How Do People With Good Health Insurance Still Go Into Medical Debt?

Categories: Insurance
How Do People With Good Health Insurance Still Go Into Medical Debt?

Jay Stillman

8 min read

In a Gallup survey published at the end of 2019, 25% of Americans said they or a close family member put off medical treatment for a serious medical condition because of cost. An additional 8% said that they or a family member decided against therapy for a minor health issue because of expense. 

The American Cancer Society came up with another surprising figure using data from the 2015-2017 National Health Interview Survey. They published a report in the Journal of General Internal Medicine showing that more than 100 million Americans experience financial difficulties due to medical expenses

Both these surveys took place after the Affordable Care Act (ACA) made health insurance more accessible to Americans. They also show that medical financial hardship can even affect people who thought that they had a good health insurance policy. 

What Is “Good” Health Insurance?

The quality of any health insurance policy is subjective and depends on the medical needs of each policyholder. A “good” policy for someone healthy might be a “bad” policy for someone else with a chronic condition. 

Why doesn’t the same policy work for everyone? The deductible, coinsurance payments, healthcare network, and monthly premiums for health insurance policies vary depending on the type of coverage that you need. 

“Good” Health Insurance for Healthy People

For example, a healthy individual who needs limited healthcare can pay lower monthly premiums. The tradeoff for these savings is that their policy usually has a higher deductible, and, often, they have to cover a more substantial portion of payments (coinsurance) after they reach that deductible. 

However, if you are healthy overall, you will likely only have minor healthcare expenses, so such an insurance plan will be cheaper overall. 

“Good” Health Insurance for Those with Illnesses or Chronic Conditions

For someone with a disease or a chronic condition that requires regular treatment, the same low-premium, high-deductible insurance policy will lead to financial hardship. Because a policyholder with a chronic condition or disease needs ongoing healthcare services, they will have to pay all of their deductible amount every year. Even when they reach the deductible, they will have to make coinsurance payments. 

For someone with preexisting conditions that require regular medical care, a “good” health insurance policy might require higher monthly premiums, but a lower deductible and inexpensive coinsurance payments. 

A “good” policy for someone with significant healthcare needs would also offer access to a more extensive network of providers so that they have access to all the services they need. 

In general, the healthier an individual or family is, the lower the chance they will need extensive medical care. Having a policy with low monthly premiums might mean you have to pay for most or all of your healthcare out-of-pocket. However, because healthy people usually only need minimal medical service, the overall expense would be lower than if they had to pay higher monthly premiums. 

How Health Insurance Fails as a Safety Net

Ideally, health insurance acts as a safety net to keep you from experiencing medical financial hardships. However, out-of-pocket payments, hidden costs, unclear pricing, and other factors can make healthcare expensive, even if you have what you thought was a “good” insurance plan. 

You can expect some out-of-pocket costs when it comes to health insurance. These costs include payments under your deductible, copays, coinsurance, and fees that cover additional services not included in your insurance policy. 

Out-of-Pocket Costs Can Cause Financial Hardship

You have to pay all out-of-pocket costs on your own. These payments alone could cause financial hardship in some instances. For example, perhaps you are a healthy individual or family with a high-deductible health insurance plan. You only go to the doctor for a checkup or annual flu shot, and you pay for these visits out-of-pocket because you have a high deductible. 

If you have an unexpected accident, you will suddenly have to make more out-of-pocket payments. If you have a very high deductible, these payments may become unaffordable. 

The problem could be worse if you have an injury that requires you to see a specialist who is outside of your insurance provider’s network. 

Even if you have a low deductible plan, you would have to pay the entire cost if you visit an out-of-network provider. If this happens, you will realize that your health insurance plan is not the safety net that you thought it was. 

Do you always have to pay for out-of-pocket costs? In some cases, you may not have to. If someone else is liable for an accident or event that caused your injuries, they may have to cover your out-of-pocket expenses. For example, if a drunk driver causes an accident that injures you, you can obtain legal representation and try to get the driver or their insurance provider to pay for your medical costs. 

Hidden Costs

All the services that you get from healthcare providers may not get covered by your insurance policy. For complete coverage, every service needs to be performed by an in-network provider. In some cases, you may get surprised by hidden costs from an out-of-network provider. 

For example, you may get a blood test at your regular in-network clinic. However, the sample might get sent to an out-of-network lab for analysis. You could potentially have to pay for the lab assessment because the lab is not in-network. 

A more expensive example could involve getting a diagnosis from your regular physician, but then having a procedure performed by an out-of-network surgeon. You could be liable for the entire cost of the surgery.  

If you have not yet reached your deductible, you are liable for all lab costs, medical testing, and other procedures. These charges would be in addition to the expected cost of the office visit. Your provider may or may not make you aware of these extra costs when ordering the test, scan, or procedure. In some cases, you may not know about these charges until you get your bill. 

If your policy has a 20% coinsurance payment, you could have to make large payments as well. If you have $10,000 in tests after an accident, for example, you would be responsible for $2,000, even if you already met your deductible for the year. Depending on your income, this amount could be unaffordable. 

Most insurance policies have an out-of-pocket maximum. Once the sum or your deductible, copayments, and coinsurance costs reach the annual maximum, the insurance company covers 100% of payments for medical services. Even if you reach this maximum, the insurance company does not have to pay out-of-network costs, so you could still get stuck with a significant medical bill.  

Opaque Pricing

Pricing for healthcare can vary. Front desk staff at a hospital or clinic can give you the price for an office visit and various standard services, such as a flu shot or complete blood count. However, they cannot provide you the entire cost for an appointment because your physician could order additional tests, immunizations, or services.  These will come at an additional cost. 

A physician will not usually know the details of your insurance policy when they order tests. Their primary goal is to provide medical services and make a diagnosis. 

Front desk staff will collect copayments when you come into the hospital or clinic. However, other costs will come in the form of a bill after your insurance company processes the payment and totals the price of all the services that you received during your visit. 

Because of this, it is almost impossible to know the exact price of your visit beforehand. 

Medical Bills In Relation To Income and Savings

One of the main reasons that people fall into debt because of medical payments is that the costs can be very high compared to their income, savings, and assets. Health insurance providers do not take income into account when selling policies to customers. 

If you suffer from a significant illness or an injury, you may not be able to work, which will reduce your income, making it even more challenging to deal with healthcare-related debt. 

In some cases, an unexpected event such as an accident or injury may lead to an increase in medical bills. If you have a lower income, the cost-sharing for covered services may be enough to cause financial hardship. 

If you are in an auto accident, you may end up being unable to work because of your injuries, and you will not be able to earn any income. Even the best health insurance policy will not cover lost wages. If you were not at fault in the accident, you may have to resort to litigation to get reimbursement for lost wages or other non-medical expenses related to your accident. 

Coinsurance Can Also Cause Issues

Coinsurance payments can be enough to cause problems, especially if the medical bills are high compared to the patient’s income. This problem could even arise if you have a “good” insurance policy with cost-sharing measures. 

For example, perhaps you have a plan that has a low deductible and only requires you to pay 10% for coinsurance. If you receive a disease diagnosis or have an accident and your medical bills cost $100,000 for in-network care, you would still be responsible for $10,000. Even if you have a moderate income and savings, $10,000 may be an unaffordable amount. 

The American Culture of Avoiding Doctors and Hospitals

The Gallup Poll that found that 25% of Americans put off treatment for a severe medical condition because of financial concerns is one illustration of the culture of avoiding hospitals and doctors in America. 

In the same release that announced the 2019 findings, Gallup also stated that they had tracked similar data since the early 2000s. When taking that information into account, 50% of all Americans said that they or a close family member decided to forego medical treatment for financial reasons. Avoiding the doctor to avoid medical bills has been prevalent in America for at least the past two decades. 

While health insurance can certainly be useful in helping you pay for medical costs, it may not be the safety net that you expect. A health insurance policy that fits your needs can provide for expected healthcare services. If you require unexpected treatment as the result of an incident such as an auto accident, you may need to rely on the services of a personal injury lawyer. An attorney can help you obtain money to pay for out-of-pocket expenses from an auto insurance company or the person at fault for your accident.