Cavalcade of Risk #98: Call for submissions

John Leppard, proprietor of Healthcare Manumission, hosts next week's Cavalcade of Risk. Submissions are due this Monday (the 8th).

John asks that you please include:

■ Your blog's url
■ Your post's url
■ The post's trackback URL (if available)
■ A (brief) summary of the post

And PLEASE remember: ONLY posts that relate to risk (not personal finance tips and the like).

You can submit your post via Blog Carnival or email.

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Cutting Corners

First Tennessee did it, now Washington (state) wants to copy. Seems the folks in the great northwest believe the way to more affordable health insurance is to limit what the plan pays.

It's OK to get cancer but make sure you are well or dead in 90 days or less.

A few years back, Tennessee put in place a somewhat similar plan with an even lower annual cap ($25,000). As of 2007, the premium was about $150 a month.

Washington and several other states are struggling to maintain existing health-insurance plans for low-income people who don’t qualify for Medicaid, USAToday reported earlier this week. A program in the state that covers about 65,000 people will close later this year unless lawmakers come up with $160 million in new funding, the article said.

Keep in mind that Medicaid does not impose annual or lifetime caps on your benefits.

So if you are going to be sick in Washington better make sure you are also poor.

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Mortgage Insurance: Old vs New

Back in the day, agents routinely sold "decreasing term life insurance" plans to help their clients' beneficiaries pay off a mortgage. The plan, written to coincide (generally) with the number of years on a given mortgage, had a fixed premium but a declining face amount. The idea was that, as the mortgage balance declined, so would the policy.

The most obvious problem with this approach was that the policy actually became more and more expensive with each passing year, as the same premium pruchased less and less protection. There were other problems with these plans, as well, but they remained a commonly used tool for a long while.

Today, we often use some kind of permanent plan (such as Universal Life) or "regular" term plan to cover mortgages. In fact, we often don't sell separate policies to cover a mortgage, but simply include it as part of a comprehensive package.

The problem with this approach is that it still only covers one risk: death. Of course, some people (but not nearly enough) own disability insurance, which can help pay the mortgage in the event that one becomes disabled. Another approach, which is currently being touted by Assurity Life, is to couple a Critical Illness benefit with a life insurance plan. In a video the carrier recently sent to its agents, Ken Smith (Director of Health Products) explained why this may be a good idea:

[ed: the video was distributed "for agent use only," so I can't embed or link to it here. I'll do my best to pass along Mr Smith's "pitch"]

Something like 25% of folks in the UK own a critical illness policy; of those, over 60% bought their plan as a means of covering their mortgage. After all, what's more likely to happen before one reaches age 65, death or a critical illness? Folks with life insurance protection only could face a very unpleasant surprise if they're diagnosed with cancer or have a stroke. Either of these would mean some major time off work, and an increased risk of losing the house while still very much alive.

According to Mr Smith, the cost of the additional protection is usually "less than the cost of a cup of coffee a day."

It was unclear to me whether Mr Smith was discussing a critical illness policy with a death benefit, or a life insurance policy with a critical illness benefit. I'm not aware of any life insurance plans already in force to which one could add a critical illness rider. Likewise, most CI plans don't have a death benefit. So, what's one to do?

Well, if one currently has neither, then a combination plan may be the best best. If one already owns the "old fashioned" kind of mortgage insurance (e.g. term life), then supplementing that with a separate CI plan may be the best bet. Either way, your first stop should be with a professional, independent agent who can help you sort out your options. It's one more way that insurance can help manage risk.

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Why You Need Disability Insurance

'Nuff said:

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Health Wonk Review is up...

Managed Care Matters' Joe Paduda hosts this week's compendium of all that's wonky in the wild, wild world of health policy and polity. It's a little late, but Joe does a great job of explaining why each post merits inclusion.

Do check it out.

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Health News: (Don't) Make a Run for it!

For folks caught up in the fitness craze (and you know who you are!), there's something you should know:

"Researchers have discovered that the health benefits of aerobic exercise are determined by our genes - and can vary substantially between individuals."

Dang!

Turns out that, at least according to English researchers at the Royal Veterinary College [ed: so, are they talking about running dogs or running people?], about 1 in 5 of us get essentially no fitness benefit from excercising regularly. Which is not to say that it's necessarily a waste of time, but it does call into question some assumptions about health insurance programs that incentivize folks to excercise on a regular basis.

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