Checking Your Benefits Safety Net

Back to Living with Hepatitis C

Checking Your Benefits Safety Net
Part 2 – Health Insurance and Cash Reserves

Jacques Chambers, CLU, Benefits Consultant

Last month, I reviewed the importance of planning ahead, just in case….. That article focused on obtaining the necessary employee benefits literature from your employer and on reviewing sources of income in the event you become unable to work.

In addition to planning for a source of income if disability should occur, it is just as important to make sure that you do not lose your health insurance. The third priority is to build as big a cash reserve as time and income permit in order to smooth out the financial rough spots and provide money for unusual expenses or emergencies.

Health Insurance

If you personally purchased an individual health insurance policy, chances are you will be able to keep it as long as you pay your premiums in a timely manner. The situation would only change if the insurance company stopped writing insurance in your state or if the rates became unaffordable. Unfortunately, there is little that can be done to completely prevent either of these from occurring, although you can substantially reduce the risk.

When possible, avoid purchasing health insurance through another entity, such as an association. Not only does that bring in another layer that could terminate coverage and leave you without insurance, but those products often are of lower quality than many others on the market. This is especially true of “associations” that are simply insurance marketing tools.

If you have the opportunity to purchase individual health insurance, buy it from a carrier who has a large presence in your state. Often the “Blues”—Blue Cross and/or Blue Shield are among the most stable carriers in many states.

Most reputable carriers will also “pool” the experience on the individual policies. This means that everyone gets the same rate increase whether they have filed claims or not. All health insurance rates are rising, but they tend to rise less when the increases are evenly spread among all policyholders.

Most people, however, receive their health insurance through their employer. Thanks to several federal laws, a person who has health insurance through his/her employer can usually maintain some form of good quality health insurance indefinitely, even if their employment ends.

Employer provided health insurance can usually be continued temporarily under a federal law called COBRA. Your health insurance Summary Plan Description will explain your rights. The federal COBRA law generally covers all employers with 20 or more employees who are not either a government entity nor a religious institution. (COBRA Continuation of health insurance is covered under an earlier article, COBRA - Extending Your Employer-Based Health Insurance; see Benefits Archives.)

If your employer does not come under the federal law, check with your state Department of Insurance. Approximately half the states have enacted “mini-COBRA” laws that cover small groups that federal law does not cover. Some follow the federal law closely; others only provide a shorter extension of coverage, while a few expand on COBRA. California, for example, just extended COBRA Continuation to 36 months for almost all employees.

If your group does not come under the federal COBRA law, contact your state’s Department of Insurance and ask if there is a state statute under which you might be covered.

Under another federal law, called HIPAA, once your group coverage has ended and you have extended the coverage under COBRA for as long as possible, you are permitted to purchase an individual health insurance policy that must be offered to you regardless of your health condition. This is covered more thoroughly in another earlier article, What Happens When Cobra Ends?, also in the Benefits Archives.

Among all these various laws, the bottom line is that once you are covered for health insurance under an employer plan, you will be able to continue some form of health insurance as long as you are willing and able to pay for it.

“Willing and able to pay for it” can become a major issue. Often overlooked in describing these continuations of health insurance is the fact that you must pay the full premium yourself. Health insurance premiums for a single individual can cost anywhere from $150 to $400 per month or more, depending on what part of the country you live in and how broad the benefits are.

Adding such a monthly bill to any budget is bad enough, but is even harder for someone trying to adjust to living on the reduced income of disability benefits. Yet, health insurance is vital to your health, so it is not something you can easily choose to abandon. Also, once diagnosed with HCV, it can be difficult to obtain new health insurance once your coverage lapses, unless you can return to the workforce.

Other than dipping into savings or borrowing money from friends and relatives, there are not many sources of funds from which to pay health insurance premiums. One potential source is Medicaid. If you can qualify for your state’s Medicaid coverage, many have a program that will pay the health insurance premiums of persons dealing with a catastrophic illness. The logic is that it saves Medicaid money if they pay only the premiums rather than the medical bills.

Before dropping your health insurance for lack of funds, talk to your medical providers. While it is not a common occurrence, some doctors and hospitals do agree to assist with or even make the premium payments so they can continue to be adequately reimbursed for your medical expenses. In many cases, if the doctor will take the time to compare the premium with the payments from insurance, it is actually to their financial advantage to pay your insurance premiums. However, this is not something they would want to publicize, so when it is done, it is done quietly and informally.

Cash Reserve

Disability income benefits may meet routine costs; health insurance may cover the majority of the medical bills; but there will always be additional, and often unexpected, costs. For these you will need access to additional cash, whether it is a savings account or an expanded amount of credit available. For persons who are recently diagnosed and remain asymptomatic, they should consider revising their budgets to allow for setting aside some money in savings.

One of the best ways to save is through a tax qualified retirement savings plan, especially plans administered by the employer, such as a 401(k) plan, or a 403(b) for employees of non-profit organizations. These plans have several advantages over other types of savings programs. First, by saving through payroll deduction, it is easier to save the money when it is money you never see in the first place. Also, under any savings program that is currently sheltered from income tax, the money will grow faster than if taxes on earnings must be siphoned off. Finally, if the employer contributes to the plan in addition to your contributions, that gives you a base rate of return that enhances any actual investment earnings.

Another reason that these plans are an excellent place to build some “just-in-case” funds is that there are penalties for early withdrawal. However, if you become disabled, most tax-sheltered retirement funds such as IRAs or 401(k)s become accessible without the penalty, although regular income taxes would still be owed.

Another source of cash, should your health start to deteriorate, is life insurance policies. While turning the policies into cash can be cumbersome and inefficient, they can provide a last resort source of funds. See Life Settlements and HCV (Cash for Your Life Insurance Policy).

In planning for the future, you should see if it is possible to increase the amount of life insurance that you carry through your employer. It may be possible to increase it at open enrollment without having to provide any health evidence.

At the very least, you may wish to consider expanding your credit limits either with an equity line of credit on your home or through expanding your credit card limits. Don’t let this backfire by accumulating additional debt, however. Save the credit for when it may be really needed.

Summary

In looking to the future, you should focus on three needs:

The need for continued income in the event of disability, as discussed in last month’s article;
The need to maintain health insurance; and,
The need to build a cushion of cash or other liquid assets for emergencies.

Although many people are not diagnosed with HCV until they actually start having symptoms, there are many who discover the condition while asymptomatic and with several potential years of continued employment. Given the opportunity, planning ahead for possible disability can provide welcome relief from future stress. The more you prepare now, the less the stress you will have in the future.

Confused about applying for disability? Click here

[Jacques Chambers, CLU, and his company, Chambers Benefits Consulting, have over 35 years of experience in health, life and disability insurance and Social Security disability benefits. For the past twelve years, he has been assisting people with their rights, problems, and other issues concerning benefits and disability. He can be reached at jacques@helpwithbenefits.com or through his website at: http://www.helpwithbenefits.com.]

Back to Living with Hepatitis C