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Confused About Health Insurance? Get the Facts and Avoid Junk Insurance

The purpose of this article is to distinguish between real insurance and “junk insurance,” and to help you choose the right type of plan to meet your individual and family needs
Wednesday, 05 December 2012

arizona_health_insurance_quotes_2If you think you're having trouble choosing between an HMO, PPO, HSA or any other assortment of acronyms, imagine adding another layer of difficulty. That's right; the Affordable Care Act (better known as Obamacare), is about to go into its final and most important stage of implementation. This means that within the next year, the individual mandate will go into effect and everyone will need to get health insurance. People who are on employer-sponsored plans or existing individual plans will not need to change anything, but thanks to state-based "healthcare exchanges," it will become a lot easier for the uninsured to find affordable Arizona health insurance.

But enough about Obamacare for now; the purpose of this article is to help you distinguish between real insurance and imposter plans, better known as "junk insurance," and to help you choose the right plan structure to meet your individual or family needs. Some insurance companies have taken advantage of uninformed consumers by selling plans that sound good on paper, but offer very little benefit toward healthcare costs.

 

How to be an "educated health insurance buyer" -

Another problem with choosing health insurance is a general lack of understanding about what the plan covers. It seems like every insurance company in Arizona sells some version of an HMO, PPO and HDHP or HSA plan, but each of these plans is very different. This makes it more important than ever to be an educated consumer. One of the best sources of consumer information about health insurance comes from Consumer Reports, specifically "Understanding Health Insurance," one of their online information pages. Here, readers find a wealth of information on the various plan options available today.

Below is a summary of a popular "alternative" plan that is outlined by Consumer Reports, as well as an explanation of which plans to avoid.

High-deductible health plans (HDHPs)

One of the best ways to save money on healthcare is to choose a high-deductible health plan with an HSA, or Health Savings Account. This may seem more complicated than a PPO or HMO at first, but it does provide a predictable limit to annual out-of-pocket costs. The benefit of combining this type of insurance with an HSA is the ability to squirrel away tax-free dollars to help pay for pre-deductible expenses. Unlike flexible spending accounts (FSAs), the money in these accounts can be carried over from one year to the next, and it can be used for a wide variety of health-related expenses.

Keep in mind that HSAs are not the same as HRAs, or health-reimbursement arrangements. HRAs are not health insurance, and the money in the account belongs to your employers; but the money you stash in an HSA is yours to keep. Both will help a great deal with paying medical bills, prescriptions and approved healthcare costs before until you meet your plan deductible. After that, many high-deductible health plans will cover 100 percent of all insured medical care. Either one of these usually comes with a debit card for access to the account.

Will you save money by choosing a higher-deductible health plan in Arizona?

If there is one thing you need to know about health insurance, it is that the premiums go down as the deductibles go up. While some people are uncomfortable with the cost of doctor's appointments and medications, others prefer a plan that with an out-of-pocket maximum, and they like the idea of saving tax-deferred dollars in an interest-bearing account. In most cases, you will save money by choosing a higher-deductible health plan, but each plan is different. Look for one with a deductible that you can realistically handle, and make a savings plan that will allow you to accumulate funds in your HSA quickly.

Be careful of junk health insurance

Just as Americans are more confused than ever about health insurance, there are dozens of disreputable companies looking to cash in on that confusion. According to Consumer Reports, millions of Americans have signed up for "junk" health insurance before reading the fine print. Initially the plans seem to be much less expensive, but that's because the coverage is so skimpy it barely covers basic medical services.

Some of these plans, known as mini-meds, are operated by employers and brand-name insurance companies with special permission from the federal government. Others, such as health discount cards and fixed benefit indemnity plans, are so meager that they aren't considered health insurance at all; which may explain why so few people use these plans alone.

If the company has a vague or generic-sounding name and you don't recognize it, check with the Arizona insurance department. If the plan requires membership in an association, be careful. While membership in a professional organization might be required to join a group plan, you should not be joining an association where a significant portion of your monthly benefit payments go toward dues. Similarly, you should not buy a plan where you are guaranteed acceptance; at least not until 2014, when high-risk pools become available. Avoid buying health plans that don't include major medical, and be skeptical when someone offers you a bargain-basement premium. When it comes to health insurance, you usually get what you pay for.

Photo Courtesy of DigitalArt / FreeDigitalPhotos.net

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