Gambling on your health insurance can be risky

BY IRENE CARD AND BETSY CHANDLER

NEWJERSEYNEWSROOM.COM

YOUR HEALTH INSURANCE

Life is all about choices and decisions, and hoping you make the right ones at the right time. If you are a risk taker, and are rolling the dice on your health insurance, you had better know what the consequences of your actions are before the dice come to a stop. Sometimes taking a chance can work in your favor and doing so may save you some money. But what happens when you roll those dice and lose? How much did you gamble and what has that decision cost?

If you have decided to reduce your health insurance premium by electing a high deductible, just keep in mind that you might actually have to meet that deductible. None of us know in advance (which is a good thing) in which year we may spend time in the local hospital, or have a medically challenged year, $250 or $500 deductibles used to be the ‘norm'. Now, most people are electing plans with $1,000, $1,500 or $2,500 deductibles as a way of controlling premium costs. This logic often makes sense, and with so many plans now offering some benefits before you meet the deductible, rolling the dice on a higher deductible can often save a family a good deal of money in monthly premium dollars. However, keep in mind that if you save the money each month in premium, you should be prepared to pay it out if you have to. I like to advise my clients who elect the higher deductible plans to put that extra savings in a separate savings account, or ear mark it in case it is needed. But let's not kid ourselves; often the higher deductible/lower premium plan is also a function of what fits the family budget.

Another risky proposition we hear occasionally is the "my kid just graduated college but is healthy and doesn't need insurance" syndrome. This is a doubled tiered risk in my mind. First, obviously, you have no coverage if something happens. Being healthy doesn't mean you are exempt from medical expenses. Nor does it mean that the healthy status cannot change without warning. Everyone is fine until they wake up with a strange pain, or fall and break a leg, or develop a case of appendicitis or gallstones. Situations like these can be very costly without health insurance. Furthermore, the second tier of exposure is far more risky in my mind. If you elect to let "junior" run around without health insurance for a few years, keep in mind that a waiting period for preexisting conditions may apply once benefits are in place again. This depends on a number of factors, but there does exist the possibility that a waiting period of six months to a year may apply. 180 or 365 days can be a very long period of time if you or a loved one are in need of medical care.

We know a young man who decided he did not need health insurance as he was "young and healthy". Unfortunately, he was diagnosed with cancer. The good news is he could purchase health insurance immediately even with that diagnosis. The bad news is the plan will not cover anything relative to that condition for one year. My guess is that this young man will be paying off the bills he incurred for many years. A young man came to see us recently about purchasing health insurance for his family. His employer does offer health insurance but he would have needed to contribute $600 per month for his family, and he did not want to spend the money. His wife was just diagnosed with a serious condition and is in need of immediate surgery. The surgeon told her to go get health insurance and then they can schedule the surgery. As this family is eligible for group insurance sponsored by the employer, they are ineligible for individual insurance (which is fine as the group insurance is actually less costly and offers better benefits anyway.) The group plan will have a six month waiting period before it will cover any preexisting conditions. This man risked quite a bit against the $600 a month premium he "saved". Suffice it to say, the dice did not come back in his favor.

So, when you are reviewing your health insurance, you may wish to discuss with your agent the savings of a higher deductible or higher co-pay plan. It is your decision to make as to whether or not that "gamble" makes sense for you. If you can save a few thousand dollars a year in premium and are exposing yourself to $1,500, well that may be a good bet to take. If you are saving $500 but are exposing yourself to $2500 - well, perhaps not the best bet to take. You are going to pay, one way or the other. Either you buy a crème-de-la-crème plan and pay a high premium based on "anticipated" expenses that may never occur; or, you keep the premium down by choosing a higher deductible, knowing that if you do end up in the hospital, you will use your deductible. If you do get hit with the high deductible, you can always make monthly payments until the bill is paid off.

If you have elected to forgo health insurance entirely, and save the premium, you are not rich enough to make that bet. Unless you are a multi-millionaire, there is no way you can "budget" for medical expenses.

Irene Card & Betsy Chandler are both licensed insurance professionals working at MIC Insurance Services, a health insurance services company. If you have questions relative to this column or other related topics, we invite you to call (973) 492-2828, browse our past columns on our web site at www.micinsurance.com.