Crazy high deductible? consider medical gap insurance.

Anyone who has found themselves in the predicament of needing new health insurance can likely attest to one thing: deductibles are crazy high. For plan year 2020, the maximum allowed deductible increased to $8,150. This is cause for concern, considering almost 70% of Americans have less than $1,000 in savings. For the majority of people, a significant health crisis can subject a family to the deductible which may very well leave them in financial ruin or bankruptcy. Unsurprisingly, rising medical bills are a leading cause for bankruptcy in the United States, so naturally people have begun to search for a solution to what I call the "high-deductible problem".

Having insurance is better than not having insurance. However, if you cannot use your insurance in the event that something bad happens because you can't afford the deductible, you aren't getting much value from that plan to begin with. Having the wherewithal to buy health insurance in the first place is essentially recognizing the possibility that something devastating and out of your control may happen and planning for that potentiality with something to transfer the financial risk to another party. After all, insurance is just a fancy term we use to describe the transfer of financial risk between two (or more) parties. It then follows that, in the same way one can't afford to pay tens of thousands of dollars in hospital bills without insurance, one can also not afford a $8,150 deductible, even in an emergency situation. 

There are multiple solutions to the problem. Some people take out loans to pay their deductible in the event something devastating happens. This is not a bad idea if the option is on the table, after all its better to owe only the deductible than the full bill of a multi-day hospital stay. The problem is: you have to pay that loan back at some point. Like nearly all loans with the exception of cash-value life insurance loans, you are going to be paying an interest rate on that loan until it is paid off. If you find yourself in the unfortunate situation of being unable to afford the monthly loan repayments, you may face late fees and other punitive measures. The loan option is more of a band-aid than it is a solution to the high deductible problem. There is another option that I personally consider to be superior, if you are willing and able to pay the nominal cost of obtaining it.

Enter medical gap insurance. Like most people, you are probably thinking of gap insurance for a car right now. I was guilty of the same thing when I first learned about medical gap insurance. While there are some similarities, they are different types of plans. Not all plans are the same across all companies that offer them but the core aspects are usually pretty similar. Here's how it typically works:

1. You buy medical gap insurance to solve your high deductible problem.
2. You pay the separate monthly premium which starts as low as $38 per month.
3. Something happens, you file a claim with the insurance company.
4. The gap insurance pays 50% of your deductible, co-pays, and co-insurance for an outpatient visit and 100% of them for an inpatient visit. 
5. You high five yourself for making the smart decision to make financial arrangements to solve your high deductible problem in the event of an emergency. Go you!

Most people don't know medical gap insurance exists. But like gap insurance for cars, you'll be very happy you had it in the event you need to use it. For more information about medical gap insurance, contact me.

​Seth Martin