Difficulties for Insured & Uninsured

Even those who have health insurance are beginning to struggle with medical expenses. The majority of policies require an out-of-pocket payment when they receive medical care or obtain prescription products. “Copays” are set amounts payable for specific services. For example, a doctor’s office visit may require a $25 copay at the time of the appointment and a pharmacy may require a $10 payment for each prescription that is purchased. A deductible is a base amount that the patient must pay annually before their insurance begins to cover their expenses. For example, a patient may have to pay the first $500 in medical expenses they incur out-of-pocket; expenses for the remainder of the year would then be covered by the insurer.

Acknowledging Medical Expenses

Medical costs and expenses should be incorporated into a comprehensive budget along with your rent or mortgage, utilities, etc. Often people are put into a position where they must choose between paying medical bills or pay for other critical expenses such as groceries or car insurance. It is best to avoid paying medical bills with credit cards because it can lead to further interest on the debt. Surprisingly, health care costs are among the most common reasons that people file for bankruptcy.

Initial Options/Strategies to Handle Large Medical Bills

Explanation of Benefits (EOBs)

After you receive medical treatment, your health insurer will typically send you an EOB statement after the medical provider files a claim with your insurer. This document is not to be confused with a bill. An EOB lists the cost charged by the medical provider and the amount that your insurance will pay.

Billing Errors & Insurer Denials

When you receive a medical bill, it is critical to thoroughly read it. Keep in mind that a visit to one provider may generate bills from others; for example, if your doctor ordered you to have blood work done during your visit by a third-party laboratory, you may incur multiple bills from that single visit. The bill should be itemized and show the CPT codes that reflect the services provided. If you suspect an error, it is best to be proactive and contact the provider’s billing department or contracted billing company. If your insurance company has denied the claim for services that you think should be covered, it is best to contact them to discuss the amount owed. You have the right to appeal decisions made by your insurance company.

Responding to Negotiate

If you determine that the bill is your responsibility and you are unable to pay it in full, it is best to contact the provider to seek other options. It is critical that these efforts are initiated before the bill is “past due” and sent to a collection agency. You should inquire if the provider has discounts available for people with lower income. The provider may consider lowering the amount of the bill if you are able to pay the reduced balance in one lump payment. Check whether a payment plan can be established for repayment; ideally, these would be interest-free arrangements.

Hospital Financial Assistance

You may qualify for financial assistance to assist with unpaid hospital medical care. For example, the Northeast Georgia Health System offers financial assistance to those who meet federal poverty guidelines and have received emergency care that is deemed medically necessary. This type of debt relief may be free or available at a reduced cost.

Georgia’s Indigent Care Trust Fund

According to the Georgia Department of Community Health, the state’s Indigent Care Trust Fund was implemented in 1990 to allow lower-income residents access to medical care. The program works to promote the availability of Medicaid among the disadvantaged and those in rural areas. People who are uninsured may still be eligible even if they are unable to qualify for Medicaid.

Debt Consolidation

Individuals who are burdened with multiple debts may consider a medical debt consolidation. This is when your debts are combined and paid in a single monthly payment. An effective consolidation plan will ideally lower the rate(s) of interest and allow you a more affordable way to pay off your debt. There are many ways of consolidating debt such as:

• Zero or low-interest credit card: You may transfer all of your debts to a credit card with a lower rate. Many cards offer introductory rates such as 0% interest for periods of six to twelve months.
• Home equity loan or credit line: A homeowner may use the equity in their home to consolidate multiple debts into one affordable loan payment.
• Debt consolidation loan: Those with an adequate credit score may qualify for a consolidation loan. You should shop around to find one with the lowest possible interest rate.
• Borrow from a friend or family member: Keep in mind that financial agreements can have a negative effect on relationships—even among close friends or family.

Bankruptcy

Those who have accumulated a debt load that is insurmountable may consider contacting an attorney who is experienced in bankruptcy law. This is generally considered a last resort, as it has long-term negative effects on your ability to obtain credit. Bankruptcy is a legal process that may allow you to eliminate credit card debt, medical bills, and other unsecured debts. Your attorney will advise you on whether a Chapter 7 or Chapter 13 bankruptcy is best suited for your situation.

Attorney for Bankruptcy in Georgia

For over 20 years, the Law Office of Jeffrey B. Kelly has assisted clients struggling with significant financial debt by helping them obtain a fresh start. The practice has expanded to offer six convenient locations in Georgia. For a complimentary case evaluation, contact our office or call (770) 637-1756 today.

One of the most common mistakes I see people make is that they will borrow against their 401K to pay off credit card debt or medical debt.  Within a short period of time, they realize that they are not going to be able to make the 401k loan payment.   Trying to get by, they skip other important bills like car payments and house payments.  Then, they come to my office to file Chapter 13 to save the house and car.  The reason I feel so bad for these people is because we could have wiped out the credit card debt and the medical debt in a Chapter 13 or a Chapter 7 but now we are stuck with this 401k payment that they cannot afford.

Defaulting on the 401k loan is a bad idea because of the tax penalties. When a person defaults on a 401k loan, they will have to pay the government taxes that they otherwise could have completely avoided if they had never taken out the 401k loan to begin with.

I recently met with a couple from Dallas GA who had about $50,000.00 save up in their 401k. After the husband lost his job, they slowly borrowed against the 401k to make payments toward their credit cards and other living expenses. Unfortunately, they did not come to see me until they had exhausted all of their 401k. Not only did they no longer have any money in their 401k but they also now had over $20,000.00 in tax penalties for the withdrawal. If they had been in a position to pay back the 401k loans, there would have been no penalties. Unfortunately, the husband was not able to find another job.

Your 401k is meant for your retirement.  Don’t ever treat it like an emergency fund.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment