Driving to court one morning recently, I passed a sign out in front of a church that read: “Plan ahead. It wasn’t raining when Noah built the ark.” While it’s impossible to plan for every contingency and it’s always good to be flexible and open to new things as they come along, planning is an important part of being successful and sustaining that success.
I work with lawyers on many planning issues, including strategic, business and marketing planning. But another way that lawyers can plan for the future and protect themselves, their loved ones and their businesses is through insurance. Since I’m not an insurance expert, I’ve called one in to assist on these posts (it will be a 3 part series).
Michael Korn is a financial representative of National Financial Network, LLC in New York City. Before entering the financial services field, Michael was a small business owner, so he is aware of the concerns of solo and small firm owners. Michael specializes in working with small business owners and law firms, helping owners and senior management build, protect, and manage wealth. He may be reached at [email protected] or 646/885-2843. I’ve asked Michael some questions about what lawyers, particularly those working as solos or in small firms, should be thinking about.
ACS: Health insurance is a big issue these days, and is getting more and more expensive, and it’s a complicated field and tough to navigate on your own. What do lawyers need to know when they’re looking for health insurance?
MK: With the advent of managed care, one of the main issues to consider is how much freedom you want in choosing your doctors. Do you want a plan where you can only see doctors in the carrier’s network, or one where you can choose an in-network or out-of-network option?
ACS: Can you talk about the different types of health plans and what their advantages and disadvantages are?
MK: The major differences among all plans are cost and access; lower cost plans mean less access and high cost plans bring flexibility and access. The bottom line: You get what you pay for.
There are three basic types of health plans, as you do your own research, you may find additional variations on these basic plans:
•In-network-only plans, consisting of health maintenance
organizations (HMOs) or exclusive provider organizations
(EPOs);
•In- and out-of-network plans, consisting of point-of-service
(POS) plans and preferred provider organizations (PPOs); and
•Full-indemnity or fee-for-service plans.
In-network only plans (HMOs and EPOs). These plans are typically the least expensive, but they are also the least flexible. They contain costs by allowing members to use only the services of the doctors and facilities that have contracts with the network. If you want to see a doctor or visit a facility out of the network, you have to pay that provider’s full fees with no reimbursement or coverage from your plan.
Generally, HMOs focus on preventative care. Most HMOs require you to choose a primary care physician (PCP), who will be responsible for coordinating your care and providing specialist referrals in network, all with a low copay per visit.
EPOs, while still emphasizing preventative care, will allow you to visit any doctor within the network without referrals. EPOs typically have higher copays per visit and may or may not have deductibles.
In- and out-of-network plans (POS/PPO plans). These plans provide coverage for visits with any doctor or facility in or out of network. As a result of the out-of-network benefit, these plans typically cost more than HMO or EPO plans. When utilizing services within the network, you take advantage of the cost benefits of an HMO/EPO type of plan, such as the negotiated rates, copays, and membership programs. When utilizing the services of an out-of-network doctor or facility, you typically have to pay a deductible and co-insurance and submit for reimbursement, as in an indemnity plan (see below).
Some doctors are opting out of participation in a network so that they are not beholden to a pre negotiated rate for their services. A POS/PPO plan lets you access
care from these providers while getting some coverage—typically in the form of reimbursement for services with deductibles and co-insurance.
Indemnity plans. Indemnity or fee-for-service plans offer you the most flexibility but are also the most expensive. Indemnity plans feature a deductible and co-insurance. You may see any doctor you want, but you will have to manage the paperwork and submit bills for reimbursement. Indemnity plans today are generally being replaced by variations of managed care plans and can be very costly.
ACS: Are there other options that can be combined with health insurance to help keep costs down?
MK: Yes. With recent legislative changes, one cost-saving option that is gaining in popularity is the health savings account (HSA) coupled with a high-deductible health plan
(HDHP). This combination will allow you to better manage your own care and expense, allowing for a lower monthly cost and more efficient use of services.
Health savings accounts. An HSA is a savings account that is used to pay for qualified medical expenses. HSAs have tax advantages for both the employer and employee. HSAs can be funded up to the annual maximum amount (in the year 2008, the maximum is $2,900 for individuals and $5,800 for families) and may be funded by the employer, employee, or both.
Contributions to the HSA are tax deductible; income earned in the account grows tax free, and distributions for qualified medical expenses are also tax free (distributions for nonqualified medical expenses are taxable and generally subject to a 10 percent penalty). The employee owns the account, and if the funds are not utilized during the year, they roll over each year and can be used to pay for future eligible expenses.
Eligibility for HSAs: In order to be eligible to open an HSA, the employee must be covered by a qualified high-deductible health plan (it could be an HMO, EPO, POS, or PPO plan); in 2007, the minimum deductible was $1,100 for individuals and $2,200 for families. Unlike basic managed care plans, however, all expenses in such plans, including prescriptions, are subject to the deductible with the exception of annual preventative care, which is typically covered at 100 percent. Out-of-pocket expenses may be higher than in traditional plans; however, a qualified HDHP had a maximum out-of-pocket exposure of $5,500 per single or $11,000 for families in 2007.
For a sole proprietor who is relatively young and healthy, this can be an interesting way to reduce overall health care costs and take control of health insurance concerns.
ACS: In our next post in this series, Michael will outline what factors lawyers should think about before choosing a health plan.
One comment to add here.
Most people aren't aware, but every insurance broker engages a "wholesaler" This is the person that provides the quotes from the various insurers. So, my suggestion is to find out who your broker's wholesaler is and be sure that person has some expertise (and clout) in your industry. Pricing by the insurers is a bit more competitive than I realized and if your wholesaler has a good concentration in your field, you will get a better rate.
Posted by: Robert Fligel | May 07, 2008 at 07:36 AM