Covering Your Assets: Asset Protection for Patients

In a new and ironic twist, a growing number of individuals are now legally protecting themselves from their doctors. The idea may be surprising, but with rapidly disappearing...

No one doubts that there is a monumental crisis in healthcare coverage. Forty-five million Americans have no medical insurance, and even those with group or private policies are sometimes stuck with unexpected and un-payable bills. Higher deductibles and copays can easily balloon out-of-pocket costs beyond anything anticipated.

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. 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.

Unfortunately, despite a few notable fines and lawsuit settlements, these hardball tactics appear to be the normal course of business for at least some insurers.

When Patients 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 fi led against the patient’s home and bank accounts. In most states, a percentage of the debtor’s employment earnings can be garnished. Generally, before this point is reached, the patient files for personal bankruptcy to stop the wage garnishment and wipe out the medical bills and other accumulated debts. But that requires the patient to give up all of his or her assets, including savings accounts, real estate, and home equity. These assets, except those that are specifically exempt, are then turned over to the court and divided among the creditors.

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 that 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.”

How Patients Protect Themselves

Th e high level of financial risk posed by an unpredictable medical event is prompting patients 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 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.

Closing Arguments

Of course, the real solution to the problem is for everyone to have affordable insurance that covers any healthcare costs. However, it’s almost impossible to imagine a scenario in which competing financial and political interests would be able to agree and implement a worthwhile plan, at least for the foreseeable future. For now, many believe that their only reasonable choice is asset protection to minimize these risks. Early planning and advice from a knowledgeable local attorney are essential to the success of these measures.

Robert J. Mintz, JD, is an attorney and the author of the book Asset Protection for Physicians and High-Risk Business Owners. To receive a complimentary copy of the book, call 800-223-4291 or visit