Financial Issues in Terminal Illness

The Consolidated Omnibus Budget Reconciliation Act (or COBRA is a federal law that provides employees and their families the right to choose continuing group health benefits provided by a group health plan for a limited time after losing health benefits from their employer. It may be offered in circumstances such as the loss of a job, reduction in work hours, a transition between jobs, or major life events such as death and divorce. Group health plans must provide coverage under COBRA if they are maintained by state or local governments, or if they are maintained by private-sector employers with at least 20 employees. Most COBRA coverage lasts from 18 to 36 months, although this varies based on the qualifying event.

Although COBRA helps individuals maintain coverage, it can be financially unaffordable for many families because it requires payment of the full premium of up to 102% of the plan’s cost. It is typically more expensive than the cost of coverage for active employees since employers tend to pay for a large portion of employees’ coverage. Most individuals will usually receive a notification informing them that COBRA coverage will be available to them. In most instances, individuals who are eligible for COBRA have 60 days to select coverage after they are notified. If they are not eligible for COBRA, contacting the state insurance commissioner’s office may provide more insight into alternative coverage options which are available, such as mini-COBRA laws or other laws that are similar to the general provisions of COBRA.

Sources

“Continuation of Health Coverage (COBRA)”. U.S. Department of Labor. https://www.dol.gov/general/topic/health-plans/cobra 

“FAQs on COBRA Continuation Health Coverage for Work”. U.S. Department of Labor. https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-coverage.pdf

Different forms of financial assistance are available for patients with terminal illnesses and their families. These resources are often helpful in offsetting some of the costs associated with end-of-life care. There are many charitable patient assistance programs, some of which help patients with specific conditions and others that assist based on specific needs. Assistance can include transportation costs, housing costs, food costs, phone and internet access and more. 

Organizations such as the Patient Advocate Foundation or FundFinder can help match patients and their families to potential financial assistance opportunities. Some nonprofit programs assist with copayments for medication and related deductibles. Additionally, government programs such as Medicaid and Medicare can cover costs for medical equipment, hospice, palliative care, and other associated expenses. Disease-specific foundations also tend to provide grants and similar funding to support patients and their families. 

It is important to understand that seeking financial assistance for medical care or related needs should not be a source of shame or embarrassment. Instead, it should be viewed as taking a proactive step to maintain continuity of care and comfort during the final stages of life. Although paying for care for a terminal illness can pose a significant financial challenge, patients and their families can find assurance in knowing that there are numerous organizations and programs that are willing to help. 

Sources

“Financial Assistance Programs”. American Lung Association. https://www.lung.org/help-support/financial-assistance-programs 

“Programs and Resources to Help with Cancer-related Expenses”. American Cancer Society. https://www.cancer.org/cancer/financial-insurance-matters/managing-health-insurance/programs-and-resources-to-help-with-cancer-related-expenses.html

 A life insurance terminal illness benefit or accelerated death benefit can help financially support you and your family when someone has been diagnosed with a terminal illness. This benefit allows you to access all or a portion of the policy’s cash value prior to death, which could ease stressful burdens associated with costs for end-of-life care. This supplemental benefit may also be called “living benefits” or “terminal illness rider.” It is important to note that these types of benefits are not included in every policy; you may need to select it as an additional option and/or pay an extra fee.

If you already have life insurance, contact your agent or company to find out if your current policy has this type of benefit. If not, inquire whether it can be added now, if needed, or later if you are planning for unforeseen circumstances. There is never an obligation to make any claim while the covered person is still alive, but it may bring comfort to know that this option is available.

If you or a loved one has recently been diagnosed with a terminal illness and do not already own a life insurance policy, you may still be able to obtain one. A guaranteed life insurance policy is considered an alternative plan for those with significant health issues, including terminal illness. These types of policies provide smaller death benefits that help families pay for funeral or burial expenses. They do not, however, include the terminal illness benefit or cash value. It will be more expensive to secure this type of policy, but worth a call to companies if you think it may still be beneficial.

How terminal illness benefits work

• You must first qualify to receive benefits based on a confirmed medical prognosis of less than 6 months to live and the specific policy coverage
• If qualified, the benefit allows access to either a portion or all of the policy’s cash value in advance of your death based upon what your policy grants
• Depending upon how much of the total sum is paid to you up front, a lesser amount or none at all will be dispersed of the policy after death
• Benefits paid out to a terminally ill person are not taxed as income
• If it is a joint insurance policy, this type of benefit coverage is generally paid only once, but it can be utilized by either of the insured, as warranted.
• If the policy is due to expire before the person is expected to die, the company could refuse any claim for terminal illness benefits made within the final months of the policy’s active term. The family would then receive full sum of the policy upon their death.

We recommend that you call your insurance company to verify how your particular coverage applies to these benefits. 

Without a terminal illness benefit, you may be able to borrow against your life insurance policy. You can only do so if you have a whole life or universal life insurance type of policy, as these policies gain cash value. Term life insurance policies do not qualify. Any amount borrowed will reduce the overall death benefit. The loan will also accrue interest over time. Contact your agent or insurance company to initiate an application if you have had the policy long enough to amass a cash value to borrow against. You may also wish to review some key factors involved in borrowing against a policy before taking out the loan. 

Sources
“What Is an Accelerated Death Benefit in Life Insurance?” Investopedia. https://www.investopedia.com/terms/a/accelerated_death_benefit.asp 

“Guaranteed Issue Life Insurance: Pros and Cons”. Forbes Advisor. https://www.forbes.com/advisor/life-insurance/guaranteed-life-insurance/. 

“Meaning, Types & Benefits” Forbes Advisor. https://www.forbes.com/advisor/in/life-insurance/whole-life-insurance/ 

“What Is Universal Life Insurance?” Forbes Advisor. https://www.forbes.com/advisor/life-insurance/universal-life-insurance/

“What Is Term Life Insurance?” Forbes Advisor. https://www.forbes.com/advisor/life-insurance/choosing-the-right-term-life-insurance/

“How Can I Borrow Money From My Life Insurance Policy?” Forbes Advisor. https://www.forbes.com/advisor/life-insurance/dangers-of-policy-loans/

The cost of a second opinion varies significantly. If you are on Medicare and your doctor refers you for a second opinion, the visit will likely be covered under Medicare Part B; you will only have to pay a portion of the bill — usually 20%. The same holds true for any additional tests or procedures the second physician believes are necessary to confirm a diagnosis. Medicare will pay for these according to its established fee schedule, and you will only be responsible for whatever cost-sharing Medicare requires. Remember, however, that any doctors, hospitals and providers (for example, labs and pharmacies) you use must accept Medicare or you will have to assume 100% of that portion of the cost. 

Private health insurers will also pay for a second opinion in many situations, as will most Medicare Advantage Plans. However, you will most likely need to go to an in-network provider or assume a much larger share of the cost. With that being said, private insurers (which includes Medicare Advantage plans) may have limitations on when a second opinion is allowed, so always check with your health plan before scheduling an appointment, or you could wind up paying for the entire evaluation yourself. 

Another option for getting a second opinion is to schedule a consultation online. Many of the top medical centers in the U.S. offer this option, although you will typically need to pay for the consultation up front. (You may also use funds from a Health Savings Account or Flexible Savings Account.) Cleveland Clinic, for example, offers virtual second opinions for a wide array of conditions, including cancer, heart disease and COPD. The cost is $1,850 as of July 2024 and includes an intake meeting with a nurse case manager and a review of all X-rays and medical tests by a multidisciplinary team. You will also meet with a specialist virtually and receive a written report of their findings. 

Stanford Medicine in Palo Alto, California, offers a similar service for patients with cancer, heart disease and a number of other life-limiting illnesses. The cost as of this writing is $700 and includes collecting all relevant tests and reports, a review of your case by a qualified specialist and a written report. There are also a number of private, physician-run companies currently offering second opinions online. One of these, 2nd MD, provides a nurse case manager, a team member who obtains all of your medical records and a consultation with a specialist who is knowledgeable about your disease. They will also refer you to a local physician who accepts your insurance for follow-up if need be. According to company spokesperson Shelby Guerra, CMA, 2nd MD contracts with a number of employer-sponsored insurance plans. For patients who aren’t covered by insurance, the out-of-pocket cost for the service is $4,000. 

Sources

“Virtual Second Opinions”. Cleveland Clinic. https://my.clevelandclinic.org/online-services/virtual-second-opinions 

“Stanford Medicine Online Second Opinion Program”. Stanford Medicine. https://stanfordhealthcare.org/second-opinion/overview.html 
“Virtual second opinions with 2nd.MD”. 2nd MD. https://www.2nd.md/