How Unexpected Health Issues Drive Up Medical Debt

Rhea Manwani
March 30, 2022

We spoke to you earlier about the impact of out-of-pocket costs due to gaps in health coverage, but it can be unclear to identify what the root causes are, and which types of costs create greater financial strain on employees in 2022. 

That’s why we’re proud to have contributed to this year's “Inside the Wallets of Working Americans,” a report by Salary Finance, to unpack this very problem. We analyzed research, based on a group of 3,000 working Americans from ages 18 to 65 to understand what the main causes of medical debt were, and how rising healthcare costs are affecting employees around the country today. Here’s what we discovered—

Unexpected Injury or Illness Is a Leading Cause of Medical Debt

1 in 5 respondents reported carrying outstanding medical debt, and 57% of those with debt said it was caused by a specific time period, illness or procedure—not by bills related to recurring care. An additional 13% said their debt was from a combination of recurring and one-time medical bills. This suggests that unexpected illness or injury is a major driver of medical debt. 

When less than half of Americans have savings to cover an unexpected $1,000 expense if a serious illness or accident occurred today, the financial strain caused by unexpected medical events does not come as a surprise. 

What’s more, amidst rising employee burnout and mental health issues during the Great Resignation, unexpected health hardships are taking a much more central role in contributing to financial stress. Of the respondents— 66% of the respondents with unpaid medical bills said it causes them stress or worry vs. 54% last year. So instead of focusing on taking care of themselves and their families, people are more concerned with the cost of care and racking up medical debt. 

How COVID-19 Introduced New Unexpected Out-of-Pocket Costs

In a year when sudden health issues were top of mind for many Americans amidst the pandemic, we asked about how a positive COVID diagnosis impacted household finances. 57% of people with a positive COVID diagnosis in their household said they spent over $500 in health care costs as a result; 39% spent over $1,000. And it isn’t just about the initial costs of care: 22% of the COVID-positive cohort said they still suffer from long-term side effects, and 20% lost household income due to getting COVID. 

Fortunately with the milder Omicron strain, the cost of COVID-related care has come down. Only 27% of those with a positive COVID diagnosis in the household reported spending more than $500 on care vs. 57% last year.

Regardless, COVID has undeniably raised the likelihood of unexpected medical events, and the financial shocks that can result. Because COVID increased rates of care avoidance (33% reported skipping preventive checkups or follow up care since the beginning of the pandemic due to the cost or new restrictions), many employees today are not receiving the care they need when sudden injuries and illnesses happen, which can have negative impacts in the long run

Employers will need to start considering benefit alternatives that account for unexpected acute symptoms that occur due to short and long COVID- including pneumonia, sepsis, and heart failure- in order to ease the burden of these new out of pocket costs.

How Ansel Can Help 

Ansel is a solution that is built to pay when unexpected health issues pop up. Its modern supplemental health insurance plan covers an industry-leading 13,000+ conditions from dehydration and cuts with stitches to kidney stones, heart attacks, and cancer. Ansel pays cash benefits solely based on a diagnosis, and employees can receive completed claims in 72 hours via Paypal, Venmo, or online banking account. 

With wide-ranging coverage, no hospitalization or accident requirements, fast benefit payouts, and dedicated concierge on hand to help, Ansel is seeking to ease the financial burden of sudden health hardships so that employees can seek and receive care without fear of incurring medical debt. 

To see how Ansel can help your group receive benefits when unexpected medical events happen, check out our plan and get in touch

To read the full report, “Inside the Wallets of Working Americans 2022,” read here.