Good Neighbor Insurance, www.gnazhealth.com, is continuing to update our clients on the new health insurance laws.   There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work.  Many critical details of this new insurance law will be clarified in the months and years to come. 

These six major coverage options are:

(1) Individual or family coverage (private health care plans)

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military.

Medical Loss Ratio (MLR) information

Is it true?  Health plan profits are the cause of higher health care spending?

Reality check:  The latest Yahoo! Finance quarterly corporate financial reports –

1. The health care plan industry’s average profit margin is 4.40%.  This ranks the health care plan industry 143 out of 215 different industries.
2. Within the health care sector, the health care plan industry ranks 12^th out of 16.

Is it true?  Medical Loss Ratios implementation will make insurance prices more competitive?

Reality check:  Insurance markets vary considerably from one state to another.  In rural states, for example, some carriers that currently provide coverage in remote areas will be unable to meet the MLR requirements and will exit the market, leaving consumers with fewer choices.  Furthermore, the administrative costs of marketing a new plan in a state will be prohibitive given the MLR requirement, so companies will have no incentive to enter a new state and offer consumers new health plan choices.

Is it true?  It’s the cost of health insurance that’s the problem and agent and broker commissions only contribute to high insurance premiums.

Reality check:  Actually, agent and broker commissions have nothing to do with how health insurance premium rates are determined.  Insurance companies have to hire employees to sell and help administer these plans or insurance companies can “hire this out” in the form of agents and brokers.  It is cheaper for insurance companies to have agents and brokers do the work since if they do not sell and administer they do not get paid.  However, if insurance companies have to hire employees to provide this vital service the insurance company would still have to pay the employee even though they may not sell the product. 

When using agents and brokers the commission is never part of the insurance revenue stream but is a pass-through expense. It is billed that way both as a consumer convenience and as a means of complying with state premium tax and consumer protection laws.

Is it true?  Buying insurance is a lot like buying an airline ticket and health reform will make shopping for coverage even easier.  Why should anyone pay an agent or broker to help them?

Reality check:  Purchasing health insurance as an individual or as a business owner as an employee benefit is one of the most important financial decisions you can make.  It is nothing at all like buying a plane ticket.  An airline ticket is a one-time purchase that takes you to a known destination.  The variables for how to get thee may cost you time and frustration, but that is all.  Health insurance is a complex financial product and price alone does not determine the best coverage choice. What may be best for one family member is not the best for another. 

Moreover, unlike airline tickets, the purchase of health insurance typically includes considerable assistance after the sale.  Insurance brokers assist consumers with plan selection, insurance billing, claim filing, and contract interpretation.  Brokers often intercede on behalf of clients to obtain payment for services that may not be typically or otherwise covered under the plan.  For employers, brokers often serve as an extension of the human resources department and design comprehensive benefit programs, provide employees with information about the selected plans, process enrollees, and handle compliance matter, as well as servicing employee claims concerns.

Is it true?  Insurance brokers are big business and they make too much money? 

Reality check:  There are approximately 500,000 health insurance brokers nationwide, and they work in every community.  For the most part, they operate Main Street small businesses rather than Wall Street-type firms.  Their mean annual wage in 2010, according to the Bureau of Labor Statistics, was $62,520.

Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care, www.gnazhealth.com , information with him at all times when he travels Keep our blog close by you, www.gntravelinsurance.com, for continual updates on the changes with the US health care system.

Posted by Doug Gulleson at www.gntravelinsurance.com