Final answer:
A self-employed person should consider a high deductible health plan in conjunction with a health savings account to prevent major illness devastation, as it combines high coverage with the advantage of saving for future health expenses in a tax-advantaged way.
Step-by-step explanation:
To prevent major illness devastation, a self-employed person might consider a high deductible health plan in conjunction with a health savings account (HDHP with HSA). This type of health plan requires the insured to pay a certain amount of medical expenses out-of-pocket, known as the deductible, before the insurance starts to pay. An HSA is a tax-advantaged savings account designed to help individuals save for future health care costs. Contributions are tax-deductible, and money can be withdrawn tax-free for qualified medical expenses. This setup encourages saving and provides a safety net for high medical costs, addressing the issue of adverse selection in insurance markets.
In contrast, a flexible spending account (FSA) without other insurance, a cancer plan with an HSA, or a hospital indemnity plan with an FSA may not provide sufficient comprehensive coverage for a self-employed individual to protect against various health-related financial risks.