Monthly Archives: August 2023

The Ins and Outs of Health Insurance

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Health insurance is complicated and confusing.  It’s one of those things that you rarely think about until you need it.  But when you need it…you had better be prepared.  Best case scenario:  you need it, you have it, and it covers everything flawlessly.  Worst case scenario:  you need it and you don’t have it, and you end up with a tremendous debt.  Typical scenario:  you need it, you have it, and you learn surprising lessons about how much you still need to pay out of pocket.

There are four basic ways that you have to pay when it comes to your healthcare:

  1. You pay the premium on your health insurance policy.
  2. You likely pay a co-payment (usually $20 or $30 on typical doctor’s office visits) on office visits and prescriptions.
  3. If you have to have medical procedures done, you likely have to pay an annual deductible amount before your insurance starts covering things.
  4. After your deductible is met, your insurance likely still will not pay the full remaining bill.  They will pay a certain percentage (80% is a good example) and you are responsible for the remainder.  This remainder that you need to pay is called co-insurance.

Thankfully, there is one more health insurance term you should know about, which may be your saving grace in the case of a catastrophic illness.  Once you have reached the annual maximum designated by your insurance policy (note:  not all policies will offer an annual maximum), you will not have to pay any more out of pocket for co-insurance for the rest of that calendar year.  (You will still need to continue to pay co-payments, however.)

So, for example, assume you have a surgery done that costs $50,000.  You have a deductible of $500 and your co-insurance is 20% (the insurance pays the remaining 80%), and your annual maximum is $2,000.  For this surgery, you will have to pay the first $500.  The insurance will pay 80% of the remaining $49,500, or $39,600.  At first glance it looks like you will need to pick up the remaining $9,900.  Thankfully, your out-of-pocket annual maximum is $2,000, so you only need to pay a total of $2,500 ($500 deductible plus the $2,000 annual maximum on the co-insurance) for this adventure in medical care.  But if you had that $50,000 surgery without having health insurance, your out of pocket expense would be quite painful!

Tomorrow is the last day that you can purchase the Penn State Student Health Insurance Plan for fall semester.  Health insurance is expensive.  But trying to live without it can be even more expensive.

Fresh Start with a Spending Plan

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How do you plan to manage your money this semester?  The beginning of a new academic year is a great time for a fresh start when it comes to juggling your finances.  For students, each semester typically begins with a fresh lump sum of money to be used for books and for the semester’s living expenses.  And how a student manages that lump sum is not very different from the way anyone manages their regular paychecks (or direct deposit….I don’t remember the last time my pay actually came in a check).

Developing a spending plan requires that you know how much you are spending on things.  There are countless ways to track how much you are spending, ranging from financial computer programs to spreadsheets to old fashioned ledger books.  How you keep track of things is much less important than the fact that you need to keep track of things.  Some expenses occur once a semester (like tuition or books).  Many expenses occur once a month (like rent and utilities).  Some expenses occur even more frequently (like food or auto fuel).

The other part of developing a spending plan is knowing how much money you have available to work with.  For many of my readers this may be a big chunk of student loan funds that is about to refund to you to carry you through the entire semester.  For some others it may be withdrawing from a savings account.  For some it may include funds from a job.  But you need to know how much you have so you can determine how much you can spend.

Once you have established the resources available to you, then you can start subtracting out your expenses.  Start first with expenses that are required and relatively fixed—your rent and utilities and insurance.  Then you will know how much you have left to spend on things that are more flexible, such as food (which is required, but how much you spend is highly variable), entertainment, and clothing.  If your resources exceed your expenses, that is ideal.  Then you’ll have some to tuck away for an emergency or unexpected future expense.  If your expenses exceed your resources, you will need to rework things.  Figure out how you can spend less.  Or figure out how you can add more resources.  Maybe you need a job.  Maybe you need a student loan.  Maybe you need a roommate.  Maybe you need not to have a car.  There are many ways to make adjustments to your spending plan—and I’m fully aware that many of those choices are difficult to make.

As you start on your fall semester, I know you don’t want to spend a lot of energy on establishing your financial plan.  But if you put in the effort now, you’ll be much more financially secure when we get to final exams in December.  You can control your money rather than letting it control you.