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Other Articles
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Medical Insurance and Medicare
Securing Health Insurance with Pre-existing Health Conditions
By Amy Rose Herrick
Amy Rose Herrick, ChFC, IAR Economic Consultant, Amy Rose Herrick, ChFC, Economic Consultant
Many individuals drastically underestimate the cost of securing private health insurance when they are retiring early, changing jobs, or as a result of downsizing when pre-existing conditions exist.
There are in place nationwide safe guards to assure an individual who was previously covered by a group plan the opportunity to secure private coverage when employment eligibility or COBRA ceases. These individuals relying on what they thought they understood about HIPPA regulations have quite a shock when they see the actual premiums and policy coverage selection that this protection provided that does not compare to the previous premiums being remitted.
Time can also be the enemy. It may take up to three months to secure a coverage package that suits your total household needs, so don’t wait until the last 30 day renewal premium is due to secure your alternative coverage, or just begin shopping.
One quick thing to check is whether or not your state has a guaranteed insurance pool. If it does, then you will likely find coverage here because most, if not all the private carriers licensed in the state will not issue coverage to you. They are not required to when a state pool exists. You will be “declined”. This coverage can be expensive per person, and is really designed for catastrophic medical expenses. You may see coverage benefit caps at only $500,000- $1,000,000, much less than your old group coverage provided.
If you are considering relocating to another state, call the Insurance Commissioners office to determine what your options will be state pool or private insurers, and when you would be eligible to participate as a new resident.
If your state does not have a guaranteed insurance pool, all the licensed individual health insurance carriers in the state must offer you coverage. That sounds great on the surface, however, legally, they can offer you coverage that is at a premium of up to 400% higher than a non rated person applying for the same coverage. You may need to apply to several different carriers remitting the first estimated premium with each application, all at essentially the same time to determine what offer will be the best for your unique needs. Then, you cancel the ones that do not fit your needs and receive a full refund of monies remitted usually within a couple of weeks of when you declined their offer. This step can tie up some much needed cash flow temporarily.
In many families in this situation, you will need to have split coverage. This means you may have one spouse or both spouses if necessary in the state insurance pool, and the other spouse and children, or the children standing alone on an individual policy because having all the family on the same insurance pool policy would be much more expensive than splitting the family up to separate plans. There is no reason for the non-rated individuals to pay rated rates.
One saving grace to this higher than expected budget need, is the potential to deduct a portion of your medical costs off of your Schedule “A” on your income taxes. You may be able to itemize a large portion of these expenses if health insurance premiums, long term care insurance premiums, co-pays, deductibles and mileage to and from medical appointments and the pharmacy exceed 7.5% of your adjusted gross income (AGI). You may have other eligible itemized deductions that help boost your total amount of itemized deductions that offer you a higher total deduction than if you just used your standard deduction and did not itemize.
If you are self employed, the premiums only for the health care portion are generally fully deductible off of your taxable income, and the co-pays, deductibles and medical mileage would all fall under the same 7.5% restrictions listed in the prior paragraph.
This deductibility of medical expenses in many cases amounts to what could be thought of as a “back door” tax subsidy to help pay premium as a result of tax savings from itemization.
Contact an experienced health insurance agent for much needed assistance to determine what will be the best coverage options for your household, in your location.
When you have a better idea of your expected annual outlay on this budget item, you can also visit with your tax professional to see if any changes in withholding should be implemented as a result of any new tax savings created from this expense increase.
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