Most of us take good health for granted — until a serious injury or illness strikes us or a family member. The resulting medical bills, possibly coupled with lost or reduced income, can devastate a family financially.
It’s widely assumed that people who are driven into financial turmoil by a medical crisis are poor and/or have no health insurance. In fact, according to a recent study published in the American Journal of Public Health, most people who file for bankruptcy amid insurmountable medical bills have health insurance and are middle class. Numerous studies have concluded that health issues are the leading cause of bankruptcy.
One professor who’s studied the issue says, “For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, co-payments and deductibles that illness can put you in the poorhouse. And even the best job-based health insurance often vanishes when prolonged illness causes job loss — just when families need it most.”
Even if no one in your family suffers a health crisis or serious injury, the cost of health care can be a significant part of your budget. According to one index, last year, an American family of four with insurance coverage through an employer-sponsored plan paid an average of more than $28,000 for health care. That cost is only going up.
Financial professionals recommend that people study their health insurance policies so they know what is and isn’t covered. This can help you be better prepared to pay for out-of-pocket expenses.
One expert recommends finding out what your out-of-pocket maximum is and having at least that amount in savings. She says, “That maximum out of pocket is your worst case scenario. After that the insurance company should pick up 100%.” Another says that people “should…aim to have about six months’ living expenses in savings.”
Of course, many families struggle every month just to pay the bills in front of them. Saving up this kind of money can seem like an impossible goal. As the above-referenced professor notes, “Unless you’re Bill Gates, you’re just one serious illness away from bankruptcy.”
If struggling to pay your medical bills has made it difficult to keep up with your living expenses and placed your financial future at risk, it may be wise to consider bankruptcy. An experienced attorney can review your situation with you and provide recommendations and guidance.