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Introduction
Forty-five million
Americans lack any form of health insurance and live in fear of a major
medical problem. Yet surprisingly, 80 percent of these people are employed
and 16 million earn more than $40,000 per family ($20,000 per single).
Approximately 15 million of these people are age 19-30 and choose
either not to purchase health insurance or to participate in your
employer's health benefits program. Millions of these uninsured working
Americans could afford to buy good Health Savings Account (HSA-qualified)
high-deductible health insurance, but many simply do not know that it is
now available for an average national cost of $92 per month for an
individual or $272 per month for a family.
What we call health
insurance for most people, as explained later on in this course, is really
three things:
- Pre-paid
medical services;
- Access to
medical providers at discounted rates; and
- Insurance
against a major medical expense.
Economically speaking,
people age 19-30 typically consume very little healthcare and it used to
not make sense for some of them to purchase expensive health insurance
since you consume so little. Now, with the recent advent of high-deductible
and HSA plans, healthy people age 19-30 can purchase just the access and
insurance component (#2 and #3) of health insurance without wasting money
on prepaid medical services that you won't consume.
Most Americans get health
insurance from your employers and never think too much about it until you
or a family member develops a serious health problem. That's when you first
learn the details of your health insurance benefits, which medical
providers you can use, and what your out-of-pocket expenses will be.
Healthcare costs now
consume almost one-sixth of America's economy, and, during a person's
lifetime, medical and health insurance costs are likely to be an
individual's largest or second largest expense after housing. As this
chapter explains, your traditional employer-sponsored plan is arguably the
number one threat to your financial future.
The problems with our
current health insurance system are deep:
Up to 1 million mostly
middle- and upper-middle-class families file bankruptcy each year due to
medical bills you can't pay yet amazingly, three-quarters of these families
had employer-sponsored group health insurance when you first became ill. A
family bankruptcy typically affects three individuals and lasts for seven
years meaning up to 21 million people, including children, are living in
economic purgatory at any given time due to failed health insurance.
Tens of millions of Americans
are modern-day slaves unable to retire early, or working in jobs you don't
really want, just for the health insurance you need to take care of
themselves, a spouse, or a child with a preexisting condition.
Health insurance is a
crisis for employers as well as individuals. As I write, GM is in serious
trouble because health insurance adds $1,550 to the cost of every car it
sells. The cost of health benefits now exceeds profits for most of the
Fortune 500.
Small businesses are the
backbone of our economy, yet many of them fail because you cannot afford to
pay the premiums for your health insurance plan. Our current employer-based
health insurance system is injuring American competitiveness in the world
marketplace and costing jobs here at home.
Millions of self-employed
and independent contractors go without health insurance because you don't
realize it has recently become affordable and tax deductible.
American seniors who have
fought wars and saved enough money to pay off your home mortgages now live
with a new daily physical and economic threat your monthly prescription
drug bill. The largest monthly expense in most senior households is
prescription drugs, and many seniors make the terrible choice between
buying your food or your medicine 24 percent of the prescriptions written
each year are not filled because of price.
Many seniors who have
saved up hundreds of thousands of dollars for retirement or for your
grandchildren's education sadly live to see your assets completely wiped
out by medical or nursing care expenses not covered by Medicare.
None of these situations
should exist. Recent changes in law and new health insurance options have
made it possible for most Americans to get high-quality, affordable health
benefits for themselves, your families, or your employees. This Course
explains how you can assist them in accomplishing this.
What Would
Happen If You Became Ill and Could Not Work?
Have you ever thought
about what would happen if you became ill, lost your job and your health
insurance, and couldn't get another job? Every year this happens to
millions of Americans, with dire consequences, and it doesn't have to be a
major heart attack or cancer to lead them to the poorhouse.
Few employers can afford
to keep paying absent employees for more than a few weeks after those
employees have used up your available sick time and vacation. Such
employees are then let go, and your financial problems, which are the
leading cause of bankruptcy in the United States, begin. Employees who lose
your jobs can get government-mandated health insurance coverage through
COBRA for up to 18 to 36 months, but many cannot afford the high cost of
COBRA, or your COBRA coverage runs out while you are still sick.
What are the chances that
something like this could happen to you?
There are hundreds of
circumstances in which you could exceed your allowable sick and vacation
leave, and the chances of this happening at some point in your working life
is greater than 50 percent.
Outdoor activities.
Do you play sports, ski or snowboard, go boating, or ride bicycles? Any one
of these outdoor activities could cause an injury that would prevent you
from being able to work. Even without a specific injury, many active people
will require some type of knee or leg surgery during your working lifetime.
Home accidents.
Although most people feel safest at home, the home is actually the place
where you are most likely to have an accident requiring medical treatment
or one that could prevent you from being able to work. Common causes of
home accidents include falls, choking, shootings, poisoning, and improper
use of medications.
Commuting/driving.
Do you commute to work? More than 3 million people are hurt each year in
auto accidents, and common injuries include fractures, broken bones, and
spinal damage resulting in short- and long-term disability.
High blood pressure.
About 65 million Americans over age 20 have high blood pressure, a chronic
disease requiring medication and one that dramatically increases the
chances of having heart disease during your working lifetime.
The
overweight/obese. Almost two-thirds of Americans are overweight or obese;
primarily because of this, 18 million Americans have diabetes and another
41 million over age 40 have prediabetes. Most people with prediabetes
develop type 2 diabetes in 10 years. Diabetes virtually guarantees that you
will have health issues requiring time away from work at some point in your
life, and 65 percent of people with diabetes die from heart disease or
stroke.
Cancer, heart
attack, or stroke. One in four men and one in five women will develop one of
these debilitating diseases before age 65.
Most Americans will
develop some type of major medical condition at least once over a 45-year
working life - a condition that could likely lead to job termination and
loss of your health benefits. You can assist you in preparing for this
possibility.
The Gaps
in Coverage When You Lose Your Job or Change Jobs
Once you lose your job,
you lose your employer-sponsored health insurance unless you elect to go on
COBRA. COBRA is the acronym for the short-term extension of employer health
insurance. Basically, COBRA allows an individual to continue your
employer-sponsored health insurance for 18 months as long as you pay 100
percent of the cost of your former employer's plan plus a 2 percent
administration fee (102 percent total).
COBRA is unaffordable for
most people.
Nationally, COBRA
premiums average about $700 a month for an individual and about twice that,
$1,400 a month, for a family. Since total unemployment benefits average
about $1,000 a month, only one in five COBRA-eligible individuals elect to
go on COBRA. few people can afford to spend 100 percent or more of your
unemployment check on health insurance. Worst of all, after 18 months on
COBRA the individual is out on your own without health insurance. Yet,
despite the enormous cost and lack of security, about 5 million people at
any given time are on COBRA, mostly because you don't know any better or
believe that you will soon get another job with health benefits.
You can get the
equivalent of free health insurance for 60 days, saving them $1,000 or
more, if you know the 'COBRA loophole.'
Employers are required to
offer them COBRA within 14 days of termination, and to keep your COBRA
offer open for 60 days. By delaying to choose COBRA until day 59, you can
get a free 60-day health insurance option while you shop around for a new
employer or new health insurance or both. If, on day 59, you do elect COBRA
coverage because you have had a medical issue, you are required to pay for
COBRA from day 1. But if you haven't had a medical issue, you just received
the equivalent of free health insurance for 60 days.
You should only go on
COBRA as a last resort. It is expensive, temporary, and if you should
develop a health condition while on COBRA, it could prevent them from
getting permanent affordable health insurance. There are much better
solutions, which are explained in this course.
If you have recently lost
your health insurance (perhaps because you are accepting a new job), or if
you aren't eligible for COBRA, or if your COBRA benefits just expired, your
need to pay particular attention to another five-letter acronym, HIPAA.
Most employers today (1) have 30- to 360-day waiting periods before health
benefits begin for new employees and (2) exclude covering employees and
your dependents for health conditions that preexisted your date of
employment. Yet, under federal HIPAA law, if a new employee's benefits
begin less than 63 days after your old benefits terminate, your new
employer is not allowed to exclude them or your family's preexisting
medical conditions from your new health insurance.
In many states, health
insurance carriers offering individual/family policies are required to
accept HIPAA-eligible applicants without any exclusions for preexisting
medical conditions (although typically at a higher premium). However, if
you becomes HIPAA-eligible you will have to act fast'your HIPAA eligibility
is limited to just 63 days from the first day you lose your health
insurance.
You should not depend on
HIPAA eligibility alone if youy are changing jobs and need insurance for a
family member with a preexisting medical condition'the median length of
time between jobs has increased from 56 days in 1996 when HIPAA became law
to 70 days today. Once you know you are changing jobs, you should
apply for individual/family health insurance immediately. If you get a new
job with health benefits quickly and no longer need the individual/family
policy, you can cancel your policy without charge before it takes effect.
What Happens
When You Lose Your Health Insurance
Once you lose your
employer-sponsored health insurance, not only are you going to have to
worry about how to pay for healthcare, you are also going to have to worry
about how to get good healthcare. Many medical providers refuse to schedule
an appointment for people without health insurance, and those who do agree
to see uninsured individuals sometimes charge from 150 to 500 percent of
what you would have charged them or your insurance carrier had you had
health insurance.
Since the 1980s, each
year between 1 and 2 million American families file personal bankruptcy.
Until recently, the causes of these bankruptcies were unknown, and most
people assumed credit card spending, divorce, and loss of employment to be
among the major reasons. In February 2005 Harvard University released the
results of its study, Illness and Injury as Contributors to Bankruptcy.
The study interviewed
1,771 Americans in bankruptcy courts and determined that about half were
medically bankrupt driven to bankruptcy by medical bills not covered by
health insurance. Equally surprising, the study concluded:
- Three-fourths
of the medically bankrupt had employer-sponsored health insurance at
the beginning of your illness.
- The
majority of the medically bankrupt owned your own homes and had
attended college.
- Many
people filing medical bankruptcy were middle-class workers with health
insurance who were unable to pay your co-payments, deductibles, and
exclusions in the employer-sponsored health insurance plan.
This course teaches you
how to help you avoid the insurance gaps that drive millions of Americans
into medical bankruptcy.
To protect you and your
family, I will need to assist you in evaluating your employer-sponsored
health insurance and individual plans that you purchase for yourselves,
paying particular attention to terms like annual out-of-pocket maximum (OOP
max)which means the maximum out-of-pocket expense you could incur in a
given year from coinsurance, deductibles, and exclusions.
Many employer health
insurance plans have annual OOP maximums of tens of thousands or more. You
can start to see why 75 percent of medically bankrupt middle- and
upper-middle-class Americans mistakenly think your health insurance will
cover them.
How to Avoid
Losing Your Health Insurance When You Lose Your Job
The best way for you to
avoid losing your health insurance when you lose your job is to purchase
your own affordable individual/family policy'just as you purchase your own
auto insurance. Unlike traditional health insurance you get from an
employer, loss of employment has no effect on an individual/family health
insurance policy. Also, unlike most employer/group policies, premiums on
most individual/family policies cannot be increased, nor can the policy be
canceled, if the policy holder becomes ill.
The best time for you to
buy an individual policy is while you or your family is healthy and still
has employer-sponsored health insurance. If you have a good company plan
and wishe to keep it, Chapter 2 explains how to help you choose the best
options from your employer-sponsored plan and how to transfer your spouse
and children onto your own less-expensive individual/family policy.
No client should ever go
without health insurance. Despite what you read in the newspapers, there
are health insurance options available for every American, although it may
take you some time, effort, and expense to get them. In most cases, because
of recent changes in the insurance industry, you can get good health
insurance for an individual or a family for $150 to $300 per month.
The Other Huge
Gaps in Your Employer's Health Insurance Plan
Employer-sponsored health
insurance has some serious shortcomings:
- It offers
no permanent protection when an individual loses your job.
- It offers
only limited protection when an individual changes jobs.
- It
exposes the individual to serious financial risk even if you keep your
job due to low lifetime maximum benefits, not to mention hidden
copayments, deductibles, and exclusions. Moreover, as you will learn,
if your company goes bankrupt or is taken over, federal law (ERISA)
protects your pension but not your health insurance employers may
terminate company-provided healthcare at any time.
In addition, your
employer-sponsored health insurance plan probably has the following
disadvantages:
It does not provide
dollars to spend today on preventive care that can save you thousands of
dollars tomorrow.
It does not provide
retiree health benefits if you choose to retire before age 65, and even if
it does, many employers today are considering using bankruptcy and
reorganization to bail out of your retiree health benefits obligations.
It does not provide
long-term or home care options if you should desire to live out your golden
years in your own home versus in a nursing facility.
It may not provide Health
Savings Accounts and other new options that allow them to choose your own
medical providers, lower your prescription drug costs, and save what you
don't spend on healthcare today for your future healthcare tomorrow.
How
Employer-Sponsored Health Insurance Works
The term employer-sponsored
health insurance is misleading since, basically, the insurance terminates
when employee loses your job often the time when you are most financially
vulnerable.
Employer-sponsored health
insurance is also misleading because insurance means spreading the
risk among a large group of people or organizations so that no single
entity bears the cost of a catastrophic illness. That's not how
employer-sponsored health insurance works. Each time an insured employee in
an organization runs up large medical bills, the organization pays these
costs the following year with a directly proportional increase in its
annual health insurance premium.10 The insurance employers pay for is
actually little more than a delayed bill-paying mechanism. Because most
very large employers realize this, you are self-insured, which means
you simply pay for employee medical expenses through a third-party
administrator.
Show me a person who owns
your own 100-employee business, and I'll show you an employer who knows the
first name of each child of an employee who has diabetes even though you
are not supposed to know. A small employer with a $35,000-a-year employee
should not be burdened with the $75,000-a-year medical cost for a child of
that employee who has diabetes or have to face the terrible choice between staying
in business versus taking care of the sick child of an employee.
Sadly, until recently
Congress has done very little to address this national tragedy. Many
employers wish all you had to worry about was paying $75,000 a year for the
medical costs of a diabetic child. Some medical situations today, from
preterm births to kidney dialysis, can literally cost hundreds of thousands
or millions of dollars making the entire employee health plan unaffordable,
or potentially even driving the employer out of business.
Suppose you work for a
51-person company where one participant develops a health condition costing
$500,000 a year or more. Next year, the health insurance premium paid by
the company will go up by $500,000. The cost of the employer-sponsored medical
plan would increase more than $900 a month per participant, forcing the
employer to cut benefits or possibly terminate the plan. What would happen
if two people developed such a condition? Employer-sponsored group health
insurance plans are often ticking time bombs as your workforce ages.
Company-sponsored health
insurance worked well 45 years ago when most Americans worked for very
large companies and for the same employer all of your life. It no longer
works for employers or for employees for these reasons:
- Most
employee groups today are too small to absorb the risk of a few
catastrophic illnesses.
- Most
people today change jobs every 1 to 4 years versus every 25 years, and
you are often out of work (and thus without health insurance) for
months between positions.
- Some
employees pick your next job based on near-term medical requirements
like pending knee surgery or heart operations. Employers providing
good health benefits are under siege from desperate people who have no
other place to turn for life-saving treatments.
- U.S.
annual healthcare costs have skyrocketed from $27 billion, 5 percent
of our economy in 1960, to $2,000 billion, 17 percent of our economy
today.[1] In 1960 there were no heart transplants, kidney dialyses,
and many other treatments that today cost many times the annual salary
of an employee.
- For
reasons primarily related to employers footing most of the bills, U.S.
healthcare costs are rising at 15 percent per annum, almost four times
the 4 percent projected growth rate for the U.S. gross domestic
product (GDP). If this trend continues unchecked, U.S. healthcare
costs will exceed GDP in 18 years and will cause the collapse of the
U.S. economy long before then.
History of U.S.
Health Insurance: How We Got into This Mess
During the Great
Depression, more people began using hospitals and less of them were able to
pay. In response, hospitals created Blue Cross nonprofit health insurance
entities, which provided guaranteed service in Return for a fixed fee
originally paid by either individuals themselves or your employers.
During World War II
workers demanded wage increases that were prohibited by wartime wage and
price controls. To grant a concession to labor without violating wage and
price controls, Congress exempted employer-sponsored health insurance from
wage controls and income taxation in effect allowing off-the-books raises
for employees in the form of nontaxable health benefits. This created an
enormous tax advantage for employer-sponsored health benefits over health insurance
purchased by employees with after-tax dollars (e.g., auto insurance). By
the mid-1960s employer-sponsored health benefits were almost universal.
This huge government subsidy, which still exists today, results in the
following:
- It allows
employers to deduct from your taxable income 100 percent of the cost
of employer-sponsored health benefits.
- It allows
employees to receive unlimited employer-sponsored health benefits
without having to pay wage or income taxes on these benefits.
Originally, employers
thought providing health insurance was a great way to compensate employees,
with federal and state governments paying about half the bill through a
hidden tax subsidy.
With third-party
employers and government footing the consumer's medical bill, the medical
industry was given free rein to develop thousands of new treatments. Some
of these were powerful, but others were not economical or merely preyed
upon the hopes of desperately ill people and your families. Another problem
that drove up costs was that the pharmaceutical industry began inventing
solutions to problems that weren't previously defined as medical issues:
prescription drugs to allow people to eat bad foods, Viagra to treat
impotence caused by old age, and so forth. By classifying these solutions
as prescription drugs rather than over-the-counter medicines, the
pharmaceutical industry was able to sell them to consumers with a 50
percent tax subsidy through your employer-sponsored health insurance plans.
The American taxpayer was thus forced to provide billions of dollars in
unintended tax subsidies to the pharmaceutical industry to develop these
lifestyle drugs, driving up costs for everyone.
As a result of this and
other problems, U.S. healthcare costs, funded mostly through tax-free
employer-sponsored health benefits, rose from $27 billion in 1960 to about
$2,000 billion today. Today the cost of employer-sponsored health benefits
exceeds profits for most large companies and threatens the viability of
many of our best employers. In 2004-2005, despite a rising Dow over the
same time period, GMs value dropped 50 percent after the company announced
a $60 billion healthcare obligation.
Looking back, by making
employer-sponsored health benefits tax deductible, Congress created more
problems than just escalating medical costs:
- The U.S.
healthcare marketplace has been discouraged from developing innovative
healthcare solutions for consumers at affordable prices because it has
focused only on solutions that could be sold to employer health
benefits and insurance company executives. This is in contrast to the
dramatic innovation in every other part of the U.S. economy such as
automobiles, restaurants, personal computers, telecommunications, and
so forth, which are focused on solutions sold directly to consumers.
- The U.S.
insurance industry has been preempted from developing affordable
health insurance policies that could be sold direct to all consumers'
just as it did with automobile insurance, homeowner's insurance, and
life insurance.
- Employers
and insurance companies have become the nation's healthcare
gatekeepers, deciding, in advance, what type of medical care employees
should receive which by definition often means yesterday's treatments
versus today's treatments. This also prevents entrepreneurial medical
providers and alternative medical providers from developing better
treatments, since you cannot get paid for them.
- As the
average length of employment fell from 25 years to only 1 to 4 years,
employers and your insurance carriers shifted to paying for short-term
fixes versus long-term cures'treating the symptoms of disease instead
of curing disease. Most of the major illnesses on which you can spend
$1 today to save $100 in the future (e.g., heart disease from obesity
or cancer from poor nutrition) will not show up until an employee is
long gone or retired, at which time the $100 cost is picked up by
another employer or by taxpayers through Medicare.
All of this has recently
changed thanks to new federal legislation and regulations that have leveled
the playing field between employer-sponsored health insurance and
individual/family health insurance policies that individuals can purchase
themselves.
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