|Self Insure for the “Small Bills”; 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.
- 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.