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Clark Howard's Tips

February 15, 2008

The state of California has found that some insurers have been rewarding employees for digging through your initial application and finding omissions that allow them to yank your coverage.

Meanwhile, New York is suing United Health Group for cheating people by making up bogus reasonable and customary charges. For example, say the average price of a procedure is $100. UHG will come back and say the local price is actually $30, and that they'll pay their customary 80% of that $30. Then they'll leave you with the entire remaining balance. But who can fight the big bad wolf of health insurance?

On a related note, here's a scoop on how insurers rip off small businesses. The math shows that the first 2 years of coverage are very profitable for insurers because few claims are filed. By year 3, however, that trend reverses. So some insurers offer teaser rates for the first 2 years and hike them up the following year. The hope is that you'll leave and go somewhere else for coverage at that point.

Clark wants transparency in health coverage and thinks this could be achieved if there were only 8 plans offered to small businesses: 2 HMOs, 2 PPOs, 2 HSAs and 2 of the traditional 80/20 splits. The difference between plans would be that, for example, one PPO might pay for experimental treatments and the other might not. Every insurer would have to sell identical plans, and they could charge what they wanted for them. That way you could switch to HMO plan NO. 2 if your insurer's HMO plan 2 is too costly. As always, Clark says the real risk to insurers will come from socialized medicine if they don't shape up.

Consumer advice courtesy of