Will Parents Be Responsible if Adult Daughter Incurs Medical Costs in Excess of Insurance Coverage?

Jonathan, our adult daughter has developed terrible spending and debt habits. We have bailed her out many times financially and have managed to avoid cosigning loans etc in attempts to separate her consumer debt from our household. However, she remains on our health insurance plan and due to lifestyle choices, has multiple health problems and physician visits at least twice a month. 

What risks our we taking to continue to carry her on our plan? Would we be responsible for debt incurred if she was to have a hospitalization or worsening of the health problems? She is working but would have to pay if changing to their insurance plan.

Jonathan Ginsberg responds:  My initial reaction to your question is that you would not have any financial responsibility for medical expenses that exceed the limits of your insurance coverage.  That is how insurance works – you pay a certain premium for certain coverage.  If you exceed the coverage, then you become responsible for costs beyond the policy limits.

I would note, however, that if a covered person under your policy approaches or exceeds policy limits, you could find yourself with a hefty hike in your premium.  Insurance companies are in business to make money.  Your situation is no different from a car insurance company raising the premium or canceling the policy after several accidents.

You should speak with your agent about whether you and your husband are at risk for policy cancelation or premium hikes because of your daughter’s use of the policy benefits.  Your agent can probably also give you advice about whether to separate yourselves from your adult daughter with regard to your health insurance plan.

You are wise not to co-sign any loans or take responsibility for your adult daughter’s debts.  Nothing good would come of that.  You also need to make sure that her doctor and/or hospital she visits does not show you and your husband as payment guarantors.   Sometimes when someone is admitted to a hospital or starts new treatment with a doctor, they are given forms to fill out.  You need to make sure that you never signed any form – recently or years ago – that put you on the hook for unpaid bills.  If you did sign such an authorization or think you might have, you will need to revoke said authorization.   This type of contract issue is beyond the scope of my practice – I would defer to my estate planning colleagues from the Georgia ElderCare Network for advice about how to revoke an authorization to guarantee payments.

[tags] health insurance and medical costs, medical costs and bankruptcy [/tags]