Within just a few days of each other, the following things happened…
First, and as discussed in a previous newsletter, my dad was successful in resubmitting an improperly coded surgery bill. Once his claim was reviewed, he paid just $300 instead of the $6,500 bill he had rightfully questioned. I’m so grateful he brought it to my attention.
Second, I resolved my own $1,200 claim for a bill I received from an anesthesiologist following wrist surgery last summer. The entire amount was covered by the insurance company despite numerous claims that it was not.
Third, I read a moving article about a woman who did everything right to prepare for her son’s surgery, only to be faced with a $12,000 bill that caused her incredible anxiety.
Lastly, I was interviewed by representatives of CIBC Private Wealth Management for their Podcast targeted to younger clients, a program that strives to improve their audience’s financial literacy. Because health care costs must be considered as part of any financial planning, they asked me to elaborate on the advice I would give to young adults on the topic.
Taken together, all of these things got me thinking about the importance of teaching “insurance literacy” early to our young adult friends and loved ones.
What follows are my recommendations, broken out by phase of life!
At the Age of Twenty-Six…
In my experience, young adults insured on their parents’ health insurance plans rarely pay much attention to their coverage levels. They rely heavily on their parents to manage both their healthcare and their insurance. As a result of The Affordable Care Act, that arrangement can continue until the age of 26.
After that, and whether because they now have to purchase health insurance on the open market or because they have the good fortune of being employed and able to avail themselves of an employer-sponsored plan, they begin to take interest and the questions arise:
- I’m young, why do I need insurance?
- I’m healthy, why should I spend the money?
- What if I don’t have the money?
At this point, I focus on the idea of mitigating risk against a huge unanticipated healthcare cost. We talk about the potential costs associated with an unexpected illness, accident and/or the necessity of a costly hospitalization.
We also talk about the concept of an out-of-pocket (OOP) maximum — the maximum amount an individual would pay for healthcare services, beyond the cost of monthly premium, after which a plan pays healthcare expenses at 100%.
For example, a plan may have an OOP Max of $7,500. If an accident results in $100,000 worth of bills, the most you would have to pay is $7,500. This coverage not only protects the young adult, it also offers comfort and relief to anxious parents.
In terms of the cost itself, it’s worth exploring plans available through a state healthcare exchange in which income data is considered to identify eligibility for financial assistance, to defray the cost of the premium and OOP expenses. Depending on income, excellent options may be available at minimal cost. What a relief for everyone involved!
Getting that First “Real” Job…
Having a portion of the premium subsidized by an employer can be a fabulous benefit and one that should not be ignored. At this stage, I recommend understanding and paying attention to the following:
- Employee contribution. The monthly amount an individual pays toward the premium.
- Employer contribution. It’s good to know how much the employer is contributing. It gives an employee a true sense of the value of the benefit and should be considered, especially if a job change may happen.
- Deductible. This refers to the initial amount the employee must pay for health care-related expenses — out-of-pocket and in addition to any premiums — before the plan begins to pay any benefits. Many young individuals, especially if healthy, are surprised to learn that they must budget additional money for this. And while many never meet the deductible thanks to their youth and good health, one sports-related injury can change all that!
Starting a Family…
When individuals marry and/or begin to have children, health insurance concerns once again take center stage. The decision to keep individual plans vs. having both members of the couple on one plan should be made following a thorough analysis. It should begin by assessing the health status of those involved, concentrating on the specific benefit coverage levels of services likely to be used and their anticipated costs.
Adding a child to the mix creates an interest in maternity and hospitalization benefits, as well as the coverage details for the baby once he/she arrives.
At All Stages of Life…
Overall (and at any age), when making decisions about health insurance there are two important considerations:
What’s the status of my health and/or anyone else that might be covered on my plan?
This gets to how much or little you will expect to use your insurance and, if needed, what benefits you are likely to use.
For example, if you have an old sports injury that is now limiting your normal workout routine, you may want to investigate coverage for surgery and rehab with significant physical therapy. Focusing on outpatient surgical benefits, coverage for the physician and anesthesiologist, and co-pays for physical therapy, will help manage expectations.
What are the requirements for using my insurance to ensure I receive the maximum benefit?
When you enroll in a plan you are agreeing to a set of “contractual rules” — rules which you must follow in order to receive coverage.
For example, you may need a referral before accessing specialist care. You may need to ensure that your physician, hospital and any specialist care such as anesthesiology are considered in-network. Or you may need to gain prior-authorization for care. Each of these and more can have a significant impact on your coverage, so make sure you are clear regarding what your policy requires.
I am certain the topic of health insurance is not as exciting to young adults as it is to me! But, it remains one of life’s necessary evils.
In the United States, in particular, it is incumbent upon each of us to manage the health insurance market available to us and to become an educated healthcare consumer.
Make informed choices and limit any surprises. The earlier in life you begin, the more smoothly things will go in the future!