Sense & Centsibility Blog

How to Prepare for Unexpected Medical Costs

It’s August in northern Minnesota and we’ve experienced some steamy weather. It’s the perfect breeding ground for insects, whether they fly or crawl. While I love summer, I long for September when most insects disappear after a good hard frost. It just makes being outside much more pleasant!

For example, my partner and I were riding horses the early morning of July 4th. We were trying to beat the heat and the horseflies that torment all of us with nasty, stinging bites. A strong breeze and fly spray can help but won’t solve the problem. Jake, our newest horse, is a seasoned trail mount. His breed is a Tennessee Walker, and he does a funny little pivot where he can fully change direction instantly. Tennessee Walkers were originally bred to carry riders and pull wagons across the hill country of Tennessee quickly, efficiently, and comfortably (so the story goes).

So, what does all this have to do with unexpected medical costs? While I was busy adjusting the saddle on my horse, I heard Kim loudly call out “Jake!” When I looked up to see what was going on, Kim was kneeling on the ground in a fetal position, rocking back and forth.

Jake had done his fancy little pivot trying to evade the horseflies which sent Kim sailing over his head. Kim had landed on the right side of her back but scurried sideways to avoid Jake’s hooves. We both wear helmets and fortunately, Kim’s helmet and head were still intact. We took inventory of each moving part and Kim seemed to be okay. It was not until the second night that Kim was gripped by excruciating pain and was unable to sleep or lay on her back.

A trip to Urgent Care the next morning revealed at least 1 broken rib and lots of inflammation. The doctor ordered rest and pain medication. Since Kim was laid up, this meant lots of extra work for me to keep up with home and farm chores. I’m not really complaining; I was simply exhausted from my busy schedule.

Kim is still recovering, but doing much better and helping around the house. Even more important, Kim’s accident did not devastate our finances. Fortunately, Kim works for a company that offers short-term disability that pays 100% of wages after taking 40 hours of PTO (paid time off). Kim’s company also offers a Health Savings Account (HSA) that will cover all the out of pocket medical costs. We were truly blessed in so many ways around this accident! But it also helps that Kim had not used all her PTO and made regular contributions to her HSA.

While time off work has done wonders for Kim’s recovery, for some folks this could mean no paycheck and a pile of unpaid medical bills. So, how can you plan for medical costs (and lost work income) that arise unexpectedly?



1) Estimate out of pocket expenses:

You know your family’s medical history better than anyone else. Look over last year’s medical bills to determine how much you paid out of pocket. These costs often include medical bills you pay to satisfy your policy deductible, medical expenses that are NOT covered by your policy, and your share of medical bills that are covered by insurance.

2) Policy deductibles:

Policy deductibles are common. A deductible is the amount you pay for medical expenses BEFORE your insurance coverage begins. If you don’t know how much your deductible is, find out now. Do you have a deductible for an individual (just you), or family coverage which is generally much higher. Know your numbers!

3) Insured’s share:

Once your policy deductible is met for the year, typically your medical coverage kicks in. However, rarely will your insurance pay the full cost of covered services. For example, my medical coverage pays 80% of covered services, meaning I must pay the other 20%. Again, double check your policy, employee manual, or talk with someone in your HR department so you know how to plan.

Use tools available to you

1) HSA/FSA medical account

If available through your employer, use a Health Savings Account (HSA) or Flexible Spending Account (FSA) to set aside money you might need. Not only will you have a medical safety net, you will also reduce taxable income since contributions to these accounts are deducted before income taxes are calculated.

2) Medical savings account

Not everyone is fortunate enough to work for employers who offer HSAs or FSAs. But you can still prepare for the unexpected by saving for out of pocket medical costs yourself. Doing so can prevent financial chaos if you have an accident.

3) Emergency Savings for lost income

Building a healthy savings account can help relieve the stress of lost income. Experts recommend saving 3-6 months worth of household expenses in case of job loss or interruption. If you do the math, that number may be intimidating. But don’t let it stop you; there is no time like the present to start that savings plan!

Hopefully you’ll never have to experience loss of work/pay. But being prepared for the unexpected can be crucial when it comes to your finances – and your mental health. Think how much better you’ll feel knowing that you’re not going to fall behind on any bills if you have to miss some work.

Along with emergency savings, there are other expenses you should make a priority. For more info, read Barbara’s other blog, 5 Expenses that are Worth the Money.

Financial Counselors at LSS are here to help you take control of your finances, build up savings, and eliminate your debt. Call us today at 888.577.2227 to schedule an appointment. There’s no time like the present to get a financial check-up, so take action today! You can also get started with an online budget counseling session right now.

Want even more information? Check out a few of our online calculators! There's the Credit Card Debt Calculator that will tell you how long it will take you to pay your credit card debt making the monthly payment or the Snowball Calculator that shows how paying off the balance of the highest interest rate first is an excellent way to plow through multiple credit card debts.

Author Barbara Miller is a Certified Financial Counselor with LSS Financial Counseling and she specializes in Bankruptcy Counseling and Education.