Healthcare's latest financial burden: Insured patients

When I buy insurance of any kind, it is a decision usually backed by an informed calculation.

I pay steep earthquake insurance premiums, but that's because earthquakes are a fact of life in Los Angeles. And while there is a hefty deductible, I presume the federal government will provide enough financial assistance to cover that gap if I ever have a big claim. It would take about 200 years of premiums before the cost of earthquake coverage was higher than the equity I have in my home.

By contrast, I spend far less on insurance for a third car that we have, a 12-year-old Honda Accord. Despite being in nearly showroom shape, it's only worth about $4,000, and its value drops by about 10 percent each year.

Ever-rising out-of-pocket costs make such calculations more difficult when purchasing health insurance. 

If my house is leveled by an earthquake, my out-of-pocket costs would be no more than $60,000 before insurance kicks in, even without any federal assistance. If the car I drive regularly is demolished, it won't cost me more than $1,000 to drive away in another late model.

Such guarantees do not come with health coverage. If, say, my entire family is injured in that earthquake or automobile accident, it could cost nearly $20,000 out of pocket just for us to walk out of the hospital. And if this calamity happened on New Year's Eve, that total could double, as we'd have deductibles covering two calendar years. If we need any physical therapy or medication regimens that stretch over a long period of time, it could increase even further.

It's more probable just once of us could get cancer, which has cost conundrums all its own. Covered California, the state's insurance exchange, recently moved to cap specialty drug costs at no more than $500 a month, but that's not the case in the other 49 states. As a result, some insured cancer patients can rack up $100,000 in debt.

Medical bills lead to about 60 percent of all personal bankruptcy filings. That's a stat that's been repeated so much that it's become a throwaway line in healthcare finance coverage. That is, until you think about the true cause and effect: Millions of Americans can't buy a new car or a new house or have huge impediments starting new businesses because they or a loved one was sick or injured, and even their insurance couldn't indemnify them. It has a distinct impact on the economy as a whole. And when these patients can't pay their bills, hospitals are left holding the bag to some degree.

Even with the millions of Americans who have been able to obtain new coverage under the Affordable Care Act, the Commonwealth Fund estimates that 31 million Americans are underinsured--that is, the ratio of their out-of-pocket costs to their household income is out of balance, making them unlikely to be able to pay their bills.

A lot of industry observers have spoken of a "death spiral" that could be caused by the U.S. Supreme Court invalidating subsidies for millions of Americans in the King v. Burwell case. However, such a spiral could occur even without an adverse ruling. If you are facing a five or even six-figure medical bill and potential financial ruin even with insurance, what's the point of having it in the first place?

There are ways of fixing this. For example, I pay for "gap coverage" on the car I regularly drive because it is leased. It indemnifies me if the payout from my insurer is less than what the lessor says the car is worth. There would probably be a lot of takers for similar gap coverage in the healthcare realm if someone actually bothered to offer it, which they don't. It doesn't even have to be derived from healthcare-based coverage: Homeowners policies could offer it, for example. Or hospitals could offer a supplemental policy to residents in their service areas.

Given these new realities, hospitals may have to begin focusing portions of their charity care and patient financial assistance programs to insured patients.

The uninsured will remain an enormous problem in this country, particularly if the political leadership in the 20 states that have yet to expand Medicaid remain obdurant. But it's also becoming clear that the insured have financial issues of their own. They are going to have to be addressed. - Ron (@FierceHealth)