During the Health Care Reform debates we heard about both the millions of uninsured and underinsured people living in America.
Politicians were keen to point out that Americans were having to file bankruptcy, “even though they had health insurance.” According to the politicians, these people were “underinsured.”
Unfortunately, the politicians were not Paul Harvey. (Those from my generation will remember Paul Harvey.) They did not tell, “The Rest Of The Story.”
If people had health insurance and still had to file for bankruptcy it was because they had done one of two mistakes. In this post I want to explain what they did and how you can avoid making the same mistakes.
BUY THE CHEAPEST THING AVAILABLE
Before I say anything let me make one thing apparent. I am a tight-wad. If it were possible, I would squeeze a penny so tight that the copper from it could wire my entire house.
However, I also know that, “You get what you pay for.”
In my experience as an insurance agent, many people do not want to pay more than required for health insurance. When they look at a health insurance policy, they only bother to look at the premium.
Nobody expects a Little Leaguer to hit home-runs in a Major League Baseball park. However, many Americans paid for Little League talent and complained when it did not hit a home-run.
Many of the Americans who were forced to file bankruptcy “even though they had health insurance” did not bother to read their health insurance policies until it was too late. They just bought the cheapest “piece of garbage” they could get.
The good news is that the Essential Benefit Plans (EBP) plug many of the holes that were left in those old Limited Benefit plans. The bad news is that none of the EBPs cover everything.
If you are diagnosed with a cancer, Alzheimer’s disease, Multiple Sclerosis, etc. you will still be required to pay a deductible and co-insurance. The only difference is that under Obamacare, your out-of-pocket responsibilities will be limited to no more than $6250.
Under the new EBPs, as long as you have $6250 in savings, you will be able to pay all of your covered medical bills, regardless of your disease.
If you are already on Medicare, ignore this information. The out-of-pocket limit does not apply to you. Medicare Advantage plans are required to have a “Maximum Out-of-pocket” limit but traditional Medicare B does not.
IGNORE OTHER BILLS
Only a small percentage of people who had to file for bankruptcy “even though they had health insurance” were not able to pay their doctors and hospitals.
The biggest percent of bankruptcies because of medical bills was because people had to spend so much of their money to pay for deductibles and co-insurance that other bills, like mortgages, car payments and utilities were not able to be paid while they recovered.
Unfortunately, nothing in Obamacare is designed to help Americans with those expenses. If you require surgery for cancer, forget who you are thanks to Alzheimers or are unable to work because of Multiple Sclerosis the bills for your doctors and hospitals will be paid by the EBPs.
However, unless you have sufficient money in savings or adequate insurance supplements there is a very good chance that while you are recovering from treatment you could lose your house, have your car repossessed or be left alone.
WHAT YOU CAN DO
Critical Illness, Disability Income and Long Term Care insurance can be used, very affordably, to supplement what the EBPs do not pay.
When you enroll in an EBP through your state exchange or with an insurance broker this October, keep in mind that while they are a step in the right direction, they will not prevent a future bankruptcy on their own.
If you do not already have a Rainy Day fund, you will need to customize your health insurance portfolio to meet your needs. Ideally, you will be able to afford everything but that is unrealistic for most Americans.
My advice is for you to supplement your EBP with at least a $20,000 Critical Illness policy if you do not already have that much in your Rainy Day fund.
That way, if you suffer cancer, heart attack or stroke you will have enough money to pay what your EBP does not and still recover from treatment before you have to return to work.