As the health care landscape continues to evolve, Americans are grappling with ensuring their families are financially protected from a medical crisis, according to a white paper released today by Prudential Financial, Inc. (NYSE: PRU). The report,
Critical Illness Protection: On the Road to Financial Wellness
explores the role critical illness insurance can play in closing health care coverage gaps.
Critical illness coverage provides a lump sum payment upon diagnosis for a predetermined set of critical illnesses to help cover medical and non-medical expenses.
“There are three significant factors pressuring financial wellness and widening coverage gaps,” notes Bob Patience, vice president of voluntary benefits, Prudential Group Insurance. “Many families don’t have savings sufficient to cover the out-of-pocket expenses associated with a critical illness, health care costs are projected to continue to rise faster than inflation, and many employers continue to shift more healthcare costs to employees.”
About half of U.S. households have savings less than $10,000. Nearly half of households reported they would not be able to come up with $2,000 in cash within 30 days, if needed. Inadequate saving, increasing health care costs, and shifting of responsibility for health care costs to employees have led to financial distress and bankruptcies for many households. Sixty-two percent of all bankruptcies are based on a medical event, and the share of bankruptcies due to medical problems rose by 50% between 2001 and 2007. Surprisingly, 78% of those individuals in bankruptcy due to medical costs had health insurance, yet their average out-of-pocket medical expenses were nearly $18,000.
“Critical illness insurance can help a family maintain its financial wellness by providing funds to pay any expenses, whether they are medically related or not,” Patience added. “The majority of out-of-pocket expenses incurred during a serious illness are non-medical, including transportation for treatment, and medically necessary renovations to a home.”