A study last year showed that health-related issues, mostly medical bills, caused 62% of America’s bankruptcies in 2007. Private health insurance wasn’t enough protection: 78% of the healthcare related bankruptcies were to people covered by health insurance. People lose their house, their savings, and their credit just because we have a faulty healthcare system. This study was done for the year 2007, it’s expected that those numbers are higher in today’s economy.
Even worse, if one or more major heath insurance companies ever go bankrupt, personal bankruptcies will skyrocket, as people are forced to pay the bills they’d expected to be paid by those defunct insurance companies. If an insurance company doesn’t pay the hospital, the debt is passed on to the patient, and ultimately the estate. There just aren’t any guarantees with private insurance companies: If your family experiences a serious illness, you could lose everything you own. Only after all the money’s gone, can you expect some sort of government aid under today’s flawed system.
How likely is it that a major insurance company could go bankrupt in the near future? There are several possible scenarios. If the company assets were over-leveraged, like the recent bank problems, seems a likely risk, given the similar corporate structures of banks and insurance companies. But there could also be a national epidemic that might trigger insurance company bankruptcies. Regardless of the reason, anyone covered by a bankrupt insurer would not be able to find another company willing to take on their medical bills. In fact, surviving insurance companies would probably stop taking any new clients, in the way that surviving banks have been reluctant to loan money in the current economy.
But even if we can count on never facing a serious national health epidemic, or we trust in the perfect management skills of the people who run the insurance companies, the fact remains that people with health insurance today have their assets at risk. Once the money’s gone, it will be too late to fix the system. You can’t eat from an empty storehouse.
References:
LA Times
Business Week