More in Minnesota have health coverage but still can't afford to be sick

The number of Minnesotans struggling to pay their medical bills is rising sharply, despite an increase in the number of residents who have health insurance.

In the past year, Minnesota's main hospital and clinic groups filed nearly 9,000 lawsuits against people with large or long-standing medical debts — a sharp increase since 2005, according to a Star Tribune analysis of court records.

Once a leading cause of personal bankruptcy in the United States, medical debt was widely expected to decline as more Americans got health insurance following federal health reform. Instead, shifts in the insurance market are pushing more people toward high-deductible policies that can require them to pay as much as $7,500 before any insurance benefits kick in.

"Patients are being exposed to a greater proportion of their bill," said Dan Fromm, chief financial officer of Minneapolis-based Fairview Health Services. "That is certainly a factor in what we are seeing in our bad debt."

The same pressures appear to be squeezing consumers across the country. A recent study by the New York-based Commonwealth Fund estimated that more than 31 million Americans were under-insured in 2014 — unable to afford the cost-sharing that is now often a part of getting sick.

The study found that people who are under-insured face many of the same problems associated with those who are not insured. Half owed money for health care or were paying off medical debt, one-third took on credit card debt to pay medical bills and 44 percent had avoided needed medical care.

Rising out-of-pocket costs now threaten to offset some of the gains made by a large increase in the number of Americans with health coverage, said Sara Collins, a health economist and vice president at the Commonwealth Fund.

"What is concerning is the fact that people's deductibles have been increasing," Collins said. "That is really a threat to seeing an improvement in the rates of underinsurance over time."

In Minnesota, the share of people with health insurance has climbed to 95 percent from 91 percent since 2013, as the federal Affordable Care Act has taken hold. But insurers such as Blue Cross and Blue Shield and Medica have competed hard to hold down premiums as more people shopped for coverage; one way to do that is to offer more products with high deductibles and other forms of "co-insurance."

Private sector employer health coverage almost universally imposes deductibles in Minnesota; 95 percent of plans have them, according to Stefan Gildemeister, health care economist at the Minnesota Department of Health.

That's up from 52.8 percent in 2002 and significantly higher than the national average, Gildemister said.

As a result, even those with health insurance can face out-of-pocket costs that run to thousands of dollars, and health care providers, big and small, are seeing more bills that are left unpaid.

Court cases filed by health firms seeking repayment have more than doubled since 2005, according to a Star Tribune analysis of state court records.

Last year, those firms filed 8,900 lawsuits seeking at least $19 million in delinquent accounts.

By comparison, in 2005 they initiated 2,475 court cases to recover $8.4 million.

Nearly one-half of all cases were filed by three of Minnesota's biggest and busiest health care systems: Fairview Health Services; Minneapolis-based Allina Health, which owns Abbott Northwestern, Unity, Mercy and other hospitals; and the Mayo Clinic in Rochester and its subsidiaries.

Fromm said the increase in court filings doesn't reflect a change in collections strategy.

Fairview's collections activity "tends to be with patients who have some form of insurance that have high deductible levels," Fromm said.

Allina said its bad debt expense, including accounts written off as uncollectable, has increased 50 percent, or $30 million, since 2009.

It points to qualified health plans formed under the Affordable Care Act (ACA), some of which have low premiums but high deductibles.

"We believe this is due in part to the fact that many people who were uninsured before the ACA are now insured with very high deductible plans and cannot afford the self-pay portion," said Allina spokesman David Kanihan.

Taking a debtor to court is typically the last step in the collections process, and often happens when a debt is a year or more past due.

In a typical Minnesota case, debtors owed their medical providers on average about $1,575 in 2014, up from $1,200 in 2005.

With a judge's approval, the creditor can get permission to recover money by garnishing a debtor's wages or savings accounts.

Even with that power, only about one-quarter of cases are paid off within one year. After several years the recovery rate ranges between 40 and 50 percent, according to court records.

Glenn Howatt • 612-673-7192