Catastrophic illnesses are claimed to have triggered approximately half of all personal bankruptcies in the United States. According to recent findings from a Harvard University study, most people who go bankrupt because of medical problems also have health insurance. Researchers found that many private insurance plans that offer limited catastrophic coverage were inadequate and offer little financial security for less severe illnesses.



Questionnaires were distributed to 1,771 bankruptcy filers in 2001 in California, Illinois, Pennsylvania, Tennessee and Texas. According the study, a total of 1.46 million personal bankruptcies were filed in the United States during 2001.

Nearly 1,000 individuals questioned gave detailed interviews about their financial and medical circumstances. Sickness and rising medical bills were cited as the cause, in part, for 46.2 percent of the personal bankruptcies. The numbers grew to 54.5 percent when an additional three other factors were included as triggers for medical-related bankruptcies: birth, death and gambling addiction. The study assessed that medical bankruptcies currently affect approximately 2 million Americans annually, including 700,000 children.

The study also cited that a majority of individuals looking for court protection from creditors had health insurance, with more than three-quarters reporting they had coverage at the beginning of the health catastrophe that triggered their bankruptcy. The study also found that 38 percent of the participants had temporarily lost coverage by the time bankruptcy was filed, with catastrophic sickness or injury frequently leading to both job and insurance loss.

Unfortunately, it's become apparent that, for many Americans, serious illness often leads to job loss, which also means loss of health insurance. High-priced coverage through COBRA, while well intentioned, is meaningless if people can't afford to pay for it. Bankrupt families also lose more than just assets. One out of five families goes without food. A third had their utilities shut off, and nearly two-thirds skipped needed doctor or dentist visits.

The study's findings also indicated medical-related bankruptcies often hit middle-class families hard; with 56 percent of the filers being college graduates who owned a home. The study did not, however, examine how many bankruptcy filers were from dual-income families, where both partners had medical insurance.

The Harvard findings echo previous studies which have generally reported that a majority of bankruptcy filers cite medical problems as a primary cause of bankruptcy, as well as other factors, including easy credit, job loss and financial mismanagement.

Many health insurance experts suggest that the Harvard study did not adequately explore the role disability income protection plans and personal savings can play in helping individuals with medical problems avoid bankruptcy.

If you're uninsured, concerned about your current individual health plan's catastrophic coverage, or simply tired of paying an arm and a leg for major medical health insurance, you should take a look at the revolutionary comprehensive individual health insurance solutions created by companies specifically for young, healthy individuals.