Insurance Q&A

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Friday, May 26, 2006

The Basics 16 ways to slash your insurance rates

To cut your premiums, you've got to know how insurance companies are going to size you up.

By Dana Dratch,
If you're buying life, disability, long-term care or health insurance, your insurance company wants to know more about you. Depending on the type of policy, it could inquire about your habits, medical records and family history. Based on the answers, it will slot you in one of several categories that will help determine just how much you pay for coverage.

What you say and how you say it can make a difference in how your insurance company sees you and what it charges.
"It's not enough to say you got a good rate," says Randy Herz, senior vice president of Herz Financial, an insurance advisory firm in Farmington, Conn. "You have to look at what their classifications are. Then you have to understand your own health. Health is one of the biggest factors in determining the cost of your insurance."

Here are some tips from insurance insiders to help you get the best health ranking -- and the lowest rates:

Communication counts
Tell the truth, the whole truth and nothing but the truth. Think that leaving something shady out of your health history might help? Wrong, for two reasons. First, the insurance company will likely find out (it is reading your records, after all), and it will assume the problem is severe because you didn't mention it. Even worse, if you withhold information that the company regards as material, it could cancel your life policy within the first two years, says Bob Hunter, director of insurance for the Consumer Federation of America.

Give your complete health story, but do it on your own terms and give the complete picture. Don't just say you have high blood pressure. Say you were diagnosed with high blood pressure five (or however many) years ago and have successfully controlled it with medication.

"The consumer should think about it from the side of the insurance company," says Robert Hoyt, head of the risk management and insurance program at the University of Georgia and president of the American Risk & Insurance Association. "To the extent you give them good, complete information and reduce the uncertainty, then ultimately you're going to get a fairer price."

If your agent or broker knows what wrinkles might give you a problem, he can shop you to the companies most likely to take you on at a good rate.

Watch your language. Sometimes incomplete answers can paint a bad picture. And insurance underwriters are trained to assume the worst. So be clear and complete in your answers. If you had a nonaggressive cancer removed from your face one time several years ago, don't simply say you had cancer removed, says David Johnson, an insurance agent and board member with the Georgia Association of Health Underwriters. List the specific type -- basal cell, for instance -- and that it was done once with no recurrence.

Sometimes an application will ask the ever popular question, "Which of the following conditions have you been treated for?" Instead of just checking "chest pains," include the fact that it turned out to be indigestion and no follow up was needed.

Know the rules of the game. "You need to ask what the (health) ranking is based on," says Hunter. "There should be objective criteria. And you really should shop a little. The criteria vary."

Find out what your ranking is with a specific company and why, says Hunter. It could be that something they don't know will improve your ranking and decrease your premium.

Shop around. It's common consumer advice, but it can be even more important with insurance. Two different companies can view a person's health and the risk he or she poses very differently.

"Most companies try to put you in the right slot," says Hunter. "But if they make a mistake, you don't want that to be the only one you talked to."

Even the lingo varies from company to company. A ranking of "preferred" or "standard" might mean two very different things, with different rates, at two different companies.

Smart shopping is very important for smokers, especially people who only occasionally smoke a cigar or pipe. While some companies will automatically put you in a less-desirable category with a higher premium, others won't penalize you for that once-a-year stogie.

Your physician can help
Alert your doctor. Insurance companies want to talk with your doctor's office and look at your most recent records. Failing that, they might have to use only the records from the Medical Insurance Bureau (a repository for medical records used by insurance companies), which might not be to your advantage. Sometimes a doctor can give some perspective to a condition that might look worse in black and white (for example, a high cholesterol condition that's being treated successfully).

But a busy doctor's office can sometimes drop the ball, says Dave Evans, vice president and publisher for the Independent Insurance Agents & Brokers of America. And the insurance company will only try so many times before it gives up.

So let your doc know you're applying for insurance. A little advance notice can ensure the call isn't overlooked and give you the best chance at a good rating.

Make sure the company gets all of your records, not just some. To get the most complete, up-to-date picture of your health, the company needs all of your records.

"If you've moved or migrated doctors, the fact of the matter is you probably have to be more proactive," says Evans.

Shop quietly. Similar to a lot of inquiries on your credit, a lot of inquiries on your insurability can throw up a red flag, says Herz. Instead, choose an agent or broker who can quietly do some informal shopping to narrow your options before you do anything official. "It avoids you getting declined or rated," says Herz.

In addition, if you use several different agents or brokers, let them know you're shopping around. That way, "everyone knows what they're working with and it might make them more competitive," says Herz.

Pick your insurance professional carefully. Not every agent is up to the task, especially if you've had some health problems in the past.

"If you're dealing with someone who does this a lot, they can help coordinate and shepherd you along because they are comfortable with the process," says Evans.

If you anticipate problems, it's especially important to have someone who knows the system. This can be an agent or broker who knows which companies are likely to give you the best rates and someone who knows how to talk to underwriters to convey the true risk -- or lack of risk -- you would pose.

"The worse your health is, the more this matters," says Herz.

About your vices: Cut them out
Develop good habits. The insurance company probably won't ask how many times a week you work out, how many grams of fat you consume or how many glasses of water you drink. But all of those things impact the criteria they will examine. So hit the gym, lose those extra pounds and keep yourself healthy.

"These things can make a difference for people, not just in getting coverage but in the price you'll get," says Evans.

Want to drop 30% from your life insurance premium? Kick the cigarettes.

"Smoking can add up to 30% to the cost of your life, disability and health insurance premiums," says Johnson.

Avoid drugs and alcohol. If you take illegal drugs, you're not going to find an insurance company that wants to take you, says Johnson.

"If (a person) has a recent history of drug use, they're not going to be able to get insurance," he says.

If you're a recovering alcoholic, "You're probably going to be able to get coverage, but it could be a higher premium," says Johnson. Emphasize, with medical records to back you, how long you've been sober. The insurance company could see a relapse as a risk to them, so the more you can show how unlikely that is, the better for your rates.

Prepare for your exams. In some cases, the insurance company will require either a physical or a short exam by a paraprofessional, which can include taking your vital signs and drawing some blood.

To get the most accurate reading, schedule it first thing in the morning on an empty stomach. (Obviously, if you have a condition that makes that tricky, talk to your doctor first.) Give up vigorous exercise like that three-mile run 24 hours in advance. Get a good night's sleep. And some experts recommend forgoing your morning coffee, or even water.

Follow up on the details of your medical records. Do your records contain a recommendation for a test that you never got? The insurance company could see that as a bad sign, says Herz. "Have the doctor note in your records that you didn't need it after all -- or get it done," he says. Otherwise the company is likely to think that you could have some undiagnosed problem.

Think about your future. If you're healthy now and considering buying term life insurance, make sure that it's renewable and convertible, says Evans. "What that means is that you can convert to permanent coverage without a physical. That would be worth paying extra for," he says.

Keep trying and keep asking questions
Try to get coverage even if you've had health problems. Work with a professional you trust and have him quietly look into what kind of ratings you would get, says Herz. Bear in mind that a number of conditions aren't the black marks they used to be.

"A person who had open-heart surgery used to be declined," says Herz. "Now they can get regular rates."

Ditto for folks who are using medications to control conditions such as high blood pressure and high cholesterol.

"I've seen people who have cancer, heart (problems), all sorts of things, get insurance because they were able to get a favorable prognosis," says Evans.

Ask why. If you are declined or end up with rates higher than you were expecting, find out why. Talk with your agent and ask how to get a copy of your records from the Medical Information Bureau, says Evans.

Don't give up. "Don't consider a (lower health ranking) or decline in the past as indicative of future events," says Herz. It could be that last time around your agent didn't work hard enough for you, or it could be that today, with new drugs and treatments, your condition wouldn't pose as much of a risk, he says.

And time does heal -- even in the insurance business. "Sometimes, the further you get from (an event)," says Herz, "the better off you are."

Monday, May 08, 2006

Auto Insurance Costs Holding Steady; Average Nationwide Premium at $867


The cost of auto insurance is expected to rise by just 0.5 percent in 2006, the smallest increase in six years, reports the Insurance Information Institute.

A declining number of auto accidents, safer cars and fraud-fighting efforts are some of the forces contributing to the cost slowdown.

However, rising medical care and vehicle repairs continue to put upward pressure on rates, along with hurricane-related claims, the industry group also noted.

The average cost for auto insurance nationwide for 2006 is estimated at $867—an increase of just $4 per vehicle from last year, according to the I.I.I, despite record vehicle-related losses arising from the 2005 hurricane season. The projected increase represents a continued slowdown from 2005 when auto insurance costs rose by 2.5 percent.

"The cost of auto insurance is increasing by about one-sixth the rate of inflation and little more than a single gallon of gasoline," said Robert Hartwig, senior vice president and chief economist of the I.I.I.

"Many people who, for example, drive safe cars, have excellent safety records and good credit-based insurance scores may see their rates go down, often by 3 to 5 percent or about $25 to $50 per vehicle. This is welcome news for drivers who have been battered by record high gas prices over the past year," he added.

What's more, Hartwig said, people who trade-in their expensive gas-guzzlers for smaller, more fuel efficient and less expensive vehicles may see even lower insurance costs in many cases. Smaller cars that cost less with fewer horsepower are often less expensive to insure because repair costs are less. Some insurers now even offer special discounts for hybrid vehicles.

It may also pay to just leave the car at home. "People who make the switch to public transportation may also qualify for lower insurance premiums if they no longer use the vehicle commuting and drive it significantly fewer miles each year," said Hartwig.

Hartwig cited the declining number of auto accidents, safer cars, new auto theft technology, fraud-fighting efforts and graduated licensing laws for teen drivers as additional key factors contributing to the cost slowdown.

However, he observed that rising costs for medical care and vehicle repairs as well as defense costs and jury awards remain a problem, according to I.I.I.'s analysis.

Restrictions on the use of credit-based insurance scores in several states are also a cost threat to millions of drivers, according to its analysis.

"Insurance scores are highly accurate predictors of future loss, allowing insurers to more accurately price insurance and create a more fair and equitable rating environment for all drivers. Efforts to ban scoring will lead directly to higher insurance rates for good drivers while, ironically, lowering rates for people who are involved in the most accidents," said Hartwig, adding that efforts by some states to restrict other underwriting factors that have been used by some insurers for decades could have a similar negative impact.

Katrina Clobbered Cars Too
Record catastrophe losses associated with Hurricanes Katrina, Rita, Wilma, Dennis and Ophelia (the five storms that hit the Southeast in 2005) and predictions by leading meteorologists of more of the same for the next 15 to 20 years are putting pressure on the cost of auto insurance in some parts of the country.

Insurers received nearly 674,000 claims for vehicles that were damaged or destroyed by last year's storms. Those claims occurred across a wide swath of southern states and cost insurers some $3.2 billion," said Hartwig.

Florida, Louisiana and Mississippi saw the most claims, but large numbers of claims were also filed in Texas, Alabama, Georgia and North Carolina. Even the landlocked states of Arkansas and Tennessee reported significant numbers of claims despite being located hundreds of miles from where the storms made landfall.

Weather-related damage to vehicles, including flooding, is covered under the "comprehensive" portion of auto insurance policies. Banks issuing car loans and leasing companies generally require vehicle owners to carry comprehensive coverage. People who own their vehicles outright are not required to carry comprehensive coverage, though many do. The coverage is frequently dropped, however, on older vehicles.

Claim Severity Continues to Rise
"Unfortunately, while drivers today are filing fewer claims, those that are filed cost more," Hartwig said. "It costs more to repair cars, particularly following accidents involving sport utility vehicles."

This year insurers will pay between $15 and $20 billion in medical claims, the I.I.I. reported. Higher costs for hospitalization and pharmaceuticals, and state regulations that encourage abuse of medical treatments and associated legal costs are also to blame. "Collectively, these high costs in some states more than offset the decline in accident frequency, pushing overall rates upward," Hartwig observed.

Cost Drivers in Insurance
Medical costs are an important factor in the auto insurance market. Each year more than three million car accidents involve injuries. More than one in four auto accidents resulted in injury claims in 2003, according to the Insurance Research Council (IRC).

The average cost of a bodily injury claim exceeded $10,000 in 2005, but can easily run into the tens of thousands of dollars.

Higher jury awards in vehicular liability cases continue to put additional upward pressure on auto insurance rates. The average jury award in auto liability cases was $261,000 in 2003, according to the most recent available data from Jury Verdict Research.

"Auto insurance litigation is very expensive," said Hartwig. "In 2004 auto insurers spent more than $4.1 billion defending policyholders from lawsuits brought against them. Auto liability issues are much more important than people realize," he continued. "About 60 percent of auto premiums paid in 2005—almost $60 billion—was for liability coverage. As we look at 2006 and into 2007, we see this trend continuing."

Auto theft is another significant factor that affects rates. According to the Federal Bureau of Investigation (FBI), an automobile is stolen every 26 seconds in the United States. While the number of auto thefts decreased by 1.9 percent in 2004, the first decrease in five years, there were still 1.24 million vehicles reported stolen. The good news is that preliminary FBI data for the first half of 2005 indicate that the auto theft rate fell by 2.1 percent. Declines were posted in every region except the West.

The decreases over the past two years come on the heels of a 1.2 percent increase in auto thefts in 2003, 1.5 percent in 2002, 5.9 percent in 2001 and 0.7 percent in 2000. The nation's highest theft rates were found in the West and South, with the lowest rates occurring in the Midwest and Northeast. Automobile theft is a much bigger problem for some cities than others. Modesto, California, was the auto theft capital of the United States in 2004, with an auto theft rate nearly quadruple that of the country overall. Other problem cities include Las Vegas, Phoenix and Seattle.

New vehicle security devices, such as electronic tracking systems can help police find stolen vehicles and keep premiums down. Some insurers offer car owners these tracking systems at a special price in combination with premium discounts.

Fraud and abuse remain major problems in some states, such as New York, Maryland, Florida and Massachusetts. However, crackdowns by law enforcement agencies and insurers have put a definite dent into organized insurance fraud.

Factors Affecting What People Pay for Auto Insurance
The average driver will pay $867 in 2006. But what an individual driver pays will vary by state, insurance company and motorist characteristics."

Factors that influence the cost of coverage may include:
* Type of car and specific safety features;
* Number of miles driven and type of driving;
* Family claim record, including the number of accidents and their severity;
* Driving record, including speeding tickets;
* Age, gender and experience of driver; and
* Credit-based insurance score.

For more information on auto insurance, go to the I.I.I. Web site:

Source: The I.I.I. is a nonprofit, communications organization supported by the property/casualty insurance industry.


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Make Health Care More Affordable And Available For All Americans Through HSAs

White House Fact Sheet: Making Health Care More Affordable and Accessible for All Americans

From the White House:

Today, President Bush Discussed His Comprehensive Strategy To Make Health Care More Affordable And Available For All Americans Through Health Savings Accounts (HSAs), Improved Transparency, And Other Innovative Reforms.  The Administration is determined to reduce health care costs by pursuing practical, commonsense reforms that will improve quality and increase choice.  America leads the world in health care because we believe in a system of private medicine that encourages innovation and change.  The best way to reform our health care system is to preserve this system of private medicine, strengthen the relationship between doctors and patients, and make the benefits of private medicine more affordable and accessible. 

Our Reforms Are Guided By Two Clear Goals.   The first goal is to meet America's obligation to seniors and the poor.  The second goal is to make care and coverage more affordable and available for all American families. 

The President Is Working To Meet America's Obligation To Seniors And The Poor

Beneficiaries Are Enrolling In The Medicare Prescription Drug Benefit.  Medicare drug coverage enables the typical senior to spend about half of what he or she used to spend on prescription drugs each year.  About a third of seniors are eligible for prescription drug coverage that includes little or no premiums, low deductibles, and no gaps in coverage.  On average, Medicare will pay for more than 95 percent of the costs of prescription drugs for low-income seniors.  More than 30 million people now have prescription drug coverage through the Medicare program, and hundreds of thousands more are signing up each week. The May 15 deadline for seniors to sign up at the lowest cost is approaching, and the President encourages our Nation's medical community to continue getting the word out to seniors about the benefits of this program.

We Are Strengthening Medicaid.  Earlier this year, the President signed legislation making it easier for states to offer alternative benefit plans, provide coverage to more people, and design their Medicaid program to meet their needs and budgets.

We Are Expanding Community Health Centers.  These centers provide primary health care for the poor, so they do not have to go to hospital emergency rooms for routine care.  Since the President took office, the Administration has funded about 800 new or expanded Health Centers – bringing our total to more than 3,700 Health Centers serving more than 13 million Americans a year.  Over the next two years, we will fund the opening or expansion of 400 more Health Centers.

We Are Making Medicare And Medicaid Financially Sound.  Today, the Medicare and Social Security Trustees release their annual report.  Each year, the Trustees remind us that these programs are not structured in a way that they will be financially sound for our children and grandchildren.  The good news is that we do not need to cut these programs, but we can save them by restraining the growth in spending to levels we can afford.  The President continues to call on Congress to join him in creating a commission to examine the full impact of baby-boom retirements on Social Security, Medicare, and Medicaid.

The President Has Five Key Policies To Make Health Care More Affordable And Available For All American Families

1. Expand Health Savings Accounts (HSAs).  HSAs lead patients to demand more value for their money by enabling them to control their health care spending.

  • HSAs Have Two Components:  Low-Cost Catastrophic Insurance Coverage And Tax-Free Savings Accounts.  Catastrophic coverage provides protection in the event of a devastating medical illness.  HSAs allow Americans to contribute to a tax-free account to pay for routine medical needs and to build up savings by rolling over any contributions unspent in a given year.  HSAs can help us move our health care system away from one where a third party pays for most of the costs to one where consumers make their own health care decisions.

  • HSAs Are Making Health Care More Affordable And Accessible.  From March 2005 to January 2006, the number of HSAs tripled from 1 million to more than 3 million.  Forty percent of those who own HSAs have family incomes below $50,000.  More than one-third of those who bought HSAs on their own had previously been uninsured. 

  • HSAs Are Helping American Hospitals.  More insured Americans means fewer people arriving at our Nation's hospitals needing uncompensated care. 

  • The President Believes Congress Needs To Give Americans Who Buy HSA Policies On Their Own The Same Tax Breaks As Those Who Get Their Health Insurance From Their Employers.  Under current law, the self-employed, the unemployed, and workers at companies that do not provide health insurance are at a great disadvantage. The President also believes Congress should fix the tax code to raise the limit on tax-free contributions to HSAs.  In addition, the President has proposed a refundable tax credit to help low-income Americans purchase health coverage on the individual market.  Under his proposal, low-income families can receive up to $3,000 in a refundable tax credit to purchase HSA-qualified insurance. 

  • Health Insurers Should Be Allowed To Sell Portable HSA Policies Nationwide.  Today, the savings in health accounts are portable, allowing savings accounts to be taken from job to job.  However, the health insurance within HSAs is often not portable because of outdated laws and practices that prevent insurers from offering portable policies. 

  • The President Calls On Congress To Move Bills That Improve Tax-Free Health Savings Accounts.  These bills will end many of the biases in the tax code, provide a tax credit of up to $3,000 for low-income families, and make HSAs more attractive to millions of Americans. 

2. Increase Transparency.  To get the best quality care for the best price, patients need to know in advance what their medical options are, the quality and expertise of doctors and hospitals in their area, and what their medical procedure will cost.  HHS Secretary Michael Leavitt is encouraging leaders in the health care industry to post their "walk-in" prices to all patients, and the President has directed HHS to make data on Medicare's price and quality publicly available on the Internet.  The Administration is also asking insurance companies to increase health care transparency by providing their negotiated prices and quality information to their enrollees – and the Federal government will do the same.

  • To Help Spur This Transparency Revolution, The Administration Will Require Transparency From Insurance Plans Participating In Federal Programs.  Beginning this year, the Federal Employees Benefits program and the military's Tricare system are asking contractors to provide price and quality information.  The President is also asking hospitals and insurers to make information on prices and quality available to all patients, increasing transparency without the need for legislation from Congress to require transparency by law. 

3. Apply Modern Information Technology.  Too many doctors' offices and hospitals have the most advanced technology of the 21st century but still use last century's filing systems for managing medical records.  A nationwide information network will protect the privacy of a patient's medical information while making health information available in real-time.  We are making good progress toward the President's goal that most Americans have an electronic health record by 2014.

4. Enact Association Health Plans (AHPs).  Unlike big businesses, small companies cannot negotiate lower health-insurance rates because they cannot spread their risk over a large pool of employees.  AHPs would allow small firms to band together across state lines and buy insurance at the same discounts available to big companies.  The House has approved AHP legislation four times during the President's Administration, and it is now time for the Senate to pass legislation that makes health insurance more affordable for small businesses.

5. Enact Medical Liability Reform.  The glut of frivolous lawsuits are driving good doctors out of practice and driving up costs by forcing many doctors to practice defensive medicine – ordering unnecessary tests and writing unnecessary prescriptions.  The total cost of defensive medicine to our society is an estimated $60 billion to $100 billion per year, including $28 billion billed directly to taxpayers through increased costs of Medicare, Medicaid, VA, and other Federal health programs.  Junk lawsuits are a national issue requiring a national response.  The House has passed a good medical liability reform bill, and it is time for the Senate to act.

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