St. Joseph's professor's advice to 20-something daughter on health-insurance turmoil

By Todd Erkis

When my 27-year-old daughter texted me out of concern over recent headlines about the possible collapse of the health-insurance market, it occurred to me that our conversation must be a common exchange nowadays between parents and grown children - or among adults in general.

We all want to help our loved ones prepare for the possible changes and be sure they understand their options when it comes to health-care coverage. As a finance professor who worked in the insurance industry for more than 25 years as an actuary, developing insurance products and helping set prices for insurance, I felt uniquely qualified to address my daughter's questions.

Here is the advice I gave her:

You must have health insurance. Health insurance acts like a discount program for medical services. People without insurance often pay significantly more than those with insurance. Health insurance also protects against financial ruin in the event of large medical expenses. It is a must-have.

Find the best plan for your circumstances. Carefully evaluate both the monthly premium and deductibles you might have to pay and find out if you are eligible for any assistance from the government. Make sure your primary doctor and any specialists you need are in the plan as it can be expensive to use doctors outside your plan's network.

Understand your choices. The new Republican proposal decreases the required level of benefits, allowing you to choose how much coverage you want to purchase. While this will lead to more choices and likely lower prices for health insurance, be aware that the cheaper plans will cover less, which could be a problem.

Keep your coverage to avoid the surcharge. Under the Republican proposal's "continuation of coverage rule," those who drop coverage will be incur a 30 percent surcharge if they apply for health care in the future. It may seem unfair, but this is intended to stop healthy people from staying out of the system until they get sick, which can mess up the way health-care insurance works by making costs unpredictable. If you drop your insurance, you lose the protection of being grouped with everyone because more than likely, you're coming back sick. The current law addresses this issue by mandating everyone must have health insurance or pay a penalty. The problem with the current law has been the penalty is not big enough to get everyone into the system.

I am thankful you are healthy. I was proud when I read the part in your text describing your concern that people who are currently unhealthy might not be able to get health insurance in the future. Under the current law, everyone the same age (healthy or sick) gets covered at the same price, but the new proposal moves sick people to a "high risk pool." The theory is that the government would subsidize the cost to cover this group so they can also receive insurance at a reasonable price. Some may say that it is fair for people who use more insurance to pay more, but the government must make sure the subsidies are large enough so the amount paid by these people is affordable.

For my daughter, and for many Americans, the uncertainty is unsettling and the details about what may change can be confusing. I hope our politicians appreciate the high stakes here and have the wisdom to fix (or replace) the current system while providing the opportunity for every American to have health-care insurance regardless of their health or income.

I am sure every parent has that same hope.

Todd Erkis is a professor of finance at St. Joseph's University and author of "What Insurance Companies Don't Want You to Know: An Insider Shows You How to Win at Insurance." terkis@sju.edu