You're Probably Looking At Health Insurance Wrong, Here's Why

The purpose of insurance is to write the cheque that you may not be able to write yourself.

Imagine if your home were to burn down - would that be financially catastrophic?

Or, imagine you were in a car accident and another family sued you due to harm resulting from your actions – probably financially catastrophic as well, right?

One more. Imagine the primary bread winner of your family passed away prematurely – likely to be financially catastrophic for any spouse and children you may have!

Thankfully, these types of catastrophic events don’t happen to us very often, but when they do, they can have a outsized negative impact on our lives and finances.

This is the problem that insurance is designed to solve, and why we buy insurance – to protect ourselves against these types of large and unforeseen risks that (if we were uninsured), would be financially devastating.

Here’s the thing that people often forget; health insurance works the same way.

When shopping for a health insurance plan, we should be seeking to protect ourselves from the large unforeseen risks. Aka the ‘catastrophic risks’.

Despite this, there is a natural tendency for people to fixate on the immediate benefits of a health insurance plan (i.e. “what can I use this plan for right now?”).

These benefits are almost always for small, predictable, routine expenses, such as dental, paramedical services (massage, physio, chiro etc.), and vision. These types of expenses may be ‘annoying’ but they are never going to be a major financial blow, like a large unforeseen health expense has the potential to be. And yet, people will almost always think about these things first when they think about their health insurance plan.

Large Unforeseen Health Expenses:

Examples of large unforeseen health expenses often include:

• Claims for Prescription Drugs
• Claims for Travel (medical emergencies)
• Claims for Ambulance rides (air/ground)

Prescription Drugs:

Prescription drugs are the big one and is why coverage for prescription drugs tends to form the core of any health insurance plan. It also represents the largest expense to any health insurance company.

It’s entirely possible to be diagnosed with an illness that requires a prescription medication costing 4-5 figures per month! Imagine for example if you needed to pay $6,000+ per month to fill your prescription medication in perpetuity – how might that impact your family financially? How might it affect your ability to plan for the future?

Depending on the nature of the health condition being treated, prescription drugs can be exceptionally expensive – which is why it is important to prioritize prescription drug coverage when shopping for a health insurance plan.

Travel:

Medical emergencies occur all the time when people travel, and when they do they have the potential to be very costly.

There are two types of trips to consider with respect to travel coverage:

• Travel within Canada
• Travel outside of Canada

Travel within Canada:

When travelling within Canada, your risk is certainly less than if you are travelling outside of Canada.

If you experience a medical emergency in another Canadian province/territory, your provincial (or territorial) government health care plan will reimburse the province/territory you are visiting for the cost of any medical treatment you receive (up to what your provincial/territorial plan would have paid).

The largest risk when travelling within Canada tends to be the cost of ambulance rides (which can be either Air or Ground).Ambulance rides can be tens of thousands of dollars – which you would be responsible for paying.

The nice thing about having travel coverage built-in to a health care plan is it’s one less thing to worry about when you’re travelling between provinces and will cover items such as ambulance rides if needed. So, that weekend trip to a neighboring province can be a little more fun and stress-free.

Travel outside of Canada

Travel outside of Canada is undoubtedly the bigger risk when compared to travelling within Canada.

When travelling outside of Canada, emergency medical bills can (and often do) reach hundreds of thousands of dollars – particularly if you’re receiving medical treatment in the United States.

For this reason, it is essential to have emergency travel medical coverage when travelling outside of Canada. Otherwise, you may find yourself needing to repay hundreds of thousands of dollars out of your own pocket, which could be financially devastating.

For a more in-depth look at travel coverage read this blogpost.

Ambulance Rides:

With the exception of inter-facility transfers (i.e. moving you from one medical facility to another), the cost of ambulance rides falls on your shoulders should you ever need one (even within your home province/territory).

Your ambulance ride could be either an Air or Ground ambulance (depending on your location at the time of need), the cost of which can easily be tens of thousands of dollars.

Small Routine/Predictable Expenses:

Let’s return to the more predictable, small, routine expenses for a moment. These are benefits included in virtually all health care plans to varying degrees.

But, if they are only covering small routine expenses – are they really insurance?

Debatable.

Depending on your usage, it may even be more economic to simply pay these types of expenses out-of-pocket yourself as you incur them.

So…why are they even part of a health insurance plan you ask?

Insurance companies build these benefits into health care plans largely because consumers have come to expect these benefits to be included in a health care plan – whether it makes economic sense or not.

That said, having these benefits included in a health insurance plan has been shown to be health promoting. For example, when people have dental coverage that they are paying for – they are more likely to go visit the dentist regularly, which means they tend to have better oral health. Wow, go figure.

Additionally, if you need to visit a licensed health care professional (physiotherapist for example), you don’t want to be worrying about the cost, you just want to go and get treated. Less stress is always a good thing.

So, in these ways having coverage for the smaller routine expenses can be viewed as a positive, and may contribute to your being a happier, healthier human being. If so, great!

Again, keep in mind these types of benefits are ‘nice to haves’, but perhaps shouldn’t be the focus when you’re selecting a health insurance plan. Consider focusing on the coverage for the large and unexpected expenses (the risks that can bankrupt a person) and think of the coverage for the small routine stuff as more of a ‘bonus’ that you can use along the way over the lifetime of your plan, to keep yourself feeling happy, healthy, and your best self.

Conclusion:

Coverage for large unforeseen expenses are the ‘true insurances’. Meaning; they are there to help write the cheque that you may not be able to write yourself when you need to.

Whenever you’re evaluating health insurance plans, it would be our strong recommendation that you give more weight to the coverages that protect against these types of large unforeseen expenses (e.g. prescription drugs, travel, ambulance), as opposed to the small routine expenses (e.g. dental, paramedical, vision). View the coverage for small routine expenses as health-promoting ‘nice-to-haves’.

Aeva is designed to help make shopping for health care plans online easy, and helps you compare what each plan offers.

Get started today by clicking here.

Thanks for reading!