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I have been a health insurance broker for over a decade and every day I read more and more
"horror" stories that are posted on the Internet regarding health insurance companies not paying
claims, refusing to cover specific illnesses and physicians not getting reimbursed for medical
services. Unfortunately, insurance companies are driven by profits, not people (albeit they need
people to make profits). If the insurance company can find a legal reason not to pay a claim,
chances are they will find it, and you the consumer will suffer. However, what most people fail to
realize is that there are very few "loopholes" in an insurance policy that give the insurance
company an unfair advantage over the consumer. In fact, insurance companies go to great lengths
to detail the limitations of their coverage by giving the policy holders 10-days (a 10-day free look
period) to review their policy. Unfortunately, most people put their insurance cards in their wallet
and place their policy in a drawer or filing cabinet during their 10-day free look and it usually isn't
until they receive a "denial" letter from the insurance company that they take their policy out to
really read through it.
The majority of people, who buy their own health insurance, rely heavily on the insurance agent
selling the policy to explain the plan's coverage and benefits. This being the case, many
individuals who purchase their own health insurance plan can tell you very little about their plan,
other than, what they pay in premiums and how much they have to pay to satisfy their deductible.
For many consumers, purchasing a health insurance policy on their own can be an enormous
undertaking. Purchasing a health insurance policy is not like buying a car, in that, the buyer knows
that the engine and transmission are standard, and that power windows are optional. A health
insurance plan is much more ambiguous, and it is often very difficult for the consumer to
determine what type of coverage is standard and what other benefits are optional. In my opinion,
this is the primary reason that most policy holders don't realize that they do not have coverage for
a specific medical treatment until they receive a large bill from the hospital stating that "benefits
Sure, we all complain about insurance companies, but we do know that they serve a "necessary
evil." And, even though purchasing health insurance may be a frustrating, daunting and time
consuming task, there are certain things that you can do as a consumer to ensure that you are
purchasing the type of health insurance coverage you really need at a fair price.
Dealing with small business owners and the self-employed market, I have come to the realization
that it is extremely difficult for people to distinguish between the type of health insurance coverage
that they "want" and the benefits they really "need." Recently, I have read various comments on
different Blogs advocating health plans that offer 100% coverage (no deductible and no-
coinsurance) and, although I agree that those types of plans have a great "curb appeal," I can tell
you from personal experience that these plans are not for everyone. Do 100% health plans offer
the policy holder greater peace of mind? Probably. But is a 100% health insurance plan something
that most consumers really need? Probably not! In my professional opinion, when you purchase a
health insurance plan, you must achieve a balance between four important variables; wants,
needs, risk and price. Just like you would do if you were purchasing options for a new car, you
have to weigh all these variables before you spend your money. If you are healthy, take no
medications and rarely go to the doctor, do you really need a 100% plan with a $5 co-payment for
prescription drugs if it costs you $300 dollars more a month?
Is it worth $200 more a month to have a $250 deductible and a $20 brand name/$10 generic Rx
co-pay versus an 80/20 plan with a $2,500 deductible that also offers a $20 brand
name/$10generic co-pay after you pay a once a year $100 Rx deductible? Wouldn't the 80/20 plan
still offer you adequate coverage? Don't you think it would be better to put that extra $200 ($2,400
per year) in your bank account, just in case you may have to pay your $2,500 deductible or buy a
$12 Amoxicillin prescription? Isn't it wiser to keep your hard-earned money rather than pay higher
premiums to an insurance company?
Yes, there are many ways you can keep more of the money that you would normally give to an
insurance company in the form of higher monthly premiums. For example, the federal government
encourages consumers to purchase H.S.A. (Health Savings Account) qualified H.D.H.P.'s (High
Deductible Health Plans) so they have more control over how their health care dollars are spent.
Consumers who purchase an HSA Qualified H.D.H.P. can put extra money aside each year in an
interest bearing account so they can use that money to pay for out-of-pocket medical expenses.
Even procedures that are not normally covered by insurance companies, like Lasik eye surgery,
orthodontics, and alternative medicines become 100% tax deductible. If there are no claims that
year the money that was deposited into the tax deferred H.S.A can be rolled over to the next year
earning an even higher rate of interest. If there are no significant claims for several years (as is
often the case) the insured ends up building a sizeable account that enjoys similar tax benefits as
a traditional I.R.A. Most H.S.A. administrators now offer thousands of no load mutual funds to
transfer your H.S.A. funds into so you can potentially earn an even higher rate of interest.
In my experience, I believe that individuals who purchase their health plan based on wants rather
than needs feel the most defrauded or "ripped-off" by their insurance company and/or insurance
agent. In fact, I hear almost identical comments from almost every business owner that I speak to.
Comments, such as, "I have to run my business, I don't have time to be sick! "I think I have gone
to the doctor 2 times in the last 5 years" and "My insurance company keeps raising my rates and I
don't even use my insurance!" As a business owner myself, I can understand their frustration. So,
is there a simple formula that everyone can follow to make health insurance buying easier? Yes!
Become an INFORMED consumer.
Every time I contact a prospective client or call one of my client referrals, I ask a handful of specific
questions that directly relate to the policy that particular individual currently has in their filing
cabinet or dresser drawer. You know the policy that they bought to protect them from having to file
bankruptcy due to medical debt. That policy they purchased to cover that $500,000 life-saving
organ transplant or those 40 chemotherapy treatments that they may have to undergo if they are
diagnosed with cancer.
So what do you think happens almost 100% of the time when I ask these individuals "BASIC"
questions about their health insurance policy? They do not know the answers! The following is a
list of 10 questions that I frequently ask a prospective health insurance client. Let's see how many
YOU can answer without looking at your policy.
1. What Insurance Company are you insured with and what is the name of your health insurance
plan? (e.g. Blue Cross Blue Shield-"Basic Blue")
2. What is your calendar year deductible and would you have to pay a separate deductible for
each family member if everyone in your family became ill at the same time? (e.g. The majority of
health plans have a per person yearly deductible, for example, $250, $500, $1,000, or $2,500.
However, some plans will only require you to pay a 2 person maximum deductible each year, even
if everyone in your family needed extensive medical care.)
3. What is your coinsurance percentage and what dollar amount (stop loss) it is based on? (e.g. A
good plan with 80/20 coverage means you pay 20% of some dollar amount. This dollar amount is
also known as a stop loss and can vary based on the type of policy you purchase. Stop losses can
be as little as $5,000 or $10,000 or as much as $20,000 or there are some policies on the market
that have NO stop loss dollar amount.)
4. What is your maximum out of pocket expense per year? (e.g. All deductibles plus all
coinsurance percentages plus all applicable access fees or other fees)
5. What is the Lifetime maximum benefit the insurance company will pay if you become seriously
ill and does your plan have any "per illness" maximums or caps? (e.g. Some plans may have a $5
million lifetime maximum, but may have a maximum benefit cap of $100,000 per illness. This
means that you would have to develop many separate and unrelated life-threatening illnesses
costing $100,000 or less to qualify for $5 million of lifetime coverage.)
6. Is your plan a schedule plan, in that it only pays a certain amount for a specific list of
procedures? (e.g., Mega Life & Health & Midwest National Life, endorsed by the
National Association of the Self-Employed, N.A.S.E. is known for endorsing schedule plans) 7.
Does your plan have doctor co-pays and are you limited to a certain number of doctor co-pay visits
per year? (e.g. Many plans have a limit of how many times you go to the doctor per year for a co-
pay and, quite often the limit is 2-4 visits.)
8. Does your plan offer prescription drug coverage and if it does, do you pay a co-pay for your
prescriptions or do you have to meet a separate drug deductible before you receive any benefits
and/or do you just have a discount prescription card only? (e.g. Some plans offer you prescription
benefits right away, other plans require that you pay a separate drug deductible before you can
receive prescription medication for a co-pay. Today, many plans offer no co-pay options and only
provide you with a discount prescription card that gives you a 10-20% discount on all prescription
9. Does your plan have any reduction in benefits for organ transplants and if so, what is the
maximum your plan will pay if you need an organ transplant? (e.g. Some plans only pay a
$100,000 maximum benefit for organ transplants for a procedure that actually costs $350-$500K
and this $100,000 maximum may also include reimbursement for expensive anti-rejection
medications that must be taken after a transplant. If this is the case, you will often have to pay for
all anti-rejection medications out of pocket).
10. Do you have to pay a separate deductible or "access fee" for each hospital admission or for
each emergency room visit? (e.g. Some plans, like the Assurant Health's "CoreMed" plan have a
separate $750 hospital admission fee that you pay for the first 3 days you are in the hospital. This
fee is in addition to your plan deductible. Also, many plans have benefit "caps" or "access fees" for
out-patient services, such as, physical therapy, speech therapy, chemotherapy, radiation therapy,
etc. Benefit "caps" could be as little as $500 for each out-patient treatment, leaving you a bill for
the remaining balance. Access fees are additional fees that you pay per treatment. For example,
for each outpatient chemotherapy treatment, you may be required to pay a $250 "access fee" per
treatment. So for 40 chemotherapy treatments, you would have to pay 40 x $250 = $10,000.
Again, these fees would be charged in addition to your plan deductible).
Now that you've read through the list of questions that I ask a prospective health insurance client,
ask yourself how many questions you were able to answer. If you couldn't answer all ten questions
don't be discouraged. That doesn't mean that you are not a smart consumer. It may just mean that
you dealt with a "bad" insurance agent. So how could you tell if you dealt with a "bad" insurance
agent? Because a "great" insurance agent would have taken the time to help you really
understand your insurance benefits. A "great" agent spends time asking YOU questions so s/he
can understand your insurance needs. A "great" agent recommends health plans based on all four
variables; wants, needs, risk and price. A "great" agent gives you enough information to weigh all
of your options so you can make an informed purchasing decision. And lastly, a "great" agent
looks out for YOUR best interest and NOT the best interest of the insurance company.
So how do you know if you have a "great" agent? Easy, if you were able to answer all 10
questions without looking at your health insurance policy, you have a "great" agent. If you were
able to answer the majority of questions, you may have a "good" agent. However, if you were only
able to answer a few questions, chances are you have a "bad" agent. Insurance agents are no
different than any other professional. There are some insurance agents that really care about the
clients they work with, and there are other agents that avoid answering questions and duck client
phone calls when a message is left about unpaid claims or skyrocketing health insurance rates.
Remember, your health insurance purchase is just as important as purchasing a house or a car, if
not more important. So don't be afraid to ask your insurance agent a lot of questions to make sure
that you understand what your health plan does and does not cover. If you don't feel comfortable
with the type of coverage that your agent suggests or if you think the price is too high, ask your
agent if s/he can select a comparable plan so you can make a side by side comparison before you
purchase. And, most importantly, read all of the "fine print" in your health plan brochure and when
you receive your policy, take the time to read through your policy during your 10-day free look
If you can't understand something, or aren't quite sure what the asterisk (*) next to the benefit
description really means in terms of your coverage, call your agent or contact the insurance
company to ask for further clarification.
Furthermore, take the time to perform your own due diligence. For example, if you research MEGA
Life and Health or the Midwest National Life insurance company, endorsed by the National
Association for the Self Employed (NASE), you will find that there have been 14 class action
lawsuits brought against these companies since 1995. So ask yourself, "Is this a company that I
would trust to pay my health insurance claims?
Additionally, find out if your agent is a "captive" agent or an insurance "broker." "Captive" agents
can only offer ONE insurance company's products." Independent" agents or insurance "brokers"
can offer you a variety of different insurance plans from many different insurance companies. A
"captive" agent may recommend a health plan that doesn't exactly meet your needs because that
is the only plan s/he can sell. An "independent" agent or insurance "broker" can usually offer you a
variety of different insurance products from many quality carriers and can often customize a plan
to meet your specific insurance needs and budget.
Over the years, I have developed strong, trusting relationships with my clients because of my
insurance expertise and the level of personal service that I provide. This is one of the primary
reasons that I do not recommend buying health insurance on the Internet. In my opinion, there are
too many variables that Internet insurance buyers do not often take into consideration. I am a firm
believer that a health insurance purchase requires the level of expertise and personal attention
that only an insurance professional can provide. And, since it does not cost a penny more to
purchase your health insurance through an agent or broker, my advice would be to use Ebay and
Amazon for your less important purchases and to use a knowledgeable, ethical and reputable
independent agent or broker for one of the most important purchases you will ever make....your
health insurance policy.
Lastly, if you have any concerns about an insurance company, contact your state's Department of
Insurance BEFORE you buy your policy. Your state's Department of Insurance can tell you if the
insurance company is registered in your state and can also tell you if there have been any
complaints against that company that have been filed by policy holders. If you suspect that your
agent is trying to sell you a fraudulent insurance policy, (e.g. you have to become a member of a
union to qualify for coverage) or isn't being honest with you, your state's Department of Insurance
can also check to see if your agent is licensed and whether or not there has ever been any
disciplinary action previously taken against that agent.
In closing, I hope I have given you enough information so you can become an INFORMED
insurance consumer. However, I remain convinced that the following words of wisdom still go
along way: "If it sounds too good to be true, it probably is!" and "If you only buy on price, you get
what you pay for!"
©2007 Small Business Insurance Services, Inc.
C. Steven Tucker, is the President of Small Business Insurance Services, Inc. and has been a
Licensed Mult-State Insurance Broker serving the small business and self-employed market for
over a decade. Mr. Tucker believes an informed insurance consumer makes the best health
insurance purchasing decisions. Mr. Tucker has written several articles that focus on small
business health insurance, which can be read on a number of web sites.
Mr. Tucker's blog can be read at http://healthinsurancenerd.com/
If you have general questions regarding health insurance, or you are in the market to purchase a
health insurance plan, you can contact Mr. Tucker through his web site at
via Email at firstname.lastname@example.org or by plone, toll-free at 1-866-SBIS123 (724-7123)
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