Growing Gaps in Health Care Coverage Give Rise to Supplemental Insurance

Few American workers feel adequately protected by their current health insurance plan, according to a new study by Aflac, the nation’s top provider of supplemental health insurance, but two-thirds would be willing to purchase additional insurance to protect themselves from high, unexpected medical bills.

More than half of the 4000 workers surveyed said they were not prepared to pay for medical expenses not covered by their health insurance plan, according to the 2011 Aflac WorkForces Report released this June. The underinsured in the survey have lots of company.

“Today you can have health insurance and still go bankrupt if you get sick,” said Cathy Schoen, lead author of a Commonwealth Fund report on underinsured Americans. “This puts individuals, families, and the nation’s health and economic security at risk.”

Medical bills are the leading cause of personal bankruptcy in the United Sates and led to 62 percent of personal bankruptcies filed in 2007, according to a 2009 report by The American Journal of Medicine. Most of the cases involved middle-class individuals who had health insurance.

The number of underinsured Americans reached 25 million people by 2007, according the Commonwealth study. The issue became exacerbated during the recession and its aftermath as employers shifted more of the financial burden of health care onto employees. Companies reduced benefits while raising deductibles and co-pays, widening the gap between what the insurance covered and what employees could afford.

Even America’s wealthiest investors are concerned about the costs of a catastrophic illness. More than half of investors with $1 million to $5 million expressed concern over the financial impact of a family health catastrophe. Less wealthy investors were even more inclined to be worried with nearly 60 percent of investors with $100,000 to $1 million expressing concern.

Individuals are considered to be underinsured when medical expenses exceed 10 percent of their annual income, or their health-care deductibles equal or exceed 5 percent of their annual income, said Ryan M. Nunley, M.D., for aaos.org, the website of the American Academy of Orthopedic Surgeons. Those whose annual incomes are less than 200 percent of the federal poverty level are considered to be underinsured when their medical expense exceed 5 percent of their annual income.

Ten percent of households earning $90,000 or more a year were having trouble paying medical bills in 2009, as were 24 percent of households earning $40,000 to $90,000, according to a poll conducted by Kaiser. Underinsured workers make many of the same detrimental health-care decisions that uninsured Americans do, such as foregoing treatment and not filling prescriptions.

The supplemental insurance industry has stepped in to fill the gap. Consumers who wish to protect themselves from bankruptcy due to a catastrophic illness or accident can purchase additional coverage for cancer care, critical care, short-term disabilities and accidents.

The decision to buy supplemental insurance depends on a consumers’ ability to pay medical bills in a worst-case scenario, according to the website www.insuranceproviders.com. Consumers can start by researching their current policy to find out their existing coverage. Any gaps can be covered with a range of supplemental policies with varying terms and conditions. Numerous websites allow for online rate comparisons.

“Be sure to read the fine print of each contract so that you understand exactly what is being covered in every possible situation,” the website said. “A good insurance contract might not be what you need if it doesn’t fully cover the gaps in your current insurance.”