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Financial Integrity

First, good insurance is reliable. That means financial integrity that is monitored by a third party so as to maintain ongoing financial integrity year after year. The only practical way to have reliable monitoring is, at the minimum, to be licensed by the state. Financial statements have to be filed regularly and if minimum standards are not met, the insurer will be put into receivership so it does not collapse unexpectedly causing financial hardship for policyholders.

Because health insurance has become so expensive, low cost pseudo-insurance operations emerge from time to time. "If it sounds too good to be true, it probably is", applies to health insurance as much as anything else. If an offering is way cheaper than everything else on the market, it's probably not collecting enough money to pay claims. This happens most commonly when coverage is not licensed by the state.

Without oversight by a regulatory body, who knows what the operators are doing with the money.

It can be bad enough even when there is oversight. Under-priced plans may meet the minimum requirements for a while but finally go under. The state insurance regulator steps in when the operation becomes too financially weak, but there can still be damage done to some consumers.

When there is no regulation, the collapse is typically much more severe. Some states have a special fund that will at least pay unpaid claims up to a certain limit, but unlicensed operations have no such protection.

Often, the unlicensed plans operate as Multiple Employer Welfare Arrangements ("MEWA") marketing through professional associations. The unlicensed MEWA is formed under color of Federal law. However, the federal law was not intended for MEWA's to be sold to the general public or businesses in general without state licensing. However, there are licensed MEWA's that are legitimate and operate as the law intended.

Operators of unlicensed health "insurance" plans may have no intention of paying claims. Even if they do have the right intentions, they may not know what they are doing. If the operation cannot meet the minimum required financial standards for licensing, it is not good insurance, it's wishful thinking.

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State insurance departments actively attempt to stop insurance fraud, but it is up to the consumer to be vigilant, because it is not until complaints come in after unpaid claims occur, that the regulators may even be aware that a phony health "insurance" scam is being sold.

Here is an example of a state regulator's page on fraud and unlicensed operations and other consumer alerts (not associated with this website, nor does it endorse or approve anything on this website).

The big premiums that have to be paid for reliable health insurance are big for a reason. The claims are big. Modern medicine is expensive and getting more so. Attractive low premiums from unlicensed health "insurance" offerings can not be trusted because they can't be collecting enough money to pay today's high claims costs.

There are rating agencies like AM Best who rate insurance companies for current financial strength. Any rating of B- or lower has a level of risk that many prudent buyers would avoid. At the same time, restricting choice to ratings of A+ for health insurance will restrict choice of plans too much. Ratings can change, just avoid what is currently too low.

Comparing Value

Once you feel that you are dealing with reliable companies, the tricky part is in comparing plans. You have to know the meaning of such terms as deductible, coinsurance, copayment, and out-of-pocket. You have to look for any misuse of terms such as using out-of-pocket when coinsurance is meant. You have to compare total out-of-pocket, not just deductibles because coinsurance could cost you a lot more than the deductible.

Could you use the tax deduction that is available with a health savings account that you can have if you buy a certain type of plan? Is it worth paying the extra premium so as to have a doctor office copay or is it probably going to be more cost effective to pay less per month and pay any physician visits in full until the deductible is met?

If you have a favorite doctor, has the doctor joined the claims network? Plans without a network cost about 25% or so more than comparable plans with a network, so it is typically best to get a PPO network plan that the doctor subscribes to. Claims networks streamline the claims process and reduce insurance costs significantly, and therefore reduce premiums charged, so that is what most of us choose. If an HMO is available, can you live with their system?

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Would a non-profit insurance company charge less for similar coverage? Not necessarily. Good health insurance comes from both for-profit and non-profit companies. Evaluation must be made on a case by case basis. Despite complaints about high CEO salaries, the lower salary of the CEO of the non-profit may not make much difference when spread over the annual cash flow of the insurer. The net offering to the consumer is what matters.

Lifetime maximum is usually $2 million or more. Less than that is somewhat skimpy.

The covered items can vary significantly from plan to plan, so watch for these variations if you want to get what you consider to be "good health insurance". In reduced coverage plans, items often not covered or limited significantly include brand name prescriptions, caps on annual outpatient expenses, mental health coverage, various therapies, and substance abuse treatment.

There can be extra out-of-pocket for hospital admission or surgery, which may be called a "facility fee" or some similar name. It's extra that you pay on top of your deductible and coinsurance.

Plans that some consider to be on the fringes, limit the amount paid for such things as hospital room and board, intensive care, fees for surgeons and their assistants, and separate deductibles for inpatient and outpatient care. Such limits are an indication that this is not good health insurance and it is probably best to avoid such plans because you can find yourself having to pay way more than you expected you would have to when the plan was originally bought.

In most states, you have to qualify with answers to health questions to buy individual health insurance. If you want help with pre-screening, pleas contact us so we can check things out for you in advance.

If you need help, please call us. We really do like to help people get the best health insurance that they can. We have online quoting for many good health insurance companies in the 40 most populous states, and can help you shop for the best deal from reliable licensed companies.

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