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Feature: In search of affordable insurance

By FRANK SCHNAUE, Special to UPI

NEW YORK, June 25 (UPI) -- Whatever employers like to call it, being laid off, downsized, restructured, rightsized, or de-staffed, the result is the same - you're out of a job.

And regardless of why, being laid off from a job can be a traumatic, stressful experience, one that can cause you to lose sight of your own self-worth, your value as a worker and provider for your family, and even your career direction and purpose.

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The bad news is that it will probably happen to most of us during our careers, including you. The good news is that with a little preparation and smart thinking you can lessen its blow and more easily make the transition to the next chapter in your work life.

So, you have just lost your job and you have called several insurance companies, but the rates are out of this world.

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Everyone you discuss the problem with is telling you about COBRA, and its not the animal or the Chicago-based consumer electronics company, but it does cost enough to choke your daughter's horse.

Calm down, what you really don't need right now is to get sick.

Under federal law, the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, group health plans sponsored by employers with 20 or more employees are required to offer continued medical insurance coverage to you and your dependents for 18 months after you lose your job.

Under that same law, following an employee's death or divorce, the fired worker's family has the right to continue coverage for up to three years.

But, if you wish to continue your coverage under COBRA, you must notify your employer within 60 days. You must also pay the entire premium, or up to 102 percent of the cost of the coverage. In some cases this can add over $1,000 a month, or just about what you may be eligible for under your state's unemployment benefits.

So why is the premium that high?

According to the Insurance Information Institute, "The medical malpractice insurance system experienced a period of crisis in the early 1970s, when several private insurers left the market because of rising claims and inadequate rates.

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"The exodus of capacity resulted in an availability crisis. Over the next fifteen years, various attempts were made to ease the explosion in claims costs -- tort reform, increased diagnostic testing, improved peer review, and increased communication between doctors and patients," the Institute said.

"These efforts appear to have had a positive impact. The number of claims dropped. However, the size of claims - the dollar amount - has continued to grow, although initially not at the fast pace reported earlier in the decade," the group said.

Among some of the other factors driving up prices is a reduced supply of available coverage as insurers exit the medical malpractice business because of the difficulty of making a profit.

According to the Insurance Information Institute, "With the cost of claims soaring, medical malpractice insurers are leaving the market and many in the medical community are experiencing difficulties finding affordable insurance."

In March 2003 the American Medical Association increased the number of states where medical liability has reached crisis proportions from 12 to 18. The new states where conditions are critical are Arkansas, Connecticut, Illinois, Kentucky, Missouri and North Carolina.

The states that were already on the list are Florida, Georgia, Mississippi, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Texas, Washington and West Virginia.

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"Over the past couple of years a number of insurers have withdrawn from the market completely; others in poor financial condition have been forced to stop selling policies by state regulators. One of the most recent examples is Reciprocal of America, which the Virginia insurance department placed in receivership on Jan. 29," the Institute said.

Reciprocal was a malpractice underwriter that provided liability insurance to more than 150 hospitals in Virginia and was licensed to do business in 40 states and the District of Columbia. In a domino effect, Tennessee regulators placed three more medical malpractice underwriters, all reinsured by the Virginia company, under administrative supervision. The St. Paul Cos., the largest writer of medical malpractice in the United States, said that it was leaving the market because underwriting losses threatened its solvency.

"Some states that have not managed to pass meaningful tort reform have been forced to address the problem through other temporary measures," the Institute said.

On April 24 Mississippi Governor Ronnie Musgrove signed into law a bill creating an insurance pool for doctors and hospitals in the state that are having trouble finding coverage in the private market. The pool was given $500,000 in startup costs but will be self-supporting. The program will expire in 2005.

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A month earlier West Virginia Governor Bob Wise signed into law a bill that caps medical malpractice pain and suffering awards at $250,000, except in cases of wrongful death or bodily impairment, when the cap is $500,000.

Although the severity of the problems differ from one state to another and even within states, most are seeing higher jury awards and consequently higher settlements because award amounts influence demands and settlement negotiations.

When you received your group insurance at work, some of your premium was paid for by your former employer. Now that you no longer have an employer, you-the unemployed are stuck with footing the entire bill.

So, how do you manage to pay a bill that is larger than a pile of horse road apples and just about wipes out your total monthly net income?

While health insurance is available either through groups or to single individuals, the premiums, or the regular fees that you pay for health insurance coverage, are generally lower for group coverage.

Group insurance is typically offered through employers, although unions, professional associations, and other organizations also now offer it.

Experts said if you lost your job and you were a union member, talk to the union first for advice.

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The premium costs are frequently lower because economies of scale in large groups make administration less expensive. With group insurance, if you enroll when you first become eligible for coverage, you generally will not be asked for evidence that you are insurable.

Enrollment usually occurs when you first take a job, and/or during a specified period each year, which is called open enrollment. Some employers offer employees a choice of fee-for-service and managed care plans. In addition, some group plans offer dental insurance as well as medical.

Individual insurance is the option if you are out of work or work for a small company that does not offer health insurance or if you are self-employed. Buying individual insurance allows you to tailor a plan to fit your needs from the insurance company of your choice.

But, experts warn individual insurance requires careful shopping, because coverage and costs vary from company to company.

In evaluating policies, consider what medical services are covered, what benefits are paid, and how much you must pay in deductibles and coinsurance. You may keep premiums down by accepting a higher deductible.

Experts said one of the biggest problems facing those seeking insurance is the worry about coverage for preexisting conditions, especially when they lose their job. But, the Health Insurance Portability and Accountability Act helps assure continued health insurance coverage for fired employees and their dependents.

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According to the Insurance Institute starting July 1, 1997, insurers could impose only one 12-month waiting period for any preexisting condition treated or diagnosed in the previous six months.

"Your prior health insurance coverage will be credited toward the preexisting condition exclusion period as long as you have maintained continuous coverage without a break of more than 62 days. Pregnancy is not considered a preexisting condition, and newborns and adopted children who are covered within 30 days are not subject to the 12-month waiting period," the Insurance Institute said.

If you have had group health coverage for two years, and you switch jobs and go to another plan, that new health plan cannot impose another preexisting condition exclusion period. If, for example, you have had prior coverage of only eight months, you may be subject to a four-month, preexisting condition exclusion period when you switch jobs. If you've never been covered by an employer's group plan, and you get a job that offers such coverage, you may be subject to a 12-month, preexisting condition waiting period.

Federal law also makes it easier for you to get individual insurance under certain situations, including if you have left a job where you had group health insurance, or had another plan for more than 18 months without a break of more than 62 days.

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If you have not been covered under a group plan and have found it difficult to get insurance on your own, experts say check with your state insurance department to see if your state has a risk pool.

Similar to risk pools for automobile insurance, these can provide health insurance for people who cannot get it elsewhere.

If COBRA does not apply in your case -- perhaps because you work for an employer with fewer than 20 employees -- you may be able to convert your group policy to individual coverage.

The advantage of that option is that you may not have to pass a medical exam, although an exclusion based on a preexisting condition may apply, depending on your medical history and your insurance history.

If COBRA doesn't apply and converting your group coverage is not for you, then, if you are healthy, not yet eligible for Medicare, and expect to take another job, you might consider an interim or short-term policy.

These policies provide medical insurance for people with a short-term need, such as those temporarily between jobs or those making the transition between college and a job. These policies, typically written for two to six months and renewable once, cover hospitalization, intensive care, and surgical and doctors' care provided in the hospital, as well as expenses for related services performed outside the hospital, such as X-rays or laboratory tests.

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Another possibility is obtaining coverage through an association. Many trade and professional associations offer their members health coverage-often HMOs-as well as basic hospital-surgical policies and disability and long-term care insurance. If you are self-employed, or even a freelancer, you may find association membership an attractive route.

Whether you end up choosing a fee-for-service plan or a form of managed care, you must examine a benefits summary or an outline of coverage -- the description of policy benefits, exclusions, and provisions that makes it easier to understand a particular policy and compare it with others.

Look at this information closely. Think about your personal situation. After all, you may not mind that pregnancy is not covered, but you may want coverage for psychological counseling.

In addition to broad coverage for medical, surgical, and hospital expenses, there are many other kinds of health insurance.

Hospital-surgical policies, sometimes called basic health insurance, provide benefits when you have a covered condition that requires hospitalization. These benefits typically include room and board and other hospital services, surgery, physicians' non-surgical services that are performed in a hospital, expenses for diagnostic X-rays and laboratory tests, and room and board in an extended care facility.

Benefits for hospital room and board may be a per-day dollar amount or all or part of the hospital's daily rate for a semi-private room. Benefits for surgery typically are listed, showing the maximum benefit for each type of surgical procedure.

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Hospital-surgical policies may provide "first-dollar" coverage. That means that there is no deductible, or amount that you have to pay, for a covered medical expense. Other policies may contain a small deductible.

Keep in mind that hospital-surgical policies usually do not cover lengthy hospitalizations and costly medical care. In the event that you need these types of services, you may incur large expenses that are difficult to meet unless you have other insurance.

Catastrophic coverage pays hospital and medical expenses above a certain deductible; this can provide additional protection if you hold either a hospital-surgical policy or a major medical policy with a lower-than-adequate lifetime limit. These policies typically contain a very high deductible ($15,000 or more) and a maximum lifetime limit high enough to cover the costs of catastrophic illness.

Specified or dread disease policies provide benefits only if you get the specific disease or group of diseases named in the policy.

These cash benefits are paid directly to you, can be used for any purpose, and may be useful in meeting out-of-pocket expenses not covered by other insurance.

Experts said it is also a good idea to ask for the insurance company's rating. The A.M. Best Co., Standard & Poor's Corp., and Moody's all rate insurance companies after analyzing their financial records.

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And bear in mind: In some cases, even after you buy a policy, if you find that it doesn't meet your needs, you may have 30 days to return the policy and get your money back. This is called the "free look."


(Frank Schnaue is a former 35-year veteran business reporter for United Press International)

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