By Bennett Whitlock, CRPC®, Private Wealth Advisor
Major medical expenses can take a heavy financial toll. Before it does, take the time to prepare your strategy for dealing with surprise medical expenses. Here are several strategies to help you get started.
1. Plan ahead with health insurance. Review your insurance coverage to ensure you understand what services or prescriptions are covered and what medical bills you may be responsible for. It’s worth reviewing how these basic, but important, policy components may apply to you:
Deductible – Your deductible is the amount you’re expected to pay each year for medical services covered by your health insurance plan. You are responsible for all expenses until you meet your deductible.
Out-of-pocket maximum – Once your deductible is met, additional medical expenses will be applied to your out-of-pocket maximum. When you’ve incurred this amount, your insurance will pay all expenses covered by your plan for the rest of the year.
In-network – In general, medical expenses must be in-network, or part of your insurance company’s system of providers, for the bill to be applied to your deductible or out-of-pocket maximum. If you require out-of-network services, check with your insurance provider to see how the bill will be handled.
Co-pay and co-insurance – A co-pay is a set amount you pay each time you receive a service, such as a primary care physician visit or receiving a new prescription. Co-insurance is a set percentage of the expense you pay at the time of service. Co-pays and co-insurance may or may not apply to your deductible and out-of-pocket maximum.
2. Strategically use savings accounts. A key way to cope with unplanned medical costs is to have money already in the bank. Among the options to consider are:
Health Savings Accounts (HSAs) – These are tax-advantaged savings plans associated with high deductible health insurance policies. In 2018, individuals can save up to $3,450 in an HSA while families can set aside as much as $6,900. These are funds that can be used to pay out-of-pocket medical expenses this year or in future years.
Flexible Spending Accounts (FSAs) – An FSA allows you to use pre-tax dollars to pay for certain medical expenses. You must spend these funds within the same calendar year.
Savings Accounts – Set aside enough funds to cover your out-of-pocket maximum or three-to-six months’ worth of living expenses, whichever is greater.
3. Craft a bill-paying strategy. If you incur unexpected medical expenses, first work with your insurance company to understand how each bill is applied to your deductible or out-of-pocket
maximum, noting co-pays and co-insurance where appropriate. Before paying each bill, make sure the amount matches the number calculated by your insurance company.
4. Consider a health care directive. Lastly, have a conversation with your spouse or another trusted family member about your health care wishes and consider documenting your desires in a heath care directive. Your health care providers and attorney can help you get one started.
If you experience a major medical event, the least of your worries should be paying for it. Take time today to develop a strategy for how to cope with unexpected medical expenses.
Bennett Whitlock, CRPC ®, is a private wealth advisor and managing director with Whitlock Wealth Management, a franchise of Ameriprise Financial Services Inc. Learn more at WhitlockWealth.com or call 703-492-7732.