How can I tell which insurance policy is right for me?
In today's healthcare environment, you must understand basic insurance principles. Otherwise, you will be at a distinct disadvantage when selecting a new policy or evaluating a policy offered by your employer.
By introducing you to some of these principles, you can make an informed decision when analyzing your insurance options, particularly as they apply to prosthetics.
Overview of Policy Types
When selecting an insurance policy, your first challenge is to understand the two general kinds of plans available to you:
- Indemnity plans don't limit who you can receive treatment from. But this flexibility comes with a price: high out-of-pocket costs. They have become increasingly less common over time, as insurers have tried to gain more control over treatment and costs by limiting who you can receive care from. As a result, indemnity plans are relatively rare, having been largely replaced by managed care plans.
- Managed care plans place more restrictions on who you can receive treatment from. The two most common types of managed care plans are HMOs and PPOs.
- HMOs feature the significant benefit of limiting your out-of-pocket costs. The tradeoff? They restrict you to treatment from only “in network” providers – doctors and prosthetists who have signed a contract with the plan.
- PPOs provide access to a wider range of healthcare professionals, including both in-network and out-of-network options. But again, the greater access comes with a price: If you go to an out-of-network provider, your costs will be higher. But PPOs may be your best choice if your prosthetist doesn't belong to a managed care network.
Identifying Core Costs
You should focus next on the relevant plan's core costs, which vary depending on the type of insurance available. HMOs typically have low core costs, as they lack an annual deductible and require only copayments for many services, usually ranging from $5 to $35.
PPOs' core costs are more complex. First, you must take the annual deductible into consideration. Next, you have to examine your coinsurance and maximum out-of-pocket (MOP) expenses under the policy. Coinsurance and MOP are often directly linked, and are perhaps the most misunderstood elements of PPO plans.
Coinsurance refers to the cost-sharing obligation between you and your insurer. For example, most people think that an 80/20 plan means your insurer will pay 80 percent of given charges, and you're responsible for the other 20 percent. But this is only true if the plan has no MOP amount.
In policies with a MOP, the MOP amount limits the total you're responsible for paying as part of your cost-sharing with your insurer. An 80/20 plan with a $1,000 MOP means you and the insurer will share costs (the insurer paying 80 percent and you paying 20 percent) only until you reach $1,000 in payments. Any charges over the $1,000 you're responsible for are paid by your insurer at 100 percent of its usual and customary rate.
So when analyzing coinsurance and MOP, it's important to understand that the MOP reflects the maximum amount your insurer requires you to pay before it becomes responsible for 100 percent of its usual and customary rate for the remaining charges. (Some policies include the deductible in the MOP; others don't. When analyzing your plan, verify whether the deductible counts toward the MOP.)
Identifying Hidden Costs
Hidden costs are the costs you think your insurer must pay, but that you later learn are yours to deal with. A “summary of insurance” flyer that indicates coverage exists for prosthetics may not reveal limitations that can significantly impact your payment obligations. Hidden costs present themselves in various ways, the most relevant of which are discussed here.
Low annual or lifetime caps. A $2,500 annual limit on prosthetics effectively forces you to pay for the majority of your prosthetic costs. Similarly, a high-end prosthesis' cost will quickly exhaust a lifetime cap of $20,000 or even $50,000. This forces you to bear the cost of the unpaid difference. You will see limits of this type in both HMO and PPO policies.
Exclusions. Some policies contain exclusions for specific prostheses (again, usually higher-end, more expensive devices). When analyzing what a policy covers, make sure to ask if the policy contains general or specific exclusions applying to prosthetics. These exclusions usually apply to both HMO and PPO policies offered by the same company. The insurer sometimes lists these in medical or clinical “policy bulletins.” Some insurers make these available on their Web sites, but finding them can be tricky, as bulletins' titles often bear little relation to the excluded item.
Coinsurance requirement. Insurers can shift costs to you by creating a coinsurance requirement applying only to the prosthetic coverage part of your insurance plan. For example, an HMO that covers prosthetics and has no coinsurance in any other part of the policy could assign you responsibility for coinsurance of 20 percent with no MOP for all prosthetic costs. For a $20,000 prosthesis, that HMO has shifted $4,000 in costs squarely onto your shoulders. Similarly, PPO plans that feature 70/30 coinsurance in all other parts of the policy sometimes increase your cost-sharing obligation for prosthetics to 50 percent instead of the 30 percent.
“In-network only” restrictions. Some PPO plans create these restrictions just for prosthetics. So a PPO plan providing out-of-network benefits for literally every other treatment available under the policy could have an “in-network only” requirement for prosthetics. If your prosthetist isn't an in-network provider, you must confirm not only that the PPO plan you're examining has out-of-network benefits generally, but has them specifically for prosthetics.
“No repairs, no replacements.” Both HMO and PPO policies can restrict prosthetic coverage to an initial prosthesis. This means you get only one prosthesis for your entire life. Even if your prosthetist can demonstrate that a repair or replacement is medically necessary, you won't be entitled to either under the policy.
Myth-busting: I Can't Get Coverage for a Pre-existing Condition
Many amputees believe that they can't even consider new insurance because of the pre-existing risk exclusion. But in 1996, federal legislation dramatically reduced insurers' ability to refuse to pay for a prosthesis on that basis.
Under this law, an insurer can assert a pre-existing condition exclusion for no more than one year in most cases. Some states permit up to 18 months if you're seeking individual insurance, as opposed to a group (employer-based) plan. You're also entitled to a “credit” for any continuous coverage you had immediately before switching insurers.
So, you move from insurer A to insurer B. You had insurance A for two years of continuous coverage before moving to B. The one-year, pre-existing risk exclusion that B has the right to assert is offset by the two years of creditable coverage you've built up. This means that on the first day you're insured with B, your prosthetist could bill for a new prosthesis as long as it's medically necessary, and the insurer would be required to pay for it.
If you had only three months of continuous coverage with A before moving to insurance B, then B could assert the pre-existing risk exclusion. But you'd get a three-month offset against the one-year period. So B could only assert the exclusion for a total of nine months.
Even if you had no coverage before insurance B, the longest that B could usually assert the pre-existing condition exclusion would be 12 months. In short, the pre-existing condition exclusion can impact your access to prosthetic coverage, but not indefinitely.
Some policies (usually self-insured plans) waive the pre-existing risk exclusion entirely. These policies permit immediate access to prosthetic coverage even if you never had health insurance before.
You should therefore make sure to verify if the policy you're analyzing contains a pre-existing risk exclusion, particularly if you've had a break in coverage (defined as more than 63 consecutive, uninsured days) before joining the new plan.
Final Thoughts
Always document your discussions with the insurer and/or employer about health insurance. E-mail is particularly useful, since it provides written, dated evidence of what you were told. Alternatively, keep a thorough log that includes the time, date and name of the person you spoke to. While insurance company representatives won't give their last names over the phone, you should request and obtain their employee ID number.
If you believe your insurer misrepresented what was covered under its policy, consider discussing the matter with your state's Department of Insurance. However, this option is only available for traditional insurance plans. The state Department of Insurance doesn't have the authority to help you if you receive health coverage through a self-insured entity.
Finally, all the research and knowledge in the world is of little help if you only have one policy with substandard prosthetic benefits available to you. The Amputee Coalition's APPLL initiative seeks to require insurers to provide prosthetic coverage consistent with Medicare's terms and conditions. APPLL offers the only viable alternative to an insurance dead end. If you're facing this situation, contact the Amputee Coalition so that you can actively work toward a solution not only for yourself, but for all amputees facing the same problem.
About the Author
David McGill is an attorney who has previously represented insurance companies, doctors and hospitals. He has extensive experience with insurance coverage issues affecting amputees. He is also the Chairman of the Amputee Coalition's Board of Directors.
