Why Insurance Fails to Protect Americans From Medical Debt

Having health insurance is no guarantee of avoiding medical debt, according to a recent study.

About one-third of working-age Americans who have health insurance also have outstanding medical bills or debt, according to a Sept. 17 survey conducted by Commonwealth Fund, a private healthcare foundation.

That includes people with an employer-sponsored health plan, an individual health plan, or Obamacare, according to the report.

Hospitals are the main creditors, the survey found. Sixty-four percent of insured people with medical debt said it was from hospital services such as inpatient care, outpatient care, and emergency department care.

Routine care added to the debt for many of the 4,000 survey respondents. That included doctor visits (43 percent), treatment for chronic conditions (39 percent), lab work or diagnostic tests (38 percent), and dental care (25 percent).

Nearly half reported having $2,000 or more in unpaid medical bills.

Most of those having medical debt laid the blame on insurance companies (64 percent) or the broader healthcare system (57 percent), according to the survey.

“When insured people are left owing thousands of dollars for their care, coverage is falling short of its most basic purpose: protecting people financially when they get sick,” wrote Sara Collins, coauthor of the report.

Here’s why having health insurance often fails to protect Americans from debt.

Coverage Denials

At least one in five adults or their family members experienced coverage denials, either before or after they were provided care from July 22 to Oct. 27, 2025, according to a June study from Commonwealth Fund.

A similar March study from KFF, a healthcare policy research center, found that 33 percent of insured adults had coverage denied between 2022 and 2024.

Common denial reasons include noncovered services, out-of-network providers, failure to seek prior approval, or a determination by the insurer that the treatment is not medically necessary, according to KFF.

Physician billing or administrative errors can also lead to claim denials.

“Minor data errors are the most common culprit for claim denials,” said Blue Cross Blue Shield in Texas in a report. That happens when a provider submits the wrong code, leaves information out, or has a patient’s name or birthdate wrong.

Among those who reported billing errors or coverage denials, fewer than half challenged them, mostly because they weren’t aware they had the right to do so, according to a 2024 Commonwealth Fund survey.

While about one-third of prior authorization denials in the Obamacare system were overturned after appeal, fewer than 1 percent of denied claims are appealed in 2024, according to KFF.

“Not everyone has the time, knowledge, or resources to challenge their insurer’s decision,” stated Alex Hoagland, assistant professor of health economics at the University of Toronto, in a 2025 Commonwealth Fund study.

Benefit Cuts

About 60 percent of working-age Americans got health coverage through an employer in 2025, according to KFF. That’s more than 165 million people.

But the cost to employers has been rising.

For 2027, employers are expected to pay more than $19,000 in healthcare premiums per employee, a nearly double-digit increase for the fourth straight year.

Employers have been scaling back the benefit as a result.

Nearly three-quarters of small employers (73 percent) are considering dropping group coverage benefits in 2027, according to a September survey from eHealth, an insurance agency.

More resilient larger employers may respond by “shifting costs to employees through higher deductibles, coinsurance, or restricted networks,” said Dr. Paul Fronstin, director of Health Benefits Research at the Employee Benefit Research Institute, in a January report.

Fewer employers are covering GLP-1s to treat obesity due to high costs, according to an August employer report from Business Group on Health, with coverage dropping from 72 percent in 2025 to 60 percent in 2026.

“That could preserve offer rates but reduce the value of coverage, potentially lowering take-up,” Fronstin stated.

“For workers, the impact could be significant, meaning higher out-of-pocket costs, greater reliance on public programs and increased financial insecurity tied to healthcare expenses.”

Higher Premiums, Cost Sharing

While employers pay the primary portion of premiums, employees cover about 20 percent, according to the U.S. Bureau of Labor Statistics.

Over the past decade, the contribution has increased more than 30 percent for single coverage (31 percent) and the family coverage average (37 percent). In 2025, workers’ annual contribution amounted to $1,440 for single coverage and $6,850 for family coverage, according to KFF.

Beyond premium payments, Americans are responsible for out-of-pocket costs including deductibles, copays, and coinsurance.

More than three-quarters (78 percent) of working-age adults are responsible for at least $1,000 in deductibles for most covered services before the insurer pays anything. Ten years ago, only 62 percent of insured adults had a deductible of $1,000 or more, according to KFF.

Coinsurance kicks in after employees meet deductible limits. Coinsurance payments average 20 percent of the charge for covered services. For hospital admission, that amounts to an average of more than $300 per day.

In addition, most of the working population must pay at least $20 in copays every time they visit a doctor for primary care, according to KFF. Average copays exceeded $300 for hospital admission and $180 for outpatient surgery in 2025.

Most plans have an annual out-of-pocket limit, beyond which the insurance company pays 100 percent of covered charges. The average out-of-pocket limit is $3,000 for 72 percent of workers and $6,000 for 21 percent in 2025, according to KFF.

At least half of adults with employer-sponsored insurance or marketplace coverage said their insurance was fair or poor when it comes to monthly premiums and out-of-pocket costs, according to an April report from KFF.

In 2024, nearly 23 percent of insured Americans reported that their insurers did not protect them from high out-of-pocket or unaffordable healthcare costs, according to the Commonwealth Fund.

The breaking point, beyond which an average American cannot pay their medical bills, is around $4,354, according to JG Wentworth, a financial service company.

Unexpected Medical Expenses

Patients can get a surprising bill when they receive care through out-of-network providers, when hospitals charge facility fees, or due to miscalculated prices.

About one in five adults had major, unexpected medical expenses in 2025, with most of the amount over $1,000, according to the Board of Governors of the Federal Reserve System.

Forty-five percent of insured, working-age adults received an unexpected medical bill in 2024 that they thought should have been free or covered by their insurance, according to the Commonwealth Fund.

“Unexpected medical expenses can push households into medical debt, particularly those with limited savings or unstable income,” stated the Commonwealth Fund in the September report.

More than a third of insured non-elderly would be unable to pay a $1,000 bill within a month for an unexpected medical expense, according to the Commonwealth Fund.

An unexpected expense of $500 represented a hardship for nearly half of adults in 2025, according to the Federal Reserve, potentially forcing them to borrow money or sell an asset in order to cover the expense.

“As a primary care physician, one of the most difficult things is seeing a patient who can’t afford something they truly need, whether it’s important testing, a critical follow-up visit, or necessary treatment. This can have real clinical consequences and be incredibly demoralizing for caregivers,” said Commonwealth Fund President Joseph R. Betancourt, M.D., in a statement.

“No patient should have to avoid or delay care or experience anxiety about medical bills and debt. We can and should do better. There are clear steps policymakers, insurers, and hospitals can take to ensure people can get and afford the care they need, when they need it most.”