Can you imagine that the most popular way of getting health insurance, through your employer, could be the most risky if you have a significant medical problem, such as ALS (Lou Gehrig’s Disease)?
Isn’t the whole point of having health insurance to financially protect you from the perils of ill health, just as automobile insurance protects you from claims when you have a bad accident, or life insurance helps to keep your family afloat after you’ve departed?
So why is taking health insurance at work so risky? The tried and true way of getting health insurance must surely be a safe way to get health insurance.
It’s not. If you have a significant medical problem, and you are unable to continue working, or your not-so-kind-now-that-you-are-sick employer finds a way to ease you out of your job, you’ll begin the nightmare of outrageous health insurance rates, substandard coverage, and claims hassles. You could also face a situation where the small business where you are employed is hit with such huge increases in premiums due to your claims, that they cannot continue to provide coverage and cancel the policy or go out of business. You could also be an innocent bystander when your employer closes – and not have many options for coverage available.
This is how it plays out. You have a certificate of coverage that says you are part of the group insured by the policy issued to your employer. Your employer calls all the shots since they own the policy. They can cancel, modify the plan, switch carriers, or go out of business. Since you are part of the plan, your participation in the plan depends on your continued presence at work.
Sure, you’ve got protections as part of Federal Laws like COBRA and HIPAA, and state laws that provide similar protections. However the protections do not guarantee any level of coverage or price protection. So while your employer may pay the entire cost of your health plan while you are working (let’s say $1200 per month for a family), when you can’t continue working, you’ll have to pay the entire amount yourself. And you’ll need to continue paying this amount for the full term of the COBRA before you are eligible for HIPAA guaranteed insurance. This could be 18 months if you are not disabled, and possibly longer if you are disabled.
Once the COBRA benefits have been exhausted, you’ll need to apply for HIPAA guaranteed insurance (the group conversion to individual option). I’ve been told that this will run about $1500 per month for the sick person. The health family members can buy other insurance for less money. But the insurance that you’ll get that is HIPAA guaranteed and the insurance that the healthy family members can buy differ greatly. The HIPAA guaranteed that I mentioned will only pay $500,000 in a lifetime. The open market insurance may have a cap of $5 Million or be unlimited.
There are, of course, several exceptions to this scenario, including getting health insurance through a spouse’s employer, or a much tougher scenario when the employer goes out of business (and then you’ve got fewer options). This scenario also doesn’t hold when you live in a state with “community rating”, such as Maine, Massachusetts, New Jersey, New York, and Vermont. In these states everyone pays the same amount for the same plan regardless of health (there are a few minor adjustments for location, etc.)
What can you do to prevent such a tough scenario from happening? You can buy your own health insurance policy (individual insurance, *not* individual purchase of association group) from an insurer with a large presence in your state, and pay for it yourself. Everyone needs to compare their options and determine which works best for them. I recommend downloading our free spreadsheet for comparing health insurance quotes that works well for comparing choices when you get health insurance from your employer, directly from an insurer, or a combination of the two approaches.
Jonathan Pletzke is a consumer expert on health insurance and author of the health insurance book Get a Good Deal on Your Health Insurance Without Getting Ripped-Off, available online and at bookstores nationally. Additional details can be found at the consumers health insurance book and resources website www.BestHealthInsuranceBook.com. Copyright 2007-2008 Aji Publishing.