Pop Quiz announcement! What is the number one reason people in the U.S. file for bankruptcy?
- Money Mismanagement
- Job Loss
- Unmanageable Medical Expenses
If you answered A, B, or C, you’d be wrong. The number one reason for bankruptcy in the U.S. is unmanageable medical expenses. According to a study done at Harvard, 62% of all bankruptcy cases result from unexpected healthcare expenses. And, according to the study, over 78 percent of the filers had some form of health insurance.
In all fairness, it wasn’t the medical expenses that caused the bankruptcy; it was that most people stop paying other debts in order to pay their medical expenses. “How can this happen when you have health insurance” you might ask. Easy, when you have a $10,000 deductible, and you need $8,000 worth of diagnostic testing, 100 percent of the expenses have to come out-of-pocket. For most people who only have maybe a thousand dollars tucked away, they’re not going to pay anything else so they can come up with that $8,000.
While many Americans were duped into believing that the Affordable Care Act (Obamacare) was going to put a stop to the continual rise in health care costs and that we were all going to have much better insurance than we use to have, nothing could be further from the truth.
Health insurance has holes. Plain and simple. Even with the better plans on the market, the consumer must take part in their insurance coverage by way of co-payments, deductibles, and co-insurance. These co-payments, deductibles, and co-insurance costs represent the amount you will pay out-of-pocket, and if you’re not financially prepared for a worst case scenario, financial devastation will come knocking on your door sooner or later, especially if you’re diagnosed with a critical illness.
Let’s look at what happens when someone with a Silver ACA plan is diagnosed with lung cancer.
A Silver ACA plan will typically look a lot like this:
- Doctor visit: $5 co-pay
- Specialist: $10 co-pay
- Prescription Drugs: $5 co-pay for generics and $25 co-pay for branded or special drugs
- Diagnostic testing: Insurer will pay 80% after deductible
- Hospital/Surgical Facility: Insurer will pay 80% after deductible
To get a monthly premium you and your family afford, you have selected a $5,000 per person deductible and $10,000 for the family.
The Bad News
Since you elected the Silver ACA plan, you are responsible for the first $5,000 of your medical expenses, and then 20 percent of every charge over the deductible. When you receive the final statement for the doctor’s fees, the surgeon’s fees, the hospital stay, and all diagnostic tests that were performed, your lung tumor ended up costing you about $29,000, and you must take care of this balance BEFORE they will schedule your chemotherapy. You’ve just been had by the healthcare industry and your insurer. You leave the doctor’s office wondering just what the heck you actually got for your monthly payment of $900 to the health insurance company.
Anytime you purchase insurance, whether it’s for your car, your home, your life, or your health, you are transferring risk to the insurance company. The problem is that most people do not transfer enough of the risk because they elect higher deductibles to save on the monthly payment. It’s certainly a good idea to take on some of the risks, so your insurance rates will be lower, but you must be prepared to pay your share out-of-pocket; for most people, this is something they are rarely prepared for.
Looking at the scenario that we listed above, if you had purchased Critical Illness Insurance, you would have filled your holes created by deductibles and co-insurance. For example, a policy that pays a $50,000 benefit would have cost about you about $40 a month.
The great thing about Critical Illness Insurance is that it pays out a lump-sum benefit after you have been diagnosed. You will have that money available for your treatment rather than afterward. Since the benefit is paid directly to you, the tax-free benefit can be used however you see fit. It can be used to fill any holes in your health insurance, or you can use all or some of it to replace the income you may lose as a result of your illness. Plus, there are many unexpected expenses that can arise anytime you are dealing with a critical illness. The money is for you to use as you see fit.
There’s More than Just Cancer out There
For most people, when they think of “critical illness,” the first thing that comes to mind is CANCER. But there are other critical illnesses out there. Although there were about 1.7 million new cases of cancer in 2016, heart disease and stroke affect much more of the population.
Having low-cost Critical Illness Insurance fills the common holes in your health insurance policy that typically leads to financial devastation. It is an inexpensive way to transfer your risk and allow you to rest peacefully knowing that if the worst should happen, you’ll have the resources to get treatment without ending up filing for bankruptcy.