Whenever I sit in the doctor’s office, I’m reminded that women make the vast majority of healthcare decisions, both for themselves and for their families. Depending on the study, women make over 70% of healthcare decisions for their families, and over 90% for themselves. Healthcare is important both for our overall wellbeing, and for our financial management. I’m a bit embarrassed to say it wasn’t until I was pregnant with my first child, that I started the journey of understanding our insurance policy. It was enough to make my head spin.
Medical debt is prevalent in the U.S. Nearly 1 in 10 (9%) owe at least $2,000, according to a recent KFF analysis, and 3 million owe more than $10,000. Here’s a simple opinion: You must get a handle on your plan for handling medical costs. Don’t wait until you have to figure it out. Start educating yourself right now. The decisions you make now can set you up for success.
Insurance is a mechanism for safeguarding your wealth, and a good plan to handle medical costs includes health insurance. When you purchase a health insurance policy, you transfer the risk from you, to the insurer. You pay a monthly premium, and the insurer agrees to pay for the cost of medical care.
Unfortunately, insurance plans can be difficult to understand, which makes it difficult to decide how to best manage your money and risk today. I always talk about medical costs with women, because it is part of a holistic management approach, and because women are much more likely to already be making healthcare decisions. In fact, most of the women I have worked with, are better able to navigate insurance policies and medical offices than their male partners.
The three top areas to pay attention to when selecting a plan are the deductible, premium, and in-network vs. out-of-network coverage.
1. What is the deductible? The deductible is the amount that you pay “out of pocket” for covered health care services prior to what your insurance plan starts to pay.
2. What is the premium? The premium is the amount you pay each month for health insurance. Typically, the lower the premium, the higher the deductible and vice versa.
3. What does the plan offer and how much of a given procedure does it cover? This is the area most difficult to sort out. Some plans will cover 100% of visits to in-network providers, with a copay, while medical providers not established with the insurance network are reimbursed at 80%, or not at all. Lab work, such as bloodwork and other specimen samples, is often handled separately.
For example, our current plan covers lab work at 100%. A couple years ago, my husband had to get weekly blood draws for months. The cost was in the $100s each time. If it wasn’t 100% covered, we’d have been responsible for the remaining portion, and I remember calculating it would have cost us over $2,000.
The question of insurance has to do with managing personal risk, and this requires a review of your personal situation beyond a standard health insurance policy.
A couple other areas to think about:
4. Family health: If you have a history of certain illness in your family, you’ll want to consider coverage that helps with that.
5. Mental health: We’ve made a lot of improvement in this area, but generally counseling is still poorly covered under a plan. This means, you may want to set aside some money for this each year, essentially “self-insuring” yourself. I suggest creating a personal fund of $1,000.
6. What other options do you have to cover medical costs? It might make sense to consider using a medical Flex Spending Account (FSA) to save money tax-free in a given year. An FSA is an employer benefit, and available to everyone, but unused funds can be lost at the end of the year. If you have a high-deductible health insurance plan, a Health Savings Account is another saving mechanism, but can be used anytime in the future.
7. If your child is sick, how will you manage that? What if you get sick? Disability insurance might make sense. You can also start by setting aside some money for that beyond your initial “emergency fund.”
Adding on these additional questions, can prepare you to preserve your hard-earned savings and investments, in the event of a difficult medical scenario.
Photo by Towfiqu barbhuiya