Health insurance is a vital component to the financial security of any American citizen.  Without it we take the chance of severely and permanently disrupting our financial well-being in the event of a major or catastrophic medical event.

The entire purpose of health insurance is to prevent financial ruin due to a catastrophic medical event such as a heart attack, stroke, catastrophic injury, or any other event that leads to major medical expenses.  It is important to choose the correct type of health plan to prevent this financial scenario and it is the job of the licensed insurance agent to help the applicant apply for the best health plan to fit the applicant’s needs.

A major medical policy includes the following:

• Lifetime benefits maximum
• Deductible
• Coinsurance
• Stop-loss and out-of-pocket maximums
• Co-payments
• Policy limitations and exclusions

In soliciting the correct health insurance policy to clients, it is important to research the correct insurance carriers.  The most popular carriers provide for national coverage, meaning that they protect the insured anywhere they may travel throughout the U.S.  While there are hundreds of insurance companies that offer health coverage, generally it is best to select among the largest, most prominent carriers available.

4 of the largest health insurance carriers in the U.S. are:

United Healthcare – www.uhc.com
Humana – www.humana.com
Aetna – www.aetna.com
Blue Cross/ Blue Shield – www.bcbs.com

Often times, individuals and families already have a history with a local doctor and/or pediatrician that they wish to continue.  Checking to see that this doctor or medical professional is accepted ‘in network’ with the insurance carrier will ensure that the coverage will provide for doctors co-pays and other office expenses.   While most hospitals and prompt care centers accept all 5 of the above insurers, it is just as important to check that these facilities are also ‘in network’ with the insurance provider being promoted.

Again, the most important aspect of health insurance is to protect against catastrophic financial loss due to major medical events.  Knowing this, it is important to understand the key components of a major medical insurance plan and how to properly promote them.

Key components of a major medical insurance policy:

Lifetime maximum

A policy’s lifetime maximum is defined as the coverage limit the insurance will cover in the event of a major medical event, or series of events over the insured’s lifetime.  It should cover catastrophic events such as transplant surgeries, cancer treatments, and other costly procedures.  A true major medical policy should provide for a lifetime benefit maximum ranging between $2-5 million dollars or more.

Deductible 

A policy’s deductible is the amount that an insured must pay before an insurer begins to pick up medical expenses on a calendar-year basis.  Most policies offer a range of deductible options starting from $500 to $5,000 depending on the monthly premium amount.  A deductible can either be  ‘per calendar-year’ or ‘per incident.’  It is always better to offer a ‘calendar-year’ deductible policy as it limits the insured to paying a deductible once a year, if necessary, based on medical events throughout the year.  While some lesser known insurers offer a ‘per incident’ deductible, it is far less advantageous and more costly to an insured in the event of medical expenses throughout the year, and should be discouraged from being solicited.

Coinsurance

The most common deductible is 80/20, though other options exist including 100/0, 90/10, and 70/30, each changing the premium amount of the policy.  Though 60/40 and 50/50 coinsurance options do exist, these policies leave the insured with a higher out-of-pocket expense ceiling for major medical expenses.

Stop-loss and out-of-pocket maximums

One of the most important aspects of a major medical policy is the annual expense limit for which an insured is responsible.  The ‘stop-loss’ amount in a major medical policy is the monetary amount of medical expense in which the insured has covered through coinsurance at which the insurer begins to cover the remaining of the annual expenses at 100% coverage.  Calculating an insured’s out-of-pocket maximum includes adding the policy’s deductible with the coinsurance amount up to the stop-loss limit.  An example of a policy with a deductible of $1000 and an 80/20 coinsurance up to a $10,000 stop-loss would limit the insured to a total expense of $3,000  (1000+ (80% of 10,000) = $3,000).

Co-pays and limits

A common feature in comprehensive major medical insurance is to also include a financial limit of a ‘co-pay’ to the insured for visits to the physician and emergency room, as well as for generic and brand name prescriptions.  While co-pays provide small payments for services in a physician’s office or for prescriptions, the most advantageous and important aspect of a major medical policy is to provide financial protection against major medical expenses that could otherwise lead to catastrophic financial loss.

Policy limitations and exclusions

Understanding and properly reviewing specific policy limitations and exclusions with an applicant is another important step to selling the correct health insurance policy.  The applicant should have a thorough and complete understanding of how the policy will and will not work.

In addition to selling the correct health plan, it is just as important to understand the medical history of the applicant to ensure that the policy covers the consumer correctly.  While current Federal legislation proposes to eliminate ‘pre-existing’ medical conditions as a limitation towards insurance coverage in the future, current policies still limit individuals to coverage based on previous medical history.

A pre-existing medical condition is best defined as any physical or mental ailment that has procured itself before an individual attains health insurance.  While pre-existing conditions are similar in definition, each insurance carrier considers pre-existing conditions  according to it’s respective underwriting guidelines; therefore, it is important that the agent properly addresses these concerns with the applicant and fully lists any pre-existing conditions on behalf of the applicant to the insurance carrier.  Providing an accurate and complete application to the insurance carrier is the fiduciary responsibility of every insurance agent.

A successful insurance agent provides an invaluable service to individuals and families.  Helping apply for and attain the correct insurance policy limits medical expenses to reasonable levels and prevents financial catastrophe in the event of a major medical event.  It is difficult enough to deal with the physical and emotional toll of medical emergencies to have to worry about the financial hardship that follows.  Having the correct health plan in place eliminates the hardship of this financial loss.