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How health insurance sets people up for personal bankruptcy

On Behalf of | Feb 9, 2022 | Bankruptcy

If you read the statistics about the number of people who filed for bankruptcy because of medical debt, you might assume that most of those people didn’t have health insurance. Being uninsured when you get diagnosed with cancer or suffered severe injuries in a freak accident could leave you with tens of thousands of dollars in medical debt.

Hospitals can become quite aggressive when trying to collect on those debts, going so far as to turn accounts over to third-party collection agencies or seek liens against people’s property. All of those risks are a real concern for those without health insurance. However, plenty of the people who end up filing for bankruptcy due to medical debt had health insurance that simply didn’t cover enough.

How health insurance leaves people with big bills

Most modern health insurance plans won’t cover all of your costs. With the exception of needs-based insurance like Medicaid, there are often coverage limits and patient cost-sharing obligations. Insurance companies try to pass on as much of the cost for care as they can to individual policyholders.

You may have a deductible that is thousands of dollars. Until you pay all of that out of pocket, the insurance company won’t pay anything. On top of that, you may have coinsurance. People the coinsurance on their policy may have to pay 10% or even more of their total medical costs. There may also be co-pays for each appointment that you attend, which can add up quite quickly when you need frequent care.

You may find that you have tens of thousands of dollars in expenses spread over several years if you have lasting injuries or a serious medical issue like cancer.

Medical debt collection can affect your health

If you have spent months struggling to regain full motor function after an incomplete spinal cord injury or more than a year battling cancer, you should be able to appreciate your hard-won good health.

Unfortunately, aggressive collection activity can affect your mental health and eventually your physical health through stress. Hospitals and other health care providers won’t necessarily care about the damage they cause their former patients when they try to collect the remaining balances on someone’s medical bills.

Health issues remain one of the leading causes of financial hardship in the United States. Filing personal bankruptcy can be a way to take control over your finances and finally put your recent health struggles and the bills they caused behind you.