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

32
Journal of Personal Finance
the following scenario was described: “Imagine getting a $3,000 raise and
then finding out that your health-plan premium was going up $1,000”
(Regnier, 2003, p. 16). The article went on to state that, given recent health
insurance rate increases, this scenario was not at all implausible.
Even those with “good health insurance” are paying more out-ofpocket
for premiums, co-payments, and deductibles today than they were a
decade ago. Increasing health-care costs force trade-offs in household
spending and affect life decisions (e.g., retirement date) and the financial
planning process. Dollars spent on medical expenses are also unavailable to
invest for financial goals such as retirement. The 2006 Health Confidence
Survey found that 36% of respondents decreased savings for retirement as a
result of increased health care costs, up from 25% in 2004 (Helman & Fronstin,
2006). Almost 3 in 10 (28%) reported difficulty paying for basic necessities.
Health care, both its quality and cost, is an issue of concern to many Americans.
Two in ten (19%) respondents identified health care as the most critical
of seven issues of concern, placing it ahead of the war, energy and gas prices,
terrorism, the economy, education, and Social Security (Helman & Fronstin,
2006).
Health finance, quite simply, is a vast array of financial issues that
are associated in some way with physical health. Examples include Medicare
and Medicaid, long-term care, disability insurance, COBRA group health
insurance continuation benefits, financial expenses associated with obesity
and diabetes, and the cost of smoking as an out-of-pocket expense, to name
just a few. Financial planners see the effects of health finance on clients all
the time (e.g., those who purchase a long-term care policy, delay retirement to
maintain health insurance, and practice poor health habits and end up paying
the price). 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.
It concludes with implications for financial advisors.
©2008, IARFC All rights of reproduction in any form reserved.