We came across an interesting article on the perils of limited-benefit health insurance in USAToday (with Kaiser Health News), that we wanted to share with you today. We’ll be talking some more about the healthcare reform and annual and lifetime maximums later this week, but we thought we’d talk a little generally about limited-benefit health insurance and its implications today.
What is Limited-Benefit Health Insurance?
Limited-benefit health insurance is exactly what it sounds like: health insurance with very limited benefits, usually with maximum dollar limits on the health insurance coverage that can range from less than $100 a day to more than $250,000 a year. In comparison, under healthcare reform, health insurance plans will generally be required to raise their maximums to $750,000 a year this fall, and raise those maximums to $2 million a year in September 2012.
Because the benefits are so limited, limited-benefit health insurance is usually very affordable, especially in comparison to more comprehensive health insurance plans. Unsurprisingly, this makes limited-benefit health insurance extremely popular with folks who can’t afford other health insurance, small businesses and some large employers as well.
It turns out limited-benefit health insurance is very popular with health insurers as well because payouts on limited-benefit health insurance are … well, limited. Some health insurers pay as little as 60 cents of each health insurance premium dollar on medical care, which is way below the new healthcare reform requirement that health insurers payout 80% of health insurance premium revenue on medical care.
Affordable Health Insurance? Sign Me Up!
Not so fast! A limited benefit plan may be okay for your regular doctors’ visits and incidental medical expenses, but chances are if you have a real medical emergency, it can be a financial catastrophe, as the USAToday article we referenced describes:
A few months into a new job as a contract engineer, Jim Arey was stunned by an $8,000 bill he received for two doctor-administered infusions of an expensive drug he needs regularly.
That’s when the Columbia, Md., man learned that the insurance provided through his placement firm capped doctor’s office care at $2,000 a year. He unknowingly hit his cap on his first visit because of the cost of the drug.
For a while, Arey, 29, tried to do without the medication for ankylosing spondylitis, which causes inflammation of the joints between his vertebrae, but soon was not “able to move without screaming.” Treating side effects that resulted from going without medication put Arey even further in debt.
In fact, for some folks, a limited benefit health insurance may be worse than no health insurance at all. Having limited benefit health insurance may disqualify you from some public assistance programs and government programs such as the new temporary high-risk health insurance pools which have recently started under healthcare reform.
I Don’t Know If My Health Insurance Plan is a Limited Benefit Plan or Not! What Should I Do?
Well, the first step is always reading your health insurance policy and understanding what the limits of your health insurance may be. You don’t want to be caught in a scenario like the one described above where you’re happily going to go see your doctor and don’t realize that you’ve blown through your health insurance maximums in the course of a month or two. Even worse, you don’t want to be diagnosed with an expensive medical condition while only insured by limited benefits health insurance; that condition will be a considered a pre-existing condition by all future health insurers and likely subject to exclusions, if you are considered insurable at all.
If you have limited benefit health insurance and are concerned that you will need more comprehensive health insurance coverage, you may want to consider taking out a supplemental health insurance policy to fill in the gaps of your health insurance. Even if you are only concerned about a possible future medical emergency, high-deductible (catastrophic) health insurance may be a relatively affordable option to insure against the costs of a future medical catastrophe.
Do you know what the limits of your health insurance area? Tell us about it!
- Beware! Unlicensed “Health Benefit Plan” Scams
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- Can Affordable Health Insurance Continue to Give You A Choice?
- Healthcare Reform: Ohio Designates Medical Mutual to Administrate Interim High-Risk Health Insurance Pool, Applications Accepted August 1
- Healthcare Reform: When Are Health Insurance Premiums Not Health Insurance Premiums? The Medical-Loss Ratio Debate