Emerging from the Bubble

This week I’m writing on one of the most talked-about topics of the year: health insurance. No, I’m not going to get into the political debate surrounding the health care reform law (though I’d surely love to argue with anyone willing to buy me a drink). Instead, I’m here to discuss your student Blue Cross Blue Shield health insurance policy and what to do when it expires after graduation.

Your Harvard health insurance policy ends July 31, so if your start date is after August 1 or you are going the entrepreneurship route, you’ll want to think about buying health insurance. If you stay in Massachusetts, you are legally required to buy insurance or you’ll have monthly tax penalties. But even if you aren’t required by law to buy it, you may still want to consider getting gap coverage.

Perhaps you can convince your future employer to let you join their group plan early and just pay the premia out-of-pocket. Perhaps your parents’ plans are unusually generous and will let you go back on them for a few months. (Six months from now the new health care reform law will allow anyone under the age of 27 to be on his or her parents’ plan, but that won’t do you any good until October or if you are 27+.) Unfortunately, our Harvard plans do not offer COBRA extensions like many of our previous jobs did, though Harvard Health Services will allow graduating students to continue to see doctors on a fee-for-service basis through September 30.

On the other hand, perhaps you want to play the health lottery and just skip coverage during the gap. This certainly could turn out just fine, but consider the down side: you get hurt while traveling or are in an auto accident while fetching groceries or strain your lower back while wrestling with nephews, and suddenly you find yourself in the emergency room. (We are not as young as we seem to think. Case in point: HBS intramural sports injuries.) This much is clear: that trip will end expensively. True, the ER is required to treat you regardless of your ability to pay, but given your impending ability to pay (i.e. your sweet job), you will find yourself facing a large bill upon your hospital discharge. And yes, you could be healthy and happy and just fine for those few months without insurance; alternatively you could be in excruciating pain and massive debt. The important questions here are: what are the different odds of those two outcomes, and what does that make your expected value for this route?

In order to help you evaluate the risk, consider the following questions:

1. How long will I be without coverage? My start date is August 4, which means I’ll be without insurance for a grand total of 3 days. I feel pretty confident that I can keep myself healthy for those three days. (True, I still may end up regretting that statement.) On the other hand, those who are postponing start dates until January or March of 2011 may want to think much more seriously about getting gap insurance.

2. What will I be doing in the interim period? If you are doing adventure travel or completing an internship in a developing country, you’ll want different coverage than if you are cleaning out your attic and visiting your grandparents in the Midwest. If you will be out of the country for the majority of the period, you might want to consider getting catastrophic coverage here in the US and supplementing it with travel insurance that covers emergency evacuation and hospitalizations. I highly recommend World Nomads (//www.worldnomads.com/policyparts.aspx) for affordable and comprehensive travel insurance. You’ll also want to be sure to get a physical, visit the travel clinic, and refill important prescriptions here at Harvard before your policy expires.

3. How much risk am I willing to shoulder? If you are healthy and don’t anticipate needing to see a doctor for chronic conditions during the interim period, you might want to consider an indemnity plan, which covers a certain percentage (often around 80%) of all charges and requires you to pay the balance. Most indemnity (or “co-insurance”) plans also have a deductible, which is the out-of-pocket amount you must first pay before the plan kicks in. The greater the deductible, the lower the monthly cost of the plan, but the expected cost increases dramatically should you have an incident and need major medical care.

On the other hand, if you know you need to see a physical therapist once a week or anticipate a volatile few months for your health (or your family’s), you might want to consider a managed care plan. The benefit to these is that you usually only pay a set co-pay for visits and file little-to-no paperwork, but the restriction is that you are often limited to a specific network of doctors. Go out of network and these plans could end up costing more than co-insurance plans. Also, be sure to check companies’ rules around pre-existing conditions. There may be minimum waiting periods before your regular physical therapy will be covered, which means you may be paying out of pocket anyway. Check out //www.ahrq.gov/consumer/insuranceqa/insuranceqa5.htm/ for a thorough discussion of the differences between these types of plans.

4. Do I have any “pre-existing conditions”? Thanks to the new health care reform law, insurance companies will soon be forced to stop excluding people with pre-existing conditions from getting coverage for comprehensive care. But that piece of the legislation doesn’t go into effect until 2014. In the mean time, you may very well be left out of key coverage, even under your employer’s group plan, if you have gaps in your insurance history. If you have any chronic issues like migraines or lasting pain from smashing a finger in an ill-advised intramural football game, you will want to contact your employer (soon!) to read the fine print on your future health plan.

Once you determine if you want to buy gap insurance, you’ll need to check out what is offered in the state you plan to live in post-graduation. Since insurance is regulated at the state level and there are pretty big variances in plan coverage and price, you’ll want to conduct some research online. The Harvard University Health Services site is a great place to start: //huhs.harvard.edu/Insurance/Students/InsuranceOptionsForGraduatingStudents.aspx.
Just remember this: each of us believes that he or she is an above-average driver, has a great sense of humor, and is going to stay healthy indefinitely. But that just isn’t true for everyone. Be realistic about the chance that you’ll need health insurance and plan accordingly.

Author’s Biography
Christina Wallace is an EC from Lansing, Michigan. She recently bought HBS professor Youngme Moon’s new book “Different” and loved it. She highly recommends it to everyone, everywhere. Seriously, go read it. (You’re welcome.)