How to Bridge the Healthcare Affordability Gap

Here are a couple of statistics to wrap your mind around:

The average deductible for a Silver-tier health insurance plan is well over $5,000, according to research by KFF. According to the Department of Health’s estimates, treating a broken ankle can easily cost over $7,500.

Meanwhile, over 40% of American households are unable to write a check to cover a $1,000 emergency. And 60% of Americans report having experienced such an emergency in the past year.

Moreover, many people are enrolled in high-deductible plans with deductibles exceeding $18,000 per year for a family.

The math ain’t mathing!

The vast chasm between the actual cost of a health emergency, out of pocket, and what families can afford to pay is known as the healthcare affordability gap.

If you’re in good health, and you can afford to write a check for your deductible this year without breaking a sweat, high-deductible plans are a good way to keep premiums low. And combining it with a health savings account, and contributing the maximum possible each year, is a very smart idea for many reasons.

However, if a $5,000 medical emergency would force you to choose between paying the hospital or covering your rent or mortgage payment, then having a plan with a deductible larger than your savings account is a problem.

And it’s not just the cost of a broken ankle you need to worry about: According to the Department of Health, a three-day hospital stay costs around $30,000 and up. And a cancer diagnosis can cost hundreds of thousands of dollars–– much of it in the form of indirect costs like time off work, caretaker costs, and medical travel costs that are not covered by health insurance.

Plug The Gap

Fortunately, there are some easy and affordable ways to “plug the gap” left by traditional major medical insurance.

Two of the most popular and well-received options include accident/hospital insurance and critical illness insurance.

Here’s how they work: 

Accident/Hospital Insurance

Accident and hospital insurance are two types of supplemental insurance plans.

But instead of paying your healthcare providers directly, like most major medical insurance plans, these indemnity plans pay you directly.

Accident insurance plans pay a cash benefit when you’re injured due to an accident — think broken bones, burns, dislocations, lacerations, concussions, etc.

Here’s the step-by-step process:

• You pay a monthly premium, which is normally very affordable. 
• If you’re hurt in a covered accident, you file a claim.
• The insurer pays a cash lump sum for specific injuries or treatments. You receive the money within days of providing documentation. So it’s available to cover deductibles and other immediate out-of-pocket costs. 
• You can use the money for any purpose — deductibles, copays, lost wages, childcare costs, transportation, durable medical equipment, or anything else you like. 

Hospital indemnity insurance pays you a cash benefit when you’re admitted to a hospital — whether for illness, surgery, childbirth, or injury (depending on the plan).

Here’s the process: 

• You pay a small, affordable monthly premium.
• If you’re hospitalized, the insurer pays either a daily benefit (e.g., $200 per day), a cash lump sum, or both. 
• Payments are not tied to your actual hospital bill. This eliminates payment delays and ensures the cash is available when you need it most. 
• Again, you can spend the money on whatever you need — not just medical costs. Lost wages while you’re in the hospital or recovering can constitute a significant indirect expense, and one not covered by health insurance. A hospital insurance plan is a valuable but affordable hedge against that risk.

Critical Illness Insurance

A critical illness policy pays a large cash lump sum if you’re diagnosed with a specific medical condition.

Individual plans vary, but may include cancer, heart attacks, strokes, Lou Gehrig’s disease, multiple sclerosis, others.

Again, you can use your cash lump sum benefit for any purpose you choose. You aren’t restricted to using it to pay medical providers.

Common uses for this cash benefit include: 

• Long-term care/assisted living costs
• Nursing facility costs
• Durable medical equipment
• Child care
• Housekeeping/caretaker assistance
• Medical travel costs
• Deductibles, copays, and coinsurance
• Out-of-network fees
• Lost wages/time off work
• Durable medical equipment. 

Combining Supplemental Plans with Health Insurance or Health Sharing

These supplemental insurance plans aren’t designed to be a standalone solution.

You should use these plans to help cover the financial gaps in your major medical insurance or health sharing plan – and help you bridge the “affordability gap” between your available savings and your health plan’s deductibles, coinsurance, or in the case of health sharing plans, member responsibility amounts. 

Example: 

Suppose you have a Silver-tier plan with a $5,000 deductible.

But you know you only have $4,000 in savings or access to cash, most of the time. That leaves you with an affordability gap of about $1,000 before your major medical plan’s benefits kick in.

But with supplemental plans like these, you can effectively reduce or eliminate the affordability gap for your household. So you don’t have to delay or skip getting the care you or your loved one needs. And you don’t have to put it on a credit card at a crippling interest rate.

A supplemental plan can also help you choose a higher-deductible health plan. This can help reduce premiums and overall monthly costs. It may also help you qualify to make pre-tax contributions to health savings accounts, reducing your tax bill, and allowing you to pay medical expenses with tax-free dollars.

The synergies are substantial.

Accident, hospital, and critical illness insurance policies are great, affordable tools for helping you manage the risk of unexpected healthcare costs. And these plans are designed for working families. I highly recommend considering them.

Especially if that deductible is a gamble you can’t afford to lose.

Your Personal Benefits Manager – the person who emailed you this newsletter-, can help you analyze your needs, and provide quotes for any supplemental plans that may make sense for you.

No charge. Just give them a call, or drop them an email. I know they’ll take great care of you!

Click here to schedule an appointment, or call 800-913-0172 to get started.    

To your health and wealth,

Wiley P. Long, III
President - HSA for America

The HSA for America Maximize Your HSA Newsletter is published monthly and emailed to subscribers at no charge. Subscribe now to stay on top of the critical information you need to know about health insurance, healthshare plans and managing your finances to achieve financial security.