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| Self Insure for the "Small Bills"; Hospital and Catastrophic Coverage |
Hospital and Catastrophic Coverage
Did you know that in many offices if you tell
your doctor you have no insurance, the assistant will actually write
"self-insured" on your folder? And then the bill they will hand you will
be more than your copay if you had personal health insurance, but in some
instances, less than the amount they would have sent to an insurance company.
Many times when the doctor bills the insurance
company, they bill them for the highest amount they can because the insurance
is going to pay an agreed upon percentage, not a flat dollar amount on the
bill. When you have no insurance at all, most doctors will charge you an amount
closer to what an insurance company is actually going to pay.
Most people pay much more in health insurance
(whether it be group or private) than the insurance company will pay in
benefits. Like fire insurance, you pay hoping you won't ever have to use it.
And except for those with chronic diseases, the once or twice a year doctor
visit could be easily paid out of your own pockets. But unlike fire insurance,
the cost of private health insurance seems unreasonable and continually
increases even if you don't need to use it.
The high and increasing cost of even having
private health insurance is forcing many Americans to at least partially
self-insure, and that may not be a bad thing. That is, you make plans to pay
for office visits, emergency room visits, dental and eye care, and other
"smaller" costs yourself and take insurance that is intended to pay
only for a hospital stay or for a catastrophic illness.
The
immediate side effect of this approach is that you only go to a doctor when you
really need to, and you will probably make more of an effort to take care of
yourself so you don't need a doctor as often. Thus your cost becomes lower both
in what you pay for insurance as well as in what you have to spend at the
doctor's office.
Obviously, you can't "self-insure"
without making some plans. One of the best methods is to set up a Health
Savings Account, a special type of IRA into which you can make pre-tax
deposits, and then can use the money tax free as needed for medical expenses.
There are federal limits on the annual
contributions, but the money can be carried over from one year to another,
building interest until the time you need it.
If you self-insure for the more manageable
expenses, you can then get hospital or catastrophic insurance in the even of a
major illness and can often get a much lower premium.
Hospital Insurance is exactly what it sounds
like insurance that pays the hospital only in the event of a major illness.
Generally, you have a high deductible which is paid out of your HSA or other
savings before the insurance pays. Once the deductible is met, the insurance
will pay from 60% to 100% of the remaining costs, depending on your policy.
The following questions should be asked when searchingfor Hospitalization (Only) Insurance:
- Is emergency room or outpatient care included, once the
deductible has been met?
- Is the doctor's fee paid while you are in the hospital?
- Are incidentals such as lab work, x-rays, etc.,
covered?
- Is the policy guaranteed renewable? In other words, if you do have a major illness, can the company terminate your policy? Will they raise the premiums so high that you can't possibly pay them? That sort of thing happens all too often.
Another alternative, and one that is usually
even less expensive than hospital insurance is "catastrophic
insurance." Although catastrophic and hospital insurance along with the
term "major medical" are sometimes used interchangeably in today's
insurance market.
One time "catastrophic" meant an
illness that required extensive care or costly surgery, such as cancer, heart
surgery, or strokes, organ transplants or similar situations in which the bill
can be hundreds of thousands of dollars very quickly. Once your regular
insurance had paid all it would, the catastrophic care would kick in.
With the high cost of insurance today, many
people can afford nothing but catastrophic (or catastrophe) insurance. Thus,
hospital insurance IS catastrophic insurance with some companies. However, true
catastrophic insurance is usually a much lower premium than hospital insurance.
It is also possible to purchase both if they are differentiated.