RETHINKING: Financial Planning and Health Insurance.

Financial Planning and Health Insurance

One of my big frustrations when I counsel people with multiple sclerosis about financial planning is the number of people who realize they need help far too late. By the time they come to me with questions, they are facing reduced income, inadequate or overly-expensive health coverage, and inadequate or nonexistent long-term care plans. They begin to plan only when loss of productivity looms, or they find themselves caught in "job lock", meaning their employment-based health insurance plan is forcing them to stay in their current job and position.

Financial planning

Everyone has a financial plan whether they realize it or not. The plan may be simply to take things as they come, to forego insurance, and to live from paycheck to paycheck. If that's your plan, you are hoping that somebody else has taken care of matters. You may feel okay about it because your employer supplies you with health benefits. After all, you aren't rich and you don't know anything about financial planning. Besides, you can absolutely trust your employer to make your financial decisions for you. You may even believe that you will never get terribly sick, or disabled, or old.

Real world thinking

If you have a chronic illness like MS, which carries the possibility of disability, you could be financially responsible for enormous expenses. This is the cold truth. One major object of financial planning is to find ways to ameliorate the potential financial risks of illness or disability. That means taking steps to make yourself and your loved ones as "bullet-proof" as possible, regardless of any unpleasant financial surprises your health conditions might bring.

Myths about insurance

There is a large body of mythology about insurance. It's a good idea to clear away these commonly held misconceptions because an investment in health insurance is a vital part of good financial planning for anyone with MS. The assumptions are:

1. You get health insurance through your employer. Period.

2. Insurance from your employer is sufficient.

3. Insurance companies take care of you if you get sick.

4. If you don't have insurance from your employer, an insurance agent will always find some for you.

5. If you can't afford insurance, the government will pay for you.

6. If you can't work, your employer's insurance company or the government will give you enough money to survive.

7. If you can't work, you will continue to receive health insurance from your employer.

None of these are true. But the mythology is so persuasive that most people don't take too seriously the need to do insurance planning while they are still relatively young and healthy. In fact, most people construct death plans, also known as life insurance, without feeling they are being morbid. But they postpone constructing life plans, which is what financial planning is, even if they know they have MS.

I recommend getting a better understanding of what insurance is and what it does, as well as what it does not do, as soon as possible. If you have been recently diagnosed with MS, that advice is doubled.

The most important principle of insurance planning is to plan for the worst scenario. You need to plan for things you don't think and try not to believe will ever happen to you. (I hope you are right.) If you are prepared to meet this planning challenge head on, you will not have to cope with devastating financial loss at a time when you might be least equipped to handle it.

Insurance transfers risk

Investing in good health insurance is a logical alternative to paying really big bills. Health insurance is essential to financial planning because it is a means of protecting your other assets. It is really a means of controlling potential financial risk, not stopping it. Rather than taking on all the financial consequences of your illness yourself, you pay a premium and transfer some of the risk to an insurance company.

The risks the insurance company accepts are not all-inclusive. They only include the items spelled out in the policy, which is a contract between you and the insurance company.

Prepare to invest in as much health insurance as you can buy. Do this carefully, and think through each step. When looking at insurance products, compare more than the cost of the premiums. Evaluate the cost of the risk as well. The full cost includes not only deductibles and co-payments, but also the cost of noncovered items. If, for example, your policy has no coverage for durable medical equipment, and you find yourself needing a wheelchair, your cost includes the premium, deductibles, co-payments, and the entire cost of the wheelchair.

Remember, too, that financial protection plans involving insurance are developed for the long term. The insurance that you purchase today may not be needed for decades. But the dollars you spend today make protection available when you need it. As you grow older and your health changes, you may not be able to purchase benefits that you once could have obtained. Thus, you need to regard the decisions you make now as permanent, life-long choices.

You may choose to use your employer's health-insurance plan as your protection (after your own thorough review of the plan so that you know exactly what protections you are and are not getting). I always recommend against this eggs-in-one-basket approach.

Someone else's employment-based health insurance is even less adequate. If the responsible spouse dies, becomes disabled, unemployed, or divorces the employment-based insurance is likely to end prematurely. It is far safer and saner to plan for benefits that are not tied to somebody else's continued employment, wellbeing, or affection.

Laura Cooper is writing a book on insurance planning for people with MS. See InsideMS, Spring 1998, for her ideas about finding group health insurance that is independent of employment.