July 2010 Newsletter

SHARING FINANCIAL RISK
All of us who buy health insurance want the same thing…And that’s to pay as little as possible for good coverage, without assuming too much financial risk, in case of a costly medical event. For example, you can choose to share none of the risk and have the insurance company pay 100% of everything, and you’ll have a sky high premium to match. Or you can take on a lot of risk yourself by choosing a huge deductible of say, $20,000, with no coverage for doctor visits or prescriptions, in order to get a cheap premium, and then hope you don’t end up in the hospital and have to pay that $20,000 out of your own pocket.
Somewhere between those 2 extremes of managing exposure to financial risk, there’s a fine line, a tipping point, between saving you money with the right plan and the right deductible that you can afford, without lining the pockets of the insurance company. Choosing the right plan, copays, deductibles and co-insurance determine how much of the financial risk the carrier will assume, and how much risk you will assume. All of these affect the premium. For example, low copays, deductibles and co-insurance drive your premiums up because you’re asking the insurance company to start sharing the expense sooner. Whereas, no copays, higher deductibles and co-insurance, lower your premiums, but you must be financially able to pay them when you need medical attention.

Remember, unpaid medical bills are the #1 cause of bankruptcy in the United States today, so it’s important to get it right.
Your exposure to financial risk is why you’re buying insurance in the first place!