It’s Open Season!

(Shhh, I'm hunting wabbits. Well, health insurance plans, but still . . .)

It’s October, the traditional kickoff of Open Season, a time when both employers and the government present health insurance plans for the following calendar year. The period given to make a choice is short, sometimes just a week or two in the private sector. The enrollment period for plans under the Affordable Care Act (ACA or Obamacare) this year is November 1, 2017 through December 15, 2017.

Despite the long enrollment period for ACA plans, be careful when procrastinating this year. In an effort to depress enrollment in ACA plans, the Trump Administration has instructed the Department of Health and Human Services to allow the Healthcare.gov website to nurse its weekly hangover on every Sunday of the period, except the last one, December 10th. The site will be shut down from 12 a.m. to 12 p.m. on those days. For those of you who don’t procrastinate, the site will also be unavailable on the first night of the period, November 1st.

These deadlines are important to remember. If you miss the deadline for either private or public enrollment, you can’t enroll in a health insurance plan unless you start a new job.

Public and private plans tend to mirror each other since the passage of the ACA. One of the biggest things they have in common is the type of plans offered. Two of the most common are the Health Maintenance Organization plans (HMOs) and Preferred Provider Organization plans (PPOs).

The main differences between the two options are coverage and cost. (Please note that the below description are generalizations. Your plan may differ in some important ways.)

HMOs

Coverage: Each insurance company has a network of doctors, hospitals, therapists, and other providers. A patient chooses a primary care doctor who is in the network. That doctor directs the patient’s care, including how much (whether they see other doctors) and by whom (which other doctors they see). If the patient needs to see a specialist, the primary care doctor has to agree that they need to and they must see someone in the network.

Costs: The insurance companies negotiate a discounted rate with their network providers, kind of like buying in bulk. If the patient wants to see a provider outside the network, the entire cost comes out of the patient’s pocket. But premiums are generally lower and co-pays are minimal, set costs ($5, $10, $20). HMOs often do not have deductibles.

PPOs

Coverage: The insurance company still has network providers, but they are larger. There is no referral necessary to see a specialist so the patient decides how much care they need and who to see. If the patient wants to see an out-of-network provider, a PPO covers the cost, at least partially.

Costs: PPOs still have negotiated rates with in-network providers, but premiums are higher. PPOs also have high deductibles and co-pays, which are a percentage of the cost of the appointment or drug. PPOs also have maximum out-of-pocket costs, which sounds good, but not when you realize that there are separate ones for in- and out-of-network costs, and may amount to several thousand dollars annually.

How to Decide

You and your family will have to consider carefully which plan is right for your needs.

• How strongly do you feel about choosing your providers? I am very picky about my providers and tend to research a provider before I go or ask for names from providers I already trust. I do not want to be told I can’t go to the best providers for me just because they are out of network, so I have always had a PPO. That does not mean that there aren’t good providers in an HMO’s network. It just means that there are fewer options.
• What kind of plan fits into your budget? I have a pretty reasonable premium, but I have two deductibles, and could end up paying $10,000 out of pocket this year.
• Are the doctors you see in your plan’s network and do you have the relationship you want with them? If it matters to you to stay with the providers you have, this may be an important factor.
• How likely are you to need one or more specialists? Many types of non-MD specialists often fall outside of network coverage: psychologists/social workers, nutritionists, chiropractors, etc.

If you want to know more about health insurance policies, check out these posts: Insurance 101, What is Health Insurance?, How Do They Figure Out What Plans to Offer and How Much They Cost?, Getting to the Bottom of What's Actually Covered

If you have questions about HMOs and PPOs, please email through the blog. I will try to answer your questions in subsequent posts.

Conversations with a Retired Healthcare Executive (Who Just Happens to be My Father)

Chapter 2: How do they figure out what plans to offer and how much they cost?  

Health insurance plays an outsized role in our lives. But does anyone really know how it works? Or, for that matter, what it really says? In this series, I will be talking to my dad, a retired healthcare executive, about a variety of topics to get some clarity on private (employer-supplied) health insurance.

Jeremy Sachs spent 30 years working for a Fortune 500 insurance company. During much of that time, as House Counsel for the Employee Benefits Division, he advised corporate managers of the Division on a wide range of legal issues relating to the Company's group health insurance policies, including during the times when the Health Insurance Portability and Accountability Act (HIPAA) and the Americans with Disabilities Act (ADA) were passed and instituted.

This series does not apply to Medicare, Medicaid, Obamacare (The Affordable Care Act, or ACA), or individual health insurance, unless otherwise specified.

The Players

Insurance Company

• Sales Rep/Marketer—liaison between the insurance Company and your employer
• Underwriters – determine the risks involved for each policy
• Actuaries – mathematicians who determine the cost of a policy

Your Employer

The Process

Negotiations for a new health insurance policy or an update to an existing policy are long and complicated

They start with your employer. The insurance company’s sales rep sits down with your employer’s Benefits Manager and negotiates what your employer wants included in the insurance policy: what level of risk the insurance company is willing to take; what the deductibles will be; the method will be for computing a provider’s “reasonable and customary (R&C) charges”; and, what percentage of those R&C charges the company wants to cover. (That’s when the policy says they will cover 80% of reasonable and customary charges after the deductible or 70% of psychological therapy visits.)

Once the insurance company knows what the employer wants in the policy, the representative collects certain types of information about your employer, including:

• Type of work (office/manufacturing/labor/academic/government, etc.)
• Number of employees
• Type of employees and percentages (skilled, management, executive, etc.)
• Employee retention (In the insurance industry, employees who stay at their jobs longer may suggest a more stable lifestyle – that is, employees who keep a job for only a short time, and then move on are considered higher risk.)
• Claims history from previous years. (A Group Policy issued to a brand-new company may cost more, since the Insurer will have to guess how high the first yearly payout of claims will be.
• Company financial stability

And about you. Since it’s illegal to ask specific employee health questions, the insurance company will ask questions about the members of the group:

• Gender
• Age
• Race/Ethnicity
• Percentage who have dependents.*
• Other general demographic questions

* Dependents are important because their – both children and spouses – costs are calculated at a higher rate than that for the primary insured. This is because since employees come to work on a regular basis, they are assumed to be generally healthy. But no such assumption can be made for dependents. Spouses and kids, as a group, tend to have more or higher claims than employees. (The kids I know definitely get sick or injured more often than the adults, but I am not sure why the spouses do. Dad didn’t know, either.)

These and other factors are all thrown into equations when the insurance company calculates the cost of the individual benefits offered in the policy, and the premium for the policy overall.

Once the sales rep has collected all the information from the employer, they send it to the underwriters. Underwriters determine how risky it will be for the Insurer to cover the group.  Keeling over from a heart attack is more likely in a sedentary cube farm than on an active factory floor. But losing a finger is more likely on a factory floor than in a cube farm. Unless you’re using the copier wrong.

Or, if the Company is located, say, in Florida, the group may have a more employees with respiratory conditions than in, say, in the Colorado Rockies, where the air tends to be purer. 

The underwriters start with “standard rates”. They take the gathered information and use complicated algorithms to determine how much risk of a claim is likely for each type of coverage that the employer wants in the policy. They then assign higher degrees of risk for any elements of the group that don’t fit the algorithm.  Then they send their calculations to the actuaries.

The Actuaries are the mathematicians who figure out how much to charge. Actuarial tables are always being updated. As treatments and knowledge around a condition improve, probabilities of severe consequences are adjusted and sometimes costs go down. But there are also new conditions that can’t be treated that have to be factored in. They create their own algorithms around the Law of Probabilities -- that you will need X treatment, based on current national or local (industry) claim experience. They create rates to be charged to the group based on a series of calculations of the probability that employees and dependents, as a group, may at some point need all or most of the insurance for the conditions covered by the policy. Then they figure out the rates for your employer’s Group Policy. 

With the rates in hand, the sales rep for the Insurer finally presents the policy package to your Benefits Manager. The package includes rates, definitions, and descriptions of what will be covered. These are the sections that specifically explain the insurer’s LIMITATIONS on what’s covered and lists of the risks that it will not cover at all (EXCLUSIONS), as well as a whole host of administrative requirements and other explanatory material.          

A squeaky wheel can impact your insurance policy.

So, after two pages, why does all this matter? Because you’re not as powerless as you think.

There is a long negotiation involved once the initial figures are given. Both sides are worried about competition. Insurance companies don’t want to lose clients to another insurance company because of lower prices, and your company doesn’t want to lose good employees to a competitor with better benefits. 

And that doesn’t even touch on unionized industries. Unions will often negotiate on the cost to employee and breadth of coverage. Like better maternity coverage for a younger employee pool or better rehab coverage for an older employee pool.

So, if you have an opinion, tell your employer. Start with the Benefits Coordinator or someone in Human Resources for companies that aren’t big enough to have a Benefits Coordinator. We had issues a few years ago with the pharmacy provider my company was using, and after a few years, there were enough complaints that my employer switched providers. [CS1] 

It’s not a guarantee, but it never hurts to speak up.

Bonus:

Every policy has an incurred but not reported (IBNR) reserve for health insurance claims, commonly referred to as a ”tail.” The tail covers late claims submissions. Sometimes I just don’t have the time and energy to submit claims, especially the out of network ones, so I wait until I do. The tail, based on the size of the policy, covers those late filings. The length of this grace period, called the IBNR runoff, varies with the policy, but is often six to twelve months. So don’t give up on reimbursement if you’re a little late. Know your IBNR runoff period, and give yourself a break.

Conversations with a Retired Healthcare Executive (Who Just Happens to be My Father)

Health insurance plays an outsized role in our lives. But does anyone really know how it works? Or, for that matter, what it really says? In this series, I will be talking to my dad, a retired healthcare executive, about a variety of topics to get some clarity on private (employer-supplied) health insurance.

Jeremy Sachs spent 30 years working for a Fortune 500 insurance company. During much of that time, as House Counsel for the Employee Benefits Division, he advised corporate managers of the Division on a wide range of legal issues relating to the Company's group health insurance policies, including during the times when the Health Insurance Portability and Accountability Act (HIPAA) and the Americans with Disabilities Act (ADA) were passed and instituted.

This series does not apply to Medicare, Medicaid, Obamacare (The Affordable Care Act, or ACA), or individual health insurance, unless otherwise specified.

Chapter 1: What is health insurance?

All insurance is about risk. A company that sells homeowner's insurance charges premiums to accept the risk that a tree might fall on your house. A company that offers car insurance accepts the risk that you might get into a car accident. Those insurance policies are contracts between you and an insurance company; group health insurance, the kind that is offered by your employer, is a contract between your employer and a private insurance company. Most commonly, you and your employer share the cost of a monthly insurance premium. In this case, the insurance company accepts the risk that you might need the type of medical treatment specified in the policy, treatment that you may not be able to afford otherwise.

But keep in mind that health insurance companies are also businesses, like all for-profit businesses: responsible to their shareholders. It’s not easy to wrap your mind around the fact that something so personal to you is business as usual to them, but understanding that is vital to understanding how insurance works.

A Brief History

Insurance used to be a lot less complicated before the proliferation of technology and advanced treatment methods, like platinum-based cancer treatments. It was also a lot less expensive before those advances (you know, platinum). 

Now we live in an age where, in many cases, our quality of life has improved exponentially. The downside is that chronic and autoimmune conditions have become a competitive market. We will always fuel that market, looking for the next drug or procedure or device that will alleviate symptoms, reduce pain, or extend lives that otherwise might be shorter than average. Insurance often is the only way for people who need the latest treatments to actually be able to afford them.

So, where do you fit?

You’re the risk. Sort of. I mean, is it really a risk if you already know the outcome? You will definitely need medical services. Health insurance covers the “care and treatment” of “accident” or “illness.” The tricky part is defining the “accidents” and “illnesses” that are covered by the plan, and what is “necessary” to treat them. Before managed care options like HMOs and PPOs, the patient’s physician decided what was necessary. Now, it’s up to the insurance company and a committee of outside medical professionals.

When the insurance policy’s definitions of “accidents” and “illnesses” are uncertain, a committee inside the insurance company looks at similar cases and the circumstances around your case, and makes a judgment call that will (hopefully) serve both the company’s interests and your own, as the patient.

When the doctor and the insurance company disagree on what’s “necessary”, they negotiate payment. This is labor-intensive, and a common reason that some doctors’ offices, especially private practices, do not take insurance. In those cases, reimbursement from the insurance company goes through you.

In both instances, you can appeal the decisions made by the insurance company, but it’s an uphill battle. For example, in the “necessary” instance, I used to take an expensive injection for anemia ($1,200/month). My symptoms were mild, but without it, there was always an underlying tiredness every day, even when I got enough sleep. The insurance company decided to set their standards against the medical community’s recommendations and make it harder to qualify for the medication.

I was not the only one who fell into the mild category. Several people with my conditions were also affected. The doctors tried to negotiate coverage with the insurance company, but it didn’t work.

It was really hard to accept that someone I’d never met had switched out the experts who knew my situation for their experts, who had no idea how it felt to drag through every day. For all intents and purposes, strangers had made a judgment call that would restrict oxygen flow to my body, including to my brain. (That’s what anemia is: lack of iron in the bloodstream, and iron delivers oxygen.) It was so personal. My day-to-day functionality, and the only option I had, was to pay the $1,200/month. The only way I could get there was to stop paying rent.

Understand that, when you enroll in an insurance plan, you become what is called a "third-party beneficiary." When your plan goes into effect, you become entitled to certain rights and coverages that your employer negotiated to be included in the policy. However, what they don’t tell you is this: no health insurance company accepts every single possible health risk. The company’s professionals -- actuaries (mathematicians) and underwriters (risk evaluators) -- decide how much risk the company can assume and still earn a profit. Because of that, every insurance policy contains specific sections that detail limitations and exclusions on benefits payable under the plan. Sometimes that means specific things like my anemia drug.

And when you are evaluating which policy is right for you, remember that these limitations and exclusions are not just found in the obvious sections. There are others listed throughout the policy. Make sure you’ve seen all of them before signing up for health insurance.

So, next time you are considering enrolling in private group health insurance, start your evaluation with the definitions section to help you understand what your plan does cover. Look for the limitations and exclusions section to see what your plan doesn’t cover. This will help you set expectations as to what doctors and treatments you will be able to afford under the plan for the coming year.

If you still have questions about the policy, reach out to your employer’s benefits coordinator or Human Resources department for clarification.

And don’t be afraid to ask questions about your specific condition and circumstances. It sucks to buy insurance and then find out after the fact that the cutting-edge treatment your doctor wants for you is out of financial reach.

Insurance 101

So, insurance. What to say about insurance? Can’t live with it, can’t toss it out a window and see it shatter into a thousand pieces on the sidewalk below? At least the (figurative) sound would be satisfying.

Diabetes is one of the most enduringly expensive conditions on the planet. The insulin pump I wear costs more than twice the average price for an engagement ring, and test strips can cost more than $1.50 each. I use between 6 and 10 per day. I’m sure your condition isn’t far behind. The bottom line is, unless independently wealthy, chronic patients can’t live a healthy life without insurance.

According to the Kaiser Family Foundation (KFF), the nearly half of the population depends on employer-provided insurance. Most of us are familiar with that narrow timeframe known as “open season” during which you are supposed to examine all of the options and make the best choice for your family and your budget. Missing the deadline can mean a loss of coverage. It’s certainly apt that the term is also used by hunters in this country. I always feel like I am under pressure and if I can just make it through the two weeks with the right decision in hand, I will be ok. At least for the next calendar year.

But first we’ve got to get there. How does health insurance even work, and how do they come up with all these different plans? What is the difference between a Health Maintenance Organization (HMO) and a Preferred Provider Organization (PPO)? Which is right for me? Do I need separate Vision and Dental coverage? Should I use an HSA or FSA? What is different in the Formulary this year? Why is drug coverage through a separate company? What qualifies as In-network vs. Out-of Network? How likely am I to hit my out-of-pocket maximum and what counts toward it? Is there a different out-of-pocket maximum for out of network coverage?

Those are just some of the questions you face every year. They are a headache for seasoned veterans, nearly impossible to decipher for newbies. Hopefully, as I am able to do research and post more often, I will be able to help you demystify and provide answers to your questions.