This is the time of year when health insurance comes into focus for a lot of people. Open enrollment periods have just closed for many of us so it seems like a good time to write a little bit about health insurance. Actually, insurance is really not an accurate way to refer to the medical coverage that we are required to buy. Yes, we call it insurance, but what we have today is not like other insurance policies.
Insureds do not have to show insurability. The last time that I shopped health insurance, the only questions that I was asked were about the ages of everyone in my family and whether they were smokers. That’s it. I didn’t even have to answer questions about health issues that we’ve been seen about. We didn’t have to answer questions about our lifestyle that might impact our health, like whether I get enough exercise (which I don’t) or whether I skydive (which I don’t, at least not right now).
Health insurers might want to know about customers’ general health, but there really isn’t any point to asking those questions. They aren’t going to deny coverage to anyone. Health insurers are writing coverage for anyone that applies and pays the premium. This is different from other insurance policies. If a person applies for auto insurance, and the carrier deems them a high risk, they may decline to write the coverage. More likely, they will move the risk to the assigned risk portion of their book of business. That will often be a subsidiary company that specializes in high risk insurance. They price it higher, provide lower limits, and often write more restricted policies than their standard market policies.
Insureds do not usually pay the indicated rate. If you’ve ever priced individual (or family) coverage, you know that the price that was offered through an employer is significantly lower than what you can find on your own. The last time that I shopped for health insurance for my family, the premium was cost prohibitive. I just couldn’t afford to pay for it. I even priced health coverage for only one member of my family.
When I became eligible for coverage through my employer, my monthly premium for the family was about the same as it would have been for one family member when I was buying it by myself. Since an employer has the ability to tell the insurance company that they will be buying for the group, they get lower rates. Every member of the group pays the same premium for the same coverage. There is a real insurance reason that companies do that. Within the group, there will be people who don’t use their health insurance at all and others that really get their money’s worth. In the end, the individual, or the family, doesn’t pay the indicated rate for themselves. They pay a rate based on the characteristics of the group.
Insureds do not have the choice to customize coverage. If you’re shopping for a policy, you get a bunch of options, but those are only related to deductibles, out of pocket maximums, co-pays for specific services, and the like. You don’t get to make decisions about real customizations. There are mandated coverage minimums that your policy covers. So, whether you can have children or not, you have coverage for pregnancy. Whether you have a need for addiction counseling or not, you have coverage for addiction counseling and recovery. There are other similar coverages that you don’t have the option to get rid of. They are a part of your policy, like it or not; need it or not.
Insureds have coverage for planned events. Your auto policy does not include coverage if you ever plan to use your car as a high-speed battering ram. Your homeowners’ policy does not include coverage if you ever decide to start a fire on the living room floor, intending to burn the house to the ground. It just doesn’t work that way. However, health insurance includes coverage for your planned visits to your doctor. Health insurance today provides payment of the cost for certain planned visits, like checkups, well person visits (they used to call them physicals), and the like.
If health insurance was like other policies, you would only have coverage for those unexpected visits to the doctors, not the visits for maintaining your health. Insureds would have coverage once they found out that they had a catastrophic illness, not the visit to their family practice doctor because they’re not feeling well.
Insureds often do not receive an actual policy. When you buy an auto policy, you get a copy of it. When you buy a homeowners’ policy, you get a copy of it. When you buy life insurance, you get a copy of that policy. When you buy health insurance, especially in a group setting through work, you will not get a copy of a policy. You will get a summary of benefits that will give the basics about what costs will be covered, when the deductible applies, etc.
What are the details of those benefits? You won’t know that until a claim is submitted. Thankfully the insured normally isn’t submitting claims themselves. They allow the doctor’s office to submit their claims for them (and assign the benefit to the office). An insured doesn’t really know all that goes into getting claims approved unless there is a problem. She gets a letter in the mail that states why the claim (or, as is often the case, that the request for a medical service) is denied. That’s when the rules start to show up.
It may be that a doctor needs to show that they tried a specific treatment plan before ordering an imaging study or some other requirement that you won’t know about unless there’s a problem. Sometimes, you get warning of these requirements because the doctor will tell you, but again, there’s no policy in front of you to tell you what these requirements are when they kick in.
Health insurance isn’t insurance in the purest sense and it has been like that for nearly 100 years. In 1931, Baylor University Hospital sold plans to teachers that provided up to 21 days of hospital care in a year. That was the beginning of health insurance plans in the US, which was the first step toward where we are today. What started as a way for hospitals to improve their revenues during the Great Depression has become the primary way that we pay for medical services in the 21st century.
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