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Young People Need Health Insurance By Stephen J. Butler

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A friend mentioned that he has worried all his life and nothing really bad has ever happened, so it is a practice that has worked well for him so far. Those of us without enough to worry about can add the following arrow to our quivers:

When our children are out of school and/or too old to be covered as dependents on group health insurance plans we should consider continuing coverage on them. Why? Because kids in their twenties are clueless relative to us older folk. If they lose a job and have no coverage, they are preoccupied with too many other issues. It's a rare twenty-something person who wakes up unemployed and thinks. "Yo! I need to go get some health insurance." Any such child would probably be still on the fast track at some gainful employment.

A tragic event earlier this summer reminded me of why insurance needs can never be overlooked. I learned of a family whose daughter, a high school graduate, was in an accident that left her severely paralyzed. She was not covered by health insurance. This turned a physical and emotional tragedy into a financial disaster as well. Imagine what this means for the family's retirement plans.

Today, many young people spend their twenties living life in an eclectic mix of jobs, schooling, searching for jobs, recovering from the stress of a previous job, and traveling. Throughout it all, they may or may not be covered by health insurance. Of course, they know they're not going to get sick or injured, so they view it as pointless to even think about the issue, much less spend money on it that they don't have if they are in school, traveling or between jobs.

Yet, a plan with a $2,000 deductible costs only about $30 per month for a twenty-five year old. This is a plan that would pay up to $1,000,000 in medical expenses. A wise parent might consider having that $30 automatically deducted from his or her own checking account so that the policy has no danger of being cancelled. Once it is set up, everyone can all sit back and relax.

Most health insurance plans cover children as long as they are still in school full time. After that, the kids are on their own. In reality, however, they are not on their own until they firmly get established in a job that has substance. We love our kids. If they get sick or injured, we are not going to want to turn them over to public health facilities if we have the resources to provide them with better care. Those resources, in many cases, will consist of the money otherwise earmarked for retirement.

Family financial resources, in their entirety, are often spent on medical care for dependents. Pension laws even allow pre-retirement distributions for "non-reimbursed medical expenses of the employee or a dependent." With no insurance as a buffer, the costs of some illnesses and accidents can be crushing. They can destroy years of painstaking saving and investing.

There are other fine points of this issue that bear mentioning. First, people are not always insurable. Relatively minor health problems can become pre-existing conditions that can disqualify a person from joining a small company's health plan. Therefore, even getting a job downstream does not guarantee that a comprehensive health plan will become part of the benefit package.

In some cases, having his or her own health plan may give the job applicant the luxury of negotiating an extra $150-$200 of monthly income if the employer can avoid the insurance expense.

Having even a high deductible plan with a major insurance carrier qualifies the policy holder to benefit from the reduced fees for hospital services that the carrier has negotiated. There is an astounding difference (try one-third the cost) for many services when we compare what the insurance company pays versus what is billed to an uninsured patient.

The general rule of insurance purchases is that "we never want to insure something we can afford to pay for ourselves." A high-deductible health plan for younger people fits the bill perfectly. We can all afford a few thousand dollars for routine medical care, but a severe accident or chronic health problem is something that we will need to insure.

If a parent (or grandparent) is stepping up to the plate to pay the premium, we shouldn't overlook the opportunity for some tough love. Get a signature on an open-ended note for an amount equal to whatever the future premiums might total. In ten years, when your child's stock options are exercised in a dot com that finally makes it, you can get all your money back plus interest.

When you decide to cut the cord will depend on circumstances. It reminds me of Royal Little, the late founder of Textron, who, at age 95 was giving a speech in San Francisco. He said, "I'm no longer active in the management of Textron. My boys run the company now, (pause) but after all, my boys are in their early seventies."

In the meantime, check out a web site called ehealthinsurance.com for quotes and benefit comparisons. It will offer some solutions to a potential problem you never thought you had until now.