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Business Book Reviews
| The New Health Insurance Solution | ||
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Finally a book that shows the average American how to get affordable insurance when you've lost yours from work or if you are self employed. This is a priceless book for those of us who need health insurance but can't afford the high cost without a traditional employer plan. Pilzer shows you how to lower your premiums and get affordable insurance without the loss of coverage. The following is an excerpt from the book The New Health Insurance Solution by Paul Zane Pilzer Published by Wiley; August 2005;$23.95US/$35.95CAN; 0-471-74715-7 Copyright © 2005 Paul Zane Pilzer COBRA -- A Temporary "Last Resort" if You Lose Your Employer-Sponsored Health Insurance COBRA should almost always be your last choice because it is both expensive and temporary; however, for people with expensive preexisting medical conditions that prevent them from qualifying for an affordable individual/family policy, it is a critically important backstop. You should always be familiar with your COBRA rights and obligations. In some states, if you have a family member with a serious preexisting condition, you can save tens or hundreds of thousands of dollars by becoming HIPAA-eligible, but to do this, you may have to accept and exhaust your COBRA benefits (as explained in Chapter 7). Some states require you to be HIPAA-eligible to qualify for "state-guaranteed" permanent coverage (discussed later in the chapter). Many people are under the misconception that COBRA is "ordinarily less expensive than individual health coverage." This is false in almost all cases. COBRA typically costs individuals 102 percent of the full pro rata cost of an employer-sponsored group plan -- which, as discussed here and in Chapter 2, is two to three times the average premium paid for an individual or family policy. Summary of COBRA Rules and Eligibility Employers. COBRA applies only to individuals eligible to be covered by group health plans maintained by employers with 20 or more employees in the prior year (on more than 50 percent of business days). Part-time employees count as a fraction of an employee based on hours worked. COBRA does not apply to plans sponsored by the federal government and certain church-sponsored organizations. Beneficiaries. A qualified beneficiary is a covered employee, his or her spouse, or a dependent child who was eligible to be covered by the employer's group plan the day before the qualifying event. Qualifying event that makes the covered employee eligible for COBRA 1. Voluntary or involuntary termination of employment for reasons other than "gross misconduct" 2. Reduction in the number of hours of employment Qualifying event that makes a spouse and/or dependent eligible for COBRA 1 .Voluntary or involuntary termination of employment by covered employee for reasons other than "gross misconduct' 2. Reduction in the number of hours of employment by covered employee 3. Covered employee eligible for Medicare 4. Divorce or legal separation from the covered employee 5. Death of covered employee 6. Loss of "dependent child" status Cost of COBRA health insurance coverage. Beneficiaries are allowed to be charged 100 percent of the pro rata cost of the employer's group plan (plus a 2 percent administration fee) of similarly situated individuals who have not had a qualifying event -- including both the portion paid by employees and the portion paid by employers. (An example follows.) Period of coverage * Covered employee may have up to 18 months following a qualifying event. * Spouse or dependents may have up to 36 months following a qualifying event. * Disabled persons may be allowed an additional 11 months at 150 percent of premium (versus 102 percent). The High Cost of COBRA For example, you might work for a typical company that has a generous health benefits package for existing employees but makes no payments toward COBRA coverage for ex-employees. Your existing health benefits plan probably costs $1,400 per month per family. (Contact your health benefits administrator to get the actual numbers for your company.) Your employer pays 100 percent of the cost for your individual health benefits ($400 per month) and 60 percent ($600 per month) of the cost ($ 1,000 per month) for your spouse and dependents (you pay the remaining 40 percent). Your family's COBRA coverage in this case, with you paying 100 percent of the costs, would be $1,428 a month, or $17,136 a year ($1,400 per month, or $16,800 per year, plus 2 percent administration fee). A few employers do voluntarily pay part of the cost of COBRA during the first few months of unemployment, so check carefully with your plan administrator before rejecting COBRA entirely because of cost. Employer-Sponsored Group Policy Cost (Prorated for an Employee and Dependents) Total Premium Employee Contribution Employer Contrbution Employee cost per month $400 $0 $400 Family cost per month $1,000 $400 $600 Total cost per month $1,400 $400 $1,000 Total cost per year $16,800 $4,800 $12,000 Note: Typical cost for family coverage through COBRA is $1,428 per month, or $17,137 per year. Typical cost for yourself or one family member on COBRA is $406 per month, or $4,896 per year. (These figures include the 2 percent administration fee.) COBRA Timeline -- How to Get COBRA Coverage if You Need It If you need COBRA because you or a family member has an expensive medical problem and can't get an affordable individual/family policy, you must carefully follow COBRA's qualifying rules. Neither your employer, your spouse's employer, nor your ex-spouse's employer is likely to make any exception for you if you fail to follow the exact COBRA timeline required. The reason is that employers typically dislike COBRA coverage and provide it only because it is legally required. This dislike is compounded by the fact that some people who accept COBRA consume many times their COBRA premium in healthcare costs -- which raises the cost of the employer's group health benefits plan for the employer and for participating employees. There have been hundreds of legal cases in which ex-employers claimed people who got cancer or had a heart attack were not covered under COBRA because they had either missed the last date to accept COBRA or had sent in their COBRA premium too late. To prevent these misunderstandings, the Department of Labor has issued new, very explicit rules for COBRA acceptance and premium payments for plans beginning in 2005 or later. The new rules follow. After a qualifying event, employers must send a "COBRA Qualifying Event Letter" to employees and/or their covered dependents. Most employers send this letter immediately. The letter must state the date your coverage ended and whether you are eligible for COBRA. If you are eligible, the letter must state the cost of each benefit option and the time frame within which you must elect coverage -- which is the longer of 60 days from the date your coverage ended (qualifying event) or the date the letter was posted. You may opt for separate COBRA benefits coverage for each family member -- spouse or dependent children. This means that if you must choose COBRA, you should choose COBRA for only those family members with a preexisting condition that would prevent the rest of your family from getting a normal affordable individual/family health insurance policy. From the day you elect COBRA coverage during this 60-day period, you then have 45 days to submit your first premium payment, which must cover the period back to the date of your qualifying event. The postmarked date of your acceptance and payment, not the date it is received, is considered the applicable date. Once you have accepted COBRA within 60 days of your qualifying event and paid your first premium within another 45 days, you then must continue to pay your premium every month. You have a 30-day grace period for each successive payment. If your payment is received late, your plan administrator may immediately terminate your benefits, but must retroactively reinstate them if your payment is then received within the 30-day grace period. If your payment is short by the lower of 10 percent or $50, your plan administrator must temporarily accept this minor deficiency as payment in full, notify you, and allow you 30 days to make up the difference. Most important, after sending you the initial "COBRA Qualifying Event Letter," your plan administrator has no obligation to send you monthly statements or confirmation of payments received (except for an initial minor shortfall of $50 or 10 percent). If you accept COBRA coverage, it is solely your obligation to maintain records that your acceptance has been sent to your employer on time and that all of your premium payments are up-to-date. The only obligation of your employer or the plan administrator is to send you an Early Termination Notice after you have lost your coverage. Employers can permanently terminate your COBRA coverage, without prior notice, if you fail to make the monthly premium payment before the end of each 30-day grace period. Excerpted with permission of the publisher John Wiley & Sons, Inc. from TITLE. Copyright (c) year by COPYRIGHT HOLDER. This book is available at all bookstores, online booksellers and from the Wiley web site at www.wiley.com, or call 1-800-225-5945. Paul Zane Pilzer is a world-renowned economist, and a former advisor in two White House administrations, as well as an entrepreneur, and a New York Times bestselling author. A former commentator on NPR and CNN, he is also the cofounder of a company providing individual health benefits to employees of Fortune 500 companies. His previous books include the New York Times bestseller God Wants You to Be Rich, The Wellness Revolution, Other People's Money, and Unlimited Wealth. See www.paulzanepilzer.com for more information. For more information on this book, see www.tnhis.com. |
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