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Got good health insurance? Even you can end up in medical debt

If you have good health insurance, you might think you'll always be able to afford your doctor bills, treatments and prescription drugs. But watch out: Even if you’re insured, you can get deep in medical debt.

A Jan. 2014 report on medical debt by the Kaiser Family Foundation (KFF) and Georgetown University's Health Policy Institute found that most people with medical debt -- 70 percent – have some kind of health insurance, according to the report.

insured medical debt The Affordable Care Act (also known as Obamacare) makes it less likely insured consumers will incur massive medical debt, says Sally McCarty, senior research fellow at Georgetown University's Health Policy Institute. Obamacare prevents insurers from imposing the annual or lifetime maximums that used to leave seriously ill consumers without insurance coverage after their bills reached a certain amount, she says.

Starting this year, the ACA also caps the yearly out-of-pocket maximum for in-network services at $6,350 in 2014 for a single policyholder, McCarty points out.

But serious medical debt still can be a big problem for some policyholders. Here are four ways you can rack up unaffordable medical bills when you have insurance, and how to avoid them.

How to avoid medical debt if you have health insurance

1. Your cost sharing is too high.

Patients with high deductibles are more likely than those with lower deductibles to struggle with medical debt, according to the KFF report. In fact, 34 percent of patients with deductibles of more than $1,200 for a single policy or $2,400 for a family policy reported difficulty paying medical bills. Patients had even more trouble affording their portion of the medical costs when they experienced cost-sharing "multipliers," according to the report. Examples of "multipliers" include:

  • Having to pay the deductible two years in a row. For example, one patient mentioned in the KFF report had surgery in the last month of his plan year. He had complications, and the following month needed another surgery. So, he had to come up with the money for two deductibles over the span of a few months.
  • Having more than one family member get sick at the same time.
  • Suffering from a chronic condition. Chronic conditions such as diabetes can cause a never-ending stream of bills spread throughout the year, for life, McCarty says.

How to stay out of debt: If you have a high-deductible plan (a plan with a deductible of at least $1,250 for an individual or $2,500 for a family, according to the IRS), open a health savings account (HSA) and fund it, recommends Bruce McClary, government affairs and public policy manager for ClearPoint Credit Counseling Solutions.

The benefits of an HSA? The funds are tax-free and can be used for qualifying medical expenses such as doctor visits or prescriptions. The limit you can contribute in 2014 to an HSA is $3,300 for a single person or $6,500 for a family, with an extra $1,000 for adults 55 and older.

2. You get hit with surprise out-of-network costs.

In some cases, patients get medical treatment then discover the doctor or other provider is not in their health insurance plan's provider network, McCarty says. For example, a patient might check before surgery to make sure the hospital and surgeon are in-network, but later learn the anesthesiologist wasn't. "It's relatively common for people to go out of network accidentally," says Tony Dale, chairman and founder of The Karis Group, which provides medical bill mediation. This can greatly increase the amount you have to pay.

"If you go out of network, your $5,000 deductible could become $10,000," Dale says, adding that your insurer also will pay a lower percentage of the bill -- and the yearly out-of-pocket maximum doesn't apply.

In an emergency, though, you might have no choice: if you get into a car accident while on vacation, for example, you might get rushed to an out-of-network hospital or get care from out-of-network doctors. Obamacare does protect you in some ways: the law forbids insurers to impose higher cost sharing for out-of-network emergency services. Also, plans can’t require a patient to get preapproval for out-of-network ER care.

However, the out-of-network provider can “balance bill” you: send you a bill for the difference between the amount your insurance pays and the provider’s full fee. If you get balanced billed, check your state laws, McCarty says.

For example, according to the KFF, California prohibits balance billing to HMO and PPO members for emergency services, except for ambulance charges. If your state allows balance billing, you still can call the hospital or other care provider to try to negotiate a lower bill, McCarty says.

How to stay out of debt: Check with your insurance company to make sure all providers you’ll encounter -- from your doctor to physical therapist to laboratory -- are in-network before you get services, McCarty recommends.

3. You choose to get care from an out-of-network provider.

In some cases, patients -- especially those who are seriously ill or need major surgery -- might go to an out-of-network provider by choice, McCarty says. For example, a woman diagnosed with breast cancer might see a TV ad for a nationally known cancer center and decide she wants to be treated there, she says – but have no idea how much the treatment will cost.  

How to avoid debt: When shopping for an insurance plan, look closely at the provider network, both for primary-care providers and specialists, McCarty says. If you have to pay slightly higher premiums to get a plan with a large provider network, it's probably worth it, she says.

4. Your plan has limits or exclusions.

Limits and exclusions were much more of a problem before the ACA, McCarty says, because the ACA requires that individual and small group plans inside and outside the marketplaces cover 10 essential health benefits. However, patients still can run into limits or exclusions -- for example, if an insurer deems a drug or treatment experimental, she says.

How to avoid debt: You could appeal a denial of a claim, McCarty says. According to, when an insurer refuses to pay a claim, you can:

  • File an internal appeal to request the insurer conduct a “full and fair review” the decision. If the company upholds the denial, they must tell you why, in writing.
  • Or, file an external appeal with an independent reviewer within 60 days of the insurer’s final decision.

Steps to take if you end up in debt

If you do end up deep in debt, experts say you can take these steps:

  • Try to negotiate. A patient advocate can help you negotiate to try to lower your bills, Dale says. The National Association of Healthcare Advocacy Consultants offers a search tool to find a patient advocate.

Or you can go to the billing department at the hospital or other service provider to try to work out a payment plan. "They're usually pretty agreeable and flexible," McClary says.

However, McClary adds, you should try to negotiate before the debt is sent to a collection agency.

  • Get help from a nonprofit credit counselor. Contact a nonprofit credit-counseling agency and meet with a credit counselor, McClary says. "They can help you prioritize so you can take care of some or all of your medical debt in a way that fits into your budget.”

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