Catastrophic Health Insurance?

kellyengJanuary 25, 2007

In 2006 our health care expense was all premiums minus a few minor/annual dr. visits and prescriptions.

We are both self-employed and have individual coverage. I'm wondering if we should go for major medical/catastrophic health insurance with a higher deductible instead of comprehensive to get our premium lowered.

Anyone else have only major medical covered and are you satisfied with it?

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any kids? if so, or if you plan to have some soon, keep what you got.

if not, then MM may be the way to go in your situation. i would talk to a couple of agents to see what they can offer.

    Bookmark   January 26, 2007 at 11:28AM
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I did this for a 8 years. I took into account my own health, the lack of risk factors, the excellent health of my parents--& the fact that I could afford to put money by to cover the high deductable and routine medical care--& decided that, really, all I needed coverage for was something catastrophic. But you have to realize that it is a risk: if the catastrophic event ( car accident, say) results in a chronic medical condition, then better coverage might be hard to get--& you are responsible to pay that high deductable over again with each new year. I never had to file a claim and saved a substantial amount of money as a result. I did notice that a super-high deductable ($5k) does not save enough in premiums to be worth it--I used a $2500 deduct. Check many plans--they vary quite a bit, some will include some preventive care, some have very low lifetime limits, some have extreme exclusions. Good luck with your decision!

    Bookmark   January 26, 2007 at 12:22PM
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I have had health issues that probably cost in the order of 1/4 to 1/2 mil in health care dollars by the time that I fully recovered. I was only 41. I also could not work for 6 months and there was a period of time that we were not sure if I could go back to work. We have two little kids. So my not being able to work would have been a big financial blow if I did not have a "disability insurance" (DI). We definately would have had to downsize our lifestyle (smaller home, less expensive town etc), if I did not have DI and could not work. We never ended up using the disability insurance, but it sure gave us a piece of mind while I was so sick.

Having had a personal experience of the situation, this is my take.

Insurance issues:
risk factors: most people diagnosed with a major illness have no risk factors. Don't let this give you a false sense of security. Just think through the financial risks. Your total/accumulative medical risks are completely unknown. You may be at low risk for diabetes and heart disease, but for breast cancer, your risk is the same as the general population, 1 in 7 in your life time. The actuarial people can do statistical analysis but....

Life time benefit cap/limit: this is probably more important than the deductible. If your insurance says 1 million cap that means after 1 million, the payment is cut off. They are pretty firm on this. I would say that for the same premium, have them raise the cap at a higher deductible. Many serious illnesses will run out of low insurance cap and I know of many that have...

Long term care coverage: most health insurances will not cover for long-term care, for example nursing home care for more than a few months (90 days is typical), home health aide for more than a few months etc etc. Try to think through the need and you must plan for this as well. If there is not much personal asset, you can apply for Medicare. But if you have enough, you will not get Medicare until you exhaust your assets.

Disability insurance: you must have disability insurance or ways to pay the insurance premium while you are sick. If you are sick and are not able to pay the premium, you will not be insured.

Read the fine prints on the exclusion....

All of these have to come out of the insurance budget. Good luck.

    Bookmark   January 27, 2007 at 2:30PM
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Get a high deductible comprehensive plan. (I don't know what you mean by major medical vs. comprehensive? Just make sure physician & hospital services covered.)

Usually the premium savings are close to the difference in deductible. For example, you'd probably save $200/month ($2400/yr) to go from a $100 deductible to a $2,500 deductible.

Bank your premium savings in a Health Savings Acct (either insurance co. or bank can set up) and write off those contributions above the line on your tax return. There is an IRS limit on the amt you can contribute & then write Health Savings Accounts & find the Treasury website for details.

If you or spouse get sick, withdraw $ from your HSA if needed. No taxes/penalties on gain if used for qualifed medical expenses.

Remember that the high deductible will be per individual covered!

Good luck!

    Bookmark   January 31, 2007 at 5:20PM
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>>Long term care coverage: most health insurances will not cover for long-term care, for example nursing home care for more than a few months (90 days is typical), home health aide for more than a few months etc etc. Try to think through the need and you must plan for this as well. If there is not much personal asset, you can apply for Medicare. But if you have enough, you will not get Medicare until you exhaust your assets. Medicare does NOT cover long term care, either nursing home or home health services, except in limited instances and for very limited periods. This is a very common misconception. LTC insurance needs must be covered by private insurance carriers. Restrict yourself to companies who have been in the LTC market for at least 10 years and have NEVER raised premiums on in-service policies.

Select an LTC policy with a moderate daily benefit, comprehensive (meaning both home health care AND nursing/convalescent care are covered), as short an elimination period as you can afford (you are self-insuring yourself during the elimination period before coverage kicks in), and make sure you select a compound inflation rider. The latter will be either 3% or 5% annually, and provides automatic increases in your daily benefit amount to keep up with general inflation factors.

Underwriting for both health insurance and LTC insurance is going through a "tight" period. If you are on medication, or have any history of serious disease, do not expect to receive a Preferred premium rate (the lowest). If this is the case for you, request a quote using both Preferred and Standard premium rates. Anyone taking mood-altering prescription drugs (e.g., bi-polar or schizophrenia) will not even be eligible for a policy.

OTOH, life insurance is currently a bargain, because medical science is keeping moderate- to seriously-ill people alive longer. Rates on term insurance have dropped to the lowest level in decades.

And never, ever lie to an insurance company. All of them are members of the Medical Information Bureau (MIB) and will check your records for any previous applications. Falsifying your personal or health data on an insurance application is grounds for denying any future claims.

    Bookmark   February 14, 2007 at 10:06PM
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You could probably save money by going with a major medical joint policy, particularly since you are self employed and can establish an HSA account (if I'm remembering this correctly). Be sure to specify you want an HSA-compatible health plan! Blue Cross, for instance, offers a zillion plans, but only 2 are HSA compatible.

There's a very good guide to HSAs on the US Treasury site:

Also, I ran across an old, but still very useful article on long-term care insurance. The cost examples are quite outdated, being from 1991, but it is by far the most comprehensive "what to look out for" consumer article on the subject I've ever read. Be aware that the LTC premiums they use as examples are no longer realistic. A standard rated premium on a comprehensive LTC policy at $200/daily with 5% compound inflation protection for a 65 yr old is now in the area of $10,000 annually. By comparison, my husband and I got LTC policies in our late forties, and for an excellent joint policy with $150/day, comprehensive with inflation protection, we pay $170/mo TOTAL for our policies, or slightly over $2K per year.

Here is a link that might be useful: Long Term Care insurance article

    Bookmark   February 15, 2007 at 5:29PM
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