The Asset Protection Law Center

Protecting Assets from Medical Expenses

Unexpected medical bills - from illness or injury are the single greatest threat to your savings.

According to a 2005 study by Harvard University, about half of the 1.5 million annual bankruptcy filings are caused by illness and medical bills. Surprisingly, three-fourths of people who file for bankruptcy had health insurance at the start of the illness which triggered the filing. "Unless you're Bill Gates, you're just one serious illness away from bankruptcy", said Dr. David Himmelstein, the study's lead author. "Most of the medically bankrupt were average Americans who happened to get sick" http://www.msnbc.msn.com/id/6895896.

Even the insured have unlimited risk of loss

Forty-five million Americans have no medical insurance and even those with group or private policies are often stuck with unexpected and even un-payable bills.

Higher deductibles and co-pays can easily balloon out-of-pocket costs beyond anything anticipated. A client of ours had $180,000 bill for an emergency trip to the hospital. His co-pay was $36,000.

People who think they have solid insurance, in a good plan, may find out, when it's too late, that their coverage doesn't go as far as they thought. Every day we hear stories from clients and in the news about insurers refusing payment during or after treatment. The company may claim that the physician was not a "contract" provider or the policy may be retroactively rescinded based on alleged misstatements in the original application. In a recent CBS News report about one of the nation's largest insurers, Richard Blumenthal, Connecticut Attorney General, declared that "The Company [Assurant Health] offers the illusion of coverage while challenging any large claim." In the report, a former claims adjuster revealed that it was company policy to scrutinize any significant claim, often manufacturing excuses to avoid payment.

In a recent CBS News report about one of the nation's largest insurers, Richard Blumenthal, Connecticut Attorney General, declared that "The Company [Assurant Health] offers the illusion of coverage while challenging any large claim." In the report, a former claims adjuster revealed that it was company policy to scrutinize any significant claim, often manufacturing excuses to avoid payment.

What if You Can't Pay?

What happens when a large medical bill can't be paid? Usually the outcome is a lawsuit filed by the hospital or collection agency with a judgment and a lien filed against your home and bank accounts. In most states, a percentage your employment earnings can be garnished. In most states, a percentage your employment earnings can be garnished. You can file for bankruptcy to wipe out these expenses but that requires that you give up all of your assets, including savings accounts, real estate, and home equity. These assets, except those that are specifically exempt, are turned over to the court and divided among the creditors.

How to Protect Yourself

The high level of financial risk posed by an unpredictable medical event is prompting many to take steps to protect their savings. For example, I recently met with a couple in their early 50s. They have about $300,000 of equity in their home and $200,000 in savings. The husband is self-employed and the wife works for a small company. Both are covered under her group plan, but the company may soon cut back or terminate the plan. Individual insurance policies may be available at that point but the cost and extent of the coverage is unknown. This couple's goal is to protect their savings from large, unexpected bills at any point in the future.

Asset protection, using techniques such as a specially designed family savings trust, can effectively shield savings, but the planning must be completed before disaster strikes. If bills have been incurred, or expenses loom, planning is too late at that point.

Read the complete article "Asset Protection for Patients" by Robert J. Mintz

If you would like to discuss your situation please e-mail us with the details or send us a Legal Services Request