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2 Ways Employers Can Protect Their Employees From the Burden of Medical Debt As costs and deductibles rise, simply providing healthcare benefits isn't enough to protect the physical and financial health of employees and the interests of the business.

By Michael Waterbury Edited by Chelsea Brown

Key Takeaways

  • Data shows that 43% of Americans with commercial insurance through their employer have experienced medical debt, with a quarter reporting that they are in debt right now.
  • This issue not only affects their physical and financial health but also their productivity and attitudes toward company-provided health benefits.
  • Employers need to go beyond just offering healthcare benefits to protect their employees.
  • Promoting awareness of hospital financial assistance programs and offering navigation services can help employees make informed decisions, find cost-effective care and manage medical bills.

Opinions expressed by Entrepreneur contributors are their own.

It's likely that your employees — at least some of them, and possibly quite a few — are struggling with medical debt. Medical debt has long been the leading cause of bankruptcy, and new data shows that 43% of Americans with commercial insurance through their employer have experienced medical debt, with a quarter reporting that they are in debt right now.

As costs and deductibles rise, simply providing healthcare benefits isn't enough to protect the physical and financial health of employees and the interests of the business. Employers who help their workers avoid medical debt can prevent the kind of on-the-job distractions caused by this kind of financial distress, as well as negative attitudes toward the company's health benefits.

Here are two key ways employers can go above and beyond to shield team members from medical debt and achieve better health outcomes for their people while boosting productivity and engagement.

Related: 6 Ways Entrepreneurs Can Solve the Problem of Medical Debt

Both employers and employees are struggling with the cost of healthcare

Healthcare costs are typically the second-largest expense for employers after payroll, and they're rising faster than just about anything else. Nine out of 10 employers say healthcare benefits as an expense will be unmanageable by 2031. Some might argue they already are unmanageable.

Employers spent, on average, $17,393 on family health benefits per employee in 2023 — up 48% since 2013. Rising costs have pushed employers to make cuts to health benefits, often shifting more of the burden to employees by offering less comprehensive coverage or increasing deductibles.

Since employees have to cover the deductible before insurance kicks in for many types of care, higher deductibles increase the likelihood of medical debt. With deductibles of $10,000 or more in some cases, it's clear that health plan benefits alone aren't enough. A recent survey of the American public commissioned by Goodroot found that about half (52%) of employees with medical debt owe more than $2,500.

The survey also found that more than 90% of employees who have experienced medical debt skip at least some medical care to avoid costs. This concerning pattern not only jeopardizes individual health and potentially leads to more expensive treatments later on, but also drives up costs for employers who depend on a healthy workforce and aim to promote preventative care measures.

Many of your employees are eligible for hospital financial assistance

As part of the Affordable Care Act, non-profit hospitals are required to offer free and discounted care to patients based on income. The income threshold to qualify for these programs is often quite high — a family of four with an annual income of $120,000 would qualify in many areas, and in some places, those earning $180,000 still qualify for some relief.

These programs are an integral tool for preventing medical debt, but their effectiveness is hampered by a lack of awareness and a number of misperceptions. Goodroot's survey found that 53% of employees with household incomes under $100,000 do not know about hospital financial assistance, even though they very likely would qualify.

Those who do know about it often fail to apply because the process can be cumbersome. The programs are also often referred to as "charity care," which deters some people from applying who don't want to accept "charity." Fifteen percent of employees surveyed said they didn't feel comfortable accepting "charity or assistance."

Employers have a responsibility to protect their people by promoting awareness of hospital financial assistance and supporting their employees in applying for it. The fact is, it isn't charity — it's a special rate hospitals are required to offer in order to earn their tax-exempt status. And it's very much in an employer's interest to help employees avoid the stress and hardship of being saddled with a 5- or 6-figure hospital bill.

Related: 90% of Execs Say Providing Employee Health Benefits Will Be Unsustainable By 2030 — Here's One Solution Businesses Need to Consider

Using healthcare benefits isn't as easy as it used to be — employees need help

Back when most employers offered low-deductible or no-deductible plans (and the cost of care was more reasonable), employees had an easier time understanding and using their benefits without incurring a large bill. Now, in an era of high deductible health plans (HDHPs) and minimum essential coverage (MEC) plans combined with complex industry lingo, skill is required to understand benefits and use them in a way that will lead to the best health and financial outcomes.

When looking for a new provider, determining if they are in-network or out takes a lot of effort — and the answer could impact how much an employee might owe. Likewise, knowing when lower-cost generic drugs are available or when cash prices for prescriptions are less than those paid through insurance can have a major impact on an employee's pocketbook. Comparison shopping is crucial when scheduling a diagnostic test, such as an MRI. Pricing varies wildly based on where the scan takes place, so employees can save hundreds of dollars by asking around and getting prices up front. But where do you look to find this information?

After receiving care, it's important to scrutinize bills closely. The complexity of healthcare billing means the majority of bills contain errors. Once the accurate cost is determined, there's often room for negotiation as well.

Of course, all of this takes time and effort, often during work hours, which is why an increasing number of employers offer navigation services in addition to health benefits. These services do the legwork to obtain up-front prices and negotiate on behalf of employees. Care navigation is an effective cost-containment tool for self-funded employers who pay their employees' claims, but it can also help fully insured employers save by minimizing the workday distraction their employees face while navigating the healthcare system alone.

In an ideal world, navigators and health assistance would be unnecessary, but the costs and complexity of the healthcare system in America are far from ideal. Employers who accept this and do what they can to protect their team members from avoidable debt will benefit from a healthier, happier and more productive workforce.

Related: Why Reducing Employee Healthcare Isn't Saving You Money

Michael Waterbury

Entrepreneur Leadership Network® Contributor

CEO of Goodroot

Michael Waterbury is founder and CEO of Goodroot, a community of companies reinventing healthcare one system at a time. After a 20-year career as a health plan executive, he became an entrepreneur on a mission to increase access and affordability to quality healthcare through innovation.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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