InsurancePickle.com Blog

Politicians are missing the mark because they are making decisions on something they obviously don’t understand. If they were smart then my phone would have rung a long time ago -- being someone entrenched in the industry. One of the talking points you have been hearing is that 'insurance company profits are up 400%.' If I gave you a penny last year and then this year I gave you a nickel you could also say that my donation to you was up 400%, but that doesn't make it significant. In reality, insurance companies run on thin margins. And, as we illustrated previously (below) if it were significant then the non-profit insurance companies that already exist would be putting the other companies out of business.

Another reason you can't listen to politicians is they keep chanting that individuals can "qualify for group rates." Anybody that knows anything about insurance knows that group rates are usually 2-3 times higher than the rates an individual would pay. Qualifying for 'group rates' is not a good thing.

See what was put out by a misguided member of the House of Representatives - majority leader Steny Hoyer. You'll see multiple mistakes in his file.

http://energycommerce.house.gov/Press_111/health_care/districts/MD5.Hoyer.pdf

1) He states 8300 individuals in his district have pre-existing conditions that would prevent them from buying health insurance. FALSE – there are ZERO because they all qualify for MHIP (Maryland Health Insurance Plan is the state funded, BlueCross administered, plan) unless they’ve moved to Maryland in the last 6 months (which is the waiting period for new residents). Granted other states don’t have a plan as good as Maryland’s, but shouldn’t that burden be put on those states? And, it is affordable. If you are in a low income bracket it costs about $150-$200/month and covers pre-existing conditions. It is designed to run 50% higher than the average individual plan. So, even though it covers pre-existing conditions it is still cheaper than group insurance. And it is embarrassing that the Majority Leader of the House of Representatives is completely unaware of what is offered in his own state.

2) He also states “join the health insurance exchange, benefiting from group rates” and “those that do not receive health care coverage through their employer will be able to purchase coverage at group rates.” Does anyone in public office understand that group rates are more expensive than individual rates? I had a client with Black & Decker paying $400 a month for a ‘large group plan” and got him a plan at $100/month on his own at about 1/5th the deductible. Group is more Mr. Hoyer and please understand this before making decisions.

If politicians understood the problem then maybe they would be better suited to solve it.

Many people are falsely under the impression that Europeans get ‘free’ healthcare. It is far from free. They pay more through taxes per person than we pay through insurance premiums. To understand this, take 30% of your income and compare that to what you are paying for insurance. Not only do we pay less, but we have more doctors, nurses and facilities per person than most (if not all) countries in the world. That's why you hear the horror stories of people having to wait for care. It's not a myth. In Great Britain the number of administrators and IT people on staff is about the same as the number of doctors and nurses. That is bureaucracy at its finest. It’s missing the mark because putting it in the hands of government will not address the cost of care.

And, if you're assuming that a company run 'not-for-profit' is somehow better than a profit company then you only need to look at current examples of that in the marketplace. In California Blue Cross of California and Blue Shield of California are two completely different and unrelated companies. BlueCross is owned by Anthem/Wellpoint and Blue Shield is a non-profit company. They are both good companies and I have clients with both (actually more with BC), but BlueShield does not stand out as being 'better' because they are non-profit. In Maryland, the BlueCross organization is also non-profit. It is a good company, but is not discernibly better because it is non-profit. In reality their systems are antiquated and there underwriting times can be 10 times longer than the profit companies they compete with.

This also misses the mark. There is nothing wrong with a company making a profit even off of a basic human need. My grocery store makes a profit off of the food I buy and I would much rather concern myself with the price they charge and the quality of the food I get than whether they make a profit. I like the idea that if Giant Foods doesn’t satisfy me as a consumer then I have the choice to go down the street and shop at Safeway.

Health Care is missing the mark because those in public office are so caught up with “insurance” and not with the costs of health care. Insurance is just the means to pay for health care and insurance cannot get cheaper until the costs of care are addressed. Is it any wonder that a body made up of mostly lawyers does not want to address tort reform which would lower doctors’ liability insurance premiums? That would have a direct impact on the cost doctors charge which would lower insurance premiums.

What is the point of this “Health Insurance Exchange?” Are they going to set up call centers where people can call in to get information from a government employee about plans that are available to them? If you address the issues you want to change with how the insurance plans are constructed and how pre-existing conditions are covered, etcetera, then why do you need to expand government to change the method of delivery? If it is the same plan then why increase the cost by setting up “The Exchange?” This part of the equation makes no sense. If you still have Company A and Company B selling insurance then creating a government facility staffed with government would not lower the cost of care because we would all pay to set up this unneeded entity.

To dispel the myth (if there is one) that somehow the government can run something better we need to only look at emerging market countries. Nobody has an incentive to not spend money needlessly when it is government run. Emerging market countries are 'emerging' because they are taking government controlled companies and privatizing them. This is sparking growth, expansion and jobs in those countries.

Another way to look at it is to hire two sales people. Pay one commission and only compensate them on their effort (private) and pay the other a flat salary regardless of whether the make sales, deliver on customer service, etc...(government). What do you think the outcome would be?

All health insurance policies are underwritten which means that the company needs to assess the risk they're taking on before the accept a new client.  In the case of a pregnant woman for example it certainly wouldn't make sense for an insurance company to insure this person because the they 'know' that they'll have to shell out at least $5,000-$10,000 for the birth and if the baby is premature it could run 6-7 figures in expenses.  Naturally charging $200 per month isn't worth taking the risk.

That's an extreme example, but that's the way it works for every condition.  The insurance company can't take someone that they know they'll be shelling out more than what they take in.  It would be hard to stay in business with a model like that...although some Internet companies tried it in the late 90's and of course they're not in business anymore.

So, it may be an inconvenience for the time it takes because not all doctors are really speedy about getting someone's medical records to the insurance company.  However, without the medical records they can't assess the risk properly.

I was having lunch yesterday with a friend in the fitness industry and he told me a story about a client of his who was confused by all the conflicting information he had been receiving about various benefits of nutritional products.  After my friend gave him the “real” story the man replied, “You know, you never buy BS more than once.”

And every industry has them because the conversation came up when I was telling him about the different scams (or at least less than 100% honest) in the insurance industry:

• Selling a catastrophic health insurance plans to self-employed people and failing to be truthful about it’s short-comings, (link)
•  Selling a whole life insurance policy to someone to be used (and this one was new to me this week) as a way to become your own banker?  One of the sites actually cited an example of how a $25,000 car miraculously only cost $5,000 by borrowing the money of the whole life policy. (link
• Selling a discount card as if it were health insurance (link)
• Selling a whole life policy to someone by eluding that regular retirement plans are “horrible” investments, etc…(link)

Even though the underlying product…at least in the case of the whole life insurance…may be a good product, is selling it under false pretenses a good idea?  And is selling something that may be good to someone who has no business owning it good?

Knowing that being unethical doesn’t build a sustaining business my question really is why would someone lie about a product or its capabilities just to make a sale?  Is it just deceit or is it that the salesperson is uneducated and doesn’t know any better?

Ok, most of the questions are rhetorical, but just in case you’re wondering BS has never been on the product line at InsurancePickle.com

Insurance is confusing enough when you're faced with just the facts.  Often though I'm given stories by my clients of information they've received from a NASE - Mega Life Insurance agent.

The latest I heard just yesterday was "(with other insurance companies) if you're self-employed, work from your home and get injured there your claim will get denied" essentially because you're injured on the job.  WRONG.  The ONLY time this would be the case is if you have worker's compensation (which most self-employed do NOT) AND worker's comp was paying the claim instead.  An insurance company won't double pay if someone else is responsible for the accident and has paid for the claim (or will be).  To suggest that you don't have coverage due to this is ridiculous. 

This is just one of many scare tactics used.  The other popular one is that (with other companies) your coverage can be taken away from you if you have excess claims.  Considering that's illegal in almost every state we're going to chalk that up as just another scare tactic.  They also say that an individual can be singled out for rate increases which 99% of the time is also false.  Most insurance companies use a group rating process which means all of the claims on the policies of a particular area (generally the state) contribute to the factors that increase rates.

What they really need to point out is how the plans they sell aren't major medical or comprehensive PPO/HMO plans.  They need to illustrate that if (in many cases) you end up in the hospital for two different reasons in the same year that you're responsible for your deductible all over again.  And finally they need to illustrate that because their plans are limited-benefit (surgical/catastrophic) plans and not gloss over the short-comings of their plans -- but I guess they wouldn't want to do that.

If you want to buy a limited benefit plan there are many on the market, so just make sure you compare it to a comprehensive plan because it wouldn't make any sense to get less benefit for MORE money.

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Information from AttorneyPages.com
Mega Life and Health/ NASE Health Insurance/ Health Markets (formerly UICI)

I just came across a person in my database who I guess can best be described as someone who was almost a client.  Seeing him in my database reminded me of his story and it's worth sharing so you'll know what not to do.

About four years ago I received a call from someone who had left their job and was facing paying for COBRA which was expensive (of course).  This is an everyday call and very common.  I showed him (amongst other plans from other companies) a $3600 deductible HSA with UnitedHealthcare with the recommendation that he fund the HSA account with $300/month.  The total cost of the plan was going to be about $600 ($300 for the plan and $300 into the account - read my $0 Deductible HSA to get info on that)  For $600 per month he had (or would have had) 100% coverage and would not have to go into pocket over an above the $600 for just about anything that medically could happen to him OR his wife.

Even though this would have saved him hundreds of dollars every month he decided to stay on the COBRA plan.  Well 18 months passed and he decided he wanted to apply for the plan I had recommended.  BUT, in the previous 6 months his wife developed a pre-existing condition that precluded her from getting coverage, but not him.  So, he opted to get coverage for neither of them -- even though a high risk plan was available to her.  The next time I hear from him he's spent something to the tune of about $80,000 on medical bills and now finally decides he wants to get coverage for himself.  But, of course he has since developed pre-existing conditions that have now precluded him from getting coverage as well.

Living in Virginia he has an Open Enrollment plan from CareFirst BlueCross BlueShield that has been available all along.  At every step of the way he would have been better off taking my advice, but yet he opted not to and ended up wiping through tons of savings - because the $80k I mentioned was just one issue that he encountered.  If the moral of this story isn't obvious then you may end up like this guy.

Never pay a bill from a medical provider (doctor, hospital, lab, etc..) until you've received your EOB (Explanation Of Benefits) from the insurance company.  The EOB will outline what the doctor billed, the approved amount for the service, and how much of the bill you'll be responsible for.  And, once you examine the EOB make sure it's correct.  Then make sure what the insurance company says you'll owe matches the bill from the provider.  If they don't match find out why.

I just received a bill for an x-ray I had at an urgent care facility when I broke my wrist back in March.  The bill was only $24 so it wasn't something that I'd normally scrutinize, but I did just because I couldn't understand why I was responsible for the entire $24.  After closer examination of the EOB I noticed that the provider was an out-of-network provider so they applied that amount to the separate out-of-network deductible (out-of network or non-participating providers are usually covered at a much lower rate and sometimes have a separate deductible as was the case for my insurance).  HOWEVER, my arm was broken, so didn't that fall under the category of "emergency?"  It's not like I could take the time flipping through a provider directory in the middle of a rural area trying to find an in-network provider.  Yesterday I called the insurance company and told them it was an emergency and that they should treat the bill as if it were an in-network provider.  The insurance company is reprocessing the claim and covering 90% of the bill.  Instead of $24 I'll owe only $2.40.  Granted my example doesn't contain large, shockingly high amounts, but the message is still clear -- always check your EOB and ask your insurance broker for help if you need to.  They're on your side and not the insurance company's.

Have you heard of this software that's for sale from United First FInancial?  Well for a measley $3,500 (of which $2,500 is paid as commissions and bonuses in a multi-level marketing format -- think Amway) you get a software package that's touted to help pay your mortgage off in 1/3 to 1/2 the time.

I have a big problem with companies praying on the uninformed and taking advantage of them.  I also have a big problem with these multi-level marketing companies that don't offer a competitive product signing up salespeople to (likely unknowingly) rip off their friends and family (for the small percentage of these companies that have a legitimate product I apologize).  The bottom line is if you want to pay off your mortgage early send more money toward it. 

What they're doing is opening a line of credit and making lump sum deposits against the mortgage with the credit line and then paying that back with your expendable income each month. That potentially could work, but it depends on the interest rate on the home equity line and the mortgage. The problem is the odds that you could get a home equity loan at a lower interest rate than a first mortgage is slim to none. (**update - actually that's easy to do in this market; however, you could refinance the first to an interest rate you wouldn't necessarily want to pay down any faster and give up opportunity costs)

If you took the $3,500 for the program and simply applied it to the mortgage you'd save about $19,000 in payments -- using their example of a $200,000 mortgage at 6%. Couple that with the $1,000 a month of ADDITIONAL funds (from their example) going to pay back the equity loan to make the lump sum deposit and you could pay off the mortgage in less than 10 years....no software needed. Whether you'd want to do that is a different question. Either way you could net a better result on your own.

My guess is that they market the software dwelling on the "interest saved" over time which does not take into account "opportunities lost."  Send the $3,500 to the bank and nobody gets paid but you.

Ufirst Money Merge Account Scam -- look here for another article...

The question isn't what you're paying month to month for your insurance.  The real question is if you were stuck with a bill for $25,000, $50,000, or more for a surgery, cancer treatment or a hospital stay what's your actual cost?  This number is what you should be comparing when you compare health plans.  When comparing two plans look at not only what the monthly premium is, but compare using three different scenarios (or more) -- figure a year with no medical expenses, moderate medical expenses, and major medical expenses.  Figure out what you'd pay and add that to the premium for the plan.  Some plans will be the obvious choice under all three scenarios.

So, to make it simple let's say you're paying $100 per month for a $2400 deductible.  And that plan covers you 100% after you've incurred $2400 of medical expenses.  We'll also assume that this is a comprehensive plan and not a hospital/surgical, catastrophic, or otherwise stripped down plan that would severely limit your benefits.  In this case your maximum risk is the deductible ($2400) and that would break down to $200/month ($2400 divided by 12). Your Total Monthly Cost for that plan would be $300/month ($100 premium + $200 to fund the potential expenses).  So, if you had no expenses for the year your annual medical costs would run $1200 (just the premium), and if you had a $100,000 hospital stay your costs would be $3600 ($2400 deductible and $1200 premium).

Another way to look at this, using the same numbers, is that it would make NO sense to get an HMO or a low-deductible plan that would cost more than $300/month.  I always get calls from people asking for low deductibles, but once they realize how to look at the "Total Monthly Cost" they end up with a much better plan than the one they thought they were looking for.

Finally it is more prudent to go with a comprehensive plan over a limited benefit plan.  With the $100,000 hospital stay example the limited benefit plan may have a cap on the coverage leaving you with $50,000 or more of that bill to pay.  And, these plans rarely save money in the monthly premium and the consumer also rarely realizes that they're NOT purchasing a comprehensive plan.  Be sure you know what you have.

Hey, don't just automatically assume that because your employer is providing you with a benefits package that it's a smart thing to do to get on it.  Every year you should be comparing what your employer offers to what you can do on your own.

You already know that group insurance costs more than individual coverage so unless your employer is picking up part of the tab it may not be beneficial for you to participate.  AND, even if your employer is paying for you, you need to consider your family...especially if you only have one child.  You may be paying for "family" coverage for just one child and that could cost you hundreds of dollars per month when you consider it costs less than $100 (generally speaking) to insure that child.  SO compare what it costs for multiple scenarios (i.e. just you on the plan,  just you and your spouse, the whole family, etc...).

Be smart about those benefits and take the $200 a month you just saved and put it towards your bills, a 401(K) or deposit it into your spouse's individual HSA account that can be used for the whole family.  Now that makes a lot of cents.

I just received yet another call today from a lady in Colorado who got stuck with $28,000 in hospital bills for kidney stones.  Unfortunately this is another example of "learning the hard way" that discount health plans are basically scams and should be shut down.  Regardless of what you think, they certainly do more harm than good.  I also see a growing population of immigrants being turned to these plans and being taken advantage of since they don't necessarily understand what "real" health insurance looks like and how it operates.  I think it's sadder still that they're being taken advantage of by their own kin because they speak the same language.  I'm not sure they understand fully what The American Dream is all about. 

The only example I've come across that seems to make any sense for these plans is for the illegal immigrants since they can't get health insurance.  But, that opens up a whole different conversation.  I put these warnings out there to hopefully save you some money down the road, but unfortunately there's nothing I can do after you find out the hard way.  If the government wants more people to be covered by health insurance, they need to get rid of the catalysts preventing them from doing so and DISCOUNT HEALTH PLANS should be a priority.

Good question.  Let me answer that and in doing so I'll also explain the image above.  Your agent isn't a broker because at first they don't know any better and later it's too late.  Most people who enter the insurance industry do so by being hired by a large firm and they're hired as an "agent."  Agents, in most cases, are bound to sell only the products of the company they work for.  AND, if they can sell products of other companies they usually receive a lower commission or are otherwise provided with disincentives to sell other companies.

Once they figure out how the system works though it's too late.  Meaning when an agent/broker sells an insurance product they get paid not only up front, but each and every time you (the consumer) pays your premium.  But, if the agent leaves the insurance company to become a broker they usually give up all of the clients they've accumulated making it difficult to make the jump.  It's akin to starting over and nobody enjoys that.  Of course while they're at the insurance company their manager is candy coating everything because each time they sell a policy the manager gets paid as well, so it's in the best interest of the manager that the agent sell policies for the company they work for.

Ok, so the company has great ratings, has been around for 150 years, etc.. etc.. so why not just do business with them because the agent is knowledgable, likeable, etc.. In comes the chart above which was provided by one of the biggest, oldest insurance companies in North America. You can see that for this particular Term Life Insurance product it's ONLY competitive if you're 45-55 years old and in "great" health.  But, if you're 25-40 years old or 55-65 years old or not in "great" health which company do you think your agent is STILL going to show you?  The one that they get paid less on and doesn't provide their office space OR are they going to show you the same company?  Your broker SHOULD start at zero and search the market for you because as you can see NO company tries to be competitive for all ages and health categories. 

I talked to a client yesterday and was floored at the tactics some companies are using.  First, according to her, she talked to someone from www.surehealthplans.com and the salesperson (notice I didn't say agent, because you don't need a license to sell these) was trying to convince her that it was a health insurance plan.  So, there's another discount plan to avoid.

Again, according to her she was talking to a couple different people from www.hbdc.com a.k.a. www.healthbenefitsdirect.com and they told her that without her Social Security number and banking info they'd be unable to give her a quote.  To get a quote you need little more than a zip code and a date of birth. Height, weight, and health status help the quote become a little more accurate, but under no circumstances should you give out that type of financial information until you are ready to apply for a plan.  When you buy a plan you must give that information and that's why they ask because many places will sell you the discount plan without your knowledge hoping you never notice them taking money from your bank each month.  I know this because I get calls daily wondering why someone is taking money from their account.  Again, they can get away with it because when you don't have a license, you don't have a license to lose.  Be a smart consumer and deal with us so you don't have to worry about that.  InsurancePickle.com keeps THEM from getting YOU into a pickle!

Ok, so you can't really study for this exam, but you can help swing your chances of getting a better rate by following some simple directions. You've decided on your term life insurance plan and company, so you just need to give up a little blood and urine for the company to examine.

They'll be looking for drug use (cocaine, marijuana, etc...), nicotine use, HIV, sugar, & cholesterol readings.  For the first three there's not a whole lot you can do late in the game and you certainly want to be truthful on your application, but by avoiding red meat and sweets the day before the exam can make a measurable difference in the results, and since 5-10 points of cholesterol could save you 25-40% in premium it's not something to be taking lightly.  If you can eat right for more than one day and even from the point of application to the exam day you'll be doing yourself a great service.

Finally, the exams are "fasting" exams so get them done early in the morning and have no evening (the night before) or morning snacks (the day of) until the exam is complete.  Food in your system could significanlty raise your cholesterol and sugar readings, so you'll only be cheating yourself.  Drink lots of water to help flush the system of everything, and be sure to "go" before the examiner arrives.