Financial Wellness & Productivity: Medical debt more pervasive than previously known
Employers can help, with these four steps that also boost financial wellness and productivity.
This post is part of our ongoing series, “A Uniquely American Injustice,” helping employers and employees navigate medical debt and health expenses. Find all of our posts in the series here.
Hidden as credit card balances, loans from family, or payment plans to hospitals and other medical providers, medical debt is far more pervasive than previously known, finds an investigation by Kaiser Health News and NPR.
We see this among our own clients, roughly one in six of whom have medical debt in collections, victims of what the investigators call “a health care system that is systematically pushing patients into debt on a mass scale.”
More than one in two U.S. adults say they’ve gone into debt over the past five years because of medical or dental bills, according to The Kaiser Family Foundation Health Care Debt Survey. And many of them will not be getting out of it anytime soon: One in four people with health care debt owe more than $5,000, one in five say they don’t expect to pay it off.
As Dr. Rishi Manchanda, who works with low-income patients in California and was on the board of nonprofit RIP Medical Debt, explains: “We have a health care system almost perfectly designed to create debt…Debt is no longer just a bug in our system. It is one of the main products.”
Medical debt is a systems problem that requires a systems solution including among other things policy change and a bigger role for businesses in supporting employees in preventing and managing medical debt.
Policies Supported by the Public
There is strong public support for policies to limit out-of-pocket expenses among the insured and for state consumer assistance programs, according to the KFF survey. Seven in ten adults with health care debt say they think a state consumer assistance program would be helpful to them personally.
Smart policies at the state and federal level will be a step in the right direction. Widespread adoption of employee medical debt benefits offered by leading employers will be a giant leap forward.
Steps Employers Can Take
Stress caused by medical debt hampers employees’ productivity and ability to work: 4 out of 5 employees with high financial stress say medical debt distracts them from work; and 50% of workers who report debt as a source of stress say they spend at least one hour per week at work dealing with debt-related issues (such as contacting creditors).
By supporting employees in reducing and preventing medical debt, the following steps can also help employers boost worker financial wellness and productivity.
1. Know thy employee.
Understand their unique financial challenges, especially when it comes to health care needs and costs. If you’re not sure of your employees’ situations because you’re not a TrustPlus customer, a Health Care Social Equity Audit can help.
2. Educate employees early and often about insurance and out-of-pocket expenses.
Chances are they need it. Most U.S. adults don’t understand basic insurance terms, including out-of-pocket and deductible amounts, and have trouble navigating their insurance. Here are step-by-step resources employers can use, from our Personal Finance Coaches, to educate your employees about how to protect budgets and credit scores while dealing with medical expenses and address medical collections on credit reports.
3. Provide services and benefits to help employees manage health care costs and medical debt.
68% of employees in a recent survey from the Financial Health Network say it’s important for employers to offer overall debt-related financial wellness benefits. Among the most desired: personalized coaching sessions. Just sayin’.
Other benefits including loans or hardship funds offer short-term grants for unexpected expenses, including medical ones. Employers can also contribute to health savings accounts (HSAs) and health reimbursement arrangements (HRAs) to help employees pay out-of-pocket expenses.
4. Cross-subsidize premium contributions.
Under this model being adopted by leading businesses like J.P. Morgan Chase and Bank of America, lower-wage employees pay less than higher-wage employees, which can be cost neutral for employers.
Sustainable solutions to our growing medical debt challenges in the U.S. will require a mix of policy and business innovation. In this battle to change the system, forward-thinking employers who understand the connections among financial wellness, productivity, and the bottom line will be the vanguard.
