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Underinsured? 11 ways to stretch health-care dollars

The bad news isn't just that you've got colon cancer. It's that, while you've got a good chance for long-term survival, you are underinsured and your checking account may not recover from your illness, even if you do.

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Most employees assume that because they have health insurance through their employer, they can weather any medical calamity. The sad truth is that even if you have health insurance, it probably won't be enough if you face a serious illness or an accident that requires extensive hospitalization or rehabilitation. In addition, while it's good news that people are surviving longer due to better treatment for life-threatening illnesses, their increased longevity comes at the cost of bigger medical bills.

A Harvard study of bankruptcies in 2001 showed that roughly one-half were due to medical causes. Of those that filed for such medically related bankruptcies, 75 percent had insurance at the onset of illness.

"Medical debtors were 42 percent more likely than other debtors to experience lapses in coverage," according to the study. "Even middle-class, insured families often fall prey to financial catastrophe when sick."

More people are underinsured as companies face increased costs for providing or supplementing their employees' health coverage. Medical costs for companies increased by 59 percent in 2000 alone, and continued to rise by double-digits in subsequent years. General Motors alone spends close to $6 billion a year on health care for its employees and retirees.

Businesses can't afford the high rates charged by insurers, so they're passing at least some of the added costs on to their employees. They do this by raising deductibles, increasing the amount of co-pay for each doctor's visit or treatment, and cutting back on what's covered. "Costs have gone up and employees' medical benefits have eroded over the years," says Dr. Steve Neeleman, CEO of HealthEquity Inc., a health-savings account administrator in Salt Lake City.

For example, Kim Zieglowsky, a labor-and-delivery nurse at Bozeman Deaconess Hospital, the local hospital for the city of Bozeman, Mont., was diagnosed with a rare form of bone cancer and had to seek treatment in Seattle. While she has medical insurance through her job, Zieglowsky's care will cost several hundred thousand dollars and she will have to pay a major portion of that. A mother of five, she can't afford to pay for her own care. Family and friends recently set up an account at a local bank where people can donate funds to help her.

Zieglowsky is not alone. A 1995 study published by the Journal of the American Medical Association estimated that nearly 29 million people in the United States were underinsured, and given the rise in medical costs since that study was published, the number of underinsured has likely risen, too. A more-recent study by the Commonwealth Fund, a nonprofit health-policy research group in New York, indicates that about 16 million U.S. adults with health insurance (or 12 percent of the insured population) in 2003 found themselves under financial duress due to medical bills.

A family can take preventive measures to weather the financial storm of a serious -- and expensive -- illness. Some to consider:

Set up a health-savings account. HSAs are a boon, but can only be set up if you have a high-deductible health plan ($1,000 or more for individuals; $2,000 or higher for families). You contribute pretax dollars to the account, and funds are withdrawn as needed. The amount saved is rolled over from year to year. The big problem is financing an HSA if your family's finances are already stretched to the limit. Neeleman says that one way to save money is to raise your deductible and lower your monthly insurance premiums. Then you can deposit the difference into your HSA.

-- Posted: June 28, 2005




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