Medical debt is one of the most common causative factors for modern bankruptcy. Needing cancer treatment, rehabilitative services after a stroke or trauma care after a car crash could completely overwhelm your budget.
People all too often presume that those dealing with financial hardship because of medical bills must not have insurance. However, many people dealing with medical debt had what they thought was great coverage until they discovered the gaps in their protection.
Most people don’t realize the danger of medical care when traveling
One of the ways that insurance companies keep their costs low involves negotiating compensation rates with medical providers or hospitals. When a facility or individual medical professional agrees to accept a certain rate of compensation for their work, they can become an in-network provider for a specific insurance plan.
Depending on the terms of your insurance policy, any care you receive outside of your home state or even the county where you live might be out-of-network care. Your insurance company may only cover a fraction of the services you need if you get into a car crash in another state or have a heart attack while on vacation. In some cases, your policy may not protect you at all, meaning you will have to cover the entire bill yourself.
Insurance companies pass a lot of costs on to policyholders
Insurance companies deter people from seeking medical care by attaching personal financial obligations to services. Co-pays may run anywhere from $5 to $50 or more depending on the policy and service provided. An emergency room co-pay could be hundreds of dollars.
However, before the company will cover your costs, you will have to meet a deductible. Many insurance plans have deductibles that are thousands of dollars, which might mean your responsibility is more than what you have in savings right now. Finally, you may also have coinsurance, which could leave you responsible for 10%, 20% or even 30% of your total medical costs.
All of that combined might mean hundreds of thousands of dollars in medical debt that you have no reasonable way to pay off. If you reach that point of no return, filing personal bankruptcy can both halt collection action and potentially lead to a discharge of those debts.