Personal Finance Tips

Let’s leave the politics of healthcare reform to one side and focus on a proposal to change the law to allow free market competition between insurers in different states. A policy consistently mentioned by the Republican party is to break the state monopolies in the insurance market. Since the 1800’s, the individual states have claimed the sole right to regulate the sale of insurance within their own borders. Each state has asserted the right to license insurance companies and to set the terms on which they can conduct business. This has led to a patchwork of different sets of regulations with each state creating unique laws. In turn, this forces an insurance company to set up separate subsidiaries to trade in each state. No licensed company can sell a policy to someone who has a residence in another state. There was a brief moment in 1944 when a decision of the Supreme Court allowed the possibility of federal supervision. But the lawmakers in Washington immediately changed the law to retain state control. Why is this a bad thing? The national insurance companies have divided up the states between them and choose not to compete against each other. This keeps the number of insurance companies in each state artificially low and, because there is no real competition, premium rates are higher than they should be for weak policy terms.

You are reading this article on the internet. When online, you can buy more or less any product or service across state or national boundaries. Although there are some restrictions, e.g. some states limit your right to import drugs from foreign countries, there is an almost free market where you can search for the cheapest price and buy whatever you need. There is no possible economic justification for retaining this historical privilege for insurance companies. All it does is preserve their ability to maximize their profits at your expense. For example, in Minnesota three insurance companies dominate 80% of the market for health plans. There is no doubt that, if more companies entered the market, the premium rates would fall. During his run for President, Senator John McCain was in favor of free markets for health plans. President Obama supports it and the proposal is in both versions of the healthcare reform bills currently stalled in Washington. But because the Republican party’s only policy is to oppose everything the Democrats propose, it seems even this simple change in the law may be lost. What will the result be? The anticompetitive behavior of the insurance industry will continue and you, the consumer, will suffer.

Could the law change tomorrow and allow everyone access to cheap health insurance wherever it can be found? The problem is that the states have different sets of regulations and compliance leads to different costs. The playing fields are not level. So, premiums are significantly lower in those states which have the fewest consumer protections. It would not be fair competition if people living in Minnesota, which has strong consumer protections, could all get health insurance quotes from states with little or no consumer protections. The only way in which there could be a free market is to have a single set of federal regulations for the sale of health insurance plans. Sadly, the political parties do not want to talk about this even though we would all benefit. In the US, the political elite’s interests do not match the needs of the ordinary citizens.

Health insurance market sure looks confusing to those who have to deal with it for the first time in their life. But as with anything that seems complicated at first, health insurance is quite easy to understand when you take some time to learn the basics of it. Of course, don’t expect to become an insurance market specialist overnight but the following tips will certainly help those inexperienced with health insurance shopping to get a decent policy for a fair price.

What you can get?

Individual insurance plans – the most common option for people with normal income, especially those who aren’t offered with group insurance by their employers. The vast majority of insurance companies offer such policies and the diversity of coverage options is very wide here. However, make sure to learn what are the requirements in your state and check if the insurance company is licensed in your area before getting the plan.

High risk pools – some pre-existing conditions will make it hard for you to get typical individual health insurance. That’s where high risk pools may come in handy. Such plans are available only in certain states, so make sure to learn if there are any in your area. If yes, then it would be a good option for those who are considered to be a high risk policy-holder. The rates are relatively high here, but for some it may be the only option for adequate coverage.

HIPAA coverage – this type of insurance best appeals to those who have been recently dropped of employer sponsored group coverage and don’t fall under COBRA coverage too. Health Insurance Portability and Accountability Act (also known as HIPAA) health insurance can be purchased in any state and is particularly useful to those who have pre-existing conditions. Thus, it’s a good alternative to high risk pools or an option where the pools are unavailable. Speak to your insurance agent to decide which option is better for you.

Where you can get it?

Insurance agents – these are independent individuals that provide health insurance quotes and plans from numerous companies. Each insurance agent has his own selection of companies he provides services of, and if there are any question he is the person to ask. However, first make sure that the agent you’re speaking with is licensed to work in your area before getting any services or signing policy contracts. You can do that at your state’s insurance department.

Department of insurance – while not being a direct seller of health insurance, the state insurance department can give you valuable information on local agents and providers you can buy from safely. If there are any complaints about any particular provider, this is the place to learn about them.

Online sellers – the recent trend in many insurance companies going online, as well as the development of independent sources can be a very helpful and easily accessible source of information regarding health insurance. It is very easy to get health insurance quotes online with these sites and shopping for a plan takes you only a couple of minutes.

Health insurance spendings account for a large part of business activity costs, and their share is especially large with small businesses and home-based enterprises. And with the continuous trends in rates increase it’s getting harder and harder for small enterprises to carry this burden, causing many small businesses to drop health coverage benefits altogether.

A recent study conducted by the Commonwealth Fund in New York has concluded that small businesses tend to pay 18% more for health insurance than their larger counterparts all across the country. That’s because large enterprises have a better negotiating power due to larger numbers of workers to be insured. Having that in mind, being despaired about the thing won’t help your small business much. About 60% of 46 million people in the US who have no health insurance coverage are employed by small enterprises and these numbers keep on growing. Such tendencies are no good news for small businesses, because qualified and better workers tend to pay much attention to health benefits at the enterprise and not having them lowers your chance of attracting workers who will help develop your business better.

In order to cope with the Catch 22 situation here, you have to learn how to minimize your healthcare costs and provide your employees with the benefits they deserve. Here are some tips on how to get exactly what you need:

1. Keep the workers healthy. Instead of fighting the consequences and paying for costly medical coverage, you can invest into your workers’ health and promote different wellness programs at your business. Introduce regular screenings, check-ups and promote a healthy lifestyle by offering your employees free gym sessions or other benefits. It’s much easier to prevent a disease rather than treat it.

2. Lower the coverage. Larger coverage amounts lead to higher premiums and a logical solution for this would be lowering the coverage. You can also ask your employees to partially contribute to the premiums if they want to keep the initial coverage amounts. Of course, this would be quite unpopular among your employees but if your small business insurance plan is in question you have to consider going with such unpopular measures.

3. Think about HSAs. Health savings accounts are gaining popularity amongst small business owners as they provide more flexibility and tax benefits than typical health insurance options. HSAs combine high-deductible health insurance plans with tax-free savings accounts, making the premiums you have to pay lower, and providing more saving options to your employees. And the fact that all withdrawals are tax-free makes it a great option for those who want to get great small business insurance health coverage without constraining the enterprise’s budget.

4. Team up with other small businesses. You can join an association or buying union who other local small businesses in order to gain better rates. Such associations provide small enterprises the bargain power of big companies because when combined, such groups have a large number of employees to be insured which eventually leads to more competitive premiums compared to going off alone. Member fees are usually quite low with such groups while the benefits are great, so think about joining one of you have in your area. This might give you good rates on other forms of small business insurance as well.

The world of politics is never supposed to make any real sense. After all, once you pit people’s cherished beliefs against each other, passions are roused and the arguments soon become bitter. It would be better if everyone was just allowed to do what they wanted. But, when it comes to organising medical care for the population, it takes a government to put the right kind of infrastructure in place. People have to be trained as care givers. This takes years and costs a small fortune. Hospitals and clinics have to be built. And then we come to all the support staff who drive the ambulances, keep the places clean and keep the accounts. Ah, yes, the money. All of this work over years has to be paid for. So the $64,000 question is who should foot the bill? It’s at this point that emotions get in the way of common sense.

Talk to one side of the argument and they will tell you people who want access to medical care should carry private insurance. Talk to the other side and they will tell you the state should pay for the service out of the tax revenue. It’s never really clear why people disagree. Only people who are in work pay tax. Only people who earn can afford to pay the premiums on insurance. It’s the same money. The only difference is the way it’s collected – one as tax and the other as premiums paid to an insurance company. But wait! There is a difference! If the state collects in the money, it can use it more efficiently because, unlike the insurance industry, it does not intend to make a profit. So the only reason to support the current system is to allow the insurance industry to continue making an ever larger profit.

As the Senate is currently set up, forty-one senators can stop any reform. That’s forty Republicans plus one other. Yet when you look at the number of people these Republican senators represent, it’s only 36% of the US population. This is somewhat unfair. The party with the majority of representatives was voted in by 64% of the population. The Democratic platform could not have been more clear. It was to be reform of healthcare provision. Yet when you look at the media (which is controlled by big business), all you see reported is the opposition to reform. The “tea party” movement captures all the headlines. But in all this, there is one really big irony that gets very little coverage.

The Republican senators may only represent 36% of the population, but they represent nearly 50% of the children without any health insurance and 42% of the adult population with no insurance. Despite the fact that half the uninsured children in the US are represented by the Republicans, their opposition to any reform that would give the children coverage could not be more aggressive. If we assume the outcome of the reform would be cheap health insurance for almost all US citizens, the Republicans are against it. Their policy is to keep the profits rolling in for the health insurance industry and, if the majority of the people who live in their states have no insurance, that’s just their bad luck. The US is genuinely a strange place. Despite the recession, it’s one of the richest countries in the world yet it has a political party determined to prevent its citizens from enjoying cheap health insurance. Sadly this party with the minority of votes in the Senate could get their way.