Health Insurance for Diabetics

TN | July 1, 2004

Introduction

Diabetics are challenged with the duel problem of having high out-of-pocket medical cost and at the same time being denied eligibility to many low cost health insurance plans. To make the problem even worse, the complications of diabetes make it less likely that a patient would be employed on a full-time basis and eligible for group insurance benefits. Diabetics face additional financial challenges aside than finding health insurance. Diabetics are statistically likely to have a lower income and are more likely to suffer from a range of other social and economic stresses as compared with non-diabetics. Fortunately, all diabetics have access to at least one type of health insurance and in most case two or more types of policies can be combined to improve overall coverage. Insurance coverage is often so expensive as to impair a diabetic's lifestyle and so many elect to be uninsured. In addition, insurance for diabetics is sometimes so difficult to find that many individuals conclude that insurance is unavailable. Average medical costs for a diabetic are currently $22,000 per year, or about 13 times more than the amount of a person without a chronic health condition.

Obviously the huge medical costs of treating diabetes could not possibly be directly reflected in the individual insurance rates. If insurance actuaries applied standard medical risk undwriting principles to the pricing of individual insurance for diabetics, the insurance premium rate would exceed the total net income of a majority of diabetics! Instead, medical costs for treating diabetes are absorbed using two methods: 1) costs are re-allocated to the insurance prices of non-diabetics to the extend allowed by law (which means that the premiums for health insurance that cover diabetics are significantly higher than the price of insurance plans that exclude diabetics), and 2) cost for routine diabetic care are allocated to individuals though policy deductibles and co-payments (which causes about two thirds of diabetics to not follow the medical procedures prescribed by their physicians). Some observe that our current health system seems to be designed to impoverish or bankrupt diabetics. Medicaid plans provide broad coverage for diabetes but only after the patient has exhausted most of their personal resources on their own health care. Clearly there are no easy solutions for covering the costs of diabetes. The best hope for many diabetics is that their state insurance department will allow them to enroll in the new type of limited benefit policies that provide a balance between cost and coverage, with the possibility of providing coverage for the pre-existing medical condition after six or twelve months. A growing number of commercial insurance policies are available to provide supplemental coverage.

There are five approaches that a diabetic can obtain health insurance in the United States. Each approach is outlined below with references for more information. A short discussion of other financial planning considerations for diabetics concludes the article.

Employer-provided group insurance

All states have laws that guarantee availability of coverage to employees of companies that provide health coverage on a group basis. Most states have laws that require group insurance plans to cover diabetic supplies. A listing of state laws that mandate coverage for treatment of diabetes in group plans can be found at http://www.ncsl.org/programs/health/diabetes.htm. If group coverage is an option, this is clearly the best choice despite the high price. Some managed care type group health insurance plans have special provisions for diabetics. UnitedHealthcare has a special health plan called "Diabetes Health Plan" available to businesses with diabetic employees. Participants who regularly follow their treatment plans can receive access to online monitoring and education tools at no charge, in addition to self-monitoring training and certain diabetes-related drugs and services. Increased focus on preventative and management measures can lower diabetes costs for employers and employees.

Individuals who are eligible for employer-sponsored group coverage - including COBRA or other continuation coverage - but decline to enroll in that insurance are typically not be immediately eligible for the guaranteed issue individual type major medical insurance plans listed below. State insurance laws are designed to require diabetics with financial resources to seek coverage under employer-sponsored plans first before resorting to taxpayer-supported state insurance pools.

Tip: Combine group major medical insurance with supplemental coverage listed in #4 below to minimize the impact of deductibles and co-pays.

Guaranteed issue individual insurance

This category includes COBRA coverage, HIPAA plans, individual conversion plans, Basic Health Insurance and state assigned-risk pools. These are available in every state but are unaffordable to most diabetics. Information on COBRA coverage and individual conversion option are available only from the former insurance company. The other two options are discussed below.

Before pursuing any of these insurance plans, it makes sense to separate the heath insurance for a person with diabetes from the rest of the non-diabetic family members. The other family members will be able to find much better coverage at a lower cost though traditional and commercial health insurance sources. Only the person with diabetes should apply to the guaranteed issue policy.

Most long term health insurance policies for diabetics today are issued through state-controlled assigned risk pools. Most states offer these through a Blue Cross association and some states use commercial insurance companies. While it is comforting to know that these plans are available to accept all applicants regardless of health history, most people have trouble paying for these very expensive insurance plans. In many cases the cost of health insurance is the most significant item in the person's financial planning - possibly outweighing all other bills. While these plans are best found "offline" through a local phone book, www.MedSave.com includes links to contact information for each of the state Blue Cross Associations. If this approach is not successful, contact your state's HIPAA regulator. A list of links to High Risk Health Insurance Plans is included here at MedSave.com. This list was compiled by the National Association of Insurance Commissioners and updated in April 2005. 

Tip: Withdrawals can be taken from an IRA account without penalty to pay for health insurance and, in some cases, a Health Saving Account can be used to pay for health insurance when exiting a group insurance plan.

Limited benefit & supplemental commercial health insurance

The number of renewable long term commercial health insurance plans available to diabetics is slowing increasing as the trend to universal coverage without medical underwriting expands. Still, at this time there are only a few available choices. Four of these plans are available throughout most of the U.S. now. Limited benefit policies set a maximum dollar benefit for each type of covered medical expense as opposed to the more traditional major medical insurance plans that use one overall maximum benefit for all "ordinary and necessary medical expenses". Limited benefit policies can be combined with any other types of insurance to pay additional benefits directly to the insured. None of these limited benefit plans provide insurance for prescription drug expenses and diabetic supplies, but these expenses are included under a separate discount drug card.

Core Health Insurance - This insurance is available to all applicants in approved states without regard to any medical history, financial resources or other coverage available. Coverage for pre-existing medical conditions including diabetes is liberal; outpatient benefits begin immediately. Hospitalization coverage is extended to include pre-existing conditions after the policy has been in force for a year. It can be combined with any other insurance to increase overall benefits. The liberal make this the first likely choice when seeking supplemental coverage. While it is never smart to replace major medical insurance with this type of limited benefits policy, some diabetics use this as a sole coverage when other insurance is either unavailable or unaffordable.

Tip: Core Health Insurance or any of the other limited benefit or supplemental insurance plans listed in this article can be combined with a Health Savings Account or made available to employees on a voluntary basis through a Section 126 cafeteria style employee benefit plan.

Value Health Insurance - This insurance offered by AIG American General is available in all states except AK, CT, NJ, WA and WY to applicants under age 65 with controlled diabetes (including insulin-dependent diabetes). This insurance pays expenses for pre-existing conditions after the policy has been in force for 12 months. (Other medical benefits are effective at the beginning of the policy). Hospital benefits are available up to $1,000 per day; intensive care up to $4,000 per day; surgery benefit to $20,000 and anesthesia benefit to $4,000. There is no deductible or co-pay required. Coverage is available with any doctor or hospital and benefits payments are made directly to you rather than the medical service provider. This is a limited benefit insurance policy that pays a specific dollar amount that is usually less than the total amount charged by a medical provider. The coverage is primarily for hospitalization expenses and does not cover doctors office visits. The policy is renewable until age 65. Maximum benefits, premium rates and enrollment form are included in the enrollment kit. This insurance is available and paid in addition to any other insurance that may be available. While the premiums are very affordable, this policy requires a $5 per month association and $15 per month administration fee (per family). More information is available at http://www.medsave.com/ValueHealth-insurance.htm.

Tip: Value Health Plans, along with Core Health (above) and Basic Health Insurance (below), are a few of the only low cost commercial health insurance policies available to diabetics; however these policies do not provide full protection from catastrophic medical costs. These should be used together in combination with major medical insurance whenever possible.

Value Med Insurance - This insurance is available in all states except CT, KS, MN, NC, ND, NJ, NY, RI, VT and WA to applicants under age 65 with non-insulin dependent diabetes. The coverage provided for hospitalization expenses is much less than for the "Value Health" listed above but the coverage for doctor's visits and outpatient treatment is more liberal. This insurance pays expenses for pre-existing diabetes after the policy has been in force for 12 months (6 months in Idaho). (Other medical benefits are effective at the beginning of the policy). This is a limited benefit insurance policy that pays a specific dollar amount that are likely to be less than the amount charged by a medical provider. The most popular benefit in this policy is the maximum benefit of $75 for a doctors visit and up to $250.00 outpatient benefits like lab expenses, medical supplies, or x-rays. Coverage is available with any doctor. The benefits are paid directly to you in addition to any other insurance that may be available. The premiums are very affordable, this policy requires only a $5 per month association fee. Complete description with maximum benefits, premium rates and enrollment form are all included in the enrollment kit. More information is available at http://www.medsave.com/ValueMed-health-insurance.htm.

Tip: Combine both the Value Med and Value Health policies for a better overall combination of protection that is still affordable yet approaches a wide range of coverage expected in a major medical type policy. For some diabetics, this combination is now the best alternative to major medical coverage.

Basic Health Insurance - Most diabetics who live in AK, AL, AZ, DC, DE, GA, HI, IA, IL, IN, KY, MI, MO, MS, MT, ND, NE, OK, PA, RI, or SC are eligible for a limited benefit type of health insurance that pays for some basic out-of-pocket costs but is not designed to be a primary comprehensive coverage. This insurance pays up to $65 for a doctors office visit and up to $2,000 for a surgery. Expenses for diabetes or any other pre-existing medical condition are covered after the policy has been in force for six months, so this is the most generous coverage available for pre-existing medical expenses. One of the primary advantages of this policy is that cash benefits are paid directly to the policyholder in addition to other health plan benefits that may be available from other insurance. This policy is often combined with other medical insurance to improve the overall coverage. This policy has no deductible or required co-payments so can be useful for covering out-of-pocket costs left by other health insurance policies. More information is available at www.basichealthinsurance.net.

Tip: None of these supplemental insurance plans cover diabetic supplies like blood sugar test kits but are designed to provide cash to the policy owner at a time of increased medical costs.

Short term medical insurance

Major medical insurance for 1 to 36 months that excludes coverage for all pre-existing medical conditions is available to most non-insulin dependant diabetics. In all states except Maryland, Maine, New Jersey, New York, Massachusetts and Vermont, non-insulin dependent diabetics can get short term health insurance coverage under the product name Secure STM issued by Standard Security Life. This is a month-to-month coverage for up to six months, but consecutive policies are allowed in most states to stretch coverage for longer periods of time. This is a true comprehensive short term major medical policy offering full coverage up to $1 million for the usual ordinary and necessary medical expenses at any doctor or hospital in the United States. There is no required network of providers. Like all short term medical policies, this insurance excludes coverage for pre-existing medical conditions. This is a great choice when the assigned risk plan is available but the normal cost of medical care does not justify the high price of the more expensive health insurance. The cost of this insurance is only a small fraction of the price of other plans. This insurance is the most likely choice when an applicant needs a immediate coverage and does not need coverage to pay for the pre-existing medical expenses. The policy is usually issued online. The ID card can be downloaded and printed immediately at the time of enrollment.

For longer term coverage, there is also a 36 month version of this policy called Secure STM 12x3. The more expensive Secure STM 12x3 is most likely the best choice of coverage for a non-insulin dependant diabetic who needs coverage for more than a year because it provides full major medical benefits for medical costs other than pre-existing medical condition (diabetes would be a pre-existing medical condition) and guarantees renewability for three years. No other insurance policy, to our knowledge, offers this combination of benefits at this level of affordability.

A less expensive version called Secure Lite STM is also available with a lower level of benefits. Remember that short term medical insurance policies never cover pre-existing medical expenses, and that usually means that diabetic treatment will not be covered (unless the problem first arises during the life if the policy). At this time short term medical insurance is available to insulin dependent diabetics.

Medicaid and other welfare plans

Diabetics who can not afford coverage under any other insurance are covered by Medicaid or other state-specific welfare plans. In order to qualify, applicants must have depleted their assets (often due to the cost of ongoing medical treatment) and do not have sufficient income to afford any of the other types of health insurance coverage. Normally this enrollment process is handled directly by the local welfare office.

Financial planning considerations for diabetics

All diabetics, including those who are financially comfortable, should take extra care now to ensure that their assets are protected from catastrophic medical claims. This process was formerly called "Medicaid planning" until the federal government made it illegal even a financial writer to advise others on how to protect financial assets while still qualifying for Medicaid. Still, this is the basic objective of many Americans with diabetes. Those who find the cost of health insurance to be increasingly unbearable should become familiar with the assets that are allowed under Medicaid eligibility rules and position their financial assets accordingly. While the first intention of financial planning would be to find a better alternative for health coverage, families should recognize - years in advance, if possible - those situations where assets should be repositioned in anticipation of Medicaid coverage.

Other types of insurance like disability income, Medicaid qualified annuities, asset care coverage and long term care coverage should be considered with a high level of urgency for diabetics.

 With adequate advanced planning, it is possible to be financially comfortable and secure while still qualifying for full medical coverage under Medicaid. Since this planning typically involves using annuities and a trust account, this is usually not a do-it-yourself issue. Even though professional help may be expensive, the benefits certainly outweigh the costs when there are assets to be protected. Start this planning process early; do not wait until after there is already a problem with unpaid medical claims and a family financial crisis. Any person with even moderate financial resources who is newly diagnosed with diabetes is well-advised to seek out professional financial advice. We suggest that advisers who certified in elder care planning (regardless of your current age) are better trained to handle the specific financial issues mentioned in this section.

Summary

In those cases listed above where commercial major medical insurance and supplemental insurance is available at the same rate as for non-diabetics, this represents an exceptional consumer value to the diabetic. It would be financially short-sighted to bypass this opportunity for insurance coverage. For the majority of diabetics under medical treatment, individual major medical insurance must be obtained through state-sponsored high risk pools. These plans are not available online; check the resources cited above for more information. In some cases, even for people who are currently financially secure, the high ongoing expense of treating diabetes trigger an eventual need for Medicaid-type coverage. Even in this circumstance the long term financial impact of this disease can be mitigated with smart long term financial and health care planning.


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