Question

John is a sophomore in college and used to be on his mother’s health insurance plan. His mom recently changed jobs and her benefits package changed. As a result, she can no longer afford to pay for John’s health insurance. He is a healthy 20-year-old and a full-time student. He works part time to cover his living expenses, but doesn’t have much left over at the end of each month. He’s saving up for a car and hates the idea of spending money on health insurance when he hardly ever goes to the doctor.

1.Explain the different health insurance options available for John and assess the risk vs. the reward of each option.

2.Should John go without health insurance and continue saving up for a car? Why or why not?

3.Would a Health Savings Account (HSA) be a good option for John? Why or why not?

Answer 1

1)1. Indemnity insurance - herein the person is reimbursed the actuak hospitalisation cost against the sum insured. Periodically amount is given for the insurance.Under it the person can go to any doctor of his choise and get his clain settled after treatment. Though it may be costly but it doesnt limit you to a singke doctor.

2. Cashless facility in insurance- herein the person doesnt need to claim for the medical expenses as a reimbursement but get treatment immediately without the need to pay cash at the urgent times. It saves a person for the need of urgent cash during treatment. However it is limited to a network of hospitals only.

3. Community based health insurance- under it the community pools money from the members and uses it on need. However it is used for the whole community as when needed and may not be fruitful to a particular person in specific.

2) John shoukd opt for health insurance rather than saving for a car. As health is utmost important. And it must be prioritised over all luxury. A insurance policy will act as a huge saver during the most crucial time of life . However the car might not yeild benefit. There are substitutes than owing a car. And it is a not growing asset as it value will decrease over time. Hence John shoukd opt for a insurance plan and act reasonably.

3)Health saving account can be a good investment. As it is a tax saving investment which mostly insurers won't provide. There is nothing like claim settlement here as in the case of insurance, which at times are complicated.