How Medical Debt Impacts Employee Well-being

Medical debt is a significant challenge for many workers in the United States. With rising healthcare costs and inadequate financial protections, a considerable percentage of employees struggle to pay their medical bills. The repercussions of this issue extend beyond individual financial distress, affecting workplace productivity as well. Fortunately, employers are uniquely positioned to support their employees’ financial well-being and alleviate medical debt.

The Burden of Medical Debt

Medical debt imposes a significant burden on numerous Americans, causing significant financial strain. A substantial portion, approximately 37% of U.S. employees, find themselves grappling with this type of debt, while about 32% struggle to meet their medical bill payments. Moreover, the escalating costs of healthcare have led to a surge in medical bills being sent to collections. Even with health insurance coverage, individuals still confront mounting debts due to high deductibles, out-of-network charges, and expenses surpassing out-of-pocket maximums. Consequently, medical emergencies, chronic illnesses, or extended hospital stays can spark a financial crisis for a considerable number of employees.

Why Are Workers Struggling With Medical Debt?

For most Americans with outstanding medical debt, the debt arises from a single illness or medical procedure rather than recurring care. Rising healthcare costs are a primary reason for the current prevalence of medical debt. Research from the Kaiser Family Foundation indicates that average deductibles have more than doubled in the last decade. Furthermore, as of 2020, over half of U.S. workers were enrolled in high-deductible health plans, a significant increase from 35% in 2015. Simultaneously, health premiums continue to rise for many Americans.

Inflation and the escalating cost of living further strain workers’ financial reserves. Less than half of Americans possess enough savings to cover an unexpected $1,000 expense, leaving many individuals vulnerable to medical debt. While many employees have employer-sponsored health insurance, these plans do not always provide adequate financial protections. In some cases, those with employer-sponsored health plans are considered underinsured, leaving them susceptible to substantial medical bills. Underinsured employees are less likely to seek timely medical care, leading to costlier treatments down the line, ultimately increasing employers’ healthcare expenses.

Medical Debt’s Impact on Employees

Rising healthcare costs prompt many insured workers to postpone necessary care to avoid medical debt. One-third of employees skip preventive checkups, follow-up care, and scheduled procedures. Consequently, workers’ physical and mental health suffer, resulting in increased emergency room visits and higher healthcare costs for employers and employees.

Moreover, medical debt has adverse effects on employees’ performance. Financial stress stemming from medical debt can lead to distractions at work, depression, or anxiety. Employees burdened with medical debt often allocate funds intended for essentials like food, housing, and education towards their debt repayment. Financially stressed workers typically exhibit reduced productivity, struggle to complete daily tasks and experience strained relationships with their colleagues. These declines in productivity can prove costly for employers.

Strategies for Employers to Address and Mitigate Medical Debt for Employees

Employers have a unique opportunity to address and mitigate medical debt among their employees. Employers can proactively support their workforce by implementing strategies such as promoting healthcare consumer education, helping manage healthcare costs, and tailoring benefits. These efforts not only alleviate the burden of medical debt but also enhance productivity, job satisfaction, and employee retention. For comprehensive healthcare resources and guidance, employers can reach out to their Account Manager or contact us here.