Supplement for group health insurance

TA | January 1, 2010

Q: Our group insurance just changed the cap amounts from a lifetime $ 1,000,000 per person to $ 200,000 per year. When we asked them about other potential options in case we encountered an expense greater than the cap, we were told to file for welfare. So, the answer is not with them. We are 60 and 63 and are interested in keeping the current insurance but finding something to take over where this policy lets off, i.e., maybe a major medical policy with a $ 200,00 deductible.

A: Three preliminary comments might help put this in perspective:

First, your company is among the first to moved in the direction that eventually will be the norm in the U.S. Employee benefits experts generally agree that regardless of which political camp or which candidate wins the next election - we will have lower maximum caps on our insurance policies. So while this may sound outrageous now, it will be more widely accepted in the future. The generally accepted economic concept is to have each of us (or our employer) budget for "normal" medical expenses but to distribute catastrophic claims through a government-based system.

Second, a policy with a very high deductible (for example the hypothetical $200,000 per year deductible that you proposed) is priced almost the same as a policy with a much lower deductible, say for example a $10,000 deductible. This may sound odd, but the math is supported by actuarial history and the economics of insurance. So there is really no economic justification for the existence of very large deductible individual health insurance policies.

Third, almost major medical insurers are required by state law to deny an application for individual major medical insurance coverage to anyone who is covered by another group insurance plan, despite the low limits. Again, this seems to make no sense but the laws were originally designed to protect the public from overzealous insurance sales companies.

Considering all of this, the best solution is supplemental insurance. These policies can be purchased by individuals or businesses and may be used in combination to add as much insurance coverage as you may wish. Another advantage is that supplemental insurance pays cash benefits to directly to you and not the medical service provider. Since there is no maximum benefit or adjustment of benefits paid by other insurance, a supplemental insurance with a $1000 per day hospitalization coverage, for example, pays you exactly that benefit. If you wanted even more, then it is possible to add a second policy.  In a sense, these policies put you in direct control of your health care finances. We increasingly see that individuals with financial resources available opt for a greater level of health insurance protection than is offered by today's group health insurance policies, especially the high deductible and low maximum benefit plans.

The most popular plans supplemental insurance plans in most states are Core Health Plans and Basic Health Insurance, both are supported here at MedSave.com. Both offer secure online pricing and enrollment with month to month coverage for as long as you wish. Online application is fast and easy. Coverage can be in force by the next day regardless of your previous medical history. Each plan offers a choice of different levels of benefits ranging from an inexpensive low level benefit to a pricey high level benefit pan to help match the coverage to your specific insurance budget.

The downside of supplemental coverage is that there is initially a limit on the benefits for pre-existing medical conditions (typically excluding these payments for the first 6-12 months of a new policy) and these policies are not meant to provide comprehensive coverage. They provide only the specific stated benefit. For example, a hospitalization policy would not be expected to pay the costs of pre-admission lab tests unless that benefit were specifically listed in the policy. Similarly, a cancer supplement policy would not pay for diabetic supplies. For this reason, it may be necessary to combine a few different insurance policies in the future in order to reach a suitable overall level of financial protection.

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