When was the last time you received a bill from the hospital and knew ahead of time exactly how much your out-of-pocket cost would be? Or thought that your health insurance alone would cover all of your costs? Chances are you were in for a big surprise when that bill came–but you are not alone.
Like most Americans who have health insurance, it’s likely that you are one of the 64 million enrolled in what’s known as a High Deductible Health Plan (HDHP). An HDHP is a health insurance plan with lower monthly premiums but higher out-of-pocket deductibles than a traditional health plan. In other words although your monthly policy cost may be relatively low be prepared to pay a significant out-of-pocket cost for emergencies such as a personal injury, heart attack, stroke or cancer.
Unfortunately medical debt is the number one cause of bankruptcy in the U.S and represents 50 percent of all debt in the United States. At Emerge we’re on a mission to reduce medical debt but first let’s dig into why illnesses and injuries can be so expensive even if you already have health insurance.
The Real Cost of a High Deductible Health Plan
According the the Affordable Care Act (ACA) also known as ObamaCare, an HDHP is a health insurance policy that requires you to pay an annual deductible of at least $1,300 for an individual and $2,600 for a family before your plan covers any out-of-pocket medical expense. In other words this is the minimum that you need to pay each year before your health insurance policy kicks-in to cover any medical costs.
“Collections of medical debt now represent 50% of all debt in the United States.”
-Insurance News Net
The maximum out-of-pocket expense according to the ObamaCare is $6,550 for an individual and $13,100 for a family. This means that once you pay for medical expenses up to this amount your insurance will kick-in to cover anything beyond that.
Sounds like a good deal right? Well not exactly. What most Americans don’t realize is that medical expenses are just the tip of the iceberg when it comes to the real cost of medical emergencies.
Let’s take a look at some real-world scenarios to see how your HDHP holds-up if an emergency ever occurred. The following table shows what your actual out-of-pocket cost would be even if you already have a health insurance policy. Here are the most common medical emergencies that health insurance will typically not fully cover:
Depending on the state of your health and financial situation the above table could be manageable. However, if you’re like most Americans, including those with a HDHP and have no “rainy day” savings fund or Health Savings Account, just one of any of the scenarios above could potentially land you into serious medical debt. In fact, medical debt is the leading cause of bankruptcy in America today.
How To Uncover the Gap In Your Health Insurance
While it’s good to know that your primary health insurance covers you up to an OOP maximum of $6,850 the bad news is that this is only for your medical expenses. Unfortunately there are several other expenses associated with a medical emergency such as an accident or critical illness.
Let’s take another look at the table above and see how much you could have saved with another option—a little known but rapidly growing solution to mitigating medical debt: emergency insurance. Also known as supplemental health insurance, this is a kind of insurance whose purpose is to cover you for these unexpected medical costs.
How To Understand the Real Cost of A Critical Illness
Let’s take a moment to understand the terms that you have probably heard before but perhaps never really knew exactly what they meant (until you saw your bill!).
The Out-of-Pocket Medical Expenses
Out-of-pocket (OOP) costs are the expenses for medical care that aren’t reimbursed by your health insurance. OOP costs include deductibles, coinsurance, and copayments for covered services plus all costs for services that aren’t covered.
The Non-Medical Expenses
Non-medical expenses are typically not covered by primary medical insurance insurance and can range from things such as ambulance transport, registration charges, service charges, laundry, admission charges, administration charges, etc. These are also often referred to as miscellaneous expenses. Depending on the illness or injury other non-medical expenses include lost wages homecare, childcare, travel and lodging.
The Total Financial Impact
All of these expenses add up to your total financial impact or the cost that you will be responsible for paying. Let’s look at a few real-world examples.
“Few individuals understand the out of pocket costs so often associated with surviving a Critical Illness. Whereas Health Savings Accounts (HSA’s) are a wonderful way to help employees save for the unexpected, they take time to accumulate and may be insufficient for Critical Illness that may span two or more calendar years.”
-Steve Rowley, VP Gen Re – A Berkshire Hathaway Company
The Cost of a Heart Attack
Most people survive their first heart attack and return to their normal lives to enjoy many more years of productive activity. According to the American Heart Association this recovery time can range between two weeks to three months and requires plenty of rest. If you’re not prepared the cost can pile up quickly.
The Cost of a Stroke
The good news is that according to the National Stroke Association 80% of strokes can be prevented. Unfortunately each year nearly 800,000 people experience a new or recurrent stroke. Strokes occur every 40 seconds and is the fifth leading cause of death in the U.S.
A stroke occurs when blood flow to an area of the brain is cut off depriving the brain of oxygen in which brain cells begin to die. When brain cells die during a stroke, abilities controlled by that area of the brain such as memory and muscle control are lost.
According to the National Institute of Neurological Disorders and Stroke your rate of recovery depends upon the type of stroke you have had, how much brain damage occurred from the stroke, your age and how quickly rehabilitation begins. This can range from months to even years needless to say the cost add up even if you have health insurance.
The Cost of Cancer
According to the World Health Organization more than 30% of cancer can be prevented, mainly by not using tobacco, having a healthy diet, being physically active and moderating the use of alcohol. With that said a recent report from Cancer.org estimates that almost 1.7 million new cancer cases will be diagnosed in 2016.
Cancer is the name for a group of more than one hundred diseases in which the cells begin to grow out of control. In all types of cancer some of the body’s cells begin to divide without stopping and spread into surrounding tissues beginning a spiral of further damage. Due to the range and scope of cancer the following are based on general national averages for the cost of cancer, again even if you already have health insurance:
The Cost of End Stage Kidney Failure
End-stage kidney disease is also referred to as end-stage renal disease (ESRD) which is primarily caused by diabetes and high blood pressure/hypertension. If you have ESRD your kidneys are functioning below 10 percent of their normal function. This may mean that your kidneys are barely functioning or not functioning at all.
There are over 200,000 cases of ESRD every year in the U.S. and although it cannot be cured treatment can help. The following are expenses typical of ESRD:
The Cost of Major Organ Transplant
Organ transplantation is a highly sought after medical treatment for end-stage organ failure. Each day, an average of 79 people receive organ transplants and as of the date of this blog post 120,000 men, women and children await lifesaving organ transplants in the U.S.
The cost of a transplant, including preliminary testing, the surgery itself and post-operative recovery costs vary across the country and depend on the hospital and organ type. The following represent the cost based on the average major organ transplant:
The Cost of a Coma
A coma, sometimes also called persistent vegetative state, is a profound or deep state of unconsciousness. According to BrainFacts.org “individuals in such a state have lost their thinking abilities and awareness of their surroundings, but retain non-cognitive function and normal sleep patterns.”
Once an individual is out of immediate danger the physician focuses on ensuring that subsequent issues such as bedsores or pneumonia does not occur. Physical therapy is therefore a common additional cost. The following figures are based on a range of the cost on average for a coma in the U.S.:
The Cost of Paralysis
Paralysis is defined as complete loss of strength in an affected limb or muscle group and has many causes including a stroke, tumor, coma, multiple sclerosis and trauma caused by an injury or blow. According to the Christopher and Dana Reeve Foundation approximately 1.9 percent of the U.S. population, or 5,596,000 people reported they were living with some form of paralysis, defined by the study as a central nervous system disorder resulting in difficulty or inability to move the upper or lower extremities. Here are the costs of paralysis in the U.S. on average:
The Cost of Blindness
Of the 119 million people in the United States who are age 40 or over, 3.4 million are visually impaired or blind. This level of blindness and visual impairment costs more than $4 billion annually in benefits and lost income. By age 65, one in three Americans has some form of vision-impairing eye disease.
The University of Chicago estimates that the annual costs are $15,900 for persons with vision impairment and are $26,900 for persons blind. Cost factors vary by the degree of blindness and the following is the average cost of blindness in the U.S. after adjusting for inflation:
How To Minimize Your Total Out-of-Pocket Cost
Critical illnesses, accidents and injuries can happen at anytime and although you never know when or where an incident can happen you can take steps to minimize the risk both physically and financially. There are solutions that can protect you financially from medical debt caused by these situations but it all begins with awareness and lifestyle changes that help reduce such risks. A healthy diet, regular exercise, plenty of sleep and stress reduction methods go along way towards keeping you healthy.
What is the best advice that you have ever received on how to reduce your medical cost or prevent medical debt? Is there a lifestyle change that has positively impacted your health? We would love to hear your story.