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New Study: High Medical Bills Leave Millions of Americans Bankrupt

A recent Harvard study found that about half of all Americans filing for bankruptcy do so because of the high medical expenses associated with...
May 27, 2005

By Joan O'Sullivan
Managing Director, Marsh Affinity Group Services
PIA Services Insurance Program Administrator

A recent Harvard study found that about half of all Americans filing for bankruptcy do so because of the high medical expenses associated with a catastrophic illness or injury.

This finding might not be so surprising if the researchers had focused only on those who never had any health insurance to begin with.

But over 75% of study participants who ended up bankrupt due to medical costs were "typical, middle-class Americans" who had health insurance coverage, usually through an employer.  In some cases, their insurance only covered part of their costs, leaving them with high medical bills they simply couldn't afford to pay themselves.

You can't control the level of health insurance coverage your employer might provide for you.  But you can take some important steps now to help ensure a catastrophic illness or injury doesn't devastate you financially.

STEP #1: Know Exactly What Your Current Health Insurance Covers

No health insurance plan covers everything.  Unfortunately, many Americans don't know exactly what their health insurance will or will not pay for - until they find out the hard way when faced with a costly illness or injury.

Does your policy have an annual out-of-pocket maximum? If so, what is it? And are you financially prepared to cover it yourself?

Do you need to stay within a particular network of providers? How much of the cost do you have to shoulder if you need to go outside that network for particular treatments or specialty hospital care?

Does your policy have a lifetime maximum? Though a lifetime maximum of $1,000,000 sounds like a high amount, rising health care costs may put you over that lifetime limit after just one catastrophic illness.

For example, one in two men and one in three women will develop cancer in their lifetimes, according to the American Cancer Society.

Cancer survival rates are climbing - but so are treatment costs, which can run about $100,000 a year.

Most basic health plans do cover surgeries and most kinds of cancer treatments. But many won't fully cover home health care, private nursing services, convalescent care and/or prescriptions needed to manage or recover from an illness over the long term.

Further, many patients assume that if a qualified physician recommends a particular treatment, health insurance will automatically pay for it.  This isn't always the case.

Different health insurance plans have varying definitions of what they consider "experimental" treatment, regardless of whether a qualified physician recommends it.  It's wise to consider all your treatment options and the level of coverage your health insurance will provide when making healthcare choices.

STEP #2: Start an Emergency Savings Account

Financial experts recommend you have three to six months of income saved in an easily accessible cash account in case an emergency strikes.

Emergency cash savings can help you pay your share of high medical bills or extra household expenses.  It can also keep you from using high-interest credit or raiding your home equity or retirement savings to pay high medical costs.

If you have nothing in emergency savings now and not much wiggle room in your budget, consider cutting a small weekly expense (like lunches out or your morning latte). Start your emergency account by saving $25 or even $10 a week until you have at least three months of income reserved.

STEP #3: Consider Extra Coverage

Finally, consider complementing your basic health insurance coverage with an affordable catastrophic major medical plan that's designed to take over where your basic plan stops.

For example, the PIA Services' Catastrophe Major Medical Plan provides up to an additional $2,000,000 of coverage, each five year benefit period, beyond a basic medical plan after you meet the deductible.

The medical expenses paid by your basic health plan (as well as those expenses you pay yourself) count toward meeting the deductible.  Your deductible is the greater of all benefits paid by your basic plan(s) - as defined by the group policy - or $25,000. Your deductible can be satisfied within any consecutive 36-month period. When your deductible is satisfied, the plan pays up to 100% of all reasonable and customary covered charges for the duration of the 5-year benefit period. When the benefit period ends, a new deductible is required. This plan pays eligible expenses up to $2,000,000 each benefit period.

Because the plan is available through the National Association of Professional Insurance Agents, members can enjoy economical group rates.

For a free information kit (including group rates and complete details of coverage) on the PIA Services' Catastrophe Major Medical Plan, just call toll-free 1-800-503-9230 or visit the PIA Main Street Store.

This plan is subject to the terms, conditions, exclusions and limitations of the group policy.  Coverage may vary or may not be available in all states.

American Cancer Society.  Cancer Statistics, 2004.

"New breed of drugs offers hope in cancer war." MSNBC Online.  Available:

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