Flaws in Enrollment Records for Insurance Exchange

Even now, the administration said, it may be sending incomplete or erroneous information to insurers on one out of every 10 people who try to enroll.

Julie Bataille, a spokeswoman at the federal Centers for Medicare and Medicaid Services, said the agency was working with insurers to correct the errors and resolve discrepancies in records kept by the government and by insurers.

In some cases, the government did not notify insurers of people who enrolled online at HealthCare.gov. The government refers to these people as “C.M.S. orphans” because the consumers successfully completed the application process and selected health plans, but the government did not send the information to the insurers.

An administration official said the government would do everything possible to “rescue the orphans.”

In other cases, Ms. Bataille said, the government sent more than one enrollment notice for the same person to an insurer. And in some instances, she said, the information sent was incorrect. A child may have been listed as a parent, a name may have been misspelled, or an address may be wrong.

Moreover, officials said, some people who signed up for a health plan are listed in insurance company records but not in the government’s records. In those cases, consumers may have canceled enrollment in a health plan, but the government failed to inform the insurer.

The errors and omissions resulted from technical problems that crippled the website in its first weeks, Ms. Bataille said.

With hundreds of hardware upgrades and software changes, Ms. Bataille said, the site now works well for the vast majority of consumers who use it. However, insurers say they are still seeing problems in “back-end systems,” which are supposed to deliver consumer information to insurers.

Your Money: A Guide to the New Health Insurance Exchanges

But after much anticipation, the curtain will finally rise on the exchanges next week, providing millions of consumers with an online marketplace to compare health insurance plans and then buy the coverage on the spot.

The exchanges are likely to be most attractive to people who qualify for subsidized coverage. Individuals with low and moderate incomes may be eligible for a tax credit, which can be used right away, like a gift card, to reduce their monthly premiums. People with pre-existing conditions will no longer be denied coverage or charged more (this applies to most plans outside the exchanges, too). And all of the plans on the exchanges will be required to cover a list of essential services, from maternity care to mental health care.

“In today’s individual market, it’s like Swiss cheese coverage,” said Sarah Dash, a research fellow at the Health Policy Institute at Georgetown University. “Consumers should have an easier time figuring out what they are getting for their money.”

But it’s still going to take some time to analyze the plans and their costs, which are expected to vary widely across the states. And the coverage may still pinch many families’ budgets. Fortunately, there’s a six-month window, from now to March 31, for people to figure it all out.

Here’s some information to get you started:

Q. Where can I apply or get more information on the exchanges?

A. To avoid fraud artists, enter through the front door: Healthcare.gov. From there, you can find links to the exchange offered in your state. Alternatively, you can call 1-800-318-2596.

Q. When does coverage go into effect?

A. You can apply as early as Oct. 1, but coverage won’t begin until Jan. 1. The enrollment period for coverage in 2014 closes on March 31, 2014. After that, you can enroll only if you have a major life event like a job loss, birth, marriage or divorce.

Q. What sort of coverage will be offered?

A. All plans will have to provide the same set of essential benefits, including prescriptions, preventive care, doctor visits, emergency services and hospitalization (this also applies to most individual and small-employer group plans sold outside of the exchanges). Plans can offer additional benefits, or different numbers of visits for services like physical therapyso you’ll need to do a side-by-side comparison to see what fits your needs — or at least the needs you can anticipate.

Q. How are the plans structured?

A. There are four plan levels, each named for a precious metal. They all generally offer the same essential benefits, but their cost structures vary. The lower the premium, the higher the out-of-pocket costs.

The bronze level plan, for instance, has the lowest premiums, but will require consumers to shoulder more costs out of pocket. They generally cover 60 percent of a typical population’s out-of-pocket costs, and include deductibles, co-payments and coinsurance. The silver plans cover 70 percent; gold, 80 percent; while platinum covers 90 percent (and therefore carries the highest premiums).

If you buy a plan on an exchange, your annual out-of-pocket costs cannot exceed $6,350 for individuals and $12,700 for a family of two or more in 2014. Catastrophic plans are also available to people under age 30 or those suffering a financial hardship. These carry high deductibles (equivalent to the out-of-pocket maximum, or $6,350 for a single person, in 2014). You cannot apply tax credits to these plans, either.

Premiums will vary across the states because of a variety of factors, from market competition and the underlying cost of care to the negotiating power of the exchanges, according to Kaiser research.

Q. If the costs with plan levels are similar, how will plans differ within the metal levels?

A. Networks of doctors and hospitals will differ, and cost-sharing structures may also vary. One plan might have lower deductibles and higher co-pays, whereas another plan may have a separate deductible for prescriptions. Various medications may also be covered differently. “If you are someone who is taking medicines, make sure you know what your drugs will cost in the various plans being offered,” said Cheryl Fish-Parcham, deputy director of health policy at Families USA, a Washington consumer advocacy group.

Q. Will I be eligible for a premium tax credit (subsidized coverage)?

A. People with income between 100 percent of the poverty line (or about $23,550 for a family of four) and 400 percent of poverty ($94,200 for a family of four) are eligible for a tax credit to defray premium costs. (All income eligibility is based on your modified adjusted gross income; the online version of this column links to a guide explaining how that is calculated).

The tax credits are set up so that consumers will not have to pay more than a certain percentage of their income, ranging from 2 percent for those with incomes of up to 133 percent of the poverty level ($15,282 for a single and $31,322 for a family of four) to 9.5 percent for those with income of 300 to 400 percent of the poverty level, according to the Center on Budget and Policy Priorities. The dollar amounts of the credits are calculated based on the costs of the second-to-lowest-cost silver plan available to you.

Kaiser has a calculator that can give you an idea of your eligibility.

Q.Can I get help with my out-of-pocket expenses, like deductibles?

A. People with incomes between 100 percent of the federal poverty line ($23,550 for a family of four) and 250 percent ($58,875 for a family of four) are also eligible for cost-sharing reductions, which means you’ll pay less for items including deductibles and co-payments, and you’ll have lower out-of-pocket maximums.

Advertising: Songs and Sunscreen Spread the Health Insurance Message

THE part of President Obama’s Affordable Care Act that requires Americans to obtain health insurance has been a contentious issue politically, but new advertising from the 17 states setting up marketplaces where residents will buy insurance tends to be buoyant.

New commercials for the Oregon exchange, called Cover Oregon, for example, resemble something from a tourism bureau. In one commercial, the singer Matt Sheehy performs an anthemic song, “Long Live Oregonians,” that is reminiscent of “This Land Is Your Land” by Woody Guthrie.

“From Hart Mountain, to the Skidmore Fountain, from the shores of Gold Beach, to the gorge out east,” sings Mr. Sheehy, who wears a plaid flannel shirt and appears strumming his guitar in each new location as he refers to it. “We’re free to be healthy, gonna breathe that fresh air, wanna get the best care, that a state can get.”

Neither this commercial, nor others featuring the singer Laura Gibson or the hip-hop group Lifesavas, mention insurance, although they do conclude with the exchange’s Web address.

A recent survey of uninsured Oregonians commissioned by Cover Oregon found that 87 percent of respondents were unfamiliar with the exchange, while 9 percent had a favorable opinion of it and 3 percent an unfavorable opinion. The first phase of the campaign, which was introduced on July 9, aims to familiarize Oregonians with the name of the organization. Subsequent ads will promote enrollment in the program, which, like other states’, begins Oct. 1 for coverage that takes effect Jan. 1.

“If all we were doing is what we’re doing right now, I’d be nervous,” said Amy Fauver, chief communications officer of Cover Oregon, referring to the first phase of the campaign. “But we needed to get our name out there, and get positive associations with our name, and in the fall we’re shifting to a more direct call to action.”

The campaign, by North, a Portland branding and advertising agency, also features other Oregon musicians in Web-only music videos, television and radio commercials. Work by Oregon visual artists is featured in print ads and on billboards. A promotional budget of almost $10 million includes placing advertising, the agency fee and the public relations efforts.

A Kaiser Family Foundation survey in April found that 59 percent of Americans with household incomes under $30,000, a group more apt to be uninsured, were unaware that the Affordable Care Act and its insurance requirement were the law of the land.

The first state to introduce an ad campaign was Colorado, which in May began running television commercials for Connect for Health Colorado. As with other states, the Colorado online marketplace resembles travel sites like Expedia, with competing insurance companies and a choice of coverage levels, and the commercials open with residents navigating the site.

After actors in the spots choose a plan, the walls of their homes slide away to reveal other settings, and they end up either celebrating a win in a casino, being sprayed with Champagne in a locker room or astride a horse in a winner’s circle. The ads close with a voice-over, “When health insurance companies compete, there’s only one winner: you.”

The campaign, which includes print, radio and billboard ads, is by Pilgrim, an advertising and digital marketing agency in Denver. Connect for Health Colorado is projected to spend more than $21 million on marketing and advertising, according to an analysis by The Associated Press.

Decidedly more somber is a campaign that began July 15 for Nevada’s marketplace, with a documentary-style approach that focuses on the perils of not having coverage.

“I live fast and play hard,” says the text for one print ad, with a portrait of a man in his early 20s. “But I don’t have health insurance and that scares me.”

C. J. Bawden, communications officer for the Silver State Health Insurance Exchange, said that focus groups of Nevadans indicated a preference for a serious tone.

The focus groups “said health care is a serious matter so please don’t trivialize it and make funny ads about it because we want the facts,” Mr. Bawden said.

The campaign, by KPS3, a marketing and advertising agency in Reno, Nev., includes spots on TV, radio, billboards, newspapers and social media, with projected advertising placement expenditures at about $2.8 million.

In August, beachgoers in Connecticut will be handed packets of sunscreen printed with “Get Covered” and the logo and Web site for Access Health CT, the state’s health insurance exchange. Roving representatives of the exchange clad in orange T-shirts also will hand out branded containers of hand sanitizer and packets of adhesive bandages.

The tchotchkes are part of an extensive $6 million promotional and advertising campaign, which includes television commercials and print, online and radio advertising. The campaign is by Pappas MacDonnell, a marketing and advertising agency in Southport, Conn.

Advertising for health exchanges in Utah and Rhode Island will be introduced between mid-August and early September, according to representatives from the programs.

The Covered California exchange is projected to spend $86 million on advertising placements through April 2015, and it has hired Weber Shandwick, a unit of the Interpublic Group of Companies, to develop and produce advertising, and Ogilvy Public Relations Worldwide to help promote it. A representative of the exchange said advertising would be introduced before open enrollment begins on Oct. 1, declining to be more specific. The health exchange for New York, which has yet to announce what it will be called, has a $40.2 million advertising and marketing budget for the next two years and has hired the New York office of DDB Worldwide, part of the Omnicom Group. The agency will develop a campaign with television, print, online and transit advertising.

The campaign will begin in mid- to late-September, according to Bill Schwarz, director of public affairs for the New York State Department of Health.

Insurance Co. Emails Shielded From Discovery

A federal magistrate judge has ruled in a bad-faith case that documents produced by an in-house attorney at an insurance company who was also acting as an adjuster — emails, letters and an uninsured motorist worksheet — are shielded by the attorney-client privilege.

New Commonwealth Court Rules for Insurance Rehabilitations and Liquidations

This summer, the Commonwealth Court of Pennsylvania adopted Rules 3771 through 3784 (Chapter 367) of the Pennsylvania Rules of Appellate Procedure, effective July 30, 2012. Some of the rules reflect changes to summary and formal proceedings in insurance rehabilitations and liquidations, while others merely memorialize current practice.

DealBook: ING Plans I.P.O. of European Insurance Unit

7:17 a.m. | Updated

The Dutch financial services firm ING Group said on Wednesday that it was planning an initial public offering of its European insurance business in 2014.

The offering is the latest effort by ING to repay a 10 billion euro ($13.1 billion) bailout from local taxpayers at the height of the financial crisis.

Last week, ING also raised about $1.3 billion by selling a stake in its American division, and it has also sold several of its global businesses in recent months to repay the Dutch government.
The disposals helped to increase its first-quarter net income, which more than doubled, to $2.4 billion, compared with the period a year earlier.

“ING has demonstrated steady progress so far this year on the group’s restructuring, culminating with the successful I.P.O. of our U.S. insurance business,” ING’s departing chief executive, Jan Hommen, said in a statement. “We are now accelerating preparations for the base case of an I.P.O. of our European insurance company.”

Your Money: After Hurricane Sandy, Rebuilding Under Higher Flood Insurance

By now, most know how much insurance money they have to work with, though plenty of people are still struggling to get more. But a new federal law that happened to coincide with the arrival of the storm will cause flood insurance premiums to skyrocket and require stricter, and thus more expensive, rebuilding standards.

So in the most devastated communities, families are being forced to make difficult financial calculations: can they afford the new flood insurance premiums, which, at worst, can reach as high as $30,000 a year? Do they have the money to rebuild their homes to the government’s new specifications? Does it even pay to stay?

Some families have already thrown up their hands and put their houses up for sale, while others talk of making the best of really bad options. “This issue is more devastating to more people than Sandy itself, believe it or not,” said Ron Jampel, a resident of the Shore Acres section of Brick, N.J., who started an advocacy group for affected homeowners in New Jersey called Save Our Communities 2013.

Maria Zanetich, who lives across the street from the water in Point Pleasant, N.J., with her husband and two grown daughters, considers her family lucky in many respects: their first floor is still gutted, but they can continue to live on the top floor of their three-bedroom raised ranch. Their insurance premiums will increase sharply, however, unless they elevate their home five feet, which she said could cost more than $100,000 because their home sits on a concrete slab instead of a foundation with a crawl space.

“I paid my flood insurance on time every year, but I didn’t even know that I had a subsidy, much less one that is now being phased out,” said Ms. Zanetich, who provides early intervention services for children with developmental delays. “The insurance moneys that we received will not cover both elevating my house and repairs.”

She and her husband are applying for grant money — they have already received their flood insurance claim payment — and once they hear about that, they can determine their best course of action. “The more that I try to figure it out,” Ms. Zanetich said, “the more I realize that I don’t know what I don’t know.”

Many people with homes built before the first flood maps were drawn — in New York, for instance, that’s Dec. 31, 1974 — have long received flood insurance at subsidized rates that did not reflect the property’s true risk (though only about 20 percent of flood policy holders nationwide receive these subsidies, according to the Federal Emergency Management Agency). Other homeowners were paying lower rates because the agency failed to update the flood maps, which did not do homeowner’s — or taxpayers, for that matter — any favors.

“A lot of the maps are so old, they have become unreliable,” said J. Robert Hunter, who once ran the flood program and is now the director of insurance at the Consumer Federation of America. “It’s not doing you a favor to give a cheap rate, and a year later, your house is gone,” he said, adding that it also encouraged unwise construction in certain areas. “Consumer aren’t helped by misleading maps.”

But some of that is about to change with the new law, enacted last July, which is aimed at strengthening the finances of the National Flood Insurance Program. FEMA runs the program but it is administered by private insurers.

The subsidies on these older properties started phasing out for vacation and second homes at the beginning of the year, and will rise by 25 percent annually until the rates reflect the actual risks. Homes with “severe and repeated” flooding will start to see the higher rates on Oct. 1, and also face 25 percent increases each year. Everyone else with a subsidy can keep it, at least until they sell to another owner or the policy lapses. Other properties may face higher rates when their community adopts a new flood insurance rate map (commonly called FIRMs) that shows a higher risk, but the best way to know is to ask your insurance agent. Preliminary maps are being released in New York and New Jersey in coming months, but they will not be formally adopted until late next year.

The new maps estimate the type of flooding that is likely to occur when a so-called 100-year storm sweeps into a specific area and establish a base flood elevation, or the level at which the water is expected to rise to in a storm. So incorporating those maps into rebuilding plans is important. (Early versions have already been released and are not expected to change much, FEMA officials said.)

The insurance premiums are determined, in part, by where your home stands relative to that base. The higher you go, of course, the less you pay. Consider a single-family home in a zone with a moderate to high risk of a flood, that has a flood policy with $250,000 of coverage: if the home is four feet below the base flood elevation, the homeowner would pay an annual premium of about $9,500, according to FEMA. But if the home was elevated to the base, the premium would cost $1,410. Hoist the home three feet higher, and the premium would drop to $427.

Elevating is challenging, if it is even possible, and then there is the bureaucratic morass many people are forced to push through to figure out how to pay for it all. That’s a major reason Chris Buono and his wife, who have two young boys, used their insurance claim money to pay off their mortgage, sell their damaged home in Silverton, N.J., and buy another house nearby but out of the flood zone.

They researched every possibility of saving their home, even considering lopping off the master bedroom and bathroom so the home could fit in their backyard while they installed wood pilings under the home’s original footprint. “It just kept coming down to a lack of solid answers and insanely varying estimates and the chance the bottom could fall out from under you years later in some way,” Mr. Buono, a professional guitarist, said. “Way too risky.”

He said many people he knew who were trying to elevate were scared about what they were getting themselves into. “How is that getting back to normal?” he said. “Living with a financial gun to your head after you paid to be covered.”

Homes in high-risk areas that have been “substantially damaged,” where repairs cost more than 50 percent of the structure’s value before the storm, must be fixed so that it complies with current law. Flood insurance policies do offer an extra $30,000 for this work, including elevation. But many homeowners said that did not begin to cover the added expense.

That’s the case for Will Martone and his wife, Eileen, both 62, who bought a second home on the water in Toms River, N.J., almost three years ago. They planned to work a couple of more years and retire there. But the storm caused more than $100,000 of damage, and their insurance claim paid less than half that. They have hired an advocate to help them recover more money, but that is only part of their problem. They, too, need to raise their home, since it sits below the level at which floodwaters are estimated to rise in the event of another big storm. If he does nothing, Mr. Martone said, his annual flood insurance premiums will soar to $31,000. If he raises his home by five and a half feet, he’ll pay $7,000 a year. And if he goes two feet higher, that will bring the rate down to $3,500.

They are entitled to collect the extra $30,000, but since their split-level home is on a slab, the costs are astronomical. That “puts me in the category of $150,000 plus,” said Mr. Martone, a district facilities manager for Siemens Industry, “which I do not have readily available. So there’s a good chance I’ll lose this home.”

Both New York and New Jersey have outlined their plans for various recovery programs in recent weeks, including community development block grants, even programs that would buy properties in high-risk areas for their pre-Sandy value. But people like Mr. Jampel, the founder of the homeowner’s advocacy group, say they do not believe there will be enough money to go around.

Yet for many homeowners, that’s their only hope. Emily Burek, 28, whose three-bedroom home in Highlands, N.J., took in nine feet of water, received $15,000 from her insurer thus far. But she said that covered only a third of her damages, and she is required to elevate. “Without any money to do that, I will be forced into foreclosure,” she said. “The town says there will be grant money, but they’ve also said a lot of things that turned out not to be true. So I’m not sure if it’s better that I just give up now and cut my losses.”

Bucks Blog: The States With the Highest Car Insurance Rates

Associated Press Traffic headed out of New Orleans ahead of Hurricane Isaac last August.

If you want cheap car insurance rates, it’s best not to live in Louisiana. Or Michigan.

That’s according to a new analysis from Insure.com, an insurance rate comparison site.
The average annual premium in Louisiana is $2,700. Michigan is next with $2,500, followed by Georgia at $2,200. In the New York metropolitan region, Connecticut has the nation’s 11th highest average annual premium at $1,723, New Jersey is 12th at $1,697 and New York is 33rd at $1,369.

The report is based on additional analysis of data provided for Insure.com by Quadrant Information Services, which this year obtained rates for more than 750 models from six big insurers (Allstate, Farmers, Geico, Nationwide, Progressive and State Farm) in 10 ZIP codes per state. That analysis allowed Insure.com to report on the most and least expensive cars to insure, which Bucks reported on this year. Insure.com then averaged the rates for all vehicles in each state to create the state rankings. (The cars were all 2013 models.)

Rates are for a single, 40-year-old man with a clean driving record and good credit who commutes 12 miles to work daily. Policy limits were $100,000 for injury liability for one person, $300,000 for all injuries and $50,000 for property damage in an accident, and a $500 deductible on both collision and comprehensive coverage. The rate includes uninsured motorist coverage.

Ultimately, your own rates will vary based on your driving record, the type of car you drive and other factors, including those that have little to do with your driving history. But the comparative state rankings give an idea of how policies at the state level can affect rates over all, said Amy Danise, Insure.com’s editorial director.

In Louisiana, several factors help to drive up rates, she said. For instance, drivers injured in accidents there tend to file more bodily injury claims than do those in other states. Medical costs have been increasing, so insurers have to pay more for those claims. The state also has significant claims filed under “comprehensive” coverage, which covers damage from natural disasters, like hurricanes.

Michigan, meanwhile, is an “oddball” state when it comes to car insurance, she said, in that auto policies are required to offer unlimited medical coverage for injuries sustained in an accident. Insurers pay the first $500,000 in medical claims, and the Michigan Catastrophic Claims Association pays the rest. All policyholders pay a fee for the association. The fee is $175 per car.

“All of these costs get passed on, in one way or another,” Ms. Danise said.

Meanwhile, less urban states may benefit from overall lower rates because of less traffic congestion and lower accident rates. Maine ranks as the cheapest state, with an average premium of just over $900, followed closely by Iowa at about $1,000. “You don’t have all these cars next to each other crashing into each other,” she said.

So what if you don’t live in a state with lower premiums? You can strive to keep your own driving record as clean as possible, avoiding tickets and accidents that can raise your rates. And you can shop around. Quotes for the same driver can differ by company, she said. You can also choose a car that’s less expensive to insure. In Louisiana, for instance, the cheapest choice would be a Jeep Patriot Sport , while the most expensive would be a Mercedes-Benz S65 AMG sedan.

Do you live in a high-premium state? Do you take any special steps to help keep your premium affordable?

Obituary: Delaware County Insurance Litigator Dies

John S. Kokonos, a Delaware County, Pa., insurance litigator for more than 50 years, died Monday.

Today's Economist: Casey B. Mulligan: Employer-Provided Health Insurance and the Market

Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

The future of employer-provided health insurance is better considered together with the future of total employee compensation, both cash and fringe benefits like health insurance. From that perspective, the likelihood that most employers will continue to offer health insurance is not necessarily good news for employees.

Perspectives from expert contributors.

The Patient Protection and Affordable Care Act, President Obama’s initiative, offers large health-insurance subsidies to the majority of the population beginning in 2014, but only if their employer does not offer affordable insurance. The subsidies are frequently much larger than the subsidies coming through the tax exclusion of employer-provided health insurance.

Some economists are predicting that eligible employees, especially those in line for the largest subsidies, will prefer employers who do not offer affordable insurance. As a result, they say, many more employers will not offer insurance.

Others have different expectations, pointing out that employers dropping insurance will pay penalties and throw away the tax exclusion for their employees who are not subsidy-eligible (typically the ones who earn more). Moreover, perhaps because people are comfortable with their existing coverage even if it is not subsidized, employer coverage did not decline in Massachusetts when it began a similar plan (by my estimate, only 5 percent of the people in Massachusetts who could get subsidized individual-market insurance actually receive it, largely because they have coverage through the employer of the head of the household or that person’s spouse). Note that Massachusetts has lower subsidies and a narrower eligible population than the Affordable Care Act and lower employer penalties for dropping coverage.

How many employers will drop their coverage when the new health care law gets under way? The answer makes for a nice headline, but that’s the wrong question. Would it be so bad if many employers dropped their coverage but replaced it with huge cash raises? Or would it be so good if every employer continued to offer coverage but required employees to take big pay cuts?

All sides agree that some otherwise subsidy-eligible employees will work for employers that keep their coverage, and other subsidy-eligible employees will work for employers that drop it. Market forces must be considered, because some employees will be moving between these two types of employers.

Low-income employees will ultimately cost less to employers without coverage (or without “affordable” coverage; the important issue is that their low-income employees are subsidy-eligible) than they cost to employers with coverage. If they didn’t, low-income employees would be better off at employers without coverage and would line up to work there. Meanwhile, the employers with coverage would find it more difficult to retain and attract low-income employees. That situation defies supply and demand.

Another way to see the same result: by getting low-income employees at lesser cost, employers without coverage can, without going out of business, compete aggressively for the high-income employees who are considering positions that offer coverage.

By the same logic, high-income employees will cost more to employers without coverage than they do to employers with coverage. Thus, high-income employees will lose one way or another — either they will lose their tax exclusion because their employer eliminates coverage or they will see their cash compensation fall below what it would have been without the Affordable Care Act.

At the same time, the low-income employees will enjoy the subsidy either way: either their employer drops coverage, in which case they receive the subsidy directly, or their employer increases their compensation above what it would be without the Affordable Care Act to attract them from the employers without coverage. Tax economists will recognize this as the Harberger model applied to the Affordable Care Act; international economists will recognize it as the Heckscher-Ohlin model.)

The same sorts of market competition will ultimately prevent most employers from dropping their coverage and thereby incurring the penalties. Employers keeping coverage will raise the pay of subsidy-eligible employees and get by with fewer of them. Those who remain will typically not want to leave for no-coverage employers because doing so would cut their pay. The same employers will hire a few more high-income employees at lesser pay, because for those employees, the alternative is a no-coverage employer.

Wealth Matters: Determining if Disability Insurance Is Necessary

One reason is that most people who have it got it through their employer and have given it little thought. Another is that people are not likely to go out and buy it on their own because it is so expensive, the exception being certain occupational groups, like doctors. Yet it does serve an important purpose in replacing a portion of your salary if you get hurt or become sick and are unable to work for several months or more.

Still, figuring out the real risk of becoming disabled is difficult. My colleague Ron Lieber wrote a Your Money column about the various and divergent estimates in 2010.

According to the Social Security Administration, a 20-year-old in 2011 had a 30 percent chance of being disabled for at least six months before retirement. That is a fairly scary statistic, but I couldn’t help thinking it was slightly misleading. After all, someone who moves refrigerators for a living is at greater risk for the most common disability claim — muscular-skeletal injury, according to Sun Life Financial — than someone who works in an office. But the second most common cause for a claim, cancer, doesn’t care what you do for a living.

If you are like me, you also wonder about the likelihood of an insurer paying a disability claim. Will it pay promptly when you submit the proper paperwork or give you the runaround until you give up, as was the case with one insurer, Unum, several years ago?

And to be clear, I am talking about private disability insurance. Anyone who is working and paying into Social Security is eligible to apply for Social Security disability insurance, though the average benefit is only $1,188 a month.

So how do you make an informed decision?

THE COST The first thing anyone who has looked into buying disability insurance has probably been struck by is the cost.

Dallas L. Salisbury, president and chief executive of the Employee Benefit Research Institute, a public policy research group in Washington, said that the cost for coverage in a group policy runs about $16.30 per $1,000 of coverage with a waiting period of 30 days and a maximum benefit of $15,000 a month. For individuals buying their own policies, he said, the cost is $18.60 per $1,000 of coverage but with a 90-day waiting period.

That may seem comparable, but it’s not. The 90-day waiting period is like a higher deductible on your homeowner’s insurance, and it makes the policy considerably cheaper than it would otherwise be. The 90 days is also long enough to eliminate most smaller, short-term claims.

Compare that with the costs for life insurance, which Mr. Salisbury said typically are about 22 cents per $1,000.

Chris Quinn, vice president for the employee group benefits division at Sun Life Financial, said another way to think about it was that the premium was 1 percent of someone’s salary in a group plan and 3.5 percent of that salary in an individual plan.

Mr. Salisbury said that while the number of disability claims had remained constant for decades, the costs remained high because of the small pools of people with disability insurance and the fact that insurance companies might be obliged to make payments for decades.

“The old theory was as soon as fewer people are doing backbreaking work, there will be fewer claims,” Mr. Salisbury said. “But it turns out more people are doing damaging work. Take carpal tunnel syndrome from repetitive usage. Some of the old theories hadn’t contemplated computer keyboards.”

The cost of policies that increase someone’s disability payment above the typical 50 to 60 percent of income is even higher. The reason, Mr. Salisbury and others said, is what is called adverse selection bias: the people most likely to buy additional coverage are likely to have some condition or family history that makes them believe they will need it.

THE CALCULATION The decision for most people on whether to buy an individual policy or add to an employer-sponsored one comes down to a personal risk assessment.

David Ropeik, a consultant and teacher who has written two books about assessing risk, said that when he and his wife had young children and were contemplating buying additional disability insurance, they decided against it.

“We engaged in the process because we were worried about it in the first place,” Mr. Ropeik said. “If we had been more emotionally worried, we would have fantasized about worst-case scenarios. We were fortunate that our incomes could support the other one if something happened.”

But Mr. Ropeik was careful to say that he was not arguing against buying disability insurance. “Our willingness to spend money to defray our worry depends on who we are as individuals,” he said. “It’s not a waste of money if you never collect. You’re buying something. You’re getting a value.”

For some people like Jonathan Skinner, a professor of economics at Dartmouth College who has done research on disability coverage around the world, that value is peace of mind. He said he bought as much additional coverage as he could under the college’s plan.

“As an economist, I’m happiest to insure the things that are rare occurrences that don’t cost much to insure against,” he said. “The disability top-up gives me peace of mind 100 percent of the time.”

This article has been revised to reflect the following correction:

Correction: October 19, 2012

Because of an editing error, an earlier version of this column misidentified the individual who said disability insurance costs remained high because of the small pools of people with such coverage. It was Dallas L. Salisbury of the Employee Benefit Research Institute, not Chris Quinn of Sun Life Financial.

Bucks Blog: When Non-Driving Factors Affect Auto Insurance Premiums

Automobile insurers may use factors unrelated to driving, like education and occupation, in determining rates.

Now, a consumer group is urging state insurance commissioners to restrict insurers’ ability to use those factors, arguing that the result has been unfairly high rates for lower-income drivers. Stephen Brobeck, executive director of the Consumer Federation of America, said in a call this week with reporters that premiums should mainly reflect factors like accidents, speeding tickets and miles driven.

The federation analyzed auto insurance premiums quoted on the Web sites of the five largest insurers (State Farm, Allstate, Geico, Progressive and Farmer’s) to price minimum liability coverage in five cities. Using an example of coverage for a 35-year-old woman with a good driving record, the study obtained quotes while varying characteristics like marital status, education level, occupation, home ownership and gaps in insurance coverage. Her driving record was the same in all instances.

The group found that in most cases, annual premiums were much lower if the woman was a married homeowner with a college degree, a professional job and continuous insurance coverage. In four of the examples, the premiums fell by at least 68 percent.

Premiums tended to be high if the woman was single, rented in a moderate-income area, had a high school degree, worked as a bank teller or clerical worker and had a gap in insurance coverage.

The analysis first obtained quotes for the “standard” example — a 35-year-old single bank teller with a high school degree and good credit record who rents a house in a moderate-income Zip code. The hypothetical woman had driven 15 years with no accidents or moving violations, and sought the minimum required liability coverage on a 2002 Honda Civic. Then, the researchers changed the criteria to see what the impact was on the quoted premium.

For instance, the “standard” quote of $2,696 from Progressive, for coverage in Baltimore, fell to $2,212 when the woman’s status was changed from single to married. And when all the criteria were changed to more a “favorable” status, the quote dropped to $718.

J. Robert Hunter, insurance director at the consumer federation, said a difference of nearly $2,000 based on non-driving factors is “patently unfair” and “actuarially unsound.”

Jeff Sibel, a spokesman for Progressive, said the insurer “works to price each driver’s policy as accurately as possible, so that every driver pays the appropriate amount based on his or her risk of having an accident.” He added: “To do this, we use many different rating factors, which sometimes include non-driving factors, that have been proven to be predictive of a person’s likelihood of being involved in a crash. Because different insurers use different information, which can cause rates to vary widely, we encourage consumers to shop around to find the combination of price and service that’s best for them.”

Alex Hageli, director of personal lines for the Property Casualty Insurers Association of America, disputed the federation’s position in an e-mail, saying that data have shown “consumers’ age, marital status, place of residence and occupation to be among the best predictors of future loss.” When such factors are “blended together” with criteria like driving experience, previous claims and vehicle age, he said, “these factors help to ensure that low-risk consumers can be better identified and pay less for insurance. In the final analysis, consumers benefit when insurance underwriting and rating decisions are based on a wide variety of fair and objective factors.”

Loretta Worters, spokeswoman for the Insurance Information Institute, an industry group,  said in an e-mail, “What’s missing from the C.F.A.’s analysis is that every one of these factors that they attack is correlated, and highly correlated, with loss.”

Mr. Hunter of the consumer federation said his concern with using factors like occupation and education is that such factors are “surrogates” for criteria that states aren’t allowed to use in setting premiums, like income. At the very least, insurers should give less weight to non-driving factors in setting premiums, he said.

Los Angeles had the lowest quotes, he said, because California limits the use of non-driving factors in setting insurance rates. It is up to state insurance commissioners and legislatures to take action, he said, because auto insurance is regulated at the state level.

“We’re not trying to say get rid of these entirely,” he said. “We’re saying, you have to look at the combined effect and study these factors more carefully.”

Using non-driving factors drives up premiums, and forces many working families to drive without insurance, even though they risk paying fines or criminal charges for doing so. “Many low- and moderate-income citizens can’t afford required insurance because insurers use unfair rating factors,” he said.

Do you think non-driving factors should be used to help determine insurance premiums?

Pa. Insurance Law Firm to Open N.C. Office

Blue Bell, Pa.-based insurance law firm Nelson Levine de Luca & Hamilton is set to open an office in Greensboro, N.C., with the addition of four area lawyers.

It is scheduled to open November 1.

David L. Brown will join Nelson Levine as a partner from Greensboro firm Pinto Coates Kyre & Brown, where he had been a partner, and will head up the new office.

Brown will bring with him Pinto Coates partners Martha P. Brown, John I. Malone Jr. and Brady A. Yntema, who will also join Nelson Levine as partners.

Nelson Levine Chairman Michael R. Nelson said North Carolina represents an important market for the insurance industry.

"We felt like our footprint, because of what we are building, is about having a presence in more than just the Northeast market, and the Southeast U.S. is certainly the next logical step with what we're trying to accomplish," he said. "North Carolina, especially, is sort of on the cutting edge of the Southeast."

Greensboro, along with the cities of Winston-Salem and High Point, constitute the Piedmont Triad, a hub of industry in North Carolina.

The Triad is located to the west of North Carolina's other industrial hub known as the Research Triangle, which consists of Raleigh, Durham and Chapel Hill.

Several of Pennsylvania's 100 largest firms have North Carolina offices, but none are located in the Triad, according to a scan of PaLaw, an annual publication affiliated with The Legal Intelligencer.

Cozen O'Connor, K&L Gates, Dechert, Dickie McCamey & Chilcote, Littler Mendelson, DLA Piper and McGuireWoods all have offices in either Charlotte or the Research Triangle, according to PaLaw.