Archive for the ‘COBRA’ Category

Health Insurance: Group Vs. Health

Tuesday, January 10th, 2012

 

A client had the opportunity to participate in a group plan through their employer but was somewhat distressed (shocked, actually) at the cost. I asked if they had ever sought out comparative rates in the individual market. Their immediate response was the assumption that group health insurance was less expensive.

 

This was not the first person that I have spoken to that had that impression. In reality, individual and group insurance are two completely different contracts, subject to different rules and are therefore priced differently.

 

Past Trends

Group insurance obtained through an employer is often thought to be the most economical way to obtain health insurance. Unfortunately, this is not always the case.

 

When employers paid for all or most of their employee’s health premiums, group coverage was the way to go in most cases. That was before the explosion of health care costs and economic downturn.

 

Today, while many companies struggle to keep their doors open, the necessity for cost sharing is a must. Employees are being asked to pay a larger share, if not all, of their health insurance premiums.

 

Bearing this in mind, it is beneficial to understand the moving parts and reasons why it may be beneficial to explore the option of obtaining individual insurance rather than group health insurance.

 

Group Pricing

One of the main benefits of obtaining insurance through the group market is that the insurance is guaranteed issue. This means that you can get covered through the plan regardless of any pre-existing health issues. While this is a tremendous positive for someone who has a pre-existing condition, it can be an extra burden for those without:

 

Insurance companies may assess a rating factor that is equally allocated among the participants of a particular group to actuarially account for the acceptance of individuals who may otherwise be excluded from coverage.

 

Translation: If a group is rated up 40% because someone has a preexisting condition, each and every person who obtains their insurance through that group contract will bear a premium increase by that amount. Herein lays one of the reasons why group insurance may not be as economical as one would think.

 

Typically, insurance companies will also have one set rate for single employees, one for employee and spouse and one for families. A 20 year old will therefore be paying the same individual rate as a sixty year old.  Similarly, if you opt for family coverage, your rate is the same whether you have one child covered in the plan or a brood of 10.

 

Individual Pricing

The main drawback on individual contracts is they have to be underwritten. Insurance companies review medical records and coordinate their findings to a list of standard criteria before individual coverage is offered. The upside to the underwriting process is that the cost of claims tends to be lower and therefore can be reflected in lower premiums to younger, healthy people.

 

One of the most attractive benefits of the individual market is the freedom to tailor a plan to suit your personal needs and budget. More affordable premiums can be had by omitting the types of bells and whistles which are sometimes standard to employer paid and subsidized plans.

 

Individual coverage also provides portability. You can take an individual plan forward with you if you leave your current employer by choice, through downsizing, retirement or any other event. Conversely, group insurance will restrict you to 1 year if your company falls under the jurisdiction of Illinois Continuation or 18 months under COBRA.

 

Wrap Up

Common assumptions are often erroneous regarding today’s health insurance costs.

There is no right or wrong choice between individual and group health insurance.

Current trends now dictate the need for thorough examinations of all market options.

 

Kurt Rusch CLU, ChFC

Healthcare Confidence, Behavior & Reform

Friday, November 11th, 2011

 

 

It has been more than a year – 18 months and 11 days to be exact – since the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act (HCERA) of 2010 were passed. And still, after all this time, recent surveys show Americans are not extremely well versed on the new laws nor satisfied with current healthcare issues. It seems nothing has changed.

 

Amendments to the Acts and future application deadlines can all be attributed to the lack of knowledge regarding health care reform. Moreover, there are numerous concerns which polls are now returning regard confidence, behaviors and reform in the eyes of the American public.

 

Confidence

 

The Employee Benefit Research Institute (EBRI) has been conducting annual health confidence surveys (HCS) on healthcare since 1998. Highlights of this year’s survey provide:

 

1)     Dissatisfaction with the American health care system remains widespread. 56% of respondents rated the system as poor or fair. The percentage of Americans which rated the system as poor, doubled between1998 and 2004.

 

2)     60% of Americans are very satisfied with their own current health insurance coverage; 29% are somewhat satisfied.

 

3)     57% are very confident that their employment-based health coverage will continue to be offered by their or their spouse’s, employer or union. Confidence in this belief was 68% in 2000.

 

4)     Just 18% of people are extremely satisfied with the cost of their health insurance.

 

5)     Only 12% are extremely confident they are able to afford health care without financial hardship.

 

 

Behaviors

 

What human behaviors are impacting healthcare? Last September, the Thomas Reuters-NPR Health Poll released their query of 3,000 Americans on the subject of human behavior and healthcare.

 

Smoking was, of course, the top named impacting behavior, however, by less than a 1% difference, obesity was ranked second. Stress, by less than a 4% difference, was rated third. Taking the fourth and fifth top cited answers were alcohol use at 11.2% and workplace safety at 7.5%.

 

On the subject of cost, 84.8% of those polled believe that people who exercise, eat healthy and don’t smoke should receive a discount on their health insurance premiums. 30% say overweight people should have to pay more for health insurance. 11.3% went as far to say it is acceptable to deny employment based upon obesity.

 

Reform

 

The EBRI survey reports that confidence regarding today’s health care system has neither fallen nor increased as a result of the passage of health reform.

 

62% of Americans are also not familiar with a “key aspect of the law”. The unfamiliarity refers to legislation requiring that each state must set up a health care “exchange” by 2014, where health benefits can be shopped at competitive rates. This mandate is part of the Act’s objective to broaden health insurance coverage. The proposed goal is purposed to create an alternative coverage solution for the remaining minority of the American population without employment-based benefits.

 

Changes to the Act since its March 2010 inception have altered the original passage, which further complicates American awareness. As of today, it is unknown whether any of the current court challenges filed by States, business and other parties regarding the constitutionality of certain mandates within the law will further modify how health care reform unfolds.

 

The EBRI survey also found that health care is not the issue that the majority of Americans consider to be most pressing in America today:

 

32% of those polled say the economy is the most critical issue at hand.

 

14% say the federal budget deficit is.

 

14% cite unemployment as most important.

 

12% believe healthcare is.

 

11% think education is top priority.

 

Thanks for reading,

Kurt Rusch  CLU, ChFC

 

 

 

COBRA Subsidy Goes Bye Bye

Thursday, September 1st, 2011

 

As part of the American Recovery and Reinvestment Act (ARRA) passed in 2009, the Federal Government granted a 65% subsidy for COBRA payments for workers who were laid off between September 1, 2008 and May 31, 2010. This subsidy ends today, September 1, 2011.

 

What does this mean for those on COBRA? The change will most affect those laid off toward the end of  the COBRA Subsidy period. People who fall into this category, will now be responsible for 100% of their COBRA costs as opposed to the 35% subsidize share they were paying.

 

The magnitude of these changes will vary depending on certain factors:

 

State of Health – If you and your family are healthy and qualify for individual coverage, this certainly would be a great option to explore. The Kaiser Foundation found that the average family in the United States could obtain family coverage for $410 per month on an individual basis versus $1137 per month to cover your family on a group basis. (Please note that these are national averages and not Illinois rates.)

 

What is consistent is the percentage difference. The individual coverage will be just a little over 1/3 of the cost of group coverage. The main reason for this is the difference in underwriting between individual and group coverage. Insurance companies are required to accept all active employees for group insurance regardless of their health conditions, while individual underwriting can accept or reject based on their particular merits. This allows individual insurers a relatively healthier group at least when they first enroll for coverage.

 

Employment Situation  –  Many people elected to opt out of coverage at their new employer because the amount that they would pay under COBRA with the subsidy was less than the amount that would be required to contribute to the new company’s insurance plan. Post subsidy, a trip to the HR Department will likely remedy the situation and possibly save the employee some money.

 

Unemployed With Health Issues  –  Needless to say, this is not a great situation but coverage is available in the state of Illinois through a program called CHIP (Comprehensive Health Insurance Plan). This plan is guaranteed issue and available for people who are not eligible to obtain coverage through the private market. The plan is higher priced than conventional market coverage, but it is subsidized, so the full impact of the actuarial risk is not reflected in the pricing.

 

The plethora of trickle down effects such as these that the Affordable Care Act will have is consistently on the front burner of political discussions. The provisions of the legislation are not scheduled to kick in until 2014, but the actual machinations of how it will work are still being developed.

 

If you find yourself in this situation, the best plan of attack is not to prejudge your situation. Speak with someone (preferably me) regarding your individual needs, conditions, and budget to explore which companies would best fit your personal situation.

 

Kurt Rusch  CLU, ChFC