Since early 2020, millions of Americans have been infected by the coronavirus, often resulting in the need for significant medical care. Stories have emerged of people who were hit with surprise medical bills for the treatment they received. It’s a reminder that we all need to be ready for potential out-of-pocket medical expenses, whether it is to cover treatment for the virus or another ailment.
Realities of today’s medical coverage
The emergence of COVID-19 has made it clear that medical events can occur out of the blue. Now more than ever, it’s important to make sure you have the right health insurance in place to help you manage the potential financial consequences of a health crisis.
Most people have coverage either through their employer, through an individual policy or as part of a government program such as Medicaid or Medicare. Regardless of how you are insured, it is increasingly common today to face co-pays or deductibles when you need care. Therefore, your financial commitment doesn’t end with the premiums for which you may be responsible. Depending on the policy you carry, you could easily face out-of-pocket expenses costing several thousand dollars.
One way to manage these costs is to pay close attention to whether providers you work with are “in-network,” or “out-of-network.” Typically, your personal financial liability is limited with in-network providers, but your insurance coverage may be lacking if you use out-of-network services.
In emergency situations, you may not have much control over who provides your care. These circumstances can often result in particularly large bills that may surprise those who thought their health insurance would cover them.
Insurance isn’t enough — plan for that
Health insurance may mitigate much of the cost risk, but it doesn’t eliminate it. Simply stated, sudden or unexpected medical bills fall under the heading of “emergency expenses,” like a surprise home or car repair. You should have money saved in an emergency fund to help cover these expenses.
Conventional wisdom recommends that you set aside the equivalent of three-to-six months of household income in an emergency fund. These are dollars that should be readily accessible, held in vehicles such as a bank savings account or money market funds. Given today’s economic uncertainties, an even larger emergency fund, equal to nine months or more of income, may be appropriate.
Most important, you want to avoid depleting accounts that are set up to help meet long-term goals, such as retirement or college education costs. Cash in place provides the necessary cushion against surprise medical bills while protecting savings devoted to other goals.
Other steps to consider
If you find yourself in a pinch trying to pay bills, there are other steps to consider:
• Talk to your medical provider to try to make arrangements to either alter the charge or set up a payment plan that you can realistically stick to.
• If you need more guidance, consult with a credit counselor who may be able to help you structure a solution to deal with your financial challenges.
Planning ahead is your best defense against the impact of surprise medical expenses. Also be sure you understand what is and isn’t covered under your current health insurance policy. Your financial advisor can work with you to make sure you are properly prepared.
Gregory A. Chona is a Certified Financial Planner with Ameriprise Financial Services in Crown Point. He specializes in fee-based financial planning and asset management strategies and has been in practice for 29 years. To contact him visit www.ameripriseadvisors.com/g.chona/, call 219-663-9860 ext. 114 or visit 11480 Broadway Crown Point. Ameriprise Financial Services Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax adviser or attorney regarding their specific situation.
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