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Health Coverage Does Not Protect Against Incurring Medical Debt

Cheryl Clark, for HealthLeaders Media, September 1, 2009

Health insurance does not safeguard people against medical debt in California, where one in seven non-elderly adults is trying to pay off healthcare bills in excess of $2,000. Of those with debt, 1.4 million, or two-thirds, have health coverage.

"More than 2.2 million Californians, or 13% of nonelderly adults, reported having medical debt," according to the survey, "The State of Health Insurance in California." Among those 2.2 million, 17% had debts from $2,000 to $4,000; 9.4% were paying debts between $4,000 and $8,000, and 8.7% had debt about $8,000.

The nation's largest state health survey was conducted by the UCLA Center for Health Policy Research, which conducted telephone surveys of 50,000 California residents between June 2007 and early March 2008. The survey is part of a biennial project, but its release sends a message to those trying to craft health reform proposals, the authors said.

"That even insured people are forced to take on medical debt to pay for their healthcare is another glaring inadequacy in our current system of health insurance," said E. Richard Brown, the center's director. "Current policies either do not offer enough coverage or offer full-coverage at a cost that is too expensive for many people to bear.

The fact that such a large portion of the survey respondents said they were paying off medical bills even though they had health insurance was a surprise, said Shana Alex Lavarreda, director of the center's health insurance studies and one of the report's six authors. "If insurance plans did what they were supposed to do, they would give that protection," she says.

A major reason for the debt appears to be high deductible plans, the survey found. Among those California adults who said they had employment-based health insurance for the entire year, 7.2% reported having high-deductible coverage without a health savings account, and 3.5% had a high-deductible plan with a health savings account, which is also known as a consumer-directed health plan. For the survey, a high-deductible plan was defined as one requiring the insured to pay the first $1,000 or more for a single person or $2,000 or more for family coverage.

"High deductible plans, both with and without health savings accounts, are much more common among Californians with privately purchased coverage than among those with the employment based coverage," the report noted.

More than 38% of adults with privately purchased insurance had a high deductible, compared to 10.7% of those with job-based insurance.

Lavarreda added that copayments are another reason, although the respondents were not asked why they incurred their medical debt.

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