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Friday, July 18, 2008

How Good Is Your Health Insurance Policy Really?

How much do you know about your health insurance policy? If your company provides your health insurance then you probably know just about as much as most people. You know the doctors to use and how much you have to pay before the insurance begins. For those that purchase their own health insurance policy, then you have very different situation.
The cost is the first difference that most people notice if they switch from a group plan. When your employer offers health insurance, the cost is usually a lot lower if the group is large. One for the reasons is that they spread the risk the risk among a large group of people. The second includes the fact the cost of billing is lower because the company does the collection of premiums. The biggest reason for the price difference is that the employer pays part of the premium or all of it in very rare instances.

Frequently the coverage is broader in a group plan. The individual health plan seldom contains dental, prescription and eye care. The deductibles are often higher in an individual health insurance plan and coverage more limited. Often well baby care, wellness care, including physicals and smoking cessation and maternity are not part of the policy. Many employers discovered long ago how to keep costs down and increase coverage and you can do the same thing when you buy your health insurance policy. Health insurance policies vary widely so you have to make some decisions about the type of coverage that you want. Do you want one that just covers major medical, the services of a hospital and outpatient surgery, or do you wand coverage that picks up the expense of doctors and routine physicals covered? When you include additional options and get a more comprehensive health insurance policy, the price goes up. Insurance company calculates the premium by presumed expense. They expect to pay more, because more people use the doctor and wellness care, so they increase the price accordingly.

Another way that companies keep the cost of the health insurance policy low is to use Health Maintenance Organizations, HMO's. The doctors and hospitals in the group agree to a discounted charge, so the insurance company reduces the amount they charge the company. These types of plans are also available to the individual and create a cost savings without cutting corners. Often there is a co-pay for doctor's visits and hospitalization and a few extra perks are in the package.

A final way to reduce the cost of a health insurance policy is to increase the deductible. The higher the deductible, the lower the cost. Many companies use a partial self-insure to reduce the cost. The insurance plan covers everything but has a huge deductible, about $5000 per individual. The company then starts a side fund that covers those smaller claims so the employee only pays a small deductible. This type of plan is also available for the individual. It is a combination plan where some of the monthly payment goes into a savings account used for upfront expenses. This account belongs to the individual and receives tax-free growth as long as you use it for medical expenses. The payment for up-front bills comes from the savings. Once you reach the chosen limit, a much lower cost health insurance policy takes over. These plans are great for healthy individuals.

When you compare health coverage, look for a plan that suits your needs and budget. Check the reduction of premium as you increase the deductible and, even if you don't have a MSA, set the savings aside to cover the additional out of pocket. Study your health insurance policy as the corporations do and you save on one of your biggest monthly expenses.by Jon Arnold

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