The coronavirus pandemic has people, especially parents and those with chronic health conditions, as well as the millions unemployed, scrambling to put their affairs in order. With Covid-19 infection numbers recently reaching new records and open enrollment season for health-care benefits upon us, here is a quick cheat sheet for terms you need to know to make decisions that work best for you when it comes to medical coverage, as well as gaining long-term protection in the event of health crises for you and any loved ones that rely on your finances.
The sign-up period to elect health insurance or to make changes to existing policies is called open enrollment. The only time a person can make changes to their benefits outside of this annual time-frame, is when there is a major life event, such as birth, death, marriage or divorce.
This is the annual cost you pay for health insurance. It is usually divided into 12 monthly payments. If you have health insurance from an employer, this fee is usually deducted straight from your paycheck.
Most medical insurance plans require you to pay a certain amount of money before your benefits start to kick in. This fixed number is called a deductible. You need to pay this out of pocket before the insurance company begins paying out. There may be two deductibles, one for in-network doctors, and another one for out-of-network doctors.
Once you meet your deductible, your coinsurance is a percentage of what you pay for for health-care costs. You share is usually smaller (for example, 20%), while your health insurance plan pays the rest.
Like coinsurance, you copay (short for copayment) is your responsibility for out-of-pocket health-care costs. Copays are usually a fixed dollar amount (unlike coinsurance) and can escalate per provider or service. For example, a copay for an annual visit to your doctor may be $10-$40, while $50 for a specialist, and $100 for emergency room visits.
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Sent from your health insurance company, this document is a summary of the medical bills submitted by your medical provider on your behalf to the insurance company. It typically lists the fees from the provider, plan allowances (what the plan will pay for that type of service), amount paid to your medical provider, and the amount you owe to the medical provider.
This account siphons off pre-tax dollars to set aside for qualified medical care. Usually you need to elect to participate in an FSA during your employer's open enrollment period. The maximum amount of money you can contribute to an FSA in 2021 is $2,750, but you can elect any amount less than that. Whatever you choose, be sure you'll use it within that calendar year because options to rollover any unused amounts are limited to $550. You can use money in an FSA for copays to doctors, dentists, physical therapy, and prescription medicine. Your FSA can also pay for supplements deemed necessary by a doctor. Be sure to get a Letter of Medical Necessity (LOMN) from your doctor.
Like a flexible savings account, an HSA is a savings account for medical care using pre-tax dollars. Unlike an FSA, the leftover amount in your account at year-end can roll over to the next year, but you need to be enrolled in a high-deductible health plan (HDHP) to be able to participate in an HSA. The maximum contributions are usually higher than an FSA as well. Another notable difference is that you can invest the money in your HSA and it is not tied to your employer's benefit package (meaning you can take it with you if you change jobs, unlike an FSA). For those nearing retirement, an HSA may be an attractive option to pay for health care during retirement.
In the event of your untimely death, a life insurance policy provides your loved ones with some income so you can continue providing for them. The amount you are insured for varies from 10 times to 20 times your annual salary. There are two main types of life insurance available.
Term policies are generally less expensive because you are only paying for coverage during a fixed amount of time, say 20 to 30 years.
Whole life or permanent policies are considerably more expensive than term policies because they don't expire as long as you continue paying the premium. Some of these policies also come with a cash-value option that serve as a type of savings account, where a percentage of your premium is invested and grows tax-deferred.
A durable power of attorney allows you to assign a specific person to make financial decisions for you if you are too sick to do so. This allows them to access to your financial accounts in order to pay your living expenses and other bills when you can't.
A health-care power of attorney, also know as a health-care proxy, is someone you designate to make decisions specifically about your health and medical care when you are incapacitated. Doctors will be able able to share private medical information otherwise protected by the Health Insurance Portability and Accountability Act (HIPAA) with this person.
A last will and testament is necessary for everyone, not just the wealthy. It provides instructions on how you want your belongings and assets legally divided, donated or otherwise distributed. While not assets per se, minor children, are assigned guardians in this document. Should you wish to provide an executor of your assets other than the minor child's other parent, as in the case of divorced parents, trusts can be specified in your will. An executor is named in the will to ensure follow-through. It's a good idea to name a back-up executor just in case the first person named dies before you do.
A living will specifies what to do when death is imminent. This document provides doctors with your instructions on what to do when you can no longer breathe on your own via Do Not Resuscitate (DNR) orders, defines the type of palliative care you wish to receive during your last days and how to handle organ donation if you wish. In some states, a living will is called an "advance directive."
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