Over the past year I struggled with a Health Insurance problem that I thought was relatively obscure but I have since found out to my surprise that it’s pretty common.
Here’s the deal.
In a few weeks, I will turn 65 and thus go on Medicare. Right now my wife and I are covered under commercial insurance from my former employer. The carrier, Aetna, will automatically cancel the coverage they provide when I go on Medicare.
No big deal there . . . I certainly won’t miss the $1000.00 dollars/month I pay for my premium right now.
But here’s the rub. My wife is two years younger than me. Consequently I knew I was going to have to go out on the street to get coverage for her until she was able to go on Medicare herself in two years.
To make matters even more difficult, she has Alzheimer’s (diagnosed in 2006), diabetes (diagnosed in 2010), and high cholesterol (diagnosed in 2000). So I knew she would be judged a high risk and I was going to have to pay a pretty hefty premium for that.
So about a year ago I started to look around. I applied to several carriers for her and kept getting denials. I knew, as I said, that I was likely to have to pay a hefty premium for her, but I never imagined there would be denials.
At first I thought that this was “illegal” and that carriers were compelled to cover her. So I contacted my state’s (Arizona) Insurance Commission. Come to find out that Arizona is one of the few states in the union that DO NOT maintain a high risk pool and thus do not compel carriers to provide coverage for high risk cases.
Now what to do? The clock was ticking, I had wasted a lot of time trying to navigate a rather complicated system (believe me, it’s hard to get your arms around all the “rules”) and I had a wife whose insurance is going to cancel, she has pre-existing high risk conditions, and a state that doesn’t maintain a high risk pool.
Well, after cutting through the jungle of regulations, I found out there is a solution of sorts.
If your state is one of those that don’t maintain a high risk pool, then by default you are able to apply for coverage under the “Pre-existing Condition Insurance Plan” (“PCIP”) maintained by the Federal Government. (By 2014 ALL states will be compelled to maintain a high risk pool, but that doesn’t help me right now . . . PCIP was designed to fill this gap ’till 2014.)
But there is one big nuance to that that makes it difficult. To qualify for PCIP you have to have gone without medical insurance . . . drum roll . . . for SIX MONTHS! (I haven’t yet found the reasoning for that “rule”, but that’s academic. It is what it is.)
However, there’s another option. She would be eligible for COBRA coverage, which would only carry her for 18 months, plus it would be the same premium I pay now: $1000 bucks a month. The PCIP premium is only $500 bucks a month and would carry her ’till Medicare takes over in 24 months.
Another consideration for these options has to do with Medicare rules. While she will be eligible for Medicare even with a pre-existing condition, there is a substantial penalty assessed by Medicare if you DON’T have health insurance in the 90 days prior to going on Medicare.
That condition would prevail with COBRA (though there is an iffy COBRA provision that Alzheimer’s people would be provided with 24 months coverage, but it’s too iffy for me to rely on PLUS once I choose COBRA, PCIP is perpetually out . . . so I need to be sure of which crossroads to take.) PCIP would not enable that Medicare penalty.
So the choice I faced was suffer the six month gap in the front end (PCIP) or the backend (COBRA) and with COBRA I will likely suffer a Medicare penalty for her. Plus there was a substantial difference in the premiums . . . $500/month for PCIP versus $1000/month for COBRA.
Since she’s more likely to suffer a health crisis as time goes on, there is a substantial difference in the premium (favoring PCIP), and PCIP does not carry the risk of a Medicare penalty, I’m choosing PCIP.
Certainly I’m going to be walking on egg shells for six months. One hospital emergency admission for her during that time, and I’ll suffer a major financial hit (even one overnight stay in a hospital is about $10,000 bucks.)
But, on the plus side, Arizona’s draconian health insurance provisions actually turned out to be a positive. For states that DO maintain a high risk pool, you are compelled to use that vehicle and are NOT eligible for PCIP. The average cost of health insurance for people who live in high risk pool states and have to take that provision is well over $1000 bucks a month.
So Arizona did me a favor and got my premium for her down to less than half of what it would have been if Arizona had a high risk program.
BTW, it took me almost a year to figure all this out. As I said, navigating through the complex regulatory jungle of health insurance (a complex topic to begin with) is not all that easy and certainly not intuitive.)
My surprise in all this was that several Arizona agencies I spoke with said that my circumstance was not all that uncommon. I was a little crestfallen because I had thought I had a pretty unique story . . . but I guess not.
The only thing unique about it is that it takes a long time to figure this out all by yourself. Hopefully then, this may save you a little legwork, especially if you live in one of the few states that doesn’t maintain a high risk pool.
Bob, I really sympathize with your struggles and the complexity of attempting to understand your alternatives. However, I think you were misinformed about a couple of issues: 1) There is no penalty for being uninsured 90 days prior to going onto Medicare. There is, however, a late enrollment penalty for not enrolling promptly once you are eligible (the 7-month period that begins 3 months before your month of eligibility and extends three months after that month). And, after you enroll, you have only 90 days in which to choose a Medigap plan without medical underwriting (i.e., they have to take you even if you have a pre-existing condition). 2) PCIP is available even in states that have state high risk pools. Many who can choose between the two end up picking the state pool because there is no 6-month waiting period (although you may not be eligible for a state pool until you have exhausted COBRA), and if you go from COBRA to the state pool you will not have a waiting period for covering pre-existing conditions (i.e., you would be considered “HIPAA eligible” under healthcare portability law). One of the flaws in the PCIP legislation was that they did not waive the 6-month waiting period for people exhausting COBRA. The 6-month waiting period has been a barrier for a lot of people with poorer coverage who, nevertheless, did not want to take the risk of going bare for that interval. The purpose, however, was to prevent those who had other coverage from flooding in because there was only a limited pot of money for those who truly had no other alternatives. Having chosen PCIP, I wish you and your wife the best in squeaking through the waiting period. It is very good coverage once you get it. Your situation only highlights the need for real health reform. Under the Affordable Care Act, after 2014 those in your situation will be able to purchase coverage within state health exchanges without denials for pre-existing conditions and (we hope) at affordable prices. As you say, it isn’t really all that uncommon a situation.
Great post!! Those tips are really useful to us.. Thanks for this.
@ Jan,
Thanks for your analysis.
You said “. . . I think you were misinformed . . .”. Well, it’s really not an issue of being misinformed, it’s an issue of poor communication on my part . . . and for that I apologize to the readers.
Let’s take your first point: the Medicare penalty I spoke of. You are correct. But the problem lies in my use of the word “penalty”, and also not specifying that I was talking about SUPPLEMENTAL insurance (Medigap) and not “ordinary” Medicare or Plan C Medicare.
When people hear the word “penalty”, they normally associate that with MONETARY issues (increased costs), and indeed when I said “substantial penalty” I probably reinforced that notion. But there are other types of penalties . . . I should have been more clear.
When you purchase Supplemental/Medigap Insurance, there may be a penalty if you are uninsured prior to purchasing that Supplement. That “penalty” can be anywhere from a 1 to 3 month wait for any treatment associated with a pre-existing condition.
From: “Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare”, developed jointly by the Centers for Medicare & Medicaid Services (CMS) and the National Association of Insurance Commissioners (NAIC):
“If you have a pre-existing condition and you buy a Medigap policy during your Medigap open enrollment period and you’re replacing certain kinds of health coverage that count as “creditable coverage,” it’s possible to avoid or shorten waiting periods for pre-existing conditions. Prior creditable coverage is generally any other health coverage you recently had before applying for a Medigap policy. If you have had at least 6 months of continuous prior creditable coverage, the Medigap insurance company can’t make you wait before it covers your pre-existing conditions. There are many types of health care coverage that may count as creditable coverage for Medigap policies, BUT THEY WILL ONLY COUNT IF YOU DIDN’T HAVE A BREAK IN COVERAGE FOR MORE THAN 63 DAYS.”
Since my wife’s medical treatment is pretty intense, and I expect her to have a LOT of doctor appointments and probably a few hospital stays (especially when going without treatment for 6 months) when she goes on Medicare, I anticipate having to get her Supplemental Insurance (Medigap). I should have mentioned that and it might have been more clear.
From: “Your Decision Guide”, AARP Medicare Supplement Insurance Plans:
“Exclusions: What‘s not covered by AARP Medicare Supplement Plans?
. . .
* Any stay which begins, or medical expenses you incur, during the first 3 months after your effective date will not be considered if due to a pre-existing condition. A preexisting condition is a condition for which medical advice was given or treatment was recommended by or received from a physician within 3 months prior to your plan’s effective date.”
“The following individuals are entitled to a waiver of this pre-existing condition exclusion:
. . .
* Individuals who have been covered under other health insurance coverage within the last 63 days . . .”
Now let’s move on to the issue of PCIP coverage in ALL states. Yes, you are correct there again . . . PCIP is available in all states. But there is a nuance here that I failed to mention and which accounts for the apparent inaccuracy of my statement in the OP.
PCIP can be administered/run by either the state OR the federal government. Arizona is one of those states where PCIP is administered ONLY by the federal government. So what I should have said was “For states that DO maintain a high risk pool, the PCIP program is run by the state and NOT the federal government.” Consequently, your PCIP program is going to be administered EITHER by the state or the federal government.
And there is a BIG difference between the two.
For example, the PCIP rates in Arizona are from $334 to $450. The PCIP rates in Alaska, WHERE THE PCIP PROGRAM IS RUN BY THE STATE, can be anywhere from $425 to . . . drum roll . . . a whopping $1,806 per month.
A good part of the reason I didn’t go into a lot of regulatory mumbo-jumbo (and please don’t misunderstand, I’m not challenging you here . . . as I said, you are correct) is that there’s a fine line between complexity and simplicity here. I wanted to make the article readable and understandable for Jane Doe. In reducing the complexity, I may have sacrificed some technical accuracy . . . and for that again I apologize to the readers.
And one more thing on these two issues. The Social Security issue of the penalty was peripheral to my decision (icing on the cake, perhaps) and the PCIP coverage in ALL states was totally irrelevant, all I cared about was what Arizona did. Since these issues were not critical to my decision, I may not have been so rigorous as I was on the critical issues.