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Why Your High Deductible Health Insurance Plan Puts You at Risk for Bankruptcy


60% of bankruptcies are related to medical bills and 75% of those filing bankruptcy for medical reasons had health insurance, according to a 2007 Harvard study. If you’re on an Obamacare Bronze or Silver plan, you may be responsible for paying up to $6,850 just to cover your deductible — a situation that can easily trigger a financial crisis if you end up in the emergency room or have to see a doctor when you’re sick. Here’s a closer look at why your high deductible health insurance plan may be putting you at risk for bankruptcy:

Why We Choose High Deductible Plans

The Affordable Care Act (ACA) requires all Americans to have health insurance coverage or pay a penalty — 2.5% of your adjusted gross income or $695 per adult and $347.50 per child under 18, whichever is higher. If you’re living on a tight budget, there’s a good chance you chose an Obamacare Bronze plan because it has the lowest premiums. Bronze plan premiums run anywhere from $257 to $900+, depending on your age. For many Americans, this is the best way to keep healthcare expenses low and avoid the tax penalty.

However, Bronze plans also have the highest deductible — more than $13,700 for a family plan. This means you would have to pay thousands of dollars out of pocket before your Obamacare health insurance plan took care of the rest of your bills.

Obamacare bronze plan

Risk of Medical Bankruptcy

An estimated 38 million households in the United States live paycheck to paycheck, according to statistics from CreditDonkey. In addition, approximately 28% of adults have no savings set aside for emergencies.

If this sounds like you, you run the risk of going into debt when you can’t pay the $13,700 deductible for that family plan. You’ll acquire even more debt when your health insurance fails to cover certain costs. Consider that many costs are only partially covered by certain health insurance plans so you will be responsible for additional expenses when you proceed with treatment. If you don’t have a few thousand dollars in savings to cover your deductible, you would have medical debt as soon as you stepped foot in the hospital — even with full health insurance coverage.

The risk of medical bankruptcy is very real, especially if you have a high-deductible health insurance plan.

Chapter 7 Bankruptcy

Preventing Medical Bankruptcy and Financial Distress

Fortunately, you have options. Even if you have an Obamacare plan, you can explore Medical Cash Benefits Plans that act as a supplement to your health insurance coverage. If you were diagnosed with a serious illness and had a critical illness plan, for example, you would receive a lump sum cash benefit of up to $50,000. You could use that money towards your deductible, to cover travel expenses for family members to come see you and any other costs. In this situation, the cash is yours to spend as you see fit and your regular insurance plan would take care of all of your other expenses after you met your deductible. Having a medical cash benefits plan could shield you from financial disaster and prevent bankruptcy.