Protect your medical coverage

Health care is costly in the best of times. Even the luckiest among us, those who have comprehensive insurance through an employer or Medicare, might have to stretch to afford premiums, deductibles, and co-pays. Add a recession that's thrown millions out of work and trashed the retirement savings of still more millions, and you have the makings of a full-blown crisis.

Here's our guide to getting the most care for your dollar, depending on where in our mazelike system you and your loved ones are.

That's the good news. The not-so-good news is that you are more likely now than you would have been a decade ago to have a hefty deductible and co-pays. Here's how to maximize the benefits you still have:

That way, you don't have to guess whether a service is covered or not, or whether there's an extra deductible for, say, a visit to the emergency room that doesn't result in a hospital admission. Ask your employee benefits office for a Summary Plan Description, which is what it sounds like—a summary of the provisions in your plan—and read it. It's a good idea to ask for a new copy every year so you know about any changes in your plan. If your company has an intranet, you might also be able to find it on there.

To be really conscientious, ask for a complete copy of the plan as well. Warning: It's often in small print and might run up to 100 pages. But if you ever get into a dispute over coverage, you'll want to have a copy. You are entitled by law to both of those documents.

Now that you have studied your policy, you know the rules. Follow them. If you don't, your care won't be covered. If, for instance, you have to designate a primary-care physician, do it. Or if you need pre-authorization to see a specialist or have outpatient surgery, get it.

Above all, do what you can to obtain all of your treatment within the plan's network. That can be difficult; sometimes a hospital is in the network but individual doctors aren't. If you are in doubt about whether your plan covers a particular doctor or facility, don't rely on a written directory of providers or even your insurer's online listing, both of which might be out of date. It's best to check with the doctor's office or hospital directly.

Most people default to the plan they already have instead of checking out their options during their company's annual open-enrollment period, but that's a mistake. The plan you have this year might not be the best one next year. The premium contribution might change. The deductible might go up. Your favorite doctor or hospital might have switched to another plan's network. Your spouse's plan, which was more expensive last year, might now be the cheaper one. Given the way insurers coordinate benefits from multiple coverage, it is rarely worthwhile for both spouses to select a family plan, says Joan Smyth, a benefits consultant at Mercer, an international human-resources consulting firm. Instead, pick the best plan for your family and decline the other one. Childless couples might sometimes find it advantageous to get single coverage under each of their plans.

If you expect to get married or have a baby in the coming year, keep that in mind during open enrollment. (If your family status changes between open-enrollment periods, you can switch then.) If you have a child who will graduate from high school the next year, find out whether the plan will cover him during college or even beyond and, if so, what you have to do to secure that coverage, such as providing proof of enrollment. Check the details of dependents' coverage thoroughly.

Many employers now offer an option of a high-deductible plan to be used with a health savings account (HSA). An HSA is an investment account that you can tap for deductibles and other health expenses at any age without incurring taxes. Unused HSA money rolls over every year. However, if you withdraw the money and spend it on nonqualified expenses before age 65, you will owe income taxes plus a 10 percent penalty. The law says a so-called HSA-compatible policy must have a minimum annual deductible of $1,150 for solo coverage and $2,300 for family coverage.

Some employers contribute money to their employees' HSAs, and all the money belongs to the employee immediately. If your employer does not contribute, and you don't have enough money to fund the account yourself, think twice about signing up. Facing big up-front out-of-pocket costs might tempt you to skip medical treatment when you really need it.

Unlike an HSA, a flexible spending account (FSA) works with any kind of insurance, not just a high-deductible plan.

If your employer offers an FSA, sign up for it. You can generally put up to $5,000 of your pay in the account every year, tax-free, and you can spend it on a long list of health expenses, including deductibles, co-pays, and co-insurance (but not premium contributions), over-the-counter drugs and medical supplies, dental care, and eyeglasses and contact lenses. The catch is that if there's money left in the account at the end of the year, you lose it. So it's important not to put in more money than you're sure you can spend, and you must have the patience to do the paperwork involved. Your FSA does not reimburse for something your heath insurance covers.

If you are planning any elective procedures, such as dental work or a colonoscopy, get them done as soon as you can. Fill as many prescriptions as you can, and consider getting a 90-day supply, if possible.

If you have a flexible spending account, use it up as fast as you can. Even though your contributions are deducted from each paycheck, you have access to the full value of the account on the first day of your plan year.

Your overriding goal should be to hang on to some kind of group coverage for as long as you can. It is almost certain to be better than anything you could buy on your own, and it preserves your ability to maintain coverage if you ever develop a serious medical condition.

Here are your insurance options:

That might be the most affordable option, if it's available to you. The loss of a job is considered a "qualifying event," which means you won't have to wait until the next open-enrollment period to change plans as you normally would. If your spouse and children previously were covered under your plan, they can switch, too. The federal Health Insurance Portability and Accountability Act (HIPAA), which grants you that right, says you have to make the switch within 30 days of losing your previous coverage.

The Consolidated Omnibus Budget Reconciliation Act, another federal law, usually gives you the right to stay on the health plan you had at your old job. Usually you have to pay the entire cost yourself, including the part that your employer used to pay—often 70 percent or more—plus an extra 2 percent for administration. With family coverage topping out at more than $1,000 per month, the vast majority of unemployed people eligible for COBRA end up turning it down because they can't afford it.

The federal economic stimulus bill passed in February 2009 tries to make COBRA more affordable for the newly jobless. It created a subsidy to pay for 65 percent of COBRA premiums for people laid off between Sept. 1, 2008, and Dec. 31, 2009. The subsidy lasts for nine months and phases out if your income tops $125,000 for an individual or $250,000 for married couples.

According to the Department of Labor, here's how it is supposed to work: If you're laid off, you'll get a notice saying you're eligible for the subsidized coverage, with instructions on how to sign up. (If you believe you're eligible and don't get the notice, ask your former insurer for it.) Your 35 percent share is what you'll pay for nine months. The government will reimburse your former employer for the other 65 percent.

If you lost your job last fall and turned down COBRA because you couldn't afford it, you can still sign up for the subsidized coverage now.

If your company went out of business, there's no COBRA because there's no group health plan to continue on. If you were fired for gross misconduct, you're not eligible. And COBRA doesn't apply to companies with fewer than 20 employees. (But 39 states plus the District of Columbia have "mini-COBRA" laws that extend COBRA rights to smaller employers' workers. The federal subsidy applies to mini-COBRA plans, too.)

After your nine-month subsidy runs out, you're entitled to continue your COBRA coverage for another nine months, or 18 months total, but you'll have to start paying the full cost. You have 60 days to choose that option, so you might consider waiting to see whether you get a new job before the deadline.

In 33 states plus the District of Columbia, if you're not eligible for COBRA or mini-COBRA, the law requires your group insurer to convert your coverage to an individual plan without a waiting period or exclusion of pre-existing conditions. But there are many complexities and caveats. In most of those states, insurers can charge whatever they want for coverage—usually a lot. Your state insurance department can provide you with the details for your state.

If your income takes a big enough hit from your job loss, you or your children might be eligible for one of those public health plans.

CHIP, the Children's Health Insurance Program, is available in every state. In some states it covers children in families earning as much as three times the federal poverty level, or $66,150 in 2009 for a family of four. CHIP offers comprehensive coverage, now including even dental coverage. Recent legislation provided $33 billion in federal funding to maintain the federal CHIP plans and expand coverage for children over the next four years. If you are eligible for both subsidized COBRA and CHIP, you can save money by putting kids on CHIP and adults on COBRA.

Medicaid is designed for people with incomes near or below the poverty line (though in a few states unemployed parents can earn up to twice the poverty limit and still qualify).

If you believe there is any chance you or your children qualify for either of those programs, apply for them, advises Donna Cohen Ross, director of outreach for the Center on Budget and Policy Priorities, a policy-research group in Washington, D.C. "If you apply for CHIP coverage for your child, in most states they will figure out which program you qualify for, and you'll only have to fill out one simplified application," she says. To find your state's programs, go to www.benefits.gov and enter the state's name in the search box.

If you are a childless adult without disabilities, it is unlikely that you will qualify for any kind of Medicaid, Cohen Ross adds.

Military veterans might qualify for free or reduced-price treatment at Veterans Affairs hospitals and clinics. The VA doesn't have enough funding to cover all veterans, though, so it has a priority list, with those who have been injured or disabled in combat at the top. Financial need is also taken into consideration. If you are a veteran, check with your nearest VA facility to see whether you are eligible for services.

Buying insurance on your own should be your absolute last resort. Compared with group plans, individual insurance is often more expensive overall and might have less generous benefits. In most states you can be denied coverage or charged more if you have a pre-existing health condition.

Moreover, the hard-sell marketing tactics used by many insurers make it all too easy for consumers to end up with Swiss-cheese policies that won't come close to covering their health-care expenses if they fall seriously ill.

The most dangerous pitfall is buying a plan with "affordable" premiums without investigating what it actually covers. Given that American health care is the world's most expensive, the only way for the insurer to make individual premiums affordable is to cut back on benefits. That can be accomplished in one of two ways: by increasing deductibles and co-pays (it's not uncommon to find policies with $5,000 or $10,000 deductibles) or by limiting benefits. Some individual polices don't cover doctor visits or prescription drugs, for instance.

Other policies might seem to cover everything, but they do so only up to a certain, often inadequate, limit. We've seen policies that cap outpatient care at $2,000 per year or pay only $900 per day in hospital expenses. When heart bypass surgery costs $45,000 and outpatient cancer chemotherapies can cost as much as $14,000 per treatment, such policies are guaranteed to leave you with crushing medical debts for normal treatments if you face a serious illness. You can identify those policies because they are usually labeled "limited benefit" or "not major medical" policies.

If you have no choice but to buy in the individual market, look for the most comprehensive plan you can afford. If you must choose between high deductibles and limited benefits, go for the high deductibles. Unfortunately, many people with limited incomes have no truly affordable choice in this market.

Most commercial individual policies are guaranteed renewable, meaning that even if you become ill and require expensive treatment, you can still renew the policy every year (though your premium will almost certainly go up) as long as you pay your premiums on time. Nonrenewable policies are just that—you have no right to renew them. If you get seriously ill, the insurer can cancel the policy at the end of your contract term.

Many Americans believe that there is always a safety net—some way to get health care—for those who are uninsured. That is not true, so being uninsured is a medical emergency in itself, and your first priority is to get some kind of coverage as fast as you can. In the meantime, here are some ways to help ease the financial burden if you do get sick:

It's true that if you show up at an emergency room with a medical problem that requires urgent attention, the facility is legally required to treat you even if you don't have insurance. But the hospital will send you a bill afterward, probably a very large one, and aggressively try to collect it. An emergency room is also under no obligation to provide nonemergency care. You can't show up and expect to get cancer chemotherapy or a knee replacement.

There are more than 7,000 across the country, providing basic outpatient care—including, in some cases, dental and mental-health services—and they charge according to ability to pay. Find the center nearest you at www.findahealthcenter.hrsa.gov.

Many community groups periodically put on health fairs that include free screenings for conditions such as hearing loss, high blood pressure, and high cholesterol. Some also offer free flu shots and vision screenings.

No one pays the sticker price for health care except, ironically, uninsured people who don't have the benefit of the big discounts that public and private insurers negotiate on behalf of their members. Many doctors will grant a similar discount to uninsured people paying bills on their own, especially those paying at the time of treatment, but you have to ask for it. Similarly, if you have a big hospital bill, ask for a discount. If your income is really low, you might qualify for free care. But again, you have to ask.

There are dozens of them out there, but you have to know where to look and, in many cases, make sure you follow some very specific rules. The federally funded Breast and Cervical Cancer Treatment Program, for example, will pick up the entire cost of treatment for those diseases for low-income women. But to qualify in many states, you have to have been diagnosed with your condition at one of the program's approved screening centers. If you were diagnosed elsewhere, no free treatment for you, no matter how broke you may be. (To find the screening program nearest you, go to www.cdc.gov/cancer/nbccedp.) The nonprofit Web site at www.needymeds.org lists a number of financial-assistance programs for specific diseases in an easy-to-search format.

Up until a few years ago, Medicare was blessedly uncomplicated. You got your card when you turned 65. To cover your co-pays, co-insurance, and deductibles, you could choose a Medigap supplement from among 12 standardized plans. As for outpatient drugs, well, you were on your own.

The 2003 Medicare Modernization Act upended this system. Now you have to navigate a set of choices as confusing as the private system that might have baffled you during your younger years. Which Medicare plan makes the most sense to you might depend on where you live, whether you have retiree health coverage, the size of your income, and whether you have a pre-existing health condition. We can't provide more than a quick overview here, but the nonprofit Medicare Rights Center operates a valuable Web site, at www.medicareinteractive.org, that has answers to practically any question you can think of.

Here are some of the important things you need to know:

The Medicare Modernization Act created a new category of private Medicare plans under the umbrella name Medicare Advantage. Dozens of insurance companies offer thousands of various plans nationwide. "Medicare Advantage plans are not Medigap plans," explains Judith Stein, executive director of the Center for Medicare Advocacy, a nonprofit group based in Connecticut. "They are not on top of traditional Medicare; they are instead of traditional Medicare. If you enter a Medicare Advantage plan, it's like joining any private managed-care plan." About 20 percent of Medicare beneficiaries had signed up for these plans as of January 2009.

Another big difference is that if you choose a private Medicare plan, you are not allowed to buy a supplemental Medigap plan to pick up any co-pays or deductibles. Medicare Part D drug coverage is also a part of many private Medicare plans, whereas people on traditional public Medicare have to buy a separate Part D plan.

Many private Medicare plans have richer benefits and cost consumers less than public Medicare, in part because the government gives them an average of 14 percent extra per member to spend. Some plans don't even charge additional premiums, and you don't have to buy gap insurance.

But there are serious trade-offs. You give up the nationwide choice of providers available with public Medicare. Some private plans, for instance, require you to get all of your treatment within a local network.

Moreover, cost-sharing provisions in some plans could stick you with large out-of-pocket expenses if you need costly treatments, cautions Paul Precht of the Medicare Rights Center.

Last, private Medicare plans can increase co-pays or premiums on an annual basis and change their roster of providers at any time. If you don't like it, you have to wait until the next open-enrollment period to change to another private plan.

Medigap plans, which work with traditional Medicare to cover deductibles and co-pays, come in 12 standardized versions, which makes it relatively easy to compare one with another by price. They often cost more than private Medicare plans, but they might be your best choice if you have a pre-existing medical condition. That's because if you sign up for a private Medicare plan and stay on it for a year or more, in all but a few states you give up your right to go back into a Medigap plan without consideration of pre-existing conditions. So the Medigap plan can refuse to take you, charge you extra, or even exclude coverage of your pre-existing condition. If you are healthy now but develop a health problem while in a private Medicare plan, you will not easily be able to go back to public Medicare plus Medigap, although you can switch to a different private plan. Only you can determine whether the immediate savings are worth the gamble.

This is the fastest-growing type of private Medicare plan, presumably because at first glance it seems to have the advantages of public Medicare but costs less. You can choose any doctor or hospital. But there's a catch: Many providers who accept patients with public Medicare are turning down patients in these plans. "The billing is often terrible—doctors wait months to be paid," Precht says. Also, people in these plans can end up having to pay large medical bills out of their own pockets if they don't contact their plans before obtaining treatment. Partly for those reasons, people leave those plans at more than twice the rate of other types of private Medicare plans, according to a recent study by the Government Accountability Office.

If your income meets certain guidelines (they vary by state), you might qualify for help with paying all or part of your Medicare costs, including help with your Part D drug plan. Your State Health Insurance Assistance Program, a free Medicare-Medicaid counseling service, can help you determine your eligibility. To find your state's program, go to www.shiptalk.org.

Working with unbiased experts, Consumer Reports has identified Best Buys Drugs that offer superior care at a lower price for several conditions. For more information, go to www.ConsumerReports.org/health/best-buy-drugs/index.htm.

Go to this federal Web site and enter the name of your state in the search box, and you'll find links to state Medicaid and CHIP programs.

This Department of Labor site has consumer information on COBRA, including the temporary subsidy.

Families USA, a health-advocacy group, provides links to state programs to help the uninsured and unemployed find coverage.

Medicare's extensive Web site includes interactive tools to help you compare and select Part D prescription-drug plans and Medicare Advantage plans in your area.

This comprehensive site, maintained by the nonprofit Medicare Rights Center, can help you understand and sort out your Medicare options.

The National Association of Insurance Commissioners site has links to every state's insurance department. Click on Consumers.

This nonprofit Web site links to drug-company Patient Assistance Programs as well as to state Medicaid and CHIP programs.