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Healthcare and Personal Bankruptcy

Numerous polling services blame more than 60% of personal bankruptcy filings on healthcare costs. This is a staggering number. According to Nerdwallet Health, a division of the price comparison website, 1.7 million people would file for personal bankruptcy in 2013 due to health care costs.

Let’s accept these numbers as  correct and understand what this means. At that rate, over a 30-year period, 20% of adults between the ages of 20 and 65, would file bankruptcy due to medical bills. That is one in five adults. Worse yet, this problem isn’t limited to those that we have historically known as the uninsured. Nerdwallet further estimates that 10 million people with year-round health insurance struggle with medical bills they cannot pay off within the year.

Did Mandatory Healthcare Solve the Bankruptcy Problem?

In theory, mandatory health insurance should solve this personal bankruptcy problem. In practice, it’s not yet clear that’s the case. The reports are widespread that how health insurance works under the new laws may not alleviate the bankruptcy problem. Examples include:

  • The cost of basic coverage has increased: While this varies from person to person, with some regularity the cost of basic coverage for individuals not receiving subsidies has increased.
  • Mounting out-of-network costs: Services that used to be routine and covered by health insurance now having surprising new exclusions. Items falling into this category include lab work, MRI, x-Rays, etc.
  • A changing set of rules: The stories of overnight hospital stays billed as “outpatient” and consequently not being billable to insurance are now routine. Again the result is a transfer of cost from the insurer to the “insured.”
  • Deductibles have increased: Many services that used to be covered, even before the deductible amount had been paid, no longer are. Additionally, deductibles under Obamacare plans are much larger than historic deductibles, shifting the burden of paying for a large percentage of healthcare to the patient.

What’s the Near-Term Solution?

Consumers need information on which insurance companies are delaying and denying claims, and why. A level of transparency about the effectiveness and the quality of insurance is sorely needed. Providing consumers with a quality metric on the insurance products they purchase will drive competition in the insurance market. Competition will benefit both consumers and suppliers.

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