Help your employees steer clear of medical bankruptcy
As challenging as it is to put money away in an emergency fund, it becomes nearly impossible in the face of a financial disaster.
Medical bills drive 530,000 families to bankruptcy each year, as reported by the American Public Journal of Health. It’s a sad, frightening state of the economy when the best option Americans have is to declare bankruptcy, or they’d otherwise drown in medical expenses.
It’s no wonder; adequate health care coverage is becoming largely out of reach for the majority of Americans. For the first time in history, the cost of family health coverage in the U.S. now tops $20,000. Many employers share a percentage of the health care premiums, but the average contribution for an American worker is $6,000 for a family plan. And this $6,000 premium doesn’t include co-payments, deductibles and other forms of cost-sharing when a medical emergency arises.
Related: Bernie Sanders proposes writing off $81B in medical debt
Another alarming statistic is disability insurance (or lack thereof). Only one out of five consumers own disability insurance, so it makes sense that one of the top five concerns for consumers is paying for basics if becoming disabled. It’s even more frightening that only 48 percent of American workers indicate they can cover three months of living expenses if they are not earning any income.
The APJH study concluded that 66.5 percent of bankruptcies were tied to medical issues. Either the individuals couldn’t pay their medical bills because they were too costly, or they had to take time off work and were not being compensated.
The time to save is now
As challenging as it may seem to put money away in an emergency fund, it becomes nearly impossible to save in the face of a financial disaster. Without an emergency fund already in place, individuals often have little choice but to turn to credit resources. Based on FinFit’s member assessment data, only 27.9 percent of employees are focused on setting up an emergency fund.
It is now more important than ever for employers to help employees save for a medical emergency, including helping them set up a specific savings fund. Having a specific savings fund dedicated to medical expenses will alleviate the temptation to dip into that fund for other expenses. Employees that have access to an HSA (health savings account) through their participation in a high-deductible health insurance plan is a bonus. Encourage them not only to set up an emergency savings account, but also to contribute to their HSA.
As an HR professional, it often falls on your shoulders to help educate your employees on the different health insurance plans available to them. Health insurance is not one-size-fits-all, and it is important for employees to understand their options and select the plan that works best for them. This often starts with making sure you have a full understanding of each of the options to answer any questions an employee might have.
Employers, especially HR professionals, have a huge opportunity to help employees create overall financial stability and well-being. The good news: your employees want your help with their finances.
- 57 percent of employees want guidance and coaching to validate their financial decisions.
- 3 in 5 employees said they would be comfortable sharing financial information with their employer or an appropriate third party for personalized financial guidance.
You can never offer too much when it comes to financial wellness
Employees want access to resources that will help them improve their financial situation and overall quality of life. Sometimes they just don’t know where to start. There are so many excellent financial resources you can make readily available to your employees with little to no administrative burden on your organization.
Financial wellness programs have tangible, valuable solutions and services, like certified financial counselors, whereby employees will see immediate return on their investment. Financial coaches can provide personal recommendations and professional guidance to help employees navigate difficult situations that arise, like medical emergencies. Oftentimes they provide additional resources, worksheets and checklists to ensure employees have a clear path forward and stay the course.
Financial wellness programs can also offer budget calculators and online budgeting tools to assist employees when it comes to how much they can save. Many budgeting dashboards will break down employees’ cashflow so they can see exactly where their money is going, including medical expenses. They’ll be able to track trends and better assess the funds they’ll need to put away to afford future expenses.
The key to encouraging your employees to save, for medical emergencies or otherwise, is creating behavioral change. If you can motivate your employees to get in the habit of saving, it will become easier to put small amounts of money away. Over time, they’ll see their savings build and they’ll want to save more. Many financial wellness programs offer incentives and rewards to create engagement and drive behavioral change. It doesn’t all have to fall on your shoulders, but it is your responsibility to seek out the resources your employees need.
David Kilby has been president of FinFit since it was founded in 2008. He has grown the company from a single idea into a leading financial wellness benefit platform. Prior to FinFit, David led a multimillion dollar financial holding company where he was inspired to find ways to help employees improve their financial health.
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