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A Question of Coverage

How People with Diabetes Can Avoid Health-Insurance Conflicts

By Jan Chait

Last Update: December 8, 2003

It wasn't the marriage proposal you think of—you know, the one where your Prince Charming falls to his knees and promises undying love. And yet, it held a very attractive promise to somebody who has diabetes: A good health-insurance policy.

Steve Mezaros and Fran Baumgartner

Steve Mezaros and Fran Baumgartner of Phoenix, Arizona, planned to stay common-law spouses. However, after Baumgartner had trouble getting insurance coverage because of her type 1 diabetes, the two had to get married so she could get on his policy.

Fran Baumgartner and Steve Mezaros of Phoenix, Arizona, had been living together for four years, with plans to continue the arrangement. Then, one day, Baumgartner called Mezaros crying the tears of frustration borne of six months of fighting for proper coverage for her type 1 diabetes.

"He said, 'OK, let's get married so you can get on my policy,'" Baumgartner recalled.

Two weeks later, on Friday, Nov. 13, 1998, a judge pronounced the couple man, wife…and PPO coverage.

The marriage was one of love as well as convenience, but Baumgartner admits that in earlier years she had considered "putting an ad in the paper offering to marry some guy who had insurance."

Or take Joe Dodge, also of Phoenix. A computer programmer, who is an independent contractor, he was on his wife's group policy until she stopped working.

"When she quit, we signed up for COBRA," says Dodge, who also has type 1 diabetes. "When our 18 months ran out, I asked the company if we could get a policy for ourselves. 'Sure,' they said. 'For [$4,166 per month].' We said, 'thanks, but no thanks.'"

No Guarantee of Coverage

"Diabetes is on top of the list for uninsurable diseases," says Karen Pollitz, project director at the Institute for Health Care Research and Policy at Georgetown University in Washington, D.C. "They're trying to make coverage cheap and you can only make coverage cheap by not covering sick people. [There are] no rules saying people are guaranteed the right to coverage."

According to a National Institutes of Health study, about 640,000 people with diabetes do not have any form of health insurance. They have neither insurance through an employer, nor Medicare, private-health insurance, military benefits, Medicaid or other public-assistance programs. That's dangerous, says Pollitz.

"All of the research says it's very bad for your health to not have health insurance," she says. "People who don't have insurance forego care, don't get prescriptions filled. They don't get [diseases] diagnosed. People die from being uninsured. When you're caught without insurance and can't get it because you're sick, it's a very, very frightening place to be."

As Dodge's experience shows, cost can be a deterrent even when coverage is offered.

According to the report, the average cost quoted for the hypothetical applicants was $2,988 per year for a single-only policy, or 38 percent more than the average cost of a policy for a healthy person. Individual quotes ranged from a low of $408 per year for "Alice," a 24-year-old woman with hay fever, to $30,048 for "Frank," a 62-year-old overweight smoker with high blood pressure. Even so, "Alice" was quoted rates of up to $4,596 and "Frank" was quoted prices as low as $2,928.

"The independent insurance market is tiny," says Susan Laudicina, director of research for Blue Cross/Blue Shield. "It's a very price-sensitive market. If you are a high-cost patient [and] try to purchase insurance…as an individual, it could be very expensive or impossible. If you're chronically ill, you can…find affordable coverage through the high-risk pool."

But Pollitz says that even high-risk pools, available in 29 states, are expensive.

"All of the high-risk pools cost 150 to 200 percent of the standard rate and all have pre-existing condition exclusions."

In addition, some states that have risk pools limit how many people it can take. More confusing, each state has its own laws regarding insurance coverage. If you have individual or high-risk coverage in one state and move, you could be out of luck—or in better shape than before.

To get an overview of what insurance coverage is like in your state or in the District of Columbia, log onto www.healthinsuranceinfo.net a site maintained through Georgetown University's Institute of Health Care Research and Policy.

Taking Care of Business

Insurance is, above all, a business. Just as a manufacturer, retailer or other business has to price its product to make a profit in a competitive market, so does an insurance company.

"When you get to the individual market, it's a tough place," says Joe Luchok, communications manager for the 300-member Health Insurance Association of America. "You don't have the protection of a whole bunch of people."

Luchok likens applying for individual insurance after being diagnosed with diabetes with applying for automobile insurance after an accident, saying, "You can't wreck the car and say, 'this car needs repair; give me insurance.'"

In fact, carriers in some states aren't required to give you insurance at all, says Anne Chevillot, an underwriter with the National Association of Insurance Commissioners.

"Each state will determine how a carrier can underwrite for an individual," she says. "Some states allow you to exclude a condition. Others will allow you to surcharge for conditions that may cause you to [highly] utilize the policy. For the most part, diabetes for individual underwriting… is usually a decline."

Why? Go back to the car- wreck analogy: While the "accident" may not have happened yet, insurers hear "diabetes" and think "complications," much as automobile insurers hear "teen-age driver" and think "accidents." While your teen-age driving years may have been accident-free, just as your diabetes may be complication-free, it's the overall pool that supplies the statistics—and determines the cost.

"Some carriers will accept well-controlled people with diabetes: Somebody with blood glucose in the acceptable ranges and no other complications or problems," Chevillot says. "Actuaries look at claims and claims costs."

Chevillot adds that costs should begin declining along with the rate of complications as diabetes-management education and doctors who are more educated at treating diabetes become more widespread.

Exercising Your Options

"Pollitz says the best way to remedy the problem is to stay in group coverage if there is any way that you can.

"Otherwise," she adds only slightly tongue-in-cheek, "move to New York or get elected to Congress."

What Pollitz means by this is that New York has a law that guarantees individual coverage to everybody, and the population to keep costs from becoming too prohibitive. Members of Congress have superior coverage that continues even after they leave office.

What If I Don't Get Elected to Congress?

For the rest of us, there are several options, which include:

Associations

George Lovelace, owner of Adjusters Supply Co. in Dallas, Texas, pays less than $300 a month for his insurance, despite having a double-whammy in his family: Not only does he have type 1 diabetes, his wife has had ovarian cancer. But Lovelace belongs to the printing-industry association in his state where members have banded together for group coverage.

"We have a little over 2,000 members," Lovelace says. That strength in numbers spreads the risk over those who are healthy, as well as those who have high medical costs.

Dodge also solved his insurance problem by incorporating and joining an association of small-business owners. Instead of paying the $4,000+ per month his former carrier wanted, he now pays around $500 a month.

However, there can be pitfalls associated with pooling.

"Every time they change insurance providers, I have to change doctors," Dodge said. "I've been in Arizona for four years and I've had four doctors. If this falls apart, I don't know what we'll do. Somehow, you've got to get into a group."

Lovelace hasn't had the "doctor roulette" that Dodge has experienced, but he has a choice of companies.

"If they're covering you good and are reasonable in their [payment] delays, go with the flow," Lovelace says. "I like to find something good and stay with it."

"Associations may be nice, but you need to be really careful," Pollitz says. "Check with your state's department of insurance before joining an association plan. You can't assume that anything in the [Georgetown University online] Guide applies to associations. You have to ask."

Guaranteed Issue

New York is the best of the 12 states with guaranteed issue in the individual market, Pollitz says.

Insurance companies doing business in states with guaranteed issue "must offer coverage to all individuals regardless of health status or claims experience," Laudicina says, but adds, "it's not a long-term policy solution." Officials in Maine, for example, are saying the individual market is "in a death spiral" in their state, citing average costs of up to more than $1,200 a month for basic coverage.

High-risk Pools

If your state is one of the 29 that have a high-risk pool, that's probably your best bet for getting insurance. But it'll cost you about 150 to 200 percent more than a healthy person pays for a policy, Pollitz says.

High-risk pools are designed to help people who cannot otherwise get health insurance, but laws vary in the 29 states that offer it. Contact your state's department of insurance to see if you're covered. Residents of Colorado, Indiana, Iowa, Kentucky and Washington can get details, including premium rates, online at www.onlinehealthplan.com.

Funding sources also vary. While Indiana has room for all who that apply, California's high-risk pool—the Major risk Medical Insurance program, or Mr. MIP—has a waiting list of up to two years.

Open Enrollment

This is a come-one, come-all call for health insurance by some insurance companies. Laudicina says eight of Blue Cross/Blue Shield's plans have open enrollment periods where "one or two policies are available to whomever shows up," regardless of their health status. Look for advertisements where you live.

Tax Credits

Proposed to help uninsured people buy coverage in the individual market, it isn't likely to do any good even if it comes to be, experts say. The most commonly proposed amounts—$1,000 for individuals and $2,000 for families—are only about one-third to one-fourth of what is needed for the average annual cost of a health-insurance policy.

When shopping for insurance coverage, Pollitz advises to do the equivalent of window shopping: Rather than formally applying and take the chance of being turned down, which can go on your record for other companies to see, call insurance agents and ask about your possibilities. There are a lot of variables, so be prepared for a turndown even in the most positive of assurances.

And have your checkbook handy. Typically, you'll be required to provide the first month's premium along with your application.

The Bottom Line?

The topic of health insurance for people with diabetes is a touchy one, to say the least. The best advice is to get into—and stay in—group coverage if at all possible. Even if you do get into group coverage, be prepared to enter the insurance morass with as much determination as you spend controlling your diabetes. 

States with High-Risk Pools

Alabama (open only to people eligible for HIPAA)
Alaska
Arkansas
California (has a waiting list of more than)
Colorado
Connecticut
Florida (closed to new enrollees)
Illinois (has an enrollment cap)
Indiana
Iowa
Kansas
Kentucky
Louisiana
Minnesota
Mississippi
Missouri
Montana
Nebraska
New Mexico
North Dakota
Oklahoma
Oregon
South Carolina
Tennessee (merged with its Medicaid program, called TennCare)
Texas
Utah
Washington
Wisconsin
Wyoming

SOURCE: Institute for Health Care Research and Policy, Georgetown University


This article originally appeared in Diabetes Interview magazine, November 2001, and is reproduced with permission.


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