of your baggage.

When it comes to travel, one of the last things that might be on your mind is whether or not your health insurance will pay if you need health care while out of the country.  The truth is that when you are out of the country most U.S. health insurance only will pay for emergency care and then under limited circumstances.  If you have Medicare as your only insurance you are totally on your own for any medical care outside the U.S.A.   Another thing that might not come to mind is what do you do if you are in a foreign hospital and don’t speak the language or are just having difficulty communicating.  What if you need emergency evacuation or urgent medical transportation from a remote area?

The solution is that there are some very good International Insurance companies that provide medical coverage as well as care management, emergency evacuations, trip interruption and many other important coverages for people who are traveling outside their home country.  These coverages and services can be purchased for a very reasonable cost and should be considered by anyone who is planning a trip outside the country.  Check out the link from the website www.daininginsurance.com for some very good options.

Major-med or Mini-med

Major-med or Mini-med

When I talk to people about health insurance I often get blank stares when I ask people if they are looking for a Major-med or Mini-med policy.  Let me try to explain.   A major-medical policy is a plan that although won’t pay for everything will provide coverage for the major needs in your health care and has very high or no limits to how much it will pay if you need significantly costly health care.  The Mini-med is a policy that has significant limits in the policy.  It has limits on how much it will pay and for which items it will pay.  For example, the other day someone came into my office with a “mini-med” policy that will pay up to $50 per doctor’s office visit for a maximum of two visits per year and no more than three office visits in three years.  This policy would also pay for up to $200 a day for a hospital stay for a maximum number of days.  With a “Major-med” policy you might have a deductible you pay and then the insurance company shares your costs to a certain limit before it pays 100% of your medical bills.  The premium on the “mini-med” is significantly lower than the premium on the “Major-med”.  So what should you have?

The answer isn’t as tough as you might think.  The question comes down to what do you buy the insurance for?  Are you trying to cover the major risks or the mini risks?  The major risks are things like broken bones, cancer, stroke, heart attack and the mini risks are things like the common cold, stitches and flue.  In my opinion the real point of insurance is to cover the major risks first and if you want then the minor risks.  I’ve run into people who have only a mini-med policy and are happy with the low premiums but don’t realize that the major risks are barely covered.  If they are diagnosed with cancer and only have a mini-med policy, the policy will run out of money to pay their bills after only a few hundred or maybe a few thousand dollars.  What will they do then to pay for the tens of thousands of dollars to treat the cancer?  Everyone should instead have a “major-medical” policy where you will have a few hundred or even a couple thousand dollars out of pocket to treat a major illness but the policy will pay for the tens of thousands that it takes for treatment of the entire illness. 

In my opinion, the “mini-med” policy has its place in the insurance marketplace but not as a substitute for a major-med policy.  Its place is to fill gaps in major medical policies that you might wish to pay a small additional premium to fill.  Some have said to me that a mini-med is better than no insurance at all.  I disagree if having a mini-med policy stops you from getting the major medical coverage you need.  If that’s the case it is worse than having no coverage at all.   Don’t be penny wise and dollar foolish by only have a mini-med to take care of your health care needs.

Using Insurance to transfer risk

I used to question the wisdom or even the need for insurance in my life.  Back when was young I really didn’t understand what the real purpose of insurance really was.  Over the years I started to understand that insurance is really all about transferring my financial risks to someone else, an insurance company.  When I purchased my first house the mortgage company required that I buy insurance on that house to transfer my and their risk of a fire, storm or something else destroying my house and their collateral.  When I drive my car the State of Michigan requires that I transfer my risk of great financial costs due to serious injury in an automobile crash to an insurance company.  I had to think about what do the mortgage company and the state of Michigan know about my risk that I don’t know?  Well first of all the mortgage company saw my income and knew right away that if my house burned to the ground there was no way that I would be able to come up with the money to repay them for their generously loaning me all that money and still have a place to live without transferring that risk to an insurance company.  The State of Michigan figured out that automobile accidents cause injuries that can cost the State and all those who pay taxes millions of dollars every year.  They for sure know that if I am injured and unable to work I certainly won’t be able to pay those medical bills.  Thus everyone who owns and drives a car must also have insurance on that car to transfer that risk to an insurance company.

What other financial risks do I have that I should or just want to transfer to someone else?  I have a financial risk of losing my income if I am injured or very sick.  I can buy disability income insurance.  If I die my family has a significant loss of all my future income that would have supported them.  Thus there is life insurance.  When I travel there is risk.  When I play on my boat there is risk that I might run into something.  As I live there is risk that I might get sick or injured and need a doctor or hospital.  All these things have a potential of financial loss to me and my family.  I can use the financial tool of insurance to transfer that risk to an insurance company or I can keep that risk for myself by “self insuring”.  Sometimes I might choose to share the risk with the insurance company by buying something like a higher deductible policy such as a Health Savings Account health insurance plan.  This way I pick up the smaller risks, the deductible, and the insurance company gets the larger risk like the hospital stay or major surgery.

The bottom line is that you can transfer the financial risk for just about anything.  Some risks are too large for the average person to reasonably take upon themselves and others are simply a matter of choice.  The biggest problem I see is that some people never really think about the risks and responsibilities that they have and simply “self insure” their responsibilities and financial risks by simply doing nothing.  Please at least take the time to think about it and act responsibly.

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