What does Obamacare have to do with life insurance? Unfortunately, maybe more than we think. Obamacare, more formally known as the Affordable Care Act, is changing a lot about health insurance, as well as the financial realities associated with it. That’s where life insurance may be very relevant to Obamacare – and why it may become more necessary than ever. More people may be leaving very large unpaid medical costs after their death. Life insurance may become a necessary “clean up” provision to cover those medical costs, and keep from burdening your dependents with them after you’re gone.
More expensive premiums
Based on the early results, it appears that Obamacare will have the exact opposite effect on health insurance premiums than what was predicted or expected – it looks as if premiums are actually going to be higher under the plan than what they were before.
There are various reasons why this is true, including the fact that the new plan mandates certain types of coverage that have not been required in the past. It is also spreading the associated risks of certain types of coverage across all lines, which interestingly enough, is making just about everyone’s premiums higher.
Higher premiums have a domino effect. More money paid for premiums means less money saved for contingencies. You may need to have more life insurance for the simple fact that higher premiums will mean that you will have less in savings and investments as a result of paying higher premiums.
Higher deductibles
In order to keep health insurance premiums affordable, many people who are moving into the plans are opting for the Bronze level plan. While it may be more affordable than the Silver and Gold plans, the reason it’s less expensive is because it has much higher deductibles.
The Bronze plan includes coverage of no greater than 60% of eligible medical costs. That means that the patient will be on the hook for 40% of their covered medical expenses.
If you are dealing with a major health condition – such as heart disease or cancer – it can leave you with tens of thousands of dollars in out-of-pocket medical expenses. If you die as a result, your family could be left to settle the debts.
Even if you are able to come up with the cash to pay those deductibles, it will leave you in an impaired financial state. You will likely have to liquidate long-term financial assets in order to pay the bills. That will leave less money for living expenses, for retirement – and for your final affairs.
You may have to give serious consideration to increasing your life insurance coverage substantially under Obamacare, and particularly if you choose to participate in the Bronze plan. The additional life insurance will provide an extra margin of financial safety for your heirs in the event of your death.
More uncovered treatments and procedures
Ultimately, consumers and the industry will find ways to live with the new healthcare plan that will make it more affordable. One method that is already beginning to establish itself is cash-only doctors. Some medical practitioners are deciding not to participate in the plan. In order to do so, they’ll have to accept cash payments, rather than insurance.
While this may help people who go with no health insurance at all, it will also mean more uncovered treatments and procedures. And that will mean high out-of-pocket costs, especially in the event of a major illness.
How this part will play out is still unclear. But markets always adjust to difficult circumstances, and if this ends up being one of the methods, it will leave you with unpaid bills.
More unpaid medical bills upon your death
If you add it up, it’s all pointing to the potential for the average consumer to have far more unpaid medical bills at the time of death. It will be magnified in the case of people who have serious, long-term illnesses, such as cancer. Higher costs will ultimately mean higher deductibles paid, and more bills for uncovered care.
By the time a person in such a situation dies, medical indebtedness can be so high that survivors are unable to pay the bills out of the deceased’s estate.
Life insurance may turn out to be the best way to handle the imbalance. And since health insurance premiums are sure to rise, it becomes doubly important to hold any insurance premiums to an absolute minimum. For most people, that will mean term life insurance rather than whole life insurance. You can buy a lot more coverage using term life insurance, and from the looks of things, that’s exactly what we may need – more life insurance coverage.
