Thursday, April 12, 2012

Blue Shield’s Bag of Tricks

Health insurance is a crazy game that few people really understand. Just when you think you have it figured out, they change the rules. Health insurance companies like Blue Shield have two main problems:

- Rapidly increasing cost of benefits by the medical industry makes it hard to keep the premium rates current with the increasing cost of medical claims.

- As their insured’s age, their claims surpass the premiums charged.

To solve these two problems, Blue Shield resorts to these solutions:

Negotiate aggressively:

Every two years, contracts are renegotiated with the health care providers as to the maximum they can be reimbursed for each medical procedure.

For example, my original bill for a kidney stone surgery was $42,000. After Blue Shield applied their contractually agreed discounts, my bill was cut to only $5,000.

Raise rates:

Even though insurance companies fight hard to contain costs, it’s a losing battle. They eventually must raise the premium rates of each plan when it becomes unprofitable.

New products:

Every 6-12 months, insurance companies change the plans available with new benefits, deductible options and rates to new applicants that they think will make them a profit.

Close old plans when they become unprofitable:

- When you first start your policy you will be in the peak of good health so you will get the most current plan that has been designed by Blue Shield to make a profit. You will be grouped together with others in good health to form what is called a “pool” of insured’s.

- As your pool ages, the claims experience will increase and the profitability will diminish to the point of unprofitability for the entire pool.

- At this point, the rates for the entire pool will be increased.

- At this point, Blue Shield may establish lower rates within the same pool for those who are in better health. This is called “tier rating” and it is normally in five different levels.

- When rates start to increase, the members who are still in good health will begin to leave the pool for other health insurance solutions.

- This exodus of the good risks from the pool accentuates the loss experience and the unprofitability of the pool. Thus the rates begin to accelerate rapidly.

When this happens to your pool, there are things you can do to avoid paying the increased rates. If you are in good health, you can apply for one of the new plans that have lower rates. Or you can apply for a change to a lower tier premium rate for your present plan. Another option is to change your deductible and/or drop some of the coverage. I saved $4,800 per year by dropping some coverage and raising my deductible from $750 to $2,000

If you are in poor health, you can apply for a change to a lower tier rate level premium for your present plan. Remember- you have nothing to lose by trying and as your health improves, you may be accepted into a lower tier level. Call us- this service is free.

If you do not re-apply to prove you are healthy enough to change tiers, you are stuck. Most people do not know they can transfer to get a better deal. Allied Brokers can do this for you at NO cost! Don’t give up hope- call us! We are here to help you balance cost and value within this tumultuous health insurance marketplace.

Visit our website at http://www.alliedbrokers.com/ for information about all the types of insurance we offer. Or call 1-888-505-7988 for a free rate quote.

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