When’s the last time you planned to get into a car accident? How about breaking a bone or getting so sick you needed to stay overnight in the hospital?
Let’s be honest. Nobody likes to think about the bad things that could happen in life. Unlike planning for a family vacation or special event, where you can set aside money each week or month to make it a reality, life’s curveballs just aren’t pleasant to think about. They’re even less pleasant to pay for, which is why everyone needs health insurance.
Without it, you could be on the hook for hundreds of thousands of dollars. With it, you’ll have peace of mind knowing there’s a limit to what you’ll be liable for. Plus, just like that family vacation, you’ll be able to plan for it in your budget. While you might hate forking over money each month to pay for it, here’s how health insurance would have your back in the event that you needed it in a major way.
First, if you don’t understand deductibles, coinsurance, copays, or maximum out-of-pocket costs, read this blog post first, then come on back.
Assuming you do understand those terms, let’s say you literally get hit by a truck. The good news: you’re alive. The bad news: Keeping you that way took an ambulance ride, multiple emergency surgeries, and a lengthy hospital stay, followed by extensive rehabilitation.
Your bill is one million dollars. Hey, nobody said getting hit by a truck was cheap. For this hypothetical, we’ll set your deductible at $2,000, your coinsurance at 20 percent, and your out-of-pocket maximum cost at $10,000.
You’d pay the full deductible of $2,000 and then your coinsurance would kick in. There would still be $998,000 to be paid. Your 20 percent coinsurance amounts to $199,600, but since that would be way over your $10,000 max out-of-pocket expenses as outlined by your plan, you’d only pay $10,000 before your insurance would completely cover the remainder of your expenses.
Health insurance would pay $990,000. You’d pay $10,000. Plus, for the rest of the year, any covered medical expenses you might receive would also be fully paid by your insurance company since you would’ve reached your maximum out-of-pocket amount.
While $10,000 certainly isn’t pocket change, it’s better than being responsible for the entire seven-figure amount. In fact, health insurance might actually be the least painful part of this scenario, as we imagine getting hit by a truck would hurt quite a bit.
To help offset a high-deductible plan, you might want to consider setting up a health savings account (HSA), which you can use to pay health care expenses until your deductible is covered for the year. Plus, money you deposit into an HSA doesn’t have to be used in any particular timeframe, so it can keep building up until you need it.
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