Most people get Family Health Insurance through group policies at their jobs. But many others have to purchase their own. If you work for a small company that doesn’t offer health insurance, or are self-employed here is some basic information on family health insurance that you need to know, and steps you need to take to protect yourself and your loved ones.

Serious, life-threatening illness is traumatic. Whatever else you’re concerned with in life suddenly becomes unimportant. One thing can make the situation worse – fear. Fear about a lack of health insurance coverage, and the mounting bills that threaten to exhaust your coverage limits and leave you personally responsible for huge bills. Fear that gaps in your coverage will wipe out your life’s savings, and put you in unimaginable debt. Fear that the specialist you want for your spouse or child isn’t approved by your insurance company. Those are a few reasons why a solid family health plan is so important.

family healthA quality family health insurance plan must include 5 key elements:

  • Coverage limits that are high enough not to be exhausted, even for the most devastating medical expenses.
  • Annual limits on out-of-pocket expenses (copayments and deductibles) that you can live with.
  • No dollar limits on daily room charges or surgical procedures.
  • Freedom to choose your own specialists without a referral.
  • Worldwide coverage.

Less than half of the health plans sold in the U.S. include all 5 of these elements. You want a plan that, even in the worst case, won’t cause you serious financial hardship, and lets you choose the most skilled health care provider, especially in life-threatening situations such as cancer treatment, skin grafting after severe burn, and major surgeries.

In the 1970s, standard health policy limits were only $10,000 per claim. You could purchase an additional $25,000 in coverage, and sleep well with $35,000 in total coverage. That same peace of mind in today’s health care system requires at least $3 million in coverage.

Health insurance policy limits come in 2 forms.

  • A dollar maximum per claim: This maximum is the most the insurance company will pay for any single injury or illness. For example, if your limit is $1 million, your policy will spend up to $1 million this year for injuries in a car accident, and then up to another million next year for cancer, and another million the year after for Parkinson’s disease.
  • A lifetime dollar maximum: Every dollar the insurance company pays reduces the dollar amount available for future claims. This type of policy is most common. If your lifetime limit is $1 million, your $200,000 car accident claim reduces your lifetime limit to $800,000. Then your $250,000 cancer bill reduces the $800,000 lifetime limit to $550,000, and so on.

When shopping for a health insurance plan (if you’re unable to find one with no maximum limit at all), choose one with a $1 million per claim or $3 million per lifetime maximum.

Most family health insurance plans require a copayment. A copayment is the amount your insurance company requires you to pay toward your bills. Your copay may be per-visit ($25 per each office visit or $75 per emergency room treatment). You may have a deductible ($200, $500, etc.) that you must pay each year before your health insurance coverage begins. Or perhaps your policy pays 80% of all covered medical bills, and you pay the other 20%.

Copays and deductibles don’t usually present a hardship, but coming up with 20% of all your major medical bills in one year can be. A baby born three months premature and who needs long-term, intensive, pediatric care can result in bills of $400,000, and your 20% copay would be $80,000. If the baby requires surgeries, the bill could jump to $800,000, and your 20% copay would be $160,000. That’s a risk to great for almost anyone to assume.

A quality health insurance policy has just one policy limit, either per claim or per lifetime. Many second-rate policies contain various limits such as dollar limits on specific surgeries ($35,000 for quadruple bypass surgery, $4,000 for an appendectomy, etc.), $200 a day for room, $400 a day for intensive care, etc. Even if the limits are appropriate today, in 4 or 5 years, given the pace of rising medical costs, you may end up with only half your expenses paid. Avoid any health insurance policies that contain internal limits on surgeries, room, or anything else. If you have a group family health plan from your employer with internal limits, buy a supplementary major medical policy with no internal limits and a large deductible, to cover the shortcomings of the group plan.

Many lower cost health care plans (such as PPOs or HMOs) take away your choices as to what kinds of treatment you can get and from whom you can get them. Generally, you agree to receive all your primary care from a list of approved clinics where costs can be more easily controlled. Your health insurance company has the final say on what types of treatments or procedures you can have, and may only see a specialist if your primary care physician will refer you. Many people consider that a lot to give up to save 15% or so on premiums.

If your group health plan at work doesn’t offer choice, you can buy a personal major medical policy with a moderate to high deductible. If you don’t care for your choices under your group plan, you can see whomever you like and just pay your deductible.

Recently, a managed care hybrid health plan has emerged. It’s a two-level system. The first level is managed care. When you go to your selected primary doctor, you get almost 100% coverage, even if you see a specialist (as long as you’re referred by your primary doctor). The second level gives you freedom of choice. You can go to any specialist you want, no referrals needed. You just pay the extra cost of a deductible and copay. In a serious medical situation, the extra expense for the freedom of choice may be worth it. Many managed health care plans (without the freedom of choice) won’t cover you outside your home territory, unless it’s an emergency. This could be a problem for retirees and others who have, let’s say, summer and winter residences in different states, as well as students attending out-of-state schools. An otherwise excellent managed family health care policy may have this one major flaw. For anyone out-of-territory, non-emergency care isn’t covered.

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