Health Insurance: Why It Is Important

In case you don’t know, health insurance is a type of assurance that is given based on agreed terms in case the insured person falls sick or needs medical treatment. The insured life may have a chronic condition requiring medical care for years to come. Let’s know more about it.

Who will pay for the medical expenses?

This is one of the most common questions that people ask. If you have a health insurance, you can have the peace of mind that your health will be taken care of. Actually, it is a type of agreement or contract between you (policyholder) and the company providing health insurance. The purpose of the agreement or contract is to provide protection against costs. At times, the costs are so high that the sick person is unable to pay the bills. As a result, the person is unable to get the care he needs to recover.

While you will pay a monthly or annual premium, you should expect that the amount of premium you are going to pay would be far less than the amount you would pay in case of illness.

Keep in mind that health insurance is a type of benefit that a non-profit organization, private business or a government agency provides. In order to figure out the cost, the company gets an estimate of the collective medical cost of all of the people in the state. Then the risk is divided among the policy subscribers.

As far as the concept goes, the insurer knows that one person may suffer from huge unexpected health care expenses while the other person may incur no expenses at all. So, the expense is spread across a large group of people in an effort to make the health insurance much more affordable for all the insured lives.

Aside from this, public plans are funded by the government. Therefore, they offer extra health insurance to the vulnerable groups like people with disabilities and seniors.

Let’s take an example to understand the concept better. A person with Cerebral Palsy needs special treatment through their lifespan. It’s understood that a chronic illness costs a lot more money than a standard care. Cerebral Palsy may result in a physical impairment that may last for the whole life of the sufferer.

The treatment for this condition may require regular doctor visits, many therapies and long hospital stays. Based on the degree of impairment, you may need special health insurance. Many health care professionals will involve, such as vocational therapists, occupational therapists, physical therapists, orthopedic surgeons, radiologists, pediatrician, neurologists and so on.

Some patients may need the services of more than one. Some may even need a speech pathologist, registered dietician, cosmetic dentists or urologist, to name a few.

So, the coverage offered can help you get some relief as far as the burden of the expenses is concerned. If you don’t sign up, you may suffer from a lot of financial strain and you may need help from other sources like charity organizations and community groups. Therefore, it’s a good idea to benefit from a health insurance.

Health Is The Most Important Wealth

If you’re fortunate enough to have employer-provided health insurance, that narrows your options down to the plans that your employer offers. If you don’t have coverage through your job, perhaps an organization or association that you belong to will allow you to buy health insurance through them at a group rate.

Another option is to check your local Obamacare health insurance marketplace to see if you qualify for an upfront premium credit, which would get you reduced premium costs. Even if you don’t qualify for the credit right away, buying your health insurance through the marketplace means you may qualify for it when you file your tax return for the year.

If you can’t, or won’t, get health insurance from any of these sources, you’ll have to fall back on buying a private plan. It will give you the widest range of options, but likely will be far more expensive.

Decide which type of policy to buy

Health insurance policies come in a variety of basic types, although you may not have access to all of these options through your preferred source. Health Maintenance Organizations (HMOs) are a very common type of health insurance policy. With an HMO, you’re required to use healthcare providers within the policy’s network, and you have to get a referral from your primary care physician in order to see a specialist.

Preferred Provider Organizations (PPOs) are also quite common. A PPO health insurance policy has a network, but you’re not limited to in-network care — although using network providers is cheaper — and you don’t need referrals to see specialists.

Exclusive Provider Organizations (EPOs) are a hybrid between HMOs and PPOs. You’re required to stick to the plan’s network, but don’t need referrals for specialists. Finally, Point of Service (POS) plans are a less common option that are essentially the opposite of an EPO. You’re not limited to the POS plan’s network, but do need a referral to see a specialist.

Of the four common types of plans, an HMO or EPO tends to be cheaper than a PPO or POS with the same level of coverage. However, if network coverage is poor in your area, or you’re uncomfortable limiting yourself to network providers, it may be worth paying a little more to get a PPO or POS policy.

More: Buyer beware: Long-term care costs are surging, survey says

More: Obamacare overhaul efforts are dead for now. What does that mean if you’re an Obamacare consumer?

More: Trump says he’ll negotiate with Democrats on health care plan

High deductible versus low deductible

All things being equal, the higher a plan’s deductible is, the lower the monthly premiums will be. A high deductible means that you’ll have to pay a lot of healthcare expenses yourself before the insurance policy kicks in, but if you have few or no medical expenses in a given year, these plans can be a bargain. Very low medical expenses means that you probably won’t surpass the deductible, even of a low-deductible plan, so getting a high-deductible plan keeps your insurance costs as low as possible while still protecting you in case something catastrophic happens.

If you decide to go the high-deductible route, getting a Health Savings Account (HSA)-enabled plan, and funding it with at least the equivalent of a year’s deductible, is your best option. An HSA plan neatly covers the biggest weakness of a high-deductible health insurance policy – namely, that you’d have to shell out a great deal of money on a major medical expense before the insurance would take over. If you have a full-year’s deductible tucked away in your HSA, you can just use that money to finance your share of the expenses, while simultaneously enjoying the triple tax advantage that an HSA offers.

Money Can’t Buy You Love

As the old adage goes, money can’t buy you love, but it can buy you time with the ones you love when you need it most. We all hope to have a long healthy life with plenty of time with family and friends. Sometimes however, life has different plans and a little planning can ease the financial burden at a time when the last thing you should be thinking about is money. Critical illness insurance is one option to account for the unforeseen future.

A long term client found themselves in this exact situation. While they were diligently working on their retirement plans, one of them was diagnosed with terminal brain cancer only to pass 37 days later.

Fortunately during the financial planning sessions, we discussed and included critical illness coverage to their suite of group and insurance options. This allowed the family to spend their limited time together as well as have the proper time to grieve the loss of a father and husband without worrying about finances.

Critical illness insurance pays a lump sum benefit if you are diagnosed with a dreaded disease such as multiple sclerosis, Alzheimer’s, cancer or Parkinson’s disease. Other conditions covered may include coma, stroke, heart attack, and kidney failure. Benefits are paid for the first occurrence and may be used to pay medical expenses, modify your home or even take a vacation.

There are many versions of critical illness insurance available and different insurance carriers offer different coverage. Be sure not to let premiums be your guide when choosing the right coverage for you and your family. Speaking with a financial planner can help you navigate the tricky waters of ensuring your future needs are met based on your family history and future goals.

Due to the aforementioned situation, the children of this couple have now been meeting with their financial planner on a regular basis to develop their own financial plans and to ensure that their inheritance and financial affairs are well looked after. Firsthand experience has shown them a little planning goes a long way.

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