Tuesday, May 27, 2008

Teaching About Insurance in the Classroom

Bethy writes about “I hate insurance companies” because after getting billed $1500 by the doctor, her insurance company only sent her a check for about $3. This brought to mind how many of my students do not really understand how insurance companies really work. I would love to have someone who works in an insurance company to come to the class and explain the real life scenario rather than the sales pitch.

“You are covered” does NOT mean you are covered. Most people think this means that the insurance company will pay this in full but it doesn’t. It means they will pay for part of the “allowable” charge. Of course this allowable charge is usually half of what the doctor actually bills you. For example, if the doctor charges you $200, and the allowable charge is only $100, and the insurance company pays 60%, then they will pay $60 and you pay out of your pocket $140. Many people think the insurance company will pay the entire $200 but they don’t. When my dad had his stroke, he qualified for in home physical therapy and they were told it was “covered” under medicare. Again, they thought this meant it was fully paid for. After checking into it, I found out that medicare only pays a certain amount of money and the patient is responsible for the rest.

Even auto insurance has the same kind of language. When my daughter was in a car accident, which was not her fault, she was happy because she was “covered.” Even though her van was totaled, she thought she would get a replacement for it. Imagine her horror when she was told that the insurance company would only pay her face value of the van (after prorating it for the year etc.) and did not even get enough money to buy a new used vehicle. Even though she was “covered,” she had to get a loan to get a new car.

Now you wonder why we even have insurance but think about the costs if you didn’t have it. Is it worth having? It depends. I like to think so in case something catastrophic happens like the time our house caught on fire or when I had to have surgery. I still had to pay a lot but not like I would have if we didn’t have the insurance. Sometimes we know something is “covered” but if we file the claim it will make our insurance premiums go up which in turn would cost more than if we just paid for whatever we need ourselves.

The bottom line (or what I want my students to know): Before you agree to any medical procedures, find out how much it will actually cost you. I have had the dentist call the insurance company to find out what they will pay for what is charged and how much it will actually cost me in the end. This keeps me from being surprised when I get the bill. Before I file a claim on my homeowners or car insurance, I find out how this will affect my premiums. Remember: “covered” does NOT mean covered.

Photo credit: Russell Proctor’s insurance by olivander


Anonymous said...

I also hate the impossible to understand products from insurance companies or banks (expecially banks right now!)

Those companies certainly let the customer believe whatever they want knowing that the contract gives the company plenty of loopholes to make sure its interests are protected. Have a watch of the movie Sicko for other mean examples.

Insurance is a great idea, but the average human cannot figure out 1) what they're getting and 2) if they are paying the right amount of money for it because of the complexity.

We should teach kids the general idea of insurance, which is sharing risk across a group. Kids should understand that it costs less to be counted in a group that is less risky overall. This is why it should cost less to be health insured if you don't smoke, because smoking is very risky to health. When you're buying insurance you don't want to share risk with smokers if you aren't one.

The rest of it is just profiteering and obfuscation by the insurance company.

Beth said...

oh Amen!! This is SO true. Because we don't understand it, we don't demand better coverage and treatment.

Thanks for your post!

Clix said...

Actually, I think you only have to pay the remainder of the "allowable" amount. When I worked in a chiropractor's office, we had to write off anything above the insurance provider's "Usual and Customary." The amount varied between providers, for reasons I have yet to figure out.

So even if the insurance company pays squat, you still get a discount - although what you get from it usually doesn't equal out to what you pay in premium.

Anonymous said...

Pat -

This is a topic that should be covered in every school and unfortunately often gets overlooked. Too many students graduate high school or college and are no longer covered by parents and are completely unprepared for the realities of insurance and all of the rest of the grown-up stuff.

Anonymous said...

The secret of Car Insurance is written.http://carinsurance2008.seesaa.net/