The Real Cost of Disease

Do You Know How Your Health Insurance Impacts Your Wallet?

By Thomas R. Giddens

Part I in a four part series

The 10th anniversary of Money Smart Week (MSW) kicks off on April 21. Throughout the week, several states across the nation will educate consumers on how to better manage their personal finances. Industry experts will offer advice on how to increase financial literacy, including how to handle credit reports, understand social security and weather the shaky financial times.
But how many experts will be discussing the impact of health insurance on personal finances? Likely not enough.

The Truth About Medical Costs

According to the 2012 Aflac WorkForces Report, an online survey of more than 2,000 benefits decision-makers and more than 6,100 U.S. workers, 28 percent of American workers have less than $500 (51 percent have less than $1,000) in savings for emergency expenses. This is rarely enough to cover the medical expenses associated with unexpected accidents and illnesses. Furthermore, 57 percent of workers said they would have to tap into savings, 30 percent would use a credit card and 19 percent- one out of five people- would have to withdraw funds from their 401k plans to cover the costs. Additionally, 58 percent said they have no idea how they would cover the costs.

Clearly, Americans do not have the finances set aside to help with medical bills, which can sometimes pop up unexpectedly due to an unanticipated accident or illness. Not only are people not financially prepared for medical costs, but they often do not have a full understanding of how much hospital stays and medical procedures can actually cost — and what can be done ahead of time to help.

For example, heart disease is a leading killer among men and women nationwide every year. But do people understand how much this disease can actually cost someone? The estimated cost per person for severe coronary artery disease, the most common form of heart disease, is more than $1 million. And the average cost per hospital stay for heart valve disorders in 2009 was an overwhelming $36,700.

These numbers are startling, but thankfully there are ways to help people pay these expenses. One obvious answer is supplemental or voluntary insurance policies, which help with costs that major medical insurance does not cover. There is now a broad palatte for voluntary insurance policies, such as critical care, that pay benefits for covered health events such as a stroke, paralysis, open-heart surgery and much more.

Simple Benefit Solution – Voluntary Insurance

In the event of an accident or illness, policyholders receive cash benefits that are often used to help with daily living expenses, such as rent, transportation, groceries, and other necessities determined by the policyholder. Additionally, most voluntary insurance policies are portable, which allows policyholders to retain their insurance coverage whether they decide to leave their company or retire.
And voluntary insurance has no direct cost to the employer, making it an attractive solution to managing expenses while giving employees more control over their benefits decisions and access to additional coverage.

What Agents Can Do To Help

Agents can help employees confronting financial uncertainty and changes in their employer-offered health benefit options to see the big picture and think beyond major medical insurance alone. Illustrate how voluntary insurance policies such as critical care, short-term disability and accident can help employees round out their coverage, mitigate the costs of unexpected health events and help bolster their overall financial protection plans.
Reinforce the value of voluntary insurance policies to employers too. Remind them that they bear no direct cost for making voluntary insurances available to their employees, and they benefit in the form of happier, healthier workers.
Furthermore, suggest that employers implement a year-round education program regarding health benefits options. Unfortunately, people are not as educated as they should be when making their benefits elections during open enrollment. According to the Aflac WorkForces Report, more than three quarters (76 percent) of American workers admit to making mistakes about their benefits decisions in the past. And 42 percent of workers say they have wasted money each year because of mistakes they made with their insurance benefit options. Some of the common mistakes people make include misjudging how much money should be put in their Flexible Spending Account (FSA) and neglecting to elect additional insurance plans, such as dental, vision or voluntary. Taking all this into consideration, advisors should reiterate to HR Managers and business decision-makers that employees are not always fully aware of their options and how much they cost. HR needs to properly communicate benefits options to all workers year-round to help them avoid future open enrollment mistakes and protect their wallets.

The reality is that accidents and illnesses do happen, and unfortunately, they come with a price. No one is invincible, and everyone should be as financially prepared as possible when it comes to medical expenses. These unfortunate events are out of people’s control, but finances are not. Americans need to know the truth about medical costs and how to pay them.