Once you have decided to file bankruptcy to relieve overwhelming medical debt, you must consider how to best protect yourself in the future. Unless you take measures to prevent this debt from reoccurring, you can once again find yourself in medical debt without the benefit of filing for another bankruptcy. Protecting yourself from future medical debt should be one of your first concerns while filing for chapter 7 or chapter 13 bankruptcy. Individuals who have gone through bankruptcy due to devastating medical expenses have learned the hard way that their medical insurance was inadequate, and failed to completely protect them from financial disaster. Most individuals are insured through an employer-provided health care plan. These plans usually cover only a small percentage of the costs incurred after a catastrophic illness or emergency. Some individuals purchase their own health care plans. These individuals are usually self-employed. Individualized health care coverage is very expensive, and these plans have limitations as well. Still, there are options an individual can take to supplement their medical insurance coverage, minimizing their risk, of once again, becoming overwhelmed by medical debt.
Customizing health insurance can be a useful tactic. Individuals who purchase their own medical insurance have the advantage of tailoring their insurance plan to suit their individual needs. They can change their deductibles and coverage to reflect their specific health circumstances. Although employer-provided health care insurance is usually cheaper, there is decreased ability to modify this plan to meet their individual needs. One option some employers offer is to provide a stipend in place of health care insurance. This allows an employee to shop for a more personal insurance plan.
Catastrophic coverage is another option an individual can take to protect themselves from future medical liabilities. Catastrophic medical coverage is less expensive, and can be useful in enhancing an individual’s health plan by covering just medical emergencies.
A Health Savings Account (HSA) can be a useful tool in managing medical debt. It is a tax-advantaged medical savings account available to taxpayers who are enrolled in a high deductible health plan. The funds contributed to a HSA are not subject to federal income tax at the time of deposit. These funds roll over and accumulate year to year if not spent. This approach allows the individual to set aside a certain amount every month into their HSA. These funds may be used to pay deductibles and other health care expenses not covered under their health care plan. A Flexible Spending Account (FSA) is another tool employers offer to assist employees to manage health care costs, but FSAs have significant disadvantages.
These are a few examples that individuals can consider when optimizing their health care insurance to protect them and their loved ones from medical debt and the threat of bankruptcy. There are many other concerns an individual must consider when planning for a medical emergency, such as the loss of income. Medical emergencies are very unpredictable, and no individual is immune to the possibilities of a medical crisis. It’s a good idea to plan ahead for the financial impact of a potential health care crisis.
D. Dye
