I recently recorded a presentation called “How to find supplemental health insurance” for Freedom Benefits. For those not familiar with the topic, the question may be “so what, what if I don’t have supplemental insurance?” It’s a good question in the rapidly changing field of health insurance.
Health insurance policies have changed dramatically since the implementation of the Affordable Care Act. Yet few of us have actually noticed. That is because most of us have medical expenses less than $1,000 per year. Insurance is not a major factor in this expense. Besides, regardless of whether our policy covers everything or nothing, it makes little difference to the overall financial welfare of most people. But for about one in ten households that incur out-of-pocket medical expenses in excess of their available financial resources, the impact is huge. Large medical expenses have been the primary cause of bankruptcy. Most of these bankruptcies involved people who had medical insurance before their financial problems.
With the implementation of the new type of health insurance, commonly called Obamacare policies, the financial risks are significantly larger. Policy deductibles and out-of-pocket expenses have now increased to $5,000 to $10,000 per year. So what happens if you incur this medical expense?
The options are pretty clear:
1) pay the bill timely if you have the resources like savings (ideally a Health Savings Account) or have supplemental insurance
2) pay the bill over time if the provider is willing to enter into this type of agreement
3) have the unpaid bill settled through collection actions.
So as a practical matter, smart financial planning means that those without supplemental insurance should a) have a $5,000 to $10,000 reserve for out-of-pocket medical expenses, or, b) be prepared to enter into a payment arrangement. For most households, this is not an easy choice and each option takes a toll.