Turns out, your physical well-being isn’t the only thing at stake when you go to the hospital. So too is your financial well-being. That’s because no debt is more common than medical debt.
The numbers are staggering in their scope. According to the Consumer Financial Protection Bureau, more than half of all collection notices on consumer credit reports stem from outstanding medical debt, and roughly 43 million consumers – nearly 20% of all those in the nationwide credit reporting system – have at least one medical collection on their credit report.
Now, you might be inclined to think that because you’re young or have both a job and health insurance, medical debt poses you no risk. Think again. According to a recent report from the Kaiser Family Foundation, roughly one-third of non-elderly adults report difficulty paying medical bills. Moreover, roughly 70% of people with medical debt are insured, mostly through employer-sponsored plans.
Not concerned yet? Consider that a medical collection notice on your credit report, even for a small bill, can lower your credit score 100 points or more. You can’t pay your way out of the mess after the fact, either. Medical debt notifications stay on your credit report for seven years after you’ve paid off the bill.
The good news (yes, there is good news here) is you can often prevent medical debt from ruining your credit simply by being attentive and proactive.
Pay close attention to your bills
Certainly, a considerable portion of unpaid medical debt exists on account of bills so large and overwhelming that patients don’t have the financial wherewithal to cover them. But many unpaid medical debts catch patients completely by surprise, according to Deanna Hathaway, a consumer and small business bankruptcy lawyer in Richmond, Va.
“In my experience, it’s often a surprise to people,” says Hathaway. “Most people don’t routinely check their credit reports, assume everything is fine, and then a mark on their credit shows up when they go to buy a car or home.”
The confusion often traces back to one of two common occurrences, according to Ron Sykstus, a consumer bankruptcy attorney in Birmingham, Ala.
“People usually get caught off guard either because they thought their insurance was supposed to pick something up and it didn’t, or because they paid the bill, but it got miscoded and applied to the wrong account,” says Sykstus. “It’s a hassle, but track your payments and make sure they get where they are supposed to get. I can’t stress that enough.”
Stay in your network
One of the major ways insured patients wind up with unmanageable medical bills is through services rendered – often unbeknown to the patient – by out-of-network providers, according to Kevin Haney, president of A.S.K. Benefit Solutions.
“You check into an in-network hospital and think you’re covered, but while you’re there, you’re treated by an out-of-network specialist such as an anesthesiologist, and then your coverage isn’t nearly as good,” Haney says. “The medical industry does a poor job of explaining this, and it’s where many people get hurt.”
According to Haney, if you were unknowingly treated by an out-of-network provider, it’s not unreasonable to contact the provider and ask them to bill you at their in-network rate.
“You can push back on lack of disclosure and negotiate,” Haney says. “They’re accepting much lower amounts for the same service with their in-network patients. They may do the same for you.”
Work it out with your provider BEFORE your bills are sent to collections
Even if you’re insured and are diligent about staying in-network, medical bills can still become untenable. Whether on account of a high deductible or an even higher out-of-pocket maximum, patients both insured and uninsured encounter medical bills they simply can’t afford to pay.
If you find yourself in this situation, it’s critical to understand that health care providers themselves usually do not report unpaid bills to the credit bureaus – collection agencies do. After a certain period of time, most health care providers turn unpaid debt over to a collection agency, and it’s the agency that in turn reports the debt to the credit bureaus should it remain unpaid.
“If you can keep it out of the hands of the collectors, you can usually keep it off your credit report,” says Hathaway.
The key then is to be proactive about working out an arrangement with your health care provider before the debt is ever sent to a collection agency. And make no mistake – most providers are more than happy to work with you, according to Howard Dvorkin, CPA and chairman of Debt.com.
“Trust me, no one involved with medical debt wants it to go nuclear,” says Dvorkin. “The health care providers you owe know very well how crushing medical debt is. They want to work with you, but they also need to get paid.”
If you receive a bill you can’t afford to pay in its entirety, you should immediately call your provider and negotiate, says Haney.
“Most providers, if the bill is large, will recognize there’s a good chance you don’t have the money to pay it off all at once, and most of the time, they’ll work with you,” he says. “But you have to be proactive about it. Don’t just hope it will go away. Call them immediately, explain your situation, and ask for a payment plan.”
If the bill you’re struggling with is from a hospital, you may also have the option to apply for financial aid, according to Thomas Nitzsche, a financial educator with Clearpoint Credit Counseling Solutions, a personal finance counseling firm.
“Most hospitals are required to offer financial aid,” says Nitzsche. “They’ll look at your financials to determine your need, and even if you’re denied, just the act of applying usually extends the window within which you have to pay that bill.”
If all else fails, negotiate with the collection agency
In the event that your debt is passed along to a collection agency, all is not immediately lost, says Sykstus.
“You can usually negotiate with the collection agency the same as you would with the provider,” he says. “Tell them you’ll work out a payment plan and that in return you’re asking them to not report it.”
Most collection agencies, according to Haney, actually have little interest in reporting debt to the credit bureaus.
“Think about it,” Haney says. “The best leverage they have to get you to pay is to threaten to report the bill to the credit agencies. That means as soon as they report it, they’ve lost their leverage. So, they’re going to want to talk to you long before they ever report it to the bureau. Don’t duck their calls. Talk to them and offer to work something out. They’ll usually take what they can get.”
At the end of the day, according to Haney, most people can keep medical debt from ruining their credit by following one simple rule.
Approaching retirement and curious to know how you’ll handle health care expenses? Medicare will likely play a role in helping you mitigate those costs in your golden years.
The federal government offers Medicare as an insurance program for permanently disabled Americans and those 65 or older. The Social Security Administration is responsible for funding the program, and most of its funding comes from a Medicare payroll tax you might have noticed on your pay stubs (it ranges from 1.45% to 3.8%, depending on your employment status and income level).
But what does Medicare actually cover? Read on for a quick overview.
Who’s Eligible for Medicare Coverage?
The majority of working Americans become eligible for Medicare coverage when they turn 65. You may also qualify if you’re younger and have been disabled for at least two years and receive Social Security benefits, if you receive kidney dialysis treatment, or if you are in end-stage renal failure.
In most cases, you’re automatically enrolled into Medicare once you start receiving Social Security payments. You need to opt out if you don’t want the coverage.
John K. Ross IV, an elder law attorney and partner at Ross & Shoalmire with multiple offices in Texas says eligibility is straightforward because it’s simply based on age. But the program does become much more complicated when you start digging into the details of what specific benefits make the most sense for you.
“Retirees need to make decisions around whether they’ll choose the traditional Medicare program versus Medicare Advantage,” he says. He adds that disputing Medicare’s coverage refusals is something most participants in the program will deal with at some point.
How Do You Enroll in Medicare Coverage?
You’ll be automatically enrolled into Medicare if you:
Already receive Social Security benefits
Are under 65 and are disabled, or have ALS
Receive benefits from the Railroad Retirement Board
You don’t get Social Security benefits (which could be the case if you’re 65 or older but still working)
You have end-stage renal disease
If you need to manually apply, you can do so online here. You also have the option of going to your local Social Security office or calling to apply at 1-800-772-1213.
The Basics of What Medicare Really Covers (and What It Doesn’t)
The main part of Medicare is broken down into two parts: A and B.
What Medicare Part A Covers
It covers several broad categories of hospital care and services you receive while hospitalized.
Hospital care limited to 90 days each benefit period and a lifetime reserve of 60 additional days for those who exhausted the initial 90 days coverage
Skilled nursing care
Home health services
Care in hospice for those with a life expectancy of less than six months
You can receive this coverage for free as long as you paid at least 10 years into Social Security.
“If you’re not eligible for free Part A coverage, the cost in 2017 is $413 per month if you paid into Medicare for less than 30 quarters while working,” says Desmond Henry, CFP® and founder of Afflora Financial Life Planning. “It costs $227 per month if you paid in between 30 and 39 quarters.”
What Medicare Part B Covers
Medicare Part B covers doctor’s visits and outpatient care. This can include medical equipment and physical therapy. It may cover some preventive care services, too, like screening for certain diseases including cancer and glaucoma.
Here’s a full list of what Part B provides for:
All outpatient services
Doctor’s visits and home health visits that don’t require a hospital stay
Durable medical equipment
Mental health and preventative services
Second option prior to surgery
Limited outpatient prescription drugs and drugs that cannot be self administered
The costs for Part B are more complicated than Part A. “The standard Part B premium for 2017 is $134 per month, but this may be higher based upon your income level,” says Henry.
And as important as it is to understand what Medicare really covers, it’s also essential to know what the program does not offer to those on the plan.
“Medicaid does not pay for long-term care such as in-home sitters services, and assisted living and nursing-home costs,” says Ross.
Henry goes into even greater detail. “Medicare won’t pick up the tab for hearing aids, eye exams and glasses, and dental care,” he says.
Henry explains other services like cosmetic surgery and alternative medicine get excluded from coverage, too. “People don’t typically realize that Medicare generally does not cover medical expenses when you are outside the United States or territories, either,” he adds.
What Medicare Part C Covers
Medicare coverage gets more complicated when you look at additional parts of the program. There’s also Medicare Part C, which is also known as Medicare Advantage Plans.
Whereas Medicare is a program offered by the federal government, private insurance companies offer coverage with Medicare Advantage Plans (which the government still regulates).
Medicare Advantage must provide services that are comparable or “equivalent” to what’s covered by Medicare Parts A and B. Some Part C plans offer more services not included in traditional Medicare, including prescription drug coverage.
That might help you get the coverage you need if Medicare Parts A and B aren’t sufficient for you — but that also means there’s a huge variation between all the Medicare Part C plans available, both in terms of services provided as well as the costs of the plans.
Prices also depend on the state you live in, the provider you choose, and whether you choose an HMO or PPO plan. eHealthInsurance has a tool that can help you compare a variety of Medicare Advantage plans to see which one may work best for you.
Don’t Forget About Medicare Part D
Parts A and B of Medicare provide for both hospital care as well as outpatient services and doctor’s visits — but it doesn’t cover prescription drugs. That’s where Medicare Part D comes in.
Part D plans are also offered by private insurers and are separate policies from Medicare Parts A and B. Just like Part C coverage, Part D plans vary widely in what they cover and their costs.
What’s the Future for Medicare Under the Trump Administration?
The White House and Republicans in Congress have promised to repeal the Affordable Care Act and are in the process of proposing radical changes to the current health care system.
But most of the proposed changes affect Medicaid, not Medicare. There are proposals that would change the “funding mechanism” for the Medicare program, but beneficiaries are unlikely to feel those changes directly.
And there’s disagreement between the Trump administration and House Republicans over how Medicare should be handled moving forward. Trump has merely said he wouldn’t cut the program.
Quick quiz: What’s the most valuable financial asset you own as a young professional and a provider for your family?Here are some hints: It’s not your home. It’s not your 401(k). And it’s definitely not your car.
The answer? It’s your future income. The money you earn in the years to come will allow you to pay your bills, save for the future, and create a secure financial foundation for you and your family.
Really, all the plans you’re making both for today and the future rely on the assumption that you’ll continue earning money. Which is exactly why it’s so important to protect that income and make sure you receive it no matter what.
That’s where disability insurance comes in.
Disability insurance ensures that you’re able to continue paying your bills and putting food on the table even if your health prevents you from working for an extended period of time. By sending you a monthly check that replaces some or all of your income, it protects your biggest financial asset from those worst-case scenarios.
It’s something that just about every working parent should have, but it’s a complicated product that can be difficult to understand and get right.
So in this post you’ll learn all about how disability insurance works and what kind of policy you should be looking for.
Disability insurance is often ignored both because the prospect of becoming disabled seems remote and because the premiums can be hard to swallow, especially for young families who are already struggling to pay for child care and all the other expenses that come with having young kids.
But extended disability is a lot more common than most people think.
For the most part it’s chronic illness that causes disability, not the kind of major accident that typically comes to mind. And the odds of it happening before you’re financially independent are fairly high, though there are some situations in which your personal odds may be lower.
So the big question is this: If you’re one of the 33% of people who faces an extended disability, where would the money come from to pay your bills and put food on the table? How long would your savings be able to support you, and what would you do if you needed help past that point?
Most people would struggle to make it more than a few months, which is exactly why disability insurance is so valuable. By replacing your income for potentially years at a time, it ensures that you’ll be able to continue taking care of your family no matter what.
Short-term disability insurance vs. long-term disability insurance
There are two main types of disability insurance: short-term and long-term.
Both can be helpful, but they play very different roles in your financial plan. Here’s an overview of each.
Short-Term Disability Insurance
Short-term disability insurance only offers benefits for a relatively limited amount of time. Most short-term disability insurance policies cover you for 3-6 months, though they can provide coverage for up to two years.
There is typically a waiting period of up to 14 days before the insurance kicks in to prevent it from covering minor illness and injury. After that waiting period, it will typically start to pay 50%-100% of your regular income until you either return to work or your coverage period ends.
One of the most common uses of short-term disability insurance is during maternity leave. Many, though not all, short-term disability policies cover the latter parts of pregnancy and the period after childbirth, which can help replace your income while staying home with your newborn.
Most short-term disability insurance policies are offered as an employer benefit, and in some cases that coverage may even be free. Private coverage is also an option if you aren’t able to get coverage through work, though those policies can be expensive. For example, a healthy 38-year-old male might pay a $2,300 annual premium for a $5,000 monthly benefit and 12 months of coverage.
One alternative to short-term disability insurance is building an emergency fund. A 3-6 month emergency fund would provide the same protection as a 3-6 month short-term disability insurance policy, with the added benefit of not having a monthly premium.
Long-Term Disability Insurance
Long-term disability insurance is where you typically find the most value. Because while a short-term disability could be covered by a healthy emergency fund, an extended disability is much more likely to deplete your family’s savings and put you in a difficult position unless you have some way of replacing your lost income.
Long-term disability insurance picks up where your emergency fund or short-term disability insurance leaves off. There’s typically a 3-6 month waiting period during which you would have to replace your income by other means.
But once you’re past that waiting period, your long-term disability insurance would start replacing your monthly income and would continue to do so for years at a time, as long as you remain disabled.
This is a big potential benefit. A long-term disability policy that replaces $5,000 per month in income will potentially pay you $60,000 per year for as long as you’re disable. That would go a long way toward keeping your family on the right track.
Given that potential value, it’s usually more important for families to secure long-term disability insurance than short-term disability insurance. For that reason, the rest of this guide will focus primarily on long-term disability insurance.
10 Questions To Ask When Shopping for a Long-Term Disability Insurance Policy
Long-term disability insurance is a complicated product with a lot of terms and conditions that vary policy to policy. Finding a good, independent disability insurance agent who isn’t beholden to any particular insurance company can help you secure the right policy at the right price for your specific situation.
But whether you’re looking on your own or with the help of an agent, there are 10 key features you’ll want to evaluate.
1. Your Monthly Benefit
Your monthly benefit is the amount of money your long-term disability insurance policy would pay you each month in the event of disability. And there are a few key factors that go into deciding how big a benefit you need:
What are the monthly expenses you would have to cover if you lost your income? Consider the fact that you may be able to cut back on certain discretionary expenses, but also that you may have additional medical expenses in order to treat the disability.
What other income sources do you have? You can factor in your spouse or partner’s income, your savings, and possibly even help from family.
Would your benefit be taxable or tax-free? The benefit from an individual policy you purchase on your own would almost certainly be tax-free. The benefit you get from an employer policy would likely be taxable. The difference affects how much money you would actually have available to spend.
2. How They Define ‘Disability’
Believe it or not, there is no one way of defining disability. There are a lot of variations, but most policies fall into one of three main groups:
Any occupation – This is the most restrictive of the three definitions. It defines disability as the inability to perform any job, no matter what it is or how much it pays. It’s hard to qualify for benefits under this definition.
Own occupation – This is the broadest of the three definitions. It defines disability as the inability to perform the main duties of your current job. It’s easiest to qualify for benefits under this definition.
Modified own occupation – This is a middle ground that defines disability as the inability to perform a job for which you are reasonably suited based on education, training, and experience. In other words, not just any job will do. You have to be able to work in a job that fits your level of experience and expertise before benefits stop.
Understanding your policy’s definition of disability is key to understanding the protection you’re actually receiving. A big benefit with a strict definition of disability may be less valuable than a smaller benefit with a definition that’s easier to meet.
3. The Elimination Period
The elimination period is that amount of time you have to be disabled before you can start to collect your benefit.
Typical elimination periods range from 60 to 180 days, with longer elimination periods leading to a smaller premium. You should consider how long your savings and/or short-term disability insurance would cover you when deciding how long an elimination period to choose.
4. The Benefit Period
This is the maximum amount of time you would be able to collect benefits as long as you continue to meet the policy’s definition of disability.
Many long-term disability insurance policies pay out until age 65 or 67 to coincide with the standard Social Security retirement age. Other policies will only pay benefits for 5-10 years.
Longer benefit periods are more valuable, but also more expensive. You should consider the likelihood of being able to replace your income in other ways, such as transitioning to a different job, when deciding how long you’d like your benefit period to last.
5. What isn’t Covered
Most long-term disability insurance policies will exclude certain types of conditions from coverage. For example, mental health conditions are often not covered or are subject to a shorter benefit period.
Sometimes the exclusions will only last for a period of time, such as the first two years of the policy being in place. Sometimes they last for the life of the policy. You should evaluate these exclusions in relation to your personal and family health history to understand how likely you might be to run into them.
7. Residual Benefit
A residual benefit feature means that you could receive partial benefits if you return to work at a reduced salary.
This feature can help you build your workload over time, making for an easier and smoother transition.
8. Cost-of-Living Adjustment (COLA)
Policies that come with a cost-of-living adjustment will increase your benefit each year based on the rate of inflation. This is meant to ensure that you are able to pay for the same amount of goods and services each year, even as the cost of those things increase over time.
Some COLA riders have a maximum annual increase and/or a limited amount of time for which they are applied. For example, a policy might cap the annual increase at 3%, and it may only increase the benefit for a certain number of years before leveling off.
9. Future Purchase Option
Many long-term disability insurance policies guarantee you the right to increase your coverage in the future if your income increases, without any medical underwriting. This is a valuable benefit because it eliminates the risk that a decline in health could prevent you from getting more coverage when you need it.
10. Insurer’s Financial Rating
Finally, you should make sure that the insurer is in good financial condition. The last thing you want is to have the insurance company flake out on you when it’s time to collect.
There are two ways you can get long-term disability insurance:
Through your employer as an employee benefit (referred to as group disability insurance)
On your own through an insurer of your choice
Both have their pros and cons. Here’s a breakdown.
The Pros of Group Coverage
Group disability insurance is often less expensive, and the premiums are typically tax-deductible. Many employers even offer a base level of long-term disability insurance coverage for free.
The lower premium can come with some negative trade-offs, as you’ll see below, but in the best cases it simply makes the insurance easier to afford.
2. No Medical Underwriting
Your ability to get group coverage is in no way affected by your current health. Eligibility is solely dependent on your employment status with the company.
This can be an especially big benefit if you have significant health issues that would make individual coverage either prohibitively expensive or impossible to get.
Group coverage is easy to get in place. All you have to do is sign up during open enrollment, choose the level of coverage you’d like, and you’re done.
The Cons of Group Coverage
1. Benefits Are Taxed
In most cases, your group disability insurance premiums are tax-deductible, and the benefits you receive are taxed. Which means that you won’t actually receive the full benefit.
So while group long-term disability insurance can be affordable on the front end, sometimes that comes at the cost of smaller benefits on the back end.
2. May Not Cover You Completely
In addition to the benefits being taxable, your employer may not offer enough coverage to meet your full need to begin with. You may need to get an additional policy if you want to be fully insured.
3. Lack of Control
Your group disability insurance policy is what it is, and you don’t have much, if any, say in the features it offers.
Sometimes this won’t matter, since the policy will have everything you want. But sometimes it will be lacking in certain areas, which could leave you with weaker coverage than you’d like.
4. Can’t Take It with You
You typically can’t take your group disability insurance coverage with you when you leave the company, and your employer could also choose to stop offering it at any time.
All of which means that you could find yourself without coverage somewhere down the line. And if your health status has declined or your next employer doesn’t offer group coverage, you may find it hard to get affordable disability insurance elsewhere.
The Pros and Cons of Individual Disability Insurance
The Pros of Individual Coverage
Individual long-term disability insurance policies are portable, meaning that they’re yours as long as you continue to pay the premiums, even if you change jobs. This is crucial to making sure that you always have coverage when you need it.
2. Definition of Disability
With an individual disability insurance policy, you have the opportunity to choose a broader definition of disability that increases your chances of receiving benefits. This can be particularly helpful if you work in a highly specialized field where having an own occupation definition would be beneficial.
3. Tax-Free Benefits
Individual disability insurance premiums are not tax-deductible, but the upside is that any benefits you receive are tax-free. This ensures that you get as much money as possible when you really need it.
4. Control over Other Features
You have a lot more control over all the policy features when you buy individual coverage. You can often pick and choose whether you want residual benefits, cost-of-living adjustments, and the like, allowing you to customize your coverage to your specific needs.
The Cons of Individual Coverage
Individual disability insurance is typically more expensive than group coverage, particularly if you have pre-existing medical conditions or you work in a high-risk occupation.
While it can vary greatly depending on the specifics of your circumstances, a reasonable rule of thumb is to expect $2-$2.50 in monthly benefits for every $1 in annual premium.
Long-term disability insurance is a complicated product, and unfortunately, it’s hard to shop around and get a true apples-to-apples comparison of policies.
Your best bet is to look for a truly independent disability insurance agent who isn’t tied to any particular insurance company, and who can guide you through the process and help you understand the pros and cons of the various policies offered by different companies.
3. Medical Underwriting
Applying for individual long-term disability insurance includes a medical exam and a review of your medical history, after which the insurance company may ask more questions to get a better understanding of your current medical condition.
This can be time-consuming, can feel invasive, and in some cases can lead to a more expensive policy or even a denial of coverage altogether. It can also lead to an attractive offer if you’re in good health, but regardless, it’s a cumbersome process you have to go through.
A Quick Note on Social Security Disability Coverage
While Social Security does offer long-term disability coverage, it’s generally not a good idea to rely on it.
The main reason is that it has a strict definition of disability, requiring you to be unable to work in any job for at least one year. It only pays out under the most extreme of circumstances.
You also need to have worked long enough to qualify for any coverage at all, and even if you do qualify, it often won’t meet your full benefit need.
All of which is to say that if you truly want financial protection from disability, getting some combination of group and individual coverage is likely the way to go.
Are You Protected?
No one likes to think about the possibility of being sick or disabled, but protecting your income is a crucial part of building true financial security.
Disability insurance can be an effective way to get that protection. When it’s done right, it ensures that you’ll have money coming in no matter what, allowing you to continue providing for your family even in the most difficult of circumstances.
About two years ago, Brian LeBlanc was fed up. The 30-year-old policy analyst from Alberta, Canada, had struggled with his weight for years. At the time, he weighed 240 pounds and had trouble finding clothes that fit. He decided it was time to change his lifestyle for good.
LeBlanc started running and cutting back on fast food and soft drinks. He ordered smaller portions at restaurants and avoided convenience-store foods. About a year into his weight-loss mission, his wife Erin, 31, joined him in his efforts.
“The biggest change we made was buying a kitchen food scale and measuring everything we eat,” Brian says. “Creating that habit was really powerful.”
Over the last two years, the couple has shed a total of 170 pounds.
But losing weight, they soon realized, came with an unexpected fringe benefit — saving thousands of dollars per year. Often, people complain that it’s expensive to be healthy — gym memberships and fresh produce don’t come cheap, after all. But the LeBlancs found the opposite to be true.
Erin, who is a payroll specialist, also managed their household budget. She began noticing a difference in how little money they were wasting on fast food and unused grocery items.
“Before, we always had the best intentions of going to the grocery store and buying all the healthy foods. But we never ate them,” she says. “We ended up throwing out a lot of healthy food, vegetables, and fruits.”
Before their lifestyle change, Brian and Erin would often eat out for dinner, spending as much as $80 per week, and they would often go out with friends, spending about $275 a month. Now, Brian says if they grab fast food, they choose a smaller portion. Last month, they only spent $22 on fast food.
What’s changed the most is how they shop for groceries, what they buy, and how they cook. Brian likes to prep all his meals on Sunday so his lunches during the week are consistent and portion-controlled. They also buy only enough fresh produce to last them a couple of days to prevent wasting food.
Shedding pounds — and student loan debt
Two years after the start of their weight-loss journey, they took a look at their bank statements to see how their spending has changed. By giving up eating out and drinking alcohol frequently, they now spend $600 less a month than they used to, even though they’ve had to buy new wardrobes and gym memberships.
With their newfound savings, the LeBlancs managed to pay off Brian’s $22,000 in student loans 13 years early. Even with the $600 they were now saving, they had to cut back significantly on their budget to come up with the $900-$1,000 they strived to put toward his loans each month. They stopped meeting friends for drinks after work, and Erin took on a part-time job to bring in extra cash. When they needed new wardrobes because their old clothing no longer fit, they frequented thrift shops instead of the mall.
When they made the final payment after two years, it was a relief to say the least.
Now the Canadian couple is saving for a vacation home in Phoenix, Ariz., which they hope to buy in the next few years, and they’re planning to tackle Erin’s student loans next. They’re happy with their weight and lives in general, but don’t take their journey for granted.
“There were times we questioned our sanity and we thought we cannot do this anymore,” says Erin. But they would always rally together in the end.
“There are things that are worth struggling for and worth putting in the effort,” Brian says. “Hands down, your health is one of those things.”
How Getting Healthy Can Help Financially
Spending less on food isn’t the only way your budget can improve alongside your health. Read below to see how a little weight loss can tip the scales when it comes to your finances.
Spend less on medical bills. Health care costs have skyrocketed in the last two decades, but they’ve impacted overweight and obese individuals more. A report from the Agency for Healthcare Research and Quality stated that between 2001 and 2006, costs increased 25% for those of normal weight — but 36.3% for those overweight, and a whopping 81.8% for obese people. The less you weigh, the less you’ll pay for monthly health insurance premiums and other expenses.
Buy cheaper clothes. Designers frequently charge more for plus-size clothing than smaller sizes. Some people claim retailers add a “fat tax” on clothes because there are fewer options for anyone over a size 12. It might not be fair, but it’s the way things are.
Save on life insurance. Your health is a huge factor for life insurance rates. Annual premiums for a healthy person can cost $300 less than for someone who is overweight.
Cut transportation costs. Biking or walking to get around is not only a cheap way to exercise — it’s a cheap way to travel. You’ll be saving on a gym membership and limiting gasoline costs in one fell swoop. Bonus points if you go the whole way and sell or downgrade your vehicle.
It’s a pretty common scenario: you’re looking to book a medical appointment, so you go to your insurance company’s website to find an in-network doctor. You book the appointment, see the doctor, and all seems well — until you get a whopping bill. Apparently, that doctor wasn’t in your network after all, and now you’re faced with out-of-network charges.
This happens more often than we think. Unfortunately, insurance company websites are notoriously fallible. Not only that, but they change so frequently that it can be difficult to nail down just who is and isn’t covered. At some point or another, just about everyone will have to deal with a situation where their insurance doesn’t cover a provider.
It’s easy to feel duped in this scenario. Navigating the ins and outs of insurance is hard enough, but there’s nothing more frustrating than being fed incorrect information.
So what should you do?
What to Do If You’ve Already Gotten the Bill
Call the doctor
Doctors don’t usually consider themselves responsible for significant out-of-pocket costs resulting from a lack of research on the part of the patient.
But if you asked the doctor or their representative about insurance coverage beforehand, you should contact them immediately if that information ends up being false. Many physicians will honor the price they initially told you or at least give a hefty discount. Don’t get discouraged if they don’t get back to you right away. Keep calling to see if you can get a lower price.
Negotiate and ask for a better rate
Most doctors have two different rates: one for insurance companies and one for self-pay individuals. If your doctor’s visit isn’t going to be covered by your insurance, call the doctor’s billing department to ask for the self-pay cost.
“Most physician offices will accept a lesser amount, especially if they know the service is not going toward a deductible,” said health insurance agent Natalie Cooper of Best Quote Insurance of Ohio.
Ask about a payment plan if you can’t afford to pay the bill in one go. Most medical offices would rather get the money a little bit at a time than not at all.
“Most physician and hospital groups will accept a small payment of $25 or $50 per month until it’s paid off,” Cooper said.
Use a health savings account
If you’re struggling to pay a medical bill out of pocket, see if you can open an HSA and use those funds to pay for it. If you owe $2,000, you can transfer $2,000 to an HSA and then pay the doctor directly from that account.
What’s the benefit? HSA contributions are deductible on your taxes. Unfortunately, only people with high-deductible plans are eligible to start an HSA. Individuals can only contribute up to $3,400 a year or $6,750 in an HSA. You can start an HSA anytime if you have an eligible healthcare plan.
The IRS says you can only use your HSA to pay for qualified medical expenses, a list of which you can find here. Funds in an HSA roll over from year to year, and you can contribute up to $3,400 annually or $6,750 for families.
You can also open a Flex Spending Account, which works similarly to an HSA. However, funds don’t roll over to the next year and users can only contribute $2,550 a year.
How to Prevent Out-of-Pocket Expenses
Many people use the insurance company’s website to find a doctor, but those lists are often out of date. Insurance information can even change daily. The only way to confirm a doctor’s status with an insurance company is to call them directly and ask if they’re a network provider — not just if they accept your insurance.
“When they are a network provider, they are contractually required to accept no more than the negotiated contracted rate as payment in full, which is usually less than the billed rate,” said human resources expert Laurie A. Brednich. “When they say they ‘accept xyz insurance,’ they are usually not a network provider, but will file the claims on your behalf, and you are responsible for the full billed charges.”
It can also be helpful to give them your insurance group and account numbers beforehand so there’s no question about your specific policy. The more specific you can be, the more accurately you’ll be able to navigate the insurance labyrinth.
Find out if all procedures and doctors are covered
Have you ever been to a doctor who’s recommended you see a specialist for a certain procedure — only to find out that the specialist isn’t covered by your insurance, even though they’re in the same building?
When a doctor recommends you to a colleague, they’re not confirming that the other physician is covered in-network. Before you make the appointment, talk to the billing department to see what their policies are. You can request an estimate in writing beforehand so you’ll have an idea of what the costs will be.
Some procedures might not be covered even if they’re being ordered by your in-network doctor. If your doctor sends your results to a lab, that lab might be out of network, even if your insurance covers the doctor who ordered them.
Confirm the lab’s status before you go in. If it’s too late, call your insurance and ask if they can bill the service as in-network. Cite the fact that you weren’t aware the lab would not be covered.
If they refuse, contact the doctor’s office and explain your situation. Ask them why they used an out-of-network provider and see if they’re willing to write off the bill. Be polite, but firm.
Ask the doctor to apply
When Julie Rains’ insurance changed to a preferred provider plan, she discovered her trusted doctor was now going to be out of network. Instead of searching for a replacement, she asked if her physician would apply to the insurance company to be covered by her new plan. He agreed.
It took almost two months for him to be accepted, Rains said. If you’re going this route, it’s best to start as soon as you find out your insurance company has changed policies. Rains said between the time she found out about the changes and when they went into effect, her doctor had already been approved.
You might have less luck with a doctor you’ve only been seeing for a short time, but most medical professionals take long-term patient relationships seriously — especially if your whole family goes to the same office. As always, it doesn’t hurt to ask.
Medical expenses are no joke, and that is especially true for consumers saddled with high-deductible health plans (HDHPs). Since 2011, the rate of workers enrolled in HDHPs jumped from 11% to 29%, according to the Kaiser Family Foundation.
For people enrolled in one of these HDHPs, chances are they’re familiar with the HSA, which stands for health savings account. HSAs are useful, tax-advantaged savings vehicles that allow consumers to contribute pre-tax dollars to a fund they can use for out-of-pocket medical expenses.
What HSA users may not realize, however, is that they can also hack their HSA and transform it into a tool for future retirement savings.
Before we explain further, you need to understand how HSAs normally work and who can take advantage of them. From there, you can use a strategy that allows you to use your health savings account as a powerful retirement tool that will help you manage your biggest expense once you retire.
How to Invest Through a Health Savings Account (HSA)
Health savings accounts allow you to contribute a set amount each year. As an individual, you can contribute up to $3,400 for 2017. Families can contribute up to $6,750, and the catch-up contribution for those over 50 allows you to put in an additional $1,000.
The money you contribute is tax free, meaning it reduces your taxable income in the current year. Once your money is in an HSA, you can hold it in cash or invest your savings to increase its earning potential. If you choose to invest, you can explore a variety of options.
But before you get too excited about the possibilities here, remember: not everyone gets access to HSAs. As we noted before, you need to have a high-deductible health plan before you qualify to open one of these accounts, which may or may not make sense for your financial situation.
You don’t have to use the HSA provider associated with your employer’s health insurance company, says Mark Struthers, a Certified Financial Planner and certified public accountant with Sona Financial.
“HSAs are individual accounts that don’t have to go through your employer. You can shop around for the lowest fees and best investment options,” Struthers says. And unlike their close cousin the Flexible Savings Account, HSAs are portable, meaning you can take your HSA with you if you leave the employer you opened it with.
Within the HSA itself, explains Struthers, you also get to choose many types of investments. “In addition to low-risk, savings-type accounts, you can invest in the same type of fixed income and equity mutual funds that may be in your 401(k) or IRA,” he says.
Just like all other investments, protecting against the risk of losing your hard-earned money is an essential step to take. Tony Madsen, Certified Financial Planner and president of New Leaf Financial Guidance recommends taking a hybrid approach.
“I typically advise my clients to leave two years’ worth of the maximum out-of-pocket expenses in cash in their HSAs,” Madsen explains. “Then, we include the rest in investments that are in line with the client’s overall retirement allocation.”
When you’re ready to withdraw your HSA contributions or your earnings, you can do so without penalty — and again without paying tax — anytime, so long as you spend the money on qualified health care expenses.
Examples of qualified expenses include doctor’s fees and dental treatments, vision care, ambulance services, nursing home costs, and even services like acupuncture or treatment for weight loss. It also includes things like crutches, wheelchairs, and prescription drugs (but does not include over-the-counter medications).
Why HSAs Are Great for Retirement Savings
Here’s what makes your HSA such an attractive vehicle for retirement savings:
If you can contribute to your HSA, invest it wisely, and leave the money in the account just like you would leave the money in your 401(k) or IRA until retirement, you can build a sizable nest egg to use specifically on health care costs after you retire.
Not only will you have a fund for medical expenses, but it’s also money you can use tax free!
Health savings accounts are designed to help you pay for medical expenses, tax free. No other account offers so many tax advantages for savers.
You can contribute money to the account tax free. Then you can invest that money, and the earnings are also tax free. If you withdraw the money and use it on qualified health expenses, that money is free from tax too.
In addition to the tax advantages, the funds you contribute to an HSA roll over from year to year. That means you don’t have to spend what you saved until you choose to do so.
(This is different from a Flexible Spending Account, where funds are subjected to a use-it-or-lose-it policy. If you don’t spend the money you put into the account by the end of the year, you don’t get it back.)
And health savings accounts aren’t just liquid savings vehicles. You can invest money within them, often within the same kind of mutual or index funds that you might invest in within a Roth IRA or brokerage account.
When It Doesn’t Make Sense to Use an HSA for Retirement Savings
While HSAs can provide a great, tax-free way to save and pay for qualified medical expenses, your priority should be on selecting the best health care plan for your needs first and foremost. If an HDHP makes sense for you, then you can look at using a health savings account.
If you have an HSA already or currently qualify for one, the next step is to consider hacking it to make it work even harder for you. You can transform your account from a good way to manage medical costs into a tool that makes it easier to bear the brunt of your projected retirement expenses.
This strategy may not work if you currently feel overwhelmed with the cost of your health care and need to take advantage of the tax-free savings and spending power today, instead of waiting for retirement.
Because you’re already in a high-deductible health plan if you have an HSA, that also means you are liable for greater out-of-pocket expenses if you seek treatment.
At a minimum, HDHP deductibles start at $1,300 for an individual or $2,600 for a family. Many HDHPs come with deductibles that range upward of $4,000.
Unless you already have an emergency fund with at least enough money to cover the cost of your deductible should you need to pay it, taking on an HDHP can leave you in a bad financial situation if a serious medical concern arises.
Here’s what you need to think about and ask before you switch to an HDHP:
Do you expect to spend a lot of money on health care expenses in the next 5 to 10 years? If you’re young and have no health concerns, your expenses will likely be low and manageable.
Do you currently have room in your monthly cash flow for occasional unexpected or increased expenses? If your budget can handle a few doctor’s bills here and there, you may be able to handle health care costs with regular income while you’re young.
Do you have an emergency fund, and if so, is it fully funded? Would paying your full deductible wipe out that savings? If so, you may want to create a bigger rainy day fund before you take on an HDHP.
Will you save on premiums if you switch to an HDHP? Often the higher deductible can provide you with a lower monthly premium, which can help free up more money in your monthly cash flow to pay for health needs as they arise — but that’s not always the case, so compare plans before making decisions.
Can you contribute a significant amount to your HSA? Switching to an HDHP just to get an HSA doesn’t make sense if you’re not close to making the maximum contribution to the account each year.
You can also use a tool created by Hui-chin Chen, Certified Financial Planner with Pavlov Financial Planning. She designed a decision matrix where you can input your own financial information and numbers, and see if an HSA makes sense for you based on that information.
If you’re already on an HDHP and like your plan or if you decide you want to switch to one, open an HSA and start saving. At the very least, you can save money tax free, invest it tax free, and use it tax free on qualified medical expenses.
And that’s a great situation, even if you can’t contribute money and leave it in the account all the way until retirement. If you’re able to contribute and let your savings compound until you retire, great! Use your HSA as a retirement tool to help you cover your biggest expected expense in life after work.
“A ‘good’ HSA decision is to have one and use the funds you saved as you need them,” explains Brian Hanks, Certified Financial Planner. “‘Better’ is maximizing your family contribution each year and using the funds as needed. A ‘best’ situation is to maximize your family contribution, not use the HSA account for medical expenses, and treat it as a second 401(k) or retirement account instead.”
In his first speech to Congress Tuesday night, President Donald Trump outlined the overhaul he and his administration plan to make to the Affordable Care Act, known as Obamacare.
The proposed new health care plan now heads to the Congressional Budget Office and could face more changes as Democrats and Republicans battle over it in the House and Senate.
Trump urged Congress “to save Americans from this imploding Obamacare disaster.”
The president promised to repeal and replace Obamacare. Here are five key ways he plans to dismantle the current health care system.
You could be in a high-risk pool if you have a pre-existing condition
“First, we should ensure that Americans with pre-existing conditions have access to coverage, and that we have a stable transition for Americans currently enrolled in the health care exchanges,” Trump said in his speech Tuesday night.
A draft of revisions to the Affordable Care Act leaked to Politico on Feb. 24 references high-risk pools, although Trump did not discuss them in his speech.
States would have the ability to create high-risk pools for people with pre-existing conditions who are searching for health care. According to the draft, states would receive $100 billion over nine years in “innovation grants” that would be used to fund high-risk participants, news outlets such as CNN reported.
“High-risk pools would need a lot of taxpayer funding to work properly, experts say,” the Commonwealth Fund, a private nonpartisan foundation that supports independent research on health and social issues, tweeted after Trump’s speech.
You could receive a tax credit — even if you don’t deserve one
Tax credits and expanded health savings accounts could help Americans purchase their own coverage. It should be “the plan they want, not the plan forced on them by our government,” Trump told Congress.
Tax credits based on age, with the elderly receiving higher tax credits, would take the place of Obamacare’s income-based subsidies.
“For a person under age 30, the credit would be $2,000. That amount would double for beneficiaries over the age of 60, according to the proposal,” reported Politico prior to the speech.
The credits were also heavily criticized by some GOP members.
“So the headline is that the GOP is reducing subsidies to needy individuals when in fact, the growth of the taxpayer-subsidized reimbursements will actually increase,” Rep. Mark Meadows (R-N.C.) told CNN. “The total dollars that we spend on subsidies will be far greater. So you can be a millionaire and not have employer-based health care and you’re going to get a check from the federal government — I’ve got a problem with that.”
“What are tax credits & savings accounts going to do for those who don’t have money to spend on healthcare in the first place?” tweeted Advancement Project, a national civil rights organization.
Chris Rylands, a partner in the Atlanta office of Bryan Cave LLP, says many people are worried that the tax credits will make it difficult for low-income participants to afford coverage.
Under the current system, many individuals eligible for a subsidy are immune to price hikes in insurance because the government picks up such a large portion of the cost. The proposed Republican system might make them better consumers, says Rylands, whose practice focuses on employee benefits.
“However, given the complexity of health insurance plans and the opacity of the pricing of health care services, it’s not clear whether individuals can really become well-informed consumers,” Rylands says.
You could lose Medicaid
Trump said his changes would give governors the resources and flexibility they need with Medicaid “to make sure no one is left out.”
Under the Trump administration’s revisions, Medicaid would be phased out within the next few years. Instead, states would receive a specific dollar amount per citizen covered by the program. States would also receive the ability to choose whether or not to cover mental health and substance abuse treatment.
“Medicaid is the nation’s largest health insurer, providing coverage to nearly 73 million Americans,” tweeted the Commonwealth Fund after Trump’s speech. In a follow-up tweet, it said capping spending for Medicaid will reduce coverage rates and increase consumer costs and the federal deficit.
However, the Center for Health and Economy, a nonpartisan research organization, reported in 2016 that block-granting Medicaid in the states will lead to additional savings. H&E projects that the decrease in the use of Medicaid funds, by block-granting Medicaid in the states and the repeal of the Medicaid expansion, would be an estimated $488 billion from 2017 to 2026.
Rylands points out that this will not be a popular provision in Congress.
“What I heard here — although [Trump] didn’t say so in so many words — is that they want to try to turn Medicaid into a block grant program, similar to what was done with welfare reform in the 90s,” Rylands says. “However, I suspect many governors from both parties will not like this because it could mean states will pick up more of the tab for Medicaid.”
You could pay less for drugs
Trump proposes legal reforms to protect patients and doctors from unnecessary costs that make insurance more expensive and bring down the “artificially high price of drugs.”
Alongside medical device manufacturers and insurers, the pharmaceutical manufacturing industry is obligated by the Affordable Care Act to pay a yearly fee. It was determined the industry would pay $4 billion in 2017, $4.1 billion in 2018, and $2.8 billion each year after. However, proposed revisions to the Affordable Care Act include repealing the tax.
Some consumer advocacy groups are hopeful that repealing the taxes will reduce drug prices.
“From life-saving cancer drugs to EpiPens, high Rx prices push critical care out of reach for those who need it,” tweeted AARP Advocates, a nonprofit advocacy group for senior citizens.
You could purchase cheaper health insurance across state lines
“Finally, the time has come to give Americans the freedom to purchase health insurance across state lines — creating a truly competitive national marketplace that will bring costs way down and provide far better care,” Trump told Congress.
Under the current law, many states have the choice whether or not to allow insurers to sells plans between states. However, even when allowed, there isn’t much incentive for health care providers to do so.
Whether this proposed change will result in a healthy competition in the industry or in a race to the cheapest offer remains to be seen, says Rylands.
“This has the potential to undermine traditional state regulation of insurance … since it would allow insurance companies to sell into a state without having to comply with that state’s particular insurance laws,” Rylands says.
If you’ve ever been sued by a debt collector or service provider over medical debt, you know how stressful it can be. If you couldn’t afford to pay the original debt, you likely still can’t afford it. And if you want to defend yourself, you’ll have to face the additional time and cost of going to court, too.
You should know that you’re not alone. According to staff attorney Chi Chi Wu of the National Consumer Law Center, when you look at debt collection items on credit reports in America, “half of those items are from medical debt. Not credit cards. Not auto loans. Medical debt.”
You may be tempted to ignore the suit since you know you can’t pay, but Wu advises against inaction.
“Always show up,” she says. “Never ignore a lawsuit. If you ignore it, the debt collector or service provider on the other side automatically wins by default.”
What happens when you show up, though? Here are four steps to take if you’re facing a medical debt lawsuit.
1. Find Out Where the Debt Comes From
You cannot properly address your lawsuit if you don’t understand where the debt comes from. If you look back at your past bills, you should be able to find a date of service and itemized list of services rendered with associated costs.
You may be in debt because you’re uninsured, but even insured patients end up in this boat thanks in part to a rise in high-deductible health plans. Mistakes can happen as well. If a patient visits an in-network hospital, but is unknowingly seen by an out-of-network doctor, they can be charged out-of-network fees. Doctors are independent contractors, so while the hospital may be affiliated with your insurance company, that doesn’t mean your service provider is inherently in-network.
2. Don’t ignore the lawsuit
In most consumer debt cases, consumers don’t have an attorney at all. But hiring an attorney to advise you can be a wise move. It doesn’t have to cost a fortune either, Wu says.
Most lawyers will provide a free consult before taking you on as a client. In this consult, they may be able to help you find your bearings so you can represent yourself.
Wu recommends seeking help from the Legal Services Corporation, a government-supervised nonprofit that provides legal representation at a low cost to low-income households. You can also seek help from nonprofit legal assistance firms in your area.
If you’re uninsured, one way to keep the case from going to court is to contact the doctor or debt collector immediately to negotiate your bill down to Medicaid/Medicare prices — which are often 2-3 times less than that of the gross price you were billed. When a provider refuses to negotiate down to these lower rates, it is called “discriminatory pricing,” and your legal counsel may recommend using it as a defense in court.
3. Prepare for Court
The first thing you must do is prepare an answer to the lawsuit, including any defenses or countersuits that you want to raise. This will involve filing paperwork at the court, mailing paperwork, and showing up on your initial court date. Again, it’s advisable to get a lawyer to help you through this, or at least get a consult. The National Association of Consumer Advocates has a helpful video explainer on preparing to defend a medical debt lawsuit.
It’s important to make this initial court date. It is very unlikely the judge will grant you a continuance that would move the court date further out.
There are some exceptions to this. If you are being sued in a state in which you no longer reside, it’s easier to mount a defense if you can’t appear in court. In fact, appearing in court could work against you, demonstrating to the court that you have no problem traveling to and from court out of state.
If you’ve been served in a state outside of your own, it is very important to get legal representation.
This is because you must answer the suit, but you must also do so in a way that does not imply that you are submitting to that court’s jurisdiction over you. The process is one that is best handled by someone trained in law.
After you answer the suit, the court will set a date for the discovery part of the trial. You will have to file more paperwork with the court before this date so that you are able to present evidence that you are not liable for the debt.
4. Understand Wage Garnishment
If you are found liable for the debt, or you fail to answer the lawsuit and the judge rules against you, the court may issue an order giving the lender or collection agency the ability to garnish your wages. By federal law, they cannot leave you with less than 75% of your income or $217.50 per week — whichever is greater. State law may protect you even further.
Medical debt collectors are able to garnish your wages, but they cannot garnish Social Security benefits, disability insurance payments, unemployment insurance payments, VA benefits, pension distributions, child support payments, or public assistance benefits. If you have any of these forms of income, it’s wise to set up a different bank account where those funds are deposited and keep all garnishable wages in another separate account.
You should do this because a court order can go after your bank account balances, too. While that doesn’t make it legal to take money that came from any of these protected sources, separate bank accounts will make the incidence of errors smaller — saving you headaches and potential victimization.
5. Know Your Rights
When it comes to medical billing and debts, you do have rights as a patient. Make sure you understand them so you can lower or eliminate your bill before or after you’ve been sued.
Were You Served Properly?
Sometimes wages are garnished before the plaintiff is even aware that there’s a lawsuit against them. This happens most commonly when you’re improperly served. Examples of using “improperly served” as a legal defense include papers being only mailed to you and not delivered in person, papers being left at an incorrect residence, or papers being mailed to an old address. Being “improperly served” does not mean that the papers were left with a family member or friend at your residence and they forgot to tell you about it. If that happened, you’re still on the hook.
If you have been improperly served, or if you find out that the court mistakenly started garnishing wages because you have the same name as an actual plaintiff, you should contact a lawyer immediately to figure out what possible recourses there may be for your specific situation.
6. Get Low-Cost or Free Help from Financial Assistance Programs
In 2016, about 58% of community hospitals in the U.S. were not-for-profit, according to the American Hospital Association. This gives them tax-exempt status, but also obligates them to give back to their communities. Under the Affordable Care Act, these hospitals must provide some type of financial assistance program to low-income patients. Even if you aren’t from a low-income household, you should apply, as some hospitals extend their programs far beyond the poverty line. Many hospitals also extend this program to insured patients.
These hospitals have an obligation to let you know about their financial assistance programs within four months of when your bill has been issued.
You have until eight months after the initial bill was issued to apply for financial assistance. You have the right to do this even if the debt has been sold to a third-party collector, and even if that collector is the one suing you in court.
7. Be Aware of Discriminatory Pricing
We’ve already touched on the fact that you can try to negotiate your medical bills down to Medicaid/Medicare prices. If you are being sued in court and are uninsured, discriminatory pricing can serve as a defense. If you qualify for the hospital’s financial assistance program, they legally must reduce your bill to the amount generally billed to insured patients.
8. Look Out for Balance Billing
Balance billing happens when your hospital or medical provider bills you instead of or in addition to Medicaid or Medicare. It’s a forbidden practice, and you are not responsible for any amounts due when this happens.
You may be able to identity balance billing if you receive an “Explanation of Benefits” from your insurer that states the amount they covered and the amount you still owe. If this does not match the bill your medical provider sent you, there is a cause for concern. Additionally, if the bill you receive does not show any payment from your insurance when you are, in fact, on Medicaid or Medicare, it may be a sign that you are a victim of balance billing.
9. Stop Lawsuits Before They Begin
If something about your bill doesn’t look quite right, there are ways to reduce it to its fair amount.
First of all, make sure the hospital didn’t make an error that resulted in a larger bill. One way this could happen is if something they did caused you to have to stay in the hospital an extra night, inflating your costs beyond what they should have been originally.
Another good avenue to pursue is to have your bill examined by a medical bill advocate. They’re familiar with coding and laws that you’re not, making them the perfect people to review your charges. You may find one in your community by asking around, or you can start your search with the National Association of Healthcare Advocacy Consultants.
Debt collectors, hospitals, and other medical providers don’t want to take you to court. It costs them money, and the odds of them actually getting a full payment at that point are very low. They are almost always willing to work with you before issuing a lawsuit. Negotiate. Apply for financial assistance. Set up zero-interest payment plans directly with your health care provider.
Keep the lines of communication open so that no one ends up with the additional costs of litigation.
10. Weigh Bankruptcy
At any point in this process, you can choose to file for bankruptcy. Filing for bankruptcy may alleviate the medical debt. Just be cautious. Bankruptcy is not a decision that should be made lightly, as it will remain on your credit report for up to 10 years and make it difficult to qualify for new credit.
There are two types of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 requires you to sell off all of your assets to settle what you can of your debt obligations. If you don’t have any or many assets, that aspect of it doesn’t matter much. What will matter is that the debt will essentially disappear after you file.
If you file for Chapter 13, you do not have to sell off any assets, but the debt won’t disappear either. Instead, you’ll be put on a 3-5 year payment plan in order to settle.
This may make sense if the court has already issued an order against your wages, but at any other point in your case, it would make more sense to try to set up a payment plan with the medical service provider or debt collection agency directly. Their last resort is wage garnishment. Don’t let it get that far. Know your rights so you can negotiate with them effectively rather than damaging your credit report through Chapter 13 bankruptcy.
The majority of healthy Americans can use term life insurance policies to get sufficient coverage in place for anywhere from $15 to $100 a month. Most (85%) American consumers believe that most people need life insurance, but just over 60% carry a policy. Even among those who carry a life insurance policy, the amount covered is frequently not enough.
Term life insurance is a low-cost way for individuals with financial dependents to meet those people’s needs even after death. But it can be confusing to understand what it is and what it covers.
Anyone who has a financial dependent should consider buying life insurance if they don’t have the assets available to cover their dependent’s financial needs in the event of their death.
There are five major events that create financial dependence and may justify the purchase of life insurance. These events include:
Taking on unsecured debt with a co-signer
Taking on secured debt with a co-signer
Having a child
Moving to a single income
How Much Life Insurance Do I Need?
Term life insurance is the cheapest form of life insurance, but carrying too much life insurance is a waste of money. The exact amount you decide to carry will depend on your risk tolerance and the size of your financial obligations. In this article we offer rules of thumb that can help you calculate the financial loss associated with your death.
Most life insurance companies and brokers also offer life insurance calculators, but these calculators rely on averages. Since each person’s situation is different, it can be valuable to create an estimate on your own.
Unsecured debt with a co-signer
If you’ve taken on unsecured debt (like student loans) with a co-signer and you don’t have sufficient cash or investments to cover the debt, then consider purchasing life insurance in the amount that is co-signed. The beneficiary of this policy should be the person who co-signed the loan with you.
For example, if your parents have taken out $50,000 in loans via a Parent PLUS Loan or private loans, then you should take out a $50,000 policy with your parents as the beneficiaries. In most cases involving unsecured debt with a co-signer, a short term (such as 10-15 years) will be the most cost-effective option for covering this debt.
Secured debt with a co-signer
Secured debts (like a mortgage or a car loan) have some form of capital that could be sold to pay off most or all of the loans, but you still might want to consider taking out life insurance for these types of debts.
While your co-signer can sell the asset, pay off the debt, and become financially whole, that may not be the right choice for your situation (especially if the co-signer is your spouse).
For example, a couple that takes out $200,000 for a 30-year mortgage may decide to each take out a $200,000, 30-year term life insurance policy. This policy will allow either spouse to continue to live in the house in the event of the other’s death.
Marriage isn’t a financial transaction, but it brings about financial interdependence. In the event of your death, the last thing you want your spouse to be concerned about is their finances.
Couples without children who both work aren’t financially dependent on each other, but many people would still like to provide their spouse 1-3 years’ worth of income in life insurance to cover time off from work, final expenses, and expenses associated with transitioning houses or apartments.
A couple who each earn $40,000 per year, and who have $20,000 outside of their retirement accounts, can consider purchasing life insurance policies between $20,000-$100,000 in life insurance to provide for the other’s financial needs in the event of their death.
Having a child
Because children are financially dependent on their parents, parents should carry life insurance to cover the costs of raising their children in the event of a parent’s death.
The estimated cost of raising a child from birth to 18 is $245,000, so it is reasonable for each parent to carry a policy of $100,000-$250,000 per child. It is especially important to note that stay-at-home parents should not neglect life insurance since their death may represent a big financial loss to their family (manifested in increased child care costs).
The beneficiary of this life insurance policy should be the person who would care for your child in the event of your death. Sometimes this will be your spouse, but sometimes it will be your child’s other parent, or a trust set up in your child’s name.
If a couple has two children under age 5, and $50,000 in accounts outside of retirement, then each parent should have between $150,000 and $450,000 in life insurance. Parents of older children may choose to take out smaller policies or forego the policy altogether.
If your spouse is dependent upon your income to meet their financial needs, then it is important to purchase enough life insurance to care for their immediate and ongoing financial needs in the event of your death. If you are the exclusive income earner in your house or if you co-own a business with your spouse that requires each of you to play a role that the other cannot play, then your death would yield a tremendous financial loss for several years or more.
In order to estimate the size of policy needed in this situation, there are a few guidelines to consider. According to the well-respected Trinity Study, if you invest 25 times your family’s annual expenditures in a well-diversified portfolio, then your portfolio has a high likelihood of providing for their needs (accounting for inflation) for at least 30 years. A policy worth 25 times your annual income, less the assets you have invested outside of retirement accounts, is the maximum policy size you should consider.
Many people choose to take out even less than this because their spouse will eventually choose to return to work. A second rule of thumb is that the total amount of life insurance for which your spouse is the beneficiary should be worth 10-12 times your annual income. A policy of this size would reasonably provide money to pay for living and education expenses (if your spouse needs to re-train to enter the workforce) for many years without damaging your spouse’s prospects of retirement.
Based on these rules of thumb, if you earn $100,000 and your family’s expenses are $70,000 per year, and your spouse is a stay-at-home parent, then you should have enough life insurance to pay out between $1 million and $1.75 million (remember to subtract the values of any other policies or non-retirement assets above when calculating this amount).
How to Shop for Life Insurance
After deciding on the amount of insurance you need, and the terms you need, you can start shopping for the best policy for you. Although it’s possible to shop around for the best insurance, MagnifyMoney recommends that most people connect with a life insurance broker. For this report, every quote received from a broker was within a few cents of the quote received directly from the insurance company.
If you tell a broker exactly what you want, they can pull up quotes from a dozen or more reputable companies to get you the most cost-effective insurance given your health history. This is especially important if you have some health restrictions.
People with standard health (usually driven by high blood pressure or obesity, or many family health problems) may find some difficulty finding low rates, but brokers can help connect them with the right companies.
People with “substandard health” because of obesity, high blood pressure, or elevated cholesterol, those suffering from current health issues, or people recently in remission from major illnesses will not qualify for term life insurance.
Top Three Life Insurance Brokers
PolicyGenius – PolicyGenius is an online-only broker with an easy-to-use process and helpful policy information. Users give no contact information until they are ready to purchase a policy. PolicyGenius’s system saves data, so users don’t have to re-enter time and again. It is very easy to compare prices and policies before applying.
Quotacy – Quotacy is an online-only life insurance broker with connections to more term life insurance companies than most other life insurance companies. Quotacy offers quick and easy forms to fill out, and they do not require that you give contact information until you are ready to purchase a policy. Unfortunately, they do not fully vet out the policies, so you may need to ask an agent questions before completing a purchase.
AccuQuote – AccuQuote is an online-based brokerage company that specializes in life insurance products. Unlike the online-only brokerage systems, their quotes are completed through a brokerage agent via a phone call. People who prefer some human interaction will find that AccuQuote emphasizes customer service and offers the same price points as online-only competitors.
Top Life Insurance Companies
For those who prefer to shop for life insurance without the aid of a broker, these are the top five companies to consider before purchasing a policy. Each of these companies allow you to begin an application online though you may need to connect with an agent for more details (including a rate quote).
To be a top life insurance issuer, companies had to offer the lowest rates on 30-year term insurance for preferred plus or preferred health levels, and be A+ rated through the Better Business Bureau.
Allianz – Allianz offers the lowest rates for both Preferred and Preferred Plus customers, but they do require you to contact an agent or a broker for a quote.
Thrivent Financial – Thrivent Financial offers the lowest rates for Preferred Plus customers, but they require you to contact an agent before they will confirm your rate.
American National – American National offers among the lowest rates with Preferred and Preferred Plus customers, and they work closely with all major online brokers. You must contact an agent to get a quote directly from them.
Banner Life Insurance (a subsidiary of Legal & General America) – Banner Life Insurance offers an online quote portal and very low rates for Preferred Plus customers. They also seem to be a bit more lenient on the line than other customers for considering Preferred Plus (not considering family history).
Prudential – Prudential offers an online quote portal and the lowest rates for Preferred customers.
What to Expect Next
After you’ve decided to purchase an insurance policy, the policy will need to undergo an underwriting process. This will include a quick medical examination (height, weight, blood pressure, urine sample, and drawing blood) that usually takes place in your home. After that, the insurance companies will need to collect and review your medical records before issuing a policy for you.
Underwriting typically takes 3-8 weeks depending on how complete your medical records are. The company will then issue you a policy, and as long as you continue to pay, your policy will remain in effect (until the expiration of the term). Once your policy is in effect, you can rest easy knowing that your financial dependents will be taken care of in the event of your death.
Correction: An earlier version of this post mischaracterized the way that health care ministries help members pay for medical expenses. They “share” those expenses. They do not “cover” them.
In 2013, Melanie and Matthew Moore were facing a bit of a health care cost crisis. After the birth of their first child, the Wake Forest, N.C., couple decided that it made sense for Melanie, 33, to leave her job and become the primary caregiver at home. Not only did that mean losing an additional income source, but it also meant giving up the family’s affordable health benefits.
The monthly premium for a family plan through Matthew’s employer far exceeded the reach of their newly reduced budget. Melanie began researching health insurance options online, and eventually landed on the home page for Samaritan Ministries. East-Peoria, Ill.-based Samaritan is one of the six major faith-based health care sharing ministries in the U.S.. Members of these ministries pay monthly contributions to a pool of funding that is dispersed among members as they show need.
Samaritan’s plan for Melanie and her son cost just $300 per month — less than half what they would have paid for a family health plan through Matthew’s job. Melanie quickly signed them up. To keep costs as low as possible, they decided Matthew, 31, would continue to receive individual coverage through his employer, which was free.
Even more than the price tag, Melanie says she appreciated the ministry’s faith-based approach to health care. “Health sharing promotes the Biblical ideals of sharing,” she told MagnifyMoney. “It takes a whole different mindset than insurance.”
The Moore family is not alone. As health care expenses have ballooned over the last decade, health care sharing ministries have gained in popularity as a lower cost alternative to traditional insurance. Their numbers still pale in comparison to people who receive insurance through employers or the federal marketplace. But health care sharing ministries have experienced an explosion in interest in recent years.
Membership among the top four health care sharing ministries nearly tripled in just the last two years — from a reported 274,000 members in 2014 to more than 803,000 Americans in 2016, according to a MagnifyMoney analysis of membership rates at the top six ministries. Even the smallest ministry in the bunch, Altrua, saw an eight-fold surge in membership in the last year alone — from 1,000 in early 2016 to 8,000 as of November 2016.
But what exactly are health care sharing ministries, and can they really replace primary health insurance?
At a glance, health care sharing seems like a perfect solution to families facing rising premium costs. However, a deeper look shows that participants take a leap of faith when they eschew traditional insurance protections in favor of health care sharing ministries. MagnifyMoney took a deeper look at how they work.
How Health Care Sharing Ministries Work
Ministry members pay a monthly share to the health care sharing ministry. Monthly share costs can be as low as $21 for an individual, but they can be as much as $780 per month for a family. Share costs vary from ministry to ministry and can also change unexpectedly, much like traditional insurance premiums.
In terms of actual functions, most health care sharing ministries collect monthly shares online, and they disburse funds electronically or through checks. Not all the share money goes directly to helping people in need. Some of the money goes to cover administrative costs, and some money may go into an escrow account. The escrow accounts allow ministry participants to share costs even during periods of high expenses.
When members incur medical expenses, they submit their bills to the ministry for approval. Approvals are based on the ministry’s published guidelines. Some health care sharing ministries allow medical providers to send bills directly to the ministry. The board then approves or denies sharing. When cost sharing is approved, the member is paid in one of two primary ways: Either the ministry disburses funds to those in need directly, or the ministry directs other members to send their monthly premium payments to the member in need instead.
Health care sharing ministries encourage members to pray for sick members and to send encouraging letters or emails to those in need. Health care sharing ministries specifically publish medical needs to members of the community for the purpose of prayer and encouragement.
“You almost can’t compare sharing to health insurance,” says Dale Bellis, executive director of Liberty HealthShare. “Sharing is about giving not receiving. Your goal is to be available for others in need. Participating is motivated by faith in God and faith in one another.”
The “individual responsibility”
Before sharing a cost, some health care sharing ministries require that members meet an “individual responsibility requirement.” Basically, this is their form of a deductible. The individual responsibility can cost from $35 per incident all the way to $5,000 per incident. For example, Samaritan Ministries requires members to share up to $300 per incident. Medi-Share requires members to pay a non-reimbursable fee of $35 per medical visit or $135 for an emergency room visit (much like a co-pay).
One of the benefits of participating in a health care sharing ministry is that many ministries emphasize the importance of negotiating medical expenses. It’s in the ministry’s interest to encourage members to negotiate fees, which leaves all the more money in the pool for everyone else. Some ministries hire third-party firms to negotiate bills, but it’s up to members to take advantage of those services.
Altrua Healthshare directly negotiates on behalf of its members, according toRon Bruno, VP of Business Development.
To incentivize members to negotiate their bills, some ministries offer to waive the member’s individual responsibility portion.
For example, Melanie negotiated a discount at the birth center when she had her second child in 2016. The discount she received more than covered her individual sharing responsibility of $300. That meant 100% of her expenses were shared by Samaritan members.
Who can benefit the most from health care sharing ministries
At their heart, health care sharing ministries are meant to help members who are facing unusually high or unexpected health care costs. To that end, most ministries do not share the kinds of routine preventative care — like annual physicals and immunizations — that private insurers are required to cover. Commonly “shared” expenses among ministry members are things like sudden illness or surgeries, says Michael Gardner, a spokesperson for Medi-Share.
In a way, health care sharing ministries have replaced catastrophic health plans that were phased out under the Affordable Care Act. People who may not require regular doctor’s visits but who want a health plan for emergency health care needs might benefit from a health care sharing ministry.
Finding a doctor
For the most part, ministry members are free to choose primary care doctors of their choice. This is because health care sharing ministries don’t usually share the cost of preventive care. The exception, Altrua HealthShare, has a network of affiliate providers including primary care physicians.
The trouble with choosing “any” doctor is finding a primary care physician who will accept patients who pay in cash. Samaritan Ministries directs their members to use a “cash and direct pay” resource from the Association of American Physicians and Surgeons.
Outside of primary care physicians, each health care sharing ministry allows members to request sharing pre-approval for planned surgeries and other expensive procedures. Most ministries have established processes or arrangements that help their members find the most cost-effective surgeons and specialists in their area.
Even with these resources, members are free to find their own doctors, and they will still be eligible for sharing (as long as they follow the standard procedures set forth by the ministry).
When it comes to emergency care, ministry members use the best available option and submit their bills for sharing afterward. The health care sharing ministries will seek to honor requests to share even expensive emergency care (provided the emergency care meets their standards).
Health Care Sharing Ministries vs. Insurance Companies
It’s crucial to understand that health care sharing ministries are not insurance companies. They operate more like nonprofit organizations. And because they are not technically insurance companies, they have no contractual obligation to share certain medical expenses. That means they can mostly write their own rulebook for what they expenses will share and what they won’t.
Each health care sharing ministry has full discretion over which treatments it will share, and ministries will not share expensese for many treatments or conditions that do not align with their religious ideals. For example, many ministries won’t cover treatment for drug or alcohol addictions. Medi-Share, for example, will typically not share expenses for prenatal care for an unmarried woman or health care for children born to unwed mothers. These are costs that traditional insurers would cover without hesitation.
There are also limits to how much health care sharing ministries are willing to share. The majority of ministries have a maximum sharing amount of $125,000-$1 million per incident. In contrast, government-approved health insurance plans do not have annual or lifetime maximums for insurance coverage. That’s not to say that these ministries can’t absorb large costs. Samaritan Ministries participants share $18 million per month in medical costs. Currently, Liberty HealthShare has a sharing capacity of $6 million per month among 30,000 households. Medi-Share and Christian Healthcare Ministries have shared more than $1 billion each.
When Health Care Sharing Ministries Don’t Make Financial Sense
Because these ministries don’t share expenses for routine health costs, health care sharing ministries make sense for people with low routine health care costs. In general, this includes many healthy people who don’t struggle with chronic conditions.
One surprising group that needs to look out for high routine costs are new parents.
In early 2016, Matthew and Melanie Moore gave birth to their second child. After the birth, the Moores chose to enroll the children on Matthew’s insurance plan instead of keeping them on the Samaritan plan, which wouldn’t share any of their newborn well visit expenses.
Infants visit the doctor 9-10 times in their first 18 months, and they receive dozens of immunizations during that time. For the Moores, the out-of-pocket costs for preventive care would have overwhelmed their budget again.
Faith (Almost Always) Required
Health care sharing ministries have been around since the 1980s, led by Christian Healthcare Ministries. Like Melanie and her family, most health care sharing ministry participants are drawn to the organizations’ emphasis on faith.
The organizations model their sharing plan after resource sharing ideals practiced by the early Christian church nearly 2,000 years ago.
All the health care sharing ministries require that their members affirm some set of beliefs. Most specifically, they require participants to adhere to the Christian faith. Liberty HealthShare is an exception, according to Bellis. “We are unabashedly a Christian organization, but we don’t intrude on the faith choices of participants,” he says.
Bruno, of Altrua Healthshare, explained that members of Altrua adhere to a statement of standards instead of a statement of beliefs. The standards are based on the Bible, but the ministry is non-denominational.
One reason Melanie Moore loves health care sharing ministries is the sense of community and encouragement she receives from other members. She received notes of congratulations and prayers for recovery when she received checks to pay for her child’s delivery. Likewise, she sends notes of encouragement along with her monthly share check.
All the health care sharing ministries encourage participants to pray and give words of encouragement to sick participants. The ministries exist to foster community and to promote sharing. Anyone looking for an impersonal experience will need to look elsewhere.
Each of the ministries is faithful to its heritage. These ministries are faith-centered, and they want to promote religious faith among their members. It is clear that these ministries want members to share more than medical bills. They want to promote a community of care among their members.
Health Care Sharing Ministries in the Obamacare Era
Under the guidelines of the Affordable Care Act, health care sharing ministries would never pass muster. But five of the six large health care sharing ministries were granted exemptions under the ACA — meaning their members will not have to pay tax penalties for not having qualified health coverage.
Please note: Members of Medical Cost Sharing (MCS), another ministry, will not receive qualified exemptions from Affordable Care Act penalties. Their website uses language that may lead you to believe otherwise.
The Bottom Line
Walking the line between faith and finances hasn’t been easy for the Moore family. Melanie is still a member of Samaritan, but the rest of the family is on Matthew’s traditional insurance plan.
Like the Moores, anyone considering a health care sharing ministry should think about their mindset, their faith, and their finances. Don’t join a ministry because of the low monthly costs; the organizations want members who live out the belief statements. Be sure that the rewards of joining a ministry (both financial and otherwise) outweigh the associated risks.
*This post has been updated to reflect the following correction: Due to a reporting error, the name of the ministry used by the Moore family was incorrectly noted. It is Samaritan Ministries, not Medi-Share.