HOW DOES AN INSURANCE PLAN REALLY WORK?

Insurance - or health care plans, in general - is made up of two basic components:

     the provider group, sometimes called a PPO or an HMO, that you utilize
     in order to secure pre-negotiated discounts on services, and

     the indemnity company, who makes payment to those providers for the services
     rendered, after you have paid a pre-specified portion of the bill, called a co-pay
     or deductible or coinsurance.

Note: Insurance is not meant to cover you for medical problems that have already happened, it is meant to cover you (i.e. protect you)  against things (i.e., risks) that have not happened. Just like having car insurance before you have an accident, or insurance on your home before it starts to burn, health insurance generally isn't going to cover something that already requires attention. There are a few exceptions: Medicaid (such as AHCCCS), high risk pools (not available in 17 states, including AZ), Medicare, COBRA (continuing group coverage following employment), HIPAA (coverage following 18 months of COBRA or 18 months' continuous coverage when leaving an employer group plan too small to offer COBRA), and group insurance plans through employers.

When you buy an HMO or insurance plan, you buy the two components described above. You can also buy those two components separately, and in cases where someone is not eligible for a regular health care plan (due to too many preexisting conditions, too many medications or just one or two serious preexisting condition), buying coverage in this manner may be attractive.

For instance, so long as you are not disabled or on any form of disability, and are physically capable of working, you can buy a cash reimbursement insurance indemnity plan which compensates you, the patient, a specified amount for doctor visits, lab tests, x-rays, hospital, surgeon, etc. The more you can pay, the more of these benefits you can generally buy, and monthly premiums start at about $150 and - based on age - go up from there. In some cases there may be a waiting period before hospitalization or surgery is covered for preexisting conditions, but rarely is this waiting period more than 12 months.

Also, you can buy, for anywhere from $80 per month on up, a discount plan which offers you savings on doctor visits, x-ray, lab, MRIs, CT scans, in-patient and out-  patient surgery, optical and dental (in major areas), emergency room, prescriptions, counseling, nursing homes, long term care, rehab and so on. Your ability to get these discounts is based on two things only: using a provider on the affiliated provider network and paying your portion of the discounted bill in full the day the service is rendered. Hospitals are not going to give anyone a 20-40% discount on a major bill if they have to wait for their money.

Not all agents are familiar with selling these separate components of health care. However, quite a few are - and many that are, try to offer it as an alternative to insurance. These plans are NOT alternatives to insurance and should never be purchased if you can qualify for "the real thing." These plans are not insurance and they cannot do what insurance does. If you had a bill for $75,000 and the discounts brought it down to $45,000 and the reimbursement plan paid $7,000, could you still come up with the remaining $38,000 the day you walked out of the hospital? Not a likely case for most people.

What these plans do is offer you financial relief on two levels: discounts better than what most of us could negotiate for cash, and reimbursements for numerous services. They are a superb and inexpensive option to "nothing at all" and offer you a true sense of relief that you don't have to try to tackle all medical expenses on your own.

Our office works with several such plans and has since 1994. While we do not market them, per se, we fall back on them when regular insurance is simply not an option.