Will Costly Health Care Wipe You Out?

Will Costly Health Care Wipe You Out?

This month’s newsletter is addressing at length the issue of private health insurance in

response to all the hoopla currently going on about it. Paying for health care is expensive

and can be financially devastating. Receiving affordable and high-quality health care is a

number one concern for most people. The future structure of the U.S. health care system

is uncertain. What is certain is that the structure will change out of necessity. For your

own certainty, the best advice is to proactively take charge of your particular situation,

whether you are young and raising a family or elderly and living on a fixed income.

Being informed about your health care insurance options, you can plan how to manage

and adequately fund your own specific needs for health care. There are many challenging

decisions and changes on the horizon in how affordable health care is delivered, received,

and paid for. Informed planning is the only sure way to make the most intelligent choices

for you and implement affordable strategies that will prevent the costs of health care from

financially wiping you out.

Most people who have medical, dental, and vision insurance participate on a group basis

through their employer, which helps make the protective coverage more available,

especially if you have adverse health issues. This is because there is usually no individual

health underwriting requirement in order to participate in a group plan. Also, group

health insurance is usually more affordable because some employers subsidize some of

the out-of-pocket premium costs for their employees.


Always plan ahead to make sure that you never become

financially vulnerable by being without affordable

catastrophic health insurance


Despite all of the benefits associated with group health insurance, there are some

downsides to the plans with no easy solutions to these problems. Retaining affordable

health insurance coverage is a huge problem affecting a larger number of people who

leave their employment because of career change, termination, or retirement. Many

workers are being forced to remain in jobs they dislike because they would otherwise be

without affordable health insurance. Losing affordable health insurance is a particular

hardship for others who are being involuntarily “let go” from their employer and now

must face a life without affordable health insurance until they are eligible for Medicare at

age sixty-five. Those people without group health coverage always have the option to buy

an individual policy; however, if you have a preexisting adverse health issue, an

individual policy can be prohibitively expensive and can lack the full coverage if it

excludes the preexisting condition.

The likelihood of needing health care is a matter of when, not if. This is why the

premiums to insure against medical risks are high. In addition to the premium, there are

often other out-of pocket costs associated with medical insurance coverage. The


health insurance company begins to contribute any money toward your medical costs. In

addition to the deductible, there may be

certain dollar figure for each medical service provided, and/or

are required to pay a certain percentage of your health care costs.

Medical insurance companies are protected by a “lifetime payout provision” that limits

the total amount they will have to pay out over the lifetime of the insured. The amounts

usually range between one to five million, and the higher maximum lifetime payout

assures that the coverage will not be prematurely depleted.

is a predetermined dollar amount that you have to satisfy every year before thecopayments, where you are required to pay acoinsurance, where you

Types of Private Health Insurance

Deciding about which type of medical plan is best to purchase, whether as a group

participant or individually, is a confusing process. The following is a review of the

features and benefits of the various types of plans available: indemnity, health

maintenance organization (HMO), preferred provider organization (PPO), point of

service (POS), and health savings account (HSA).

Indemnity Insurance Plan

Indemnity insurance plans are the

the treatment of unexpected illnesses as opposed to preventive medicine. The insured is

allowed total control over the choice of physicians and hospitals to be used. After an

annual deductible and copay or coinsurance is paid, the insurance company indemnifies

in full for

flexible and provides payment benefits regardless of which physician and medical facility

are used, it is the patient’s responsibility for keeping medical receipts and bills and for

completing the claim forms for payment.

The indemnity health plan does not usually cover preventive medicine services; fees for

checkups, office visits, and shots are your responsibility. This can make indemnity

insurance impractical for a large family that requires a lot of routine visits and

preventative care. Because of skyrocketing health care costs and an emphasis on

preventive medicine, managed health care has become the more prevalent medical

service approach. While the managed health care form of insurance is a more affordable

insurance alternative to the pure indemnity type plans, the offset is that there are

restrictions in your choices for getting medical treatment.

original type of health plan, where the emphasis is onany medical service provided. While the indemnity type plan is the most

Health Maintenance Organization (HMO)

HMOs paved the way for the development of managed-care medical insurance plans.

Unlike the consumer-driven, higher-cost indemnity plans, HMOs are medical provider

driven and, with controlled costs, are a lower-premium health insurance alternative. The

basic concept is to manage care and control costs by limiting medical care access to an

assembled preapproved network of physicians and hospitals.

From the network, you choose a primary care physician, who, acting as a

responsible for your overall health care as well as for making referrals to specialists and

approving further medical treatment. Usually, your choice of doctors and hospitals is

limited to those that have contract agreements with the HMO to provide for your health


Because the HMO managed-care emphasis is on preventive medicine and treatment, most

doctor visits, checkups, and shots are typically covered, with the possibility of a copay or

coinsurance requirement for each service activity being the only out-of-pocket cost.

Generally, there is a standard copayment amount per doctor visit and a preapproved

payment amount to cover prescriptions. No claim forms are required to be filed for

services provided. Instead, as an HMO member, you merely present an ID card at the

doctor’s office or hospital, which then submits the service claim directly to the HMO for


The drawback of any HMO policy is that no care can be received outside of the network

without a highly restrictive prior approval being obtained. Therefore, except for

emergency treatment, any medical service sought outside of the network is limited, and

the expenses incurred are usually not fully covered, if at all. This restricted network

referral process makes it difficult to access specialized care outside the HMO network,

which can be a detriment to you receiving the best required medical treatment available

without incurring a huge out-of-pocket financial cost.

gatekeeper, is

Preferred Provider Organization (PPO)

The PPO is an evolved type of managed-care plan that is growing rapidly in popularity. It

was developed to combine the lower cost of a managed-care plan with the greater degree

of choice found in traditional indemnity health insurance plan.

Although your health care is managed with restrictions, you are granted a more lenient

degree of choice in providers. A PPO health insurance plan operates in a similar manner

as an HMO in that you pay a fixed monthly premium, and in return you receive medical

services from the health care provider network. However, a PPO does differ from the

original HMO blueprint in that under a PPO insurance plan, a primary care physician or

“gatekeeper” physician is not required. As a result, seeing a specialist does not require a


If you need or want health care provided from

pay a higher copayment than if the provider were from within the PPO network. In

essence, each time you need medical attention, you can decide between a higher-costing

indemnity plan format with freedom of choice for provider care or a lower-costing

managed-care option that restricts your care to within the provider network.

PPO insurance is typically more expensive than an HMO managed-care plan. Even if the

premium is comparable to an HMO, there are other out-of-pocket costs associated with a

PPO. For receiving nonnetwork care, you must satisfy a deductible before the health

insurance company begins payment benefits. After the deductible is met, you must pay

coinsurance, which is higher than network provider coinsurance amounts. Furthermore,

you might also be required to pay the difference between what the nonnetwork health

care provider charges and what the plan deems to be “reasonable and customary” for the

service. However, these extra costs associated with a PPO may be worthwhile to you

because overall the PPO is less costly than an indemnity plan and more flexible about

accessing provider services than an HMO.

outside the network, you are required to

Point of Service Plan (POS)

POS plans are a lesser known type of managed health care plan operating similar to a

PPO, but they are slightly less expensive and more restrictive about provider choices than

a PPO. When you enroll in a POS plan, unlike the PPO, you are required to select a

network physician who is primarily responsible for your health care and who is

designated as your “point of service” physician. The primary POS physician is permitted

to make referrals

nonnetwork provider by the health insurance company. For medical visits within the

health care network, there is no claims paperwork to complete. For services provided

outside the network, it is your responsibility to keep track of health care receipts,

complete the claims forms, and submit bills for payment.

outside the network but with limited payments being made to the

Health Savings Account (HSA)

A health savings account (HSA) is not a health insurance plan unto itself. Instead, it is a

tax-favored savings account that is used in combination with a high deductible health

insurance policy. The HSA is used for paying out-of-pocket medical expenses with

pretax, nontaxable dollars. Here is how the combination HSA-health insurance policy

works. The managed health care policy has a high deductible, which allows a relatively

low premium. With the premium savings, the extra money available can be regularly

deposited into the completely tax-free HSA. The maximum amount that can be

contributed annually to the HSA is the lesser of the amount of the health plan’s high

deductible or the maximum specified by law, which is annually inflation adjusted. As of

2009, the maximum allowable contribution amounts to a HSA are $3,000 for individual

coverage and $5,950 for family coverage.

The HSA includes a checkbook and/or a debit card that may be used to pay for medical

expenses using nontaxable, pretax dollars until the health insurance high deductible is

met and the policy’s benefits begin. Any HSA account funds not used during a given year

remain in the account, invested to grow without taxation, and are available for future

medical expenses or for retirement income purposes similar to a traditional IRA. Note:

This is unlike the employer sponsored group Section 125 “cafeteria plan,” which requires

that all pretax contributed money must be entirely used within a given tax year or the

money is forfeited under the “use it or lose it” rule.


Research thoroughly what type of private health insurance

plan is best for your medical needs.

In evaluating whether to select a HMO, PPO, POS, or HSA health insurance plan, the

following checklist of questions can be used as a guide:

Health Plan Evaluation Checklist

How many doctors in the network are there to select from?

What hospitals are available through the plan?

preferred doctors and hospital choices in the network?

Where are the offices and hospitals in the network located? Are my

How are referrals to specialists handled?

What is the coverage policy for emergency care?

What health care treatment services are covered?

What preventive services are covered?

Are there limits on medical treatments or other services?

How much is the health insurance premium?

Are there deductible, copayment, or coinsurance requirements?


What are the additional costs and restrictions for using nonnetwork

Is there an annual out-of-pocket maximum?

In addition, depending upon how much you want to pay or what your family health

history is, you might want to include other less common coverage in your medical

insurance policy. Some of these “extra” coverage areas might include:

• Dental insurance

• Vision care

• Care by specialists

• Care for mental health

• Services for drug/alcohol abuse

• Family planning services, OB-GYN

• Chronic disease care

• Physical therapy

• Nursing home and hospice care

• Chiropractic care

• Maternity care

• Well baby care (immunizations, etc.)

What is the lifetime maximum dollar benefit?


Say “no” to specialized disease insurance.

Specialized disease insurance policies are available for specified diseases such as cancer,

heart attack, or stroke. These policies provide benefits only if you contract the specified

disease. However, the policy will not cover the specified disease diagnosed in existence


subsequently that you had the specified disease at the time of purchase, even if you did

not know it existed. Importantly, be sure you understand what conditions must be met

before the policy will start to pay your bills.

Purchasing specialized insurance is an emotional purchase decision, not an intelligent

purchase decision. Although a comprehensive medical insurance policy has a higher

premium than specialized insurance, it is a much better value because it covers all

diseases and medical treatment needs. In our opinion, buying specialized disease

insurance is a waste of money. Agents who sell it play on the purchaser’s emotions and

often use misleading sales practices that are scrutinized by state insurance regulatory


you applied for coverage. Some policies will deny coverage if learned

Can affordable health care be achieved?

Our society is challenged to provide affordable health care for everyone. Health care has

gotten so expensive because people live longer and expect to receive the highest quality

health care available. The costs for research, development, and delivery of modern

medical technology are astronomical. The amount of money spent on health care per

person and as a percentage of our gross domestic product (GDP) is spiraling out of


There are conflicting interests that must be addressed and need to be overcome in order to

stabilize our health care system. As medical service consumers, ideally we want

affordable health care for any medical reason, large or small, on demand any time we

want it and from the best physicians and medical facilities we choose to use. However,

this ideal vision conflicts with that of the health care and insurance companies, which

strive to control costs in order to be profitable. In addition, the government faces tough

and politically unpopular budgetary decisions necessary to publicly subsidize this

financially demanding social issue.

The challenge for affordable health care will have to be met, but as a society, we tend to

address difficult issues in a crisis management manner as opposed to a proactive manner.

We will be forced to respond to and implement a comprehensive system of more

responsible administrative and financial management by all parties: the health care

system, the government, and all of us individually. In the meantime, plan diligently to

manage and fund your own health care needs in order to avoid depending upon others.

FMG Welcomes Referrals for New Clients to Assist

FMG’s ideal client is one that we term the

destination or is on the journey to becoming one. Typically, quiet millionaires are good

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Today, many people are distressed and confused about their financial situation and do not

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and how we might be able to assist with our services. FMG’s fee-only financial and

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1) Determine specifically current and future goals and objectives

2) Comprehensively plan and implement how to reach them

3) Monitor progress along the way and make required adjustments accordingly

Our most important resource for deriving new clients is from satisfied clients and

professionals who refer others to us. We welcome referrals and prospective clients can

view our Internet websites

telephone us at 513-984-6696

quiet millionaire®, and has either reached and or.

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