3433-vol. 6 issue 2-3.pmd - iarfc

Volume 6, Issue 2 & 3 31
TEN HEALTH FINANCE TOPICS THAT FINANCIAL
PLANNERS NEED TO UNDERSTAND
Barbara O’Neill, PhD, CFP
Specialist in Financial Resource Management
Rutgers Cooperative Extension
ABSTRACT
Health and personal finances are strongly related. In recent years,
health care costs have consumed an increasingly larger share of
household income. Even those with “good health insurance” are
paying more out-of-pocket for premiums, co-payments, and deductibles
than they were a decade ago. Health-care expenses force trade-offs in
spending and affect financial decisions (e.g., job choices and retirement
date). Dollars spent on medical expenses are also unavailable to invest
for financial goals such as retirement. This article examines ten health
finance topics that financial planners need to understand: 1. financial
stress related to health care costs, 2. consumer driven health care, 3.
health savings accounts, 4. the COBRA and HIPAA laws, 5. retiree
health insurance and Medicare, 6. young adult health insurance, 7. state
health insurance laws and benefit programs, 8. the financial cost of
unhealthy behaviors, 9. primary and secondary health care expenses,
and 10. health and wealth relationships. Implications for financial
advisors are provided.
Planning Strategies
Health and personal finances affect one another in many ways. The
philosopher Virgil stated this relationship simply: “The greatest wealth is
health.” In other words, good health is a resource for wealth-building and
poor health detracts from it. Having great riches also won’t matter very much
if someone is sick with a life-threatening disease. Another health-wealth
relationship is the sheer cost of health care. Everett & Anthony (2005, p. 70)
note “prudent individuals who want optimum control over their health care
decisions will face complex savings, insurance, and health behavior decisions
in the future,” citing high deductible health insurance and long-term care
insurance as examples. In a special issue on health care in Money magazine,