In the United States, almost 40 million people are hospitalized every year, according to the Health Cost Utilization Project. The number of uninsured hospital stays has grown by 42% between 1997 and 2009, the last year for which statistics are available.

If you get sick and require medical care, either in or out of the hospital, you may run into several consequences, even if you have a gold-plated healthcare plan. Here are four situations you should expect and plan for in case you develop an illness. (For related reading, see Fighting The High Costs Of Healthcare.)

1. Health Insurance Coverage

The impact of an illness on your health insurance coverage depends on both the illness and the provider. Your coverage may or may not extend to the illness you have and your coverage may be capped or limited, leaving you exposed to paying out of your pocket. The real challenge comes if you are diagnosed with a chronic illness, such as diabetes or asthma. Health insurance companies can change the terms of their policies on an annual basis and you may find that they will no longer cover you for your existing illness.

If you don't currently have health insurance, you may have difficulties being accepted for a policy at all. If you do get one, your rates are likely to be significantly higher than average. Proposed legislation will preclude insurance companies from dropping coverage in the event of illness, but it is still a very real threat currently.

2. Co-Pays and Deductibles

The vast majority of health insurance policies include required co-pays and deductibles that can eat into your savings. Co-pays represent the portion of medical costs that you must pay in order for the insurance company to pay the rest. For example, your policy may have a co-pay of 20%, meaning that you have to pay $200 of a $1,000 medical bill and the insurance company will pay the remaining $800. Deductibles are the amounts you have to pay before any of the insurance kicks in.

For example, a policy may state that you have to incur (and pay for) $3,000 of medical costs before the co-pay split kicks in. You can plan ahead of time for the deductible, as it is a known dollar amount. The co-pay can be unlimited so, if you have a serious illness or have been in an accident, you could be out of pocket thousands or tens of thousands of dollars. (To learn more, check out Buying Private Health Insurance.)

3. Tiered Levels of Care

Each health insurance policy has its own rules about what procedures it will and will not pay for. As medical knowledge expands and new treatments become available, often health insurance lags behind. If you become ill, you may be faced with the decision of accepting an older (and perhaps less effective) treatment that your insurance company has approved, or paying out of pocket for a newer solution. If you are diagnosed with a progressive disease like cancer, where immediate treatment can improve the prognosis, you may be pressured to make a difficult monetary decision about your health.

4. Dropped Life Insurance Coverage

Even after you recover from an illness, you may still encounter insurance troubles. Some illnesses are considered by life insurance companies to be markers for further illness and the chance of death. For example, a seizure could indicate further seizures or epileptic events in the future, which puts you at higher risk for death.

Life insurance companies guarantee coverage for a set period of time, however, they have no requirements to renew your coverage. You may find yourself unable to secure new life insurance, thereby putting your financial and estate planning at risk. (For additional reading, see 5 Life Insurance Questions You Should Ask.)

The Bottom Line
Becoming ill could be one of the most financially impactful events in your life. Take some time to review your health and life coverage while you are still healthy to ensure that you understand the potential financial consequences of sickness. In particular, make certain that you have access to available funds to cover deductibles. Work with a financial planner or CPA to ensure that you have the coverage you need. (To help you determine if you have enough coverage, read How Much Life Insurance Should You Carry?)

Related Articles
  1. Insurance

    What Does It Cost To Raise a Child in America?

    Having a family can be an expensive proposition, but couples who know the numbers can strategize to lower the costs.
  2. Insurance

    Explaining Co-Pays

    A co-pay is a set dollar amount an insured patient pays when visiting a doctor, filling a prescription, having tests performed or receiving other medical treatment.
  3. Investing Basics

    Understanding Brokerage Fees

    Agents charge brokerage fees for facilitating transactions between buyers and sellers.
  4. Markets

    The 5 Biggest Chinese Insurance Companies

    Read about the top Chinese insurance companies by market capitalization, and learn a little about their positions in the marketplace.
  5. Insurance

    5 Ways to Lower Life Insurance Premiums

    Learn several effective methods for lowering life insurance premiums. These include quitting smoking and considering term life insurance.
  6. Insurance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  7. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  8. Insurance

    Who is a Beneficiary?

    A beneficiary is a person or entity that receives funds, assets, property or other benefits from a trust, will, or life insurance policy.
  9. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
  10. Retirement

    Strategies for a Worry-Free Retirement

    Worried about retirement? Here are several strategies to greatly reduce the chance your nest egg will end up depleted.
  1. Net Collections

    A term used in medical accounting to describe the amount of money ...
  2. Corridor Deductible

    Expenses that are paid by the insured in excess of an insurance ...
  3. Insurance Consortium

    A group of businesses or organizations that join together to ...
  4. Mobile Health

    Mobile health is the practice of medicine using new mobile technologies.
  5. Automatic Premium Loan

    An insurance policy provision that allows the insurer to deduct ...
  6. Blanket Medical Expense

    An insurance policy which provides coverage for all medical expenses ...
  1. What happens if my insurance claim falls below the deductible level?

    Though the ins and outs of health insurance are often confusing, the concept of the insurance deductible is relatively straightforward. ... Read Full Answer >>
  2. How is the deductible I paid for my insurance claim treated for tax purposes?

    The deductible you pay on your health insurance policy may be tax-deductible if you meet certain conditions. However, whether ... Read Full Answer >>
  3. What are the main factors that impact share prices in the insurance sector?

    The main factors that impact share prices in the insurance sector are interest rates, earnings and actuarial risk. In the ... Read Full Answer >>
  4. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>
  5. Which emerging markets are seeing the strongest growth in the insurance sector?

    The emerging market economies seeing the strongest growth for the insurance sector are primarily the main emerging market ... Read Full Answer >>
  6. What is the range of deductibles offered with various health insurance plans?

    A wide range of possible deductibles are available with health insurance plans, starting as low as a few hundred dollars ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!