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Wealth & Well-Being

Financial Planning For Illness: What to Do After a Diagnosis

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If you’ve received a diagnosis from your doctor, now is the time to process and consider what could change in the near future and long term. Once you have taken time to digest the news, spoken to your family, and worked on a game plan for moving forward, it is important to consider how this life change will impact your financial plans. 

We have identified four basic steps to help you address your financial situation in the wake of a recent medical diagnosis.

Step 1: Gather Your Team

Just as you want the right group of specialists and healthcare professionals on your side, it is important to lean on a trusted financial advisor during this difficult time. Everyday emotional biases already influence the way we view our wealth, and those emotions can reach an all-time high during periods of stress and uncertainty.

An advisor can help you navigate the financial complexities of managing a new diagnosis and the costs associated with treatment or care, as well as discuss potential updates to your estate plan, cash flow changes, and more. With an unbiased perspective and a steady, guiding hand,  an advisor can identify the areas of your financial life that need to be addressed—though you may not have the capacity to address them on your own at the moment (and that’s okay).

Step 2: Review Your Insurance Coverage Closely

Your health insurance policy will be the determining factor in how much you can expect to spend on treatment following a medical diagnosis. While you are likely familiar with your monthly premium costs, you will also need to double-check important figures such as:

  • Your annual deductible
  • Out-of-pocket maximum
  • Coinsurance and copays on prescriptions or doctor visits
  • In-network vs. out-of-network costs

Until you reach your annual deductible, you are responsible for all costs (though you will be charged the insurance’s negotiated rate by your healthcare provider). After meeting the deductible, you may still need to make copayments or partial payments (called coinsurance) on items like doctor's visits, bloodwork, and prescriptions—until you reach the out-of-pocket maximum. Once that has been met, insurance should cover 100% of the costs.

To prepare, it may help to find out what your out-of-pocket maximum is and use that as your short-term savings goal. While you may not come close to hitting it in a calendar year (remember, it resets each year), it can still be reassuring to know your medical bills will get paid without disrupting your other financial obligations, investments, or savings strategies. 

You will also need to speak to your insurance company about what may not be covered by your plan. Long-term care, for example, is commonly not covered by a normal health insurance policy.

If part of your treatment plan (like a certain prescription) is not covered by insurance, you may be able to negotiate directly with the provider. Some cancer organizations and healthcare advocacy groups may have resources to help you navigate these conversations with insurance providers, hospital networks, and drugmakers.

Step 3: Consider How Your Cash Flow May Change

Not only can a diagnosis increase your healthcare spending, but it may also impact your earning potential and cash flow.

If your company offers short-term and/or long-term disability coverage, you may already have some income protection, though these policies typically don’t replace 100% of your salary. You may need to leverage unused vacation or personal days and talk to your human resources department about their leave of absence policies.

Depending on your status as an employee and the size of the company, you may be entitled to FMLA leave, which would protect your job for up to 12 weeks, but your employer is not required to pay you during this time away from work. 

Losing your ability to work full-time would not only reduce your income, but would put you at risk of losing employee benefits as well (including your employer-sponsored health insurance). If you are married and your spouse is able to maintain employment, loss of coverage through your workplace can qualify you for a special enrollment period, during which time you can join your spouse’s plan. Or, you may need to prepare to pay more for health insurance through COBRA or the state’s marketplace.

A financial advisor can help you navigate the challenges of cash flow changes and help you determine the most effective, sustainable option for filling the income gap.

Step 4: Update Your Estate Plan

While people often associate estate plans with death, certain documents provide critical instruction for end-of-life care and medical decision-making. During a time when your family members may be stressed, overwhelmed, confused, and worried about making the wrong choice, your own instructions and wishes can serve as a guiding light.

It’s never too early to put your estate planning documents in order, but a recent diagnosis should be a good reason to review and update them as needed.

Some important documents to review now include:

  • Medical and/or financial power of attorney: This gives another individual the power to make decisions and act on your behalf, either as it pertains to your medical care or financial well-being (or both).
  • Healthcare directive: This tells others what sort of medical treatment you would like to receive in the event you are unable to communicate your wishes yourself. It includes decisions regarding end-of-life care, quality of life, location of treatment, life-sustaining treatment, and more.
  • Will: A will serves as the foundational document of your estate plan. Make sure it’s still accurate and up-to-date.
  • Designated beneficiaries: If you have life insurance, annuities, 401(k)s, IRAs, or other accounts, make sure a designated beneficiary is named—this is the individual who will inherit the assets after death. The individual or individuals named as your designated beneficiaries supersede what is written in your will, which is why updating this information regularly is critical. 

Your First Step? Give Us a Call

At Northstar Financial Planning, we specialize in helping families and individuals through some of life’s toughest transitions and situations, including managing a recent diagnosis. Together, we’ll create a financial plan that provides clarity, reduces stress, and supports your emotional and financial well-being now and for years into the future.

Schedule your Discovery Meeting today with one of our fiduciary CERTIFIED FINANCIAL PLANNER™ professionals to learn more about how we can help.


Written by Natalie Marin in collaboration with Lexicon Advisor Marketing

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