What I learned from knocking out my teeth and the $6,000 bill that followed
Around July 4th, 2016, I was enjoying a bike ride with friends in Washington, DC, a place I had called home since graduating from college. Luck was not on my side that day. As I came down the hill by Union Station, my attention was focused on the people exiting the metro, I failed to see a lane divider in front of me in the bike lane. (Yes, that’s the actual culprit, still standing two years later.) Why DDOT decided that they needed two lane dividers in a bike lane is still beyond me.
When I hit the divider, I flew face-first off my bike. I knocked out my two front teeth and booked a ticket to the emergency room.
Surprisingly, the trauma to my teeth was not all that painful. What really hurt were the medical bills I got hit with: $6,000 for a pair of root canals, dental caps, and a visit to the oral surgeon. And would you believe it? My health insurance provider was convinced that this was elective dental treatment, which meant I would be paying for what wasn’t covered by the dentist out-of-pocket.
After 6 months of wrangling — and with the help of a health advocate — I was able to convince my insurance that this incident was indeed not elective, and should be covered as a medical emergency. The event left me scarred by just how easily my financial situation could unravel.
I was in a relatively privileged position. I had a job, with benefits, and enough in savings to stomach the blow. (Though I did end up maxing out my credit card.) What would have happened if I didn’t have that safety net in place?
As it turns out, financial shocks like mine are the norm, not the exception. 54% of American families experienced a financial shock in 2015, the most recent year for which data are available. (A financial shock could include unplanned home or car repairs, a pay cut, or uncovered medical expenses.) The typical shock set families back $2,000, though higher earning households experienced larger shocks.
And yet, millions of Americans aren’t prepared for a single financial shock. From my work in economic research I learned that 38 million households live “hand to mouth,” meaning they don’t have anything left to put towards savings after their monthly expenses. Most of these hand-to-mouth households aren’t low income: they have earnings in line with the U.S. average, and often have a home mortgage and retirement savings.
At first this might seem surprising, but I get it: necessities are expensive, especially for budding families. 40 million Americans — and 70 percent of new graduates — are paying off student loans. 40 percent of families have a mortgage, and one in three is paying off an auto loan. With an average debt load of $123,000, it’s no wonder that families struggle to set aside a buffer in case of emergencies. In fact, half of all Americans report they couldn’t come up with $2,000 within 30 days if they needed to.
Existing workarounds don’t serve people well. The average credit card carries a balance of more than $5,000, and interest rates are high: the latest APR was almost 17%. Personal loans are unwieldy; it’s hard to shop around to get the best rate, and existing lenders chase super prime borrowers, leaving everybody else out in the cold. That leaves payday loans, which have astronomically high interest rates: 400% in some states. There has to be a better way.
My team and I at PayShield are hard at work on one. Our product, offered as an employer benefit, gives workers access to an emergency line of credit at a rock bottom interest rate. We believe that risk should be determined not by credit score, but instead by probability of repayment. As a third-party intermediary, your financial need is never shared with your boss. And we never profit off of your financial misfortune.
I’d love to go back and rewrite that July day. But getting knocked off my bike woke me up to the very real problem of financial stress in this country. I’m hopeful that we have found a way to relieve that stress. When a family faces an emergency — whether it’s the result of a broken-down car, a busted water heater, or the hospitalization of a loved one — how they’ll pay for it should be the last thing on their mind.
 A few notes about this statistic. First, it is conditional on holding debt, which three quarters of American households do. Second, this number is much larger than the median debt level — $60,000 — because of mortgage debt: the average is $160,000 among the 40 percent of families that have a mortgage. See table 4 of this Survey of Consumer Finance report for the composition of household debt by type.