The study looked at 2007 bankruptcy filings, which meant the bankruptcies occurred before the current economic downturn kicked in.

The study is a follow-up on a 2001 study, which showed that medical problems led to 46.2% of all bankruptcies. The 2007 study found that more than 60% of all bankruptcies were driven by medical problems — which is a huge increase from 2001.

Researchers at Harvard Medical School, Harvard Law School, and Ohio University examined a random sample of 2,314 bankruptcies filed across the country in 2007. This was the first-ever nationwide sample, since the 2001 study covered only 5 states. The researchers abstracted the court records and subsequently interviewed 1,032 of the filers. Bankruptcies were classified as “medical-related” according to the stated reasons for filing, the loss of income as a result of illness, and the size of medical-related debts.

In more than 9 out of 10 cases, the bankruptcy was a direct result of high medical bills. Many families who had continuous coverage were actually under-insured and therefore had to pay for thousands of dollars in out-of-pocket expenses.

For all medically bankrupt families, average out-of-pocket medical expenses totaled $17,943. It was higher at $26,971 for uninsured families and $17,749 for families who had private insurance from the start. But for those who initially had private insurance but later lost it, the average expense was $22,568.

The risk to most families is that virtually all insurance is indexed to employment. Once continued employment is threatened, e.g. by a medical event, the insurance coverage is also put at risk. On a national basis, almost one-fourth of firms immediately cancel insurance coverage when an employee is stricken with a disabling illness, and another quarter cancels coverage within a year. This puts the burden of medical costs on the employee.

For families that choose to purchase high-deductible health plans, hoping to reduce their monthly premium payments, there is another hidden risk. An investment firm surveyed employees working at various companies who had bought high-deductible health plans and found that about 50% of them chose not to seek medical care when they suffered minor illnesses. The reason: to avoid the out-of-pocket expenses.

In exchange for lower monthly premiums, high-deductible plans usually make the policy holder pay for the first $1,000 to $5,000 in medical expenses before the insurance company takes over. The danger is that small problems if left unattended can grow into big problems.

American families may have to take another look at their health insurance coverage.

Safety Tips:

• Review your policies carefully. There comparison websites that can help you evaluate your policy.
• Avoid over-applying. If you submit many insurance applications, your chances of getting turned down increase and the negative impact on you will be great. It is better to apply only for the health plan that you are most inclined to get.