Medical Bankruptcy Increasingly Affects Even High Earners

Medical expenses are a known factor of bankruptcy filing and although experts may disagree on the exact percentage of bankruptcies that medical debts are responsible for, difficulties paying medical expenses were listed as the factor causing bankruptcy in 62% according to a 2009 studyLater studies have disputed this number, arguing that a more nuanced analysis of hospitalization and medical costs is needed.  While experts argue over an exact number of bankruptcy cases caused by medical expenses, Employers and employees alike are experiencing increased healthcare costs.

Bankruptcy due to medical costs used to be considered a problem of the uninsured. But data suggests insured and uninsured individuals are affected by medical debt at very similar levels.  Experts point to increased overall consumer debt, as well as lost income due to time away from work, and the steady increases in medical insurance plans.  A recent survey by Kaiser Family Foundation reported that people earning less than $25,000 and greater than $100,000 required assistance with medical bills at nearly equal rates.

Highly compensated employees are not immune to the increased expenses from rising plan costs and leaner benefit packages.  Last year, the average cost for employer-sponsored health insurance premiums increased to just over $19,000. In a hypothetical scenario, an employee earning $100,000 with a $6,000 deductible could be contributing a full 25% of their salary towards healthcare before hitting their annual out-of-pocket maximum.

Hospital admissions have a particularly heavy impact on employed and insured individuals, because the time away from work and reduced earnings are a compounding factor in the financial strain.  When added to the increased costs related to out of pocket maximums, increasing deductibles, and narrowing provider networks, the end result is that the employee can be faced with a significant expense that is greater than expected.

As employers ask employees to share an ever larger portion of medical insurance costs, it is important to consider the impact this expense has on employees of all compensation levels. Additionally, many employers are offering plans with leaner benefits in an effort to control these rising costs, which can have an impact when an employee later needs to access the insurance benefit due to an accident or illness.  While the trend over the past years has been to lean up benefits plan in response to rising health care costs, it appears employers and employees have reached a tipping point.

If you would like to speak to one of our consultants about your employer-sponsored benefit plans and how you can make them more affordable for your employees, please contact us today.