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Posted on September 10, 2008

An unexpected medical emergency or prolonged condition can quickly become an overwhelming financial burden. According to a study published in the Journal of Health Affairs, medical debt is now one of the leading causes of bankruptcy, affecting an estimated average of 2 million Americans each year. While many depend on health insurance to assist with the cost of medical treatment, an overwhelming 75.7 percent of those whose illness led to bankruptcy had insurance at the onset of their illness.

If something unexpected were to happen to you or a family member, planning ahead can help you avoid a serious financial setback. The best plan of action is to take proactive measures before an injury or illness strikes.

With open enrollment right around the corner for many American workers, the experts at Money Management International (MMI), the nation’s largest full service nonprofit credit and debt counseling and education agency, encourage you to perform an annual check-up of your medical insurance benefits by asking the following questions:

• Does my plan cover pre-existing conditions? Not all insurance plans cover treatments for ongoing medical conditions like diabetes or heart conditions. Find out if there are limitations to your coverage, what they may be and if there is a mandatory waiting period before your coverage goes into effect.

• Is my health coverage sufficient? Find out exactly what medical services are covered under your plan, and learn what preventive measures are offered. Ask if there are any limits on medical testing, surgical procedures, outpatient care, mental health assessments or prescription drugs.

• What does my plan cost? Research your premiums and co-payments. Explore the difference in cost between using doctors in the network and those outside of the network. Find out if there is a limit to the maximum amount you would be expected to pay out of pocket.

• What are my other options? Even if your current insurance plan appears to be adequate, it may be wise to review other options. There are many types of insurance plans that use a fee-for-service system, while Health Maintenance Organizations (HMO) operate on pre-paid services. Another type of insurance is called the Preferred Provider Only (PPO) plan, a combination of fee-for-service and pre-paid services. Many people are also able to get group insurance coverage through membership in a labor union, professional association, club or other organizations.

“Consistent coverage is the most important thing,” said Cate Williams, vice president of financial literacy for MMI. “Although no one plans to get sick, the old saying that ‘It’s better to be safe than sorry’ is still true today.”

Williams added, “An emergency savings cushion is a great idea too—even with insurance, co-pays and other outside expenses can wreak havoc on an already tight budget, especially if your illness causes you to miss work.”