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How medical debt accrues despite insurance

We cannot know exactly what life will throw at us, but we can plan for the possibility of unexpected events by purchasing insurance. We buy home insurance to protect against theft or natural disasters. We buy car insurance in case we get in an accident. We buy health insurance to prepare for medical emergencies. We may even through a few thousand into savings to cover any gaps.

Even with all this preparation, some things are unavoidable. Medical debt is one of those unavoidable problems for many families across the nation – even the ones with insurance.

A Consumer Financial Protection Bureau report shows that when collection agencies flex their powerful muscles, 52 percent of the actions they take concern medical debt. A Commonwealth Fund report found that in 2012 there were an estimated 4 million middle-class individuals who spent more than 10 percent of their income on medical expenses.

High-deductible plans are a good way for young families to save money. The low premiums and health savings accounts allow families to get the preventative medical treatment they need without costing them an arm and a leg every month. The problem is that they provide little protection for those who are diagnosed with a major illness or suffer serious injuries in an accident.

The Affordable Care Act has set many new standards within the medical field, but the problem of medical debt persists despite stricter limits on out-of-pocket expenses and other costs. Moreover, although the limits may be lower, they still reset every year, and the totals can quickly add up.

A family from Oak Creek, Wisconsin, is a prime example of how people who make very smart financial decisions can find themselves in need of bankruptcy protection because of unexpected medical costs. We’ll share their story in a following post.

Source: Milwaukee-Wisconsin Journal Sentinel, “Some with insurance still slammed with high bills when they get sick,” Guy Boulton, Feb. 21, 2015

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