55% of the Americans Are Under Medical Debt Despite Having Health Insurance – Here’s Why

According to a recent survey, more than 25% of Americans owe $10,000 or more in medical debt. According to the survey conducted by Affordable Health Insurance, 55% of Americans are under some kind of medical debt. They conducted surveys on a sample size of 1250 Americans. The results show that 46% of indebted people were because of emergency visits to the hospital, 30% were because of Covid-19 treatment, and 23% because of other medical treatments. Collectively, medical debtors owe $1 trillion. Because of such a huge burden of debt, many are unable to fulfill their dreams, like buying a house. Here are some of the biggest reasons behind Americans slipping into medical debt.

Health Insurance Plans Are Not Sufficient to Cover the Medical Costs

According to the research, 69% of people having medical insurance are trapped in debt, 61% of people having medical policies from employers are under a huge burden of debt, and 59% of people who completely don’t have any kind of health insurance facility are also in debt. Hence, it seems health insurance isn’t much beneficial when it comes to covering the debt.

One reason behind the growing debt of Americans is deductibles. Traditional insurance policies have high deductibles, whether bought from the marketplace or provided by employers. According to the Kaiser Family Foundation survey, the average annual deductible for an employer policyholder is $1,700 to $2,500, and if the policyholder got insurance from the marketplace the average deductible amount is $4,400.

Moreover, the policyholder must have paid a certain X amount of money to get the required amount to cover the medical costs.

Difficult to Balance the Cost of Monthly Premiums with a High Deductible

Many people opt for high deductible plans because they cost less monthly premiums, and they can save some money or have some extra to spend. However, according to American Family Foundation, such holders are often unable to get basic and preventative care because of high up-front costs. As many health problems are unexpected and exacerbated by negligence of preventive care, high deductibles with low cost of monthly premiums, policyholders quickly fall into debt traps as they also have to pay full heavy annual deductibles.

Following US census bureau data; Americans spend an average amount of $12,530, which is about 20% of an average household monthly income, on medical expenses including both, high deductibles and premiums.

Advice to Reduce Health Insurance Costs

It is advised that a person should analyze his medical needs and compare them with the benefits provided in a particular plan before choosing any insurance plan. As apparently, high deductibles and low monthly premiums seem beneficial to bear a lower monthly cost, but regular doctor visits and prescription drug expenses are not included in deductible costs. Hence, it is not suitable for a person who needs frequent doctor visits and regular medicines.

People whose average monthly income is 100% to 400% above the federal poverty level should shop for insurance policies around ACA markets, as there are many government-provided subsidies available that can drastically reduce monthly premium costs with a low deductible, even for the gold plan.

Also, a person who feels that he is medically fit should try to qualify for a medically underwritten health insurance policy, as it might also help to reduce monthly premiums. However, these policies are usually confined to 36 month periods and generally cover dental and optical issues.

It is highly recommended that a person should create a list of cheap, local nearby health care providers which can easily be accessed when needed. Otherwise, at the time of need, he would end up visiting some expensive, out-of-network health care provider. If there is no emergency, the person should begin with a telemedicine appointment, then a doctor visit, then go to the urgent care facility-emergency room as the last option.

The policyholders should be well informed about their rights according to the state he is living in.

Some Good News

In 2022, new legislation was approved in favor to protect insurance policyholders from hefty bills by out-of-network providers. According to newly endorsed legislation, policyholders no longer have to worry about high emergency room charges as out-of-network health care providers are not allowed to bill premium charges to policyholders. However, it needs to be properly analyzed because there are some exceptions as to when and where their protections apply; for example, ambulance services are not included as a part of the legislation.