The Medical Debt Dilemma
A Ubiquitous Problem

As medical debt is pervasive in nearly every corner of society, stakeholders across the healthcare continuum are urged to aid consumers in figuring out how to better predict and manage their healthcare costs.

Both public and private entities are aware of the problem and working towards solutions. Yet despite progress, few demonstrable results have emerged.

Employers who take advantage of transparency data, benefit design, and targeted mental well-being programs can holistically address the problem and mitigate the impact of healthcare costs and medical debt


The call for new strategies and solutions to address the prevalence of medical debt has been broadcast far and wide. As this type of debt is directly related to the exuberant cost of American healthcare, it’s attracted the attention of public entities and recently spurred significant legislative action.


The No Surprises Act, which took effect on January 1, 2022, put consumer protections in place against unexpected charges for certain emergency and out-of-network services. Six months later on July 1, the Transparency in Coverage Final Rule issued by the Centers for Medicare and Medicaid Services (CMS) began requiring carriers and payers to publish their pricing for healthcare services. Both efforts followed rules requiring hospitals to provide pricing information that began in 2021.

The goal behind these unprecedented actions was for legislation to lift the veil of secrecy shrouding charge masters and negotiated rates to foster competition across hospital systems, carriers and payers. This in turn would result in lower overall prices. It was further reasoned that having access to pricing structures before seeking care would foster an environment friendly to healthcare consumers. Knowing complete cost information up front before agreeing to accept a medical service or procedure would lead to predictable spending and shopping behavior. In short, it would make searching for medical care consistent with the acquisition of other goods and services.

The economic reasoning behind this is that once purchasers have all of the information on quality and price, they will take steps to seek out only the most proven and affordable care. Consequently, the market would then put pressure on lower-quality performers and higher-cost providers. At a sustained rate, this pressure would force changes given that no one would knowingly pay for an inferior service at a higher cost.

Ideally, were this shift towards comparison shopping extrapolated across all payers – from self-funded employers with 100,000 employees or carriers insuring millions, all the way down to the rank-and-file individual with a standard HDHP – the entire healthcare system would be transformed. In due time, the vast variations across provider quality and costs for services and procedures would be reined in and we would see dramatic decreases in healthcare-related expenditures.

However, this hasn’t happened yet.

“One of the main reasons we haven’t seen healthcare costs coming down yet is that the data that’s been released so far is so vast and so confusing that outside of data aggregators, no one can make any sense of it,” says Heidi Cottle, SVP of Cost Containment at NFP. “We’re talking petabytes of spreadsheet data that couldn’t be less friendly to consumers, let alone employers.”

Ease of use is an important consideration in most technological endeavors, but it's essential when disrupting a system with as much complexity as American healthcare. Think of how simple Amazon is to use and what it would be like if payers and providers had something similar to work with. There is no more effortless shopping experience on Earth than what Amazon has perfected. They effectively engage the consumer, personalize recommendations and compare costs for similar products and highlight other products that likely fit your needs with complete detail.

To really innovate, this data must be leveraged so it’s similarly user-friendly to employers, health systems and individual patients. Organizations that achieve this while keeping the customer experience top of mind will have the most success in negotiating the lowest prices and identifying the highest-quality care. Remember, the cost of premiums and deductibles doesn’t continue to rise because of utilization but because of rising healthcare prices.


“We can use applied data analytics and really drill down to individual procedures and services to examine pricing variation across facilities and practitioners,” says Heidi. “We can even create analyses that allow employers to verify price differences across insurance carriers and payers, hospitals, and health systems within their region. We can very clearly demonstrate opportunities where companies can save money. But if we don’t deliver a great experience for them and demonstrate value, the large-scale change we need to better contain healthcare costs will continue to lag.”

The private sector, specifically employer-sponsored health plans, has been wrestling with healthcare costs for decades. Many organizations struggle to provide a benefits package that fits comfortably within their budget yet is attractive to current and potential employees. This struggle has forced them to shift higher premiums and deductibles onto their employees to reduce overall plan costs, a move that has had the unintended consequence of creating additional employee exposure to medical debt. The most recognizable example of this shift is the high-deductible health plan (HDHP).

The HDHP is becoming the standard coverage option for many in the United States. In fact, for some employers, it’s the only insurance option they offer. These plans help balance the benefits budget for employers and, in theory, incentivize employees to make better healthcare decisions and avoid wasteful spending, given that it’s their money on the line. As a result, employers are happy because their costs have decreased. Initially, employees were also happy that their premiums had gone down. Over time though, these plans and their frighteningly large deductibles have actually forced more people into medical debt.

It’s something of a catch-22 — as employers want to shield employees from high out-of-pocket health costs, they provide health insurance. However, as deductibles and premiums keep going up, employers have to shift more costs to the employee, which drives more people to HDHPs, which exposes them more to high out-of-pocket costs.

People tend to choose HDHPs because the premiums are less expensive than a traditional PPO or HMO and often because it’s all they can afford. However, these savings come with many costs. People are saving money on their monthly premium, but because of the deductible, they’re often either putting off the care they need or avoiding it altogether, which puts them at even greater risk. This creates a gap between the care employees are receiving and the recommended care that they actually need.

Identifying and understanding this gap starts with education. As any HR professional can attest, many employees do not fully understand the benefits they’re currently enrolled in, let alone the benefits available to them. When insured workers skip “free” preventive health screenings and wellness visits because they’re worried about the “cost,” it’s obvious that something is wrong.

An education initiative focusing on supporting employees and helping them make good benefits decisions should easily align with an organization’s overall strategic goals. At a bare minimum, stressing the importance of preventive, no-cost care should be an essential part of your message. To further soften the phrase “high-deductible,” offering voluntary benefits and demonstrating how they can fill potentially expensive gaps in coverage can help alleviate some of the fear associated with healthcare costs. Ensuring your employees understand how benefits like critical illness, hospital indemnity and accident expense insurance perfectly complement an HDHP can ultimately help them fill in the gaps that cause people to go into medical debt in the first place.

Medical debt can not only cause people to delay care, but it can also cause significant stress, which alone has the potential to harm mental well-being, worsen health, and shorten lifespans. “We all have some kind of debt, right? But medical debt is an entirely different animal. Typically, it’s related to some unexpected health event that is completely out of our control. Usually, our health and well-being, along with our pocketbooks, pay the price.” says Deb Smolensky, Well-Being and Engagement National Practice Leader.


When people feel overwhelmed and powerless due to things out of their control, they often look for a way to cope. To relieve some of the pressures of everyday life, a person might read a book, go for a walk or even just let their mind wander. Nearly everyone does this or something similar. Escapism is the most widespread coping technique to deal with life’s difficulties and challenges. Although positive forms of it (such as listening to music, exercising or meditating) can reduce stress, there are other, far less healthy negative forms.

“When we start feeling really stressed out, most of us are prone to entering an unhealthy mode of thinking that, in my book, I call ‘brain-off.’ This is the point where we start making poor behavior choices and unwise decisions. In some cases of constant extreme stress, people are unfortunately turning to eating, drinking or smoking to cope with those feelings of being overwhelmed and powerless.” says Deb. Indeed, this brand of self-destructive behavior is unfortunately all too common.

Being a person these days is tough, and most need help. People are trying to juggle the demands of their job with things at home like caregiving responsibilities, maintenance needs and staying connected with a spouse or child. When medical debt gets tacked on along with the responsibility of having a mortgage, car payment or student loan, it can have a measurable impact on physical but especially mental well-being.

“Most people don’t really consider how our brains respond to stress,” said Deb. “And this (medical debt) is yet another life stressor causing many people to more or less just shut down. By the time we get to this point, we’re already so exhausted from putting out fires at home and at work that a lot of times we just don’t want to think about anything.”

Part of that is because most people don’t know how to pump the brakes when stress becomes chronic. The human brain is simply not built for all of the problems in today’s modern world and often responds as though it’s being threatened. Engaging in higher-order thinking or, as Deb calls it, being “BrainOn!” helps tamp down that primal, emotional part of the brain that causes responses to danger or threats.

“If you can learn how to protect and regulate your brain’s energy,” said Deb, “you can actually create these structural changes in your brain that are proven to improve social skills and, more importantly, reduce stress. Ultimately, good things happen to people that take good care of their brains.”


With 100 million Americans having some type of medical debt, this problem has become ubiquitous. Recent legislation has created opportunities for employers, carriers and other payers to compare pricing for the first time. With this information and other tools at their disposal, employers are in a unique position to help employees better predict and manage healthcare costs and may even be in a position to move the needle nationally.

Take Advantage of the Data

With the new data available, employers can compare and contrast their current costs for specific services against actual claims data paid by other payers and carriers to hospitals and other providers. By analyzing normalized and clinically mapped benchmarked data with a trusted, expert partner, employers can clearly see if they’re paying reasonable prices. This level of transparency can empower employers to verify price differences and be put in an informed position to negotiate for better pricing.

When enough employers negotiate for the best rate and the highest quality care, even against the grain of consolidated hospital systems and commercial insurers, the pricing dynamic should change for the better. This would likely result in the first significant step in a long time towards lowered costs for employers and tangible savings for employees.

Take Advantage of Voluntary

Employees need to be educated to take advantage of all that voluntary benefits offer. Such a strategy needs to be prefaced by ensuring they understand the role and cost of preventive health screenings and visits. Initiatives then focused on how HDHPs work alone and in tandem with voluntary benefits should help keep the costs associated with care top of mind for employees.

As employees are showing more interest in health-related voluntary benefits and ways to better prepare themselves to manage medical costs, it is an ideal time to emphasize the relationship between HDHPs and voluntary benefits. Coverage for critical illness, disability, and hospital indemnity comes at no cost to an employer. So, outside of the time it takes to set up the plan, it’s an expansion to an offering that helps manage costs and demonstrates a commitment to employees who want flexibility and financial security in their coverage.

Incorporate Mental Well-Being

Proactive health initiatives that educate employees and promote mental fitness, emotional well-being and resilience will be critically important for employees dealing with the stress of physical and mental health-related issues. In addition, employers that integrate mental well-being into their programs will see positive changes that can help employees better manage their health and, by association, think more strategically when it comes to medical expenses.

Because mental well-being programs focus on prevention and intervention, they can help reduce the burden of added emotional stress that typically accompanies medical debt. With brain health affecting every aspect of a person’s life, organizations should coordinate a mental well-being educational initiative in tandem with their well-being and benefits education efforts to address this problem holistically.