Health Insurance Is Expensive, But Not Having It Is Even More Expensive

Health Insurance Is Expensive, But Not Having It Is Even More Expensive

January 30, 2024

During the pandemic, we began to see and hear the mantra “Health is the new wealth” on social media and in the news media. Health has always been our most important asset, but when we experience good health, it’s easy to take it for granted. During the during the pandemic, when so many previously healthy people became seriously ill, we all were reminded just how important our health is.

When we work with clients to build their personal financial plans, insurance is a key component of those plans. Purchasing any type of insurance allows you to transfer the risk of loss from unexpected occurrences to an insurance company. For example, when you purchase health insurance and you get injured or sick, the insurance company takes on the cost of your care. And when you purchase life insurance and you die unexpectedly, the insurance company provides your surviving family members with a death benefit check that helps replace your income that has now ceased.

Health insurance costs continue to rise steadily, and it is difficult for many people to afford the cost. However, not having health insurance is even costlier.

The High Cost of Health Insurance Is a Burden for Many

The cost of treating patients is on the rise, and as the health care industry experiences pressure from high inflation, rising wages and other costs, which are compounded by clinical workforce shortages, those costs are passed on to us

According to preliminary results from Mercer’s National Survey of Employer-Sponsored Health Plans 2023, U.S. employers expect total health benefit cost per employee to rise 5.4 percent on average in 2024, even after they make changes to their plans to slow cost growth. This 5.4 percent cost increase follows more than a decade of annual cost increases typically averaging 3 to 4 percent.

And, according to the Commonwealth Fund 2023 Health Care Affordability Survey, large shares of insured working-age adults surveyed said it was very or somewhat difficult to afford their health care. That was the response of 43 percent of those with employer coverage, 57 percent with marketplace or individual-market plans, 45 percent with Medicaid and 51 and percent with Medicare. Nearly two-thirds of working-age adults said that price inflation in the past year affected their family’s ability to afford health care.

The study also revealed that when people delayed getting health insurance because of costs, they got sicker. More than half (54 percent) of people with employer coverage who reported delaying or forgoing care because of costs said a health problem of theirs or a family member got worse because of it, as did 61 percent in marketplace or individual-market plans, 60 percent with Medicaid and 63 percent with Medicare.

The Cost of Not Having Health Insurance Is Even Higher

People who have no insurance coverage have lower access to care than people who are insured. As a result, they are more likely to delay or forgo care because of the costs. Studies repeatedly demonstrate that uninsured people are less likely than those with insurance to receive preventive care and services for major health conditions and chronic diseases.

When they do seek care, uninsured people often face unaffordable medical bills. In 2022, uninsured nonelderly adults were nearly twice as likely as those with insurance to say they had difficulty affording health care costs. These costs can quickly translate into medical debt, which can easily become a lifetime burden and source of worry.

A 2023 survey from Debt.com examined the growing burden of medical debt in the United States. It found that for 67 percent of respondents, inflation made it harder to pay medical bills. That’s a substantial increase from the 57 percent reported in the 2022 survey. Also, almost one-third (32 percent) of respondents said their medical bills had entered collections in 2023, compared to 28 percent in 2022. This signals an escalating trend that could have long-lasting financial repercussions for those affected.

Insurance Is an Important Part of Your Personal Financial Plan

Health issues can derail your future — financially and otherwise — without proper planning in place.

Not only that — being without health insurance coverage can cause constant worry, which in itself isn’t healthy. When you are worried about what might happen to your and your family’s financial situation if something happened to you, it robs you of the joy of daily living. And then if you or someone in your family does get sick or injured, that situation can end up consuming all your time, energy and financial resources, which in turn further decreases your overall quality of life.

However, when you work with a fiduciary financial advisor, you can be sure all aspects of your financial situation are being addressed and covered. We will guide you in planning for all aspects of your future, from your children’s education to setting aside funds for retirement to minimizing the disruption that unexpected medical events can cause to your lifestyle and financial situation.

We want to make sure my clients have sufficient health insurance coverage, so one of the first things we do is to ask whether they have health insurance and, if so, what type. Many people have coverage through their employers, and others have coverage through their state exchanges or through Medicaid. Americans are eligible to receive Medicare coverage once they turn 65, so we look to see how close a client is to age 65.

When we meet with clients, whether it’s during our annual review or in other meetings or conversations, we ask if anything has changed in their lives since we last spoke. We want to know if they have experienced any new health issues.

We Will Find a Solution That Works for You and Your Family

If the cost of health insurance is preventing you from getting coverage, we can help you explore your options.

For example, when clients tell us they have changed jobs, we want to find out if they have sufficient health insurance under their new employer and how a change in insurance might be affecting them financially and otherwise.

And when people lose their jobs, they have the option of going on COBRA, which is short for Consolidated Omnibus Budget Reconciliation Act. This government plan gives people who lose their health benefits the right to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances, such as a voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan. COBRA can be expensive, so we work with these clients to determine their best options.

For those clients who are nearing retirement, we want to make sure their options are covered optimally, too. When a primary income earner plans to retire, we want to make sure that he or she and his or her spouse both have health insurance coverage, with no gaps in coverage between employment and Medicare eligibility.

And for clients who feel they cannot afford health insurance at all, we want to help them get lower-cost insurance that covers at least major health care costs. For many people, catastrophic health insurance coverage is a good option. This coverage tends to have low monthly premiums and very high deductibles. Yet it can give you an affordable way to protect yourself from worst-case scenarios, like getting sick or seriously sick or injured.

Catastrophic plans cover the same services as other plans in the HealthCare.gov marketplace, and they cover some preventive services, such as vaccinations and screening tests, at no cost. They also cover at least three primary-care visits per year before you’ve met your deductible.

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Sometimes, a client will tell us a surgery has been scheduled. We will ask, “When is the surgery?” We might send them a blanket before their surgery as a care gift — we call it a “care blanket” — and wish them well. If we find out one of our clients is sick with a cold, the flu, COVID-19 or something else, we will send them a dry packet of chicken noodle soup mix because it’s easy to mail. We want our clients to know we care about them and that we are paying attention to how they are doing.

We want to accompany you on the journey toward better health. Not only is this part of our relationship-building process; it’s also our way of demonstrating that we genuinely care about your overall well-being. Addressing your health insurance and other coverage lays the foundation for your personalized financial plan and helps you navigate the potential fallout from all kinds of unexpected life transitions. And when you have a personal financial plan in place, it is easier to manage the financial repercussions of unexpected life changes.

When you develop a long-term relationship with the right financial advisor, get accustomed to hearing him or her ask, “How are you doing?” and “What has changed in your life that could affect your financial plan?” and “How was your surgery?”

 

Any opinions are those of the author and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. No investment strategy can guarantee your objectives will be met. Past performance is no guarantee of future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation.