Choosing to Self-Insure for Medical Services (Madness)
I have been to several presentations over the last few months where financial advisors have approached me to discuss a “self-insured” client. A self-insured individual is actually an uninsured individual in our view and that is not advisable.
If you don’t have the protection of rates that your insurer has negotiated with hospitals or through Medicare or Medicaid, you are vulnerable to substantially over-paying for services. There is no out-of-pocket maximum because you don’t have coverage, and there is no obligation for charges to be reasonable or to even be consistent with the negotiated rates most others pay. In sum, you are leaving yourself wide open to be gouged.
But if I am willing to take the risk, hospitals have to treat me, right?
Most hospitals are required to treat anyone who comes to the Emergency Room for care. If you need surgery, however, or if a serious illness like cancer is diagnosed and you need follow-up treatment, any provider who is treating you will routinely have you sign a statement indicating you will be financially responsible for services rendered. Can you blame them?
How will Obamacare affect the uninsured in 2014?
Over the years, many people have been uninsurable due to pre-existing conditions. That changes in 2014 when almost all Americans will be eligible for coverage without respect to pre-existing conditions or their health status. That may make providers even more aggressive in pursuing payment for services from those who are uninsured because they will have likely chosen to remain uninsured. If you are uninsured and want to apply for coverage, the open enrollment period started on October 1, 2013 and will extend until March 31, 2014. If you are uninsured and wait until after March 31, 2014, you will have to wait until the next open enrollment period for coverage that begins January 1, 2015. Premium subsidies are available for many low-income Americans.
Part D is the government benefit providing outpatient prescription drug coverage for those on Medicare.
We are still finding people on Medicare A and B who decided to “self-insure” for prescription drug coverage, Part D. In our view that is also unwise. Most serious diagnoses are accompanied by expensive medications and Part D premiums are, for the most part, quite reasonable. But remember, the annual open enrollment period for coverage the following January 1st, ends December 7th of every year. If you didn’t enroll when first eligible you can enroll on an annual basis but you will pay a premium penalty associated with late enrollment.
Long-Term Care coverage helps pay for services for those who are too frail to take care of themselves. Those services are not covered by medical insurance coverage but by long-term care policies. Many do decide to self-insure for long-term care services. They may have substantial resources and believe they can pay out-of-pocket. They may have extended family whom they believe will take care of them in those circumstances, or they don’t have the funds to pay for long-term care coverage. Remember, long-term care coverage is medically underwritten meaning an individual will only be approved for a policy if in relatively good health when applying. As a result of all these factors, self-insuring for long-term care will remain with us in 2014 and beyond.
Almost all individuals will be able to obtain medical coverage without respect to pre-existing condition issues in 2014 due to the Affordable Care Act. Deciding to remain uninsured is to assume very substantial financial risk.