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- Unexpected and uncovered hospitals stays and continued treatment are a major cause of bankruptcy
- Pre-existing condition exclusions might keep you from being able to obtain adequate coverage when you do apply for health care
- Follow up visits after an accident and preventative care for healthy people are difficult to obtain without health insurance
- It is mandated by the Affordable Care Act and there are tax penalties for non-compliance
You only go to the doctor two or three times a year to get antibiotics for a cold or the flu. You can easily afford those visits out of pocket. If you’re young and healthy, you’re probably wondering why you even need health insurance.
You might not be happy about it being mandated by the government and you’re willing to take the risk and pay the tax penalties, rather than pay the outrageous cost of medical insurance premiums.
There are several factors to keep in mind before deciding whether health insurance is worth it or not.
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Rising Costs of Health Care
The first thing to consider is the rising cost of health care treatment. Advances in technology and research, new therapies and treatments are being developed on a regular basis. Those new treatments and therapies, which you can afford to pay out of pocket now, might not even exist when you need treatment.
Another factor involved in the rising costs of health care is the increased demand for it by consumers. “Retail clinics and urgent care stores have increased access for many people at a relatively low unit cost, which has ultimately led to greater use by patients and more spending,” Laura Lorenzetti points out in a post on Fortune.
Health care costs are expected to rise by 6.5 percent over the next year. That factor is nearly six times the overall inflation rate of 1.1 percent that is expected in the U.S. during the same time period.
This rise in cost makes it increasingly difficult for you to keep up with paying for treatment out of pocket. Just for fun, consider the EpiPen, which rose from $100 for a two-pack in 2008 to $600 for the same two pack in August of 2016.
Indemnification is a fancy word for having an obligation to pay for a financial loss that someone has sustained. For example, if you had an accident or illness, which required hospitalization, then you would be obligated to pay the expenses of your hospital stay.
When you do not have health insurance, you are “indemnified” to cover 100 percent of those costs out of your own pocket. When you have health insurance, a portion (usually a higher percentage) of your obligation is shifted to your health insurance provider.
H-CUP (Healthcare Cost and Utilization Project) reports the following statistics for hospitalization in 2012:
- Average length of stay was 4.5 days at a cost of $10,400. (In some areas, it is double that amount.
- Inflation adjustments for hospital costs have increased by 1.8 percent every year since 2008.
With 80/20 hospital indemnification insurance, you would only be responsible for about 2,000 of that cost.
Statistics of Bankruptcy Due to Medical Costs
Paying out of pocket for hospitalization, like in the example above, and/or ongoing medical care for a chronic health condition has been linked to personal bankruptcy. The statistics reported by the Himmelstein study in 2007 showed that:
• 62.1 percent of all bankruptcies in 2007 were medical related.
• 92 percent of the above had medical debt over $5,000 or over 10 percent of their pre-tax income.
• The number of medical related bankruptcies had risen by 49.6 percent since 2001.
Even if you are young and in good health, you face an enormous, financial risk by not having health insurance. Out-of-pocket expenses for an accident that could leave you, not only with treatment expenses, but the loss of income could be devastating.
And the sudden arrival of an unexpected, chronic illness, like cancer, diabetes, lung disease or heart disease, can become a significant drain on your financial resources.
Pre-Existing Condition Exclusions
It ought to be clear to you, by this point, that you run an enormous financial risk by not having health insurance coverage.
But there are other risks that you run by not having health insurance or by allowing your coverage to lapse. That is the risk of not being covered for certain medical conditions that existed before you applied for insurance.
Known as pre-existing condition exclusions, insurance companies remove themselves from the obligation of covering the expenses related to conditions that you had before applying for coverage.
Chronic conditions such as asthma and allergies might, initially, be afforded out of pocket, but as costs rise, they might not be affordable at a later date, but will remain uncovered by your health insurance.
Let’s suppose that you’ve put money back to protect yourself against an accident or injury. Obtaining follow up care after an ER visit for an accident or illness without health care insurance can be difficult and very costly.
Magaly Olivero reports in an article in US News Health, that according to Ellen Pryga, director of policy for the American Hospital Association, “Your ability to get necessary follow-up care, rehab care or whatever service you need to get back as much full function as possible is going to require coverage or a fair amount of money.”
Policies for accidents, critical illness, hospitalization and other types can be purchased at a lower cost than health insurance, but they are limited in their scope of coverage. If you take that route, then you either have to guess which one you’re going to need or buy them all, in which case, you might as well buy health insurance.
Another advantage, besides offsetting major expenses for hospital stays or chronic illnesses, health care plans typically help to provide preventative care. A person who is uninsured does not tend to go to the doctor for routine checkups and preventative health care.
The neglect of preventative care tends to exacerbate your health issues and can be taxing on both your physical body and finances. In nearly all critical illnesses, such as breast cancer and other forms of cancer, early detection can make a difference in the cost of treatment options and ultimately, the successful outcome of the treatments.
Health screenings and other preventative treatments that are provided for by health insurance can make a difference in your long-term prognosis.
If the above arguments weren’t enough to convince you of your need for health insurance, then perhaps the fact that the Affordable Care Act, often referred to as Obamacare, has made health insurance a legal mandate, which took effect in 2014. The provisions of the act are as follows:
- Individuals not covered by and employee insurance plan, Medicare, Medicaid or other public health insurance plan must purchase health insurance.
- The open enrollment mandate was enacted in order to increased the size and diversity of the insured population. By doing so, younger and healthier persons are being added to the risk pool in order to spread the costs over a broader range of participants.
- In 2014, tax penalties $95 or 1 percent of total income over the filing minimum were enforced against individuals who do not provide adequate coverage for themselves and their families.
- In 2016, tax penalties increased to $695 per individual or $2085 for families or 2.5 percent of the filing minimum for the same failure to adequately insure.
- Businesses of 50 or more employees who did not provide a company health insurance plan are also being charged tax penalties.
Whether you are in agreement with the law or not, it is in effect and the tax penalties are applied. Exemptions are available for particular individuals and businesses. Challenges to the law are being made in the courts, however, until there is an appeal of the law or a ruling by the court that overturns it, the Affordable Care Act is the law and will be enforced.
You might be weighing the costs of buying health insurance. Maybe you’re young, healthy, only go to the doctor two or three times a year for a cold or the flu, and you’re confident that you can pay any healthcare expenses out of your pocket.
Even paying the tax penalties for not obeying the legal mandate of the Affordable Care Act, you might still think that you are saving money over the cost of premiums.
You take an enormous risk financially by not having health insurance coverage. You also take the risk of not being accepted when you apply for a policy later on and not having proper preventative care.
Even though it can be hard on a tight budget, having health insurance is always worth the investment and makes far more sense than going without.
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