Financial Health: A Cause and Effect on Personal Health and Financial Insecurities By Bernice Wilson, Resource Management Specialist

Financial debt and the inability to afford health insurance causes stress that can result in headaches, depression, heart attacks, an increased level of anxiety, and nervousness in the human body. In March of 2007, the United States Census Bureau used the Small Area Health Insurance Estimates (SAHIE) for counties and states to determine the health insurance status of individuals across the nation. This model estimated Alabama to have 3,713,503 insured citizens and 666,441 uninsured citizens, which is equivalent to 15.2 percent of its population. Uninsured individuals are defined as persons not covered by any type of health insurance for a year.

Earlier this year, the Employee Benefit Research Institute (EBRI) provided some realistic estimates on how much savings is needed to cover health expenses in retirement. These estimates consider factors, such as gender, marital status, age, and whether a former employer provides any help with retiree health insurance. Savings needed to meet retiree health expenses at age 65 are estimated as follows:

• Single men should save $331,000.00.
• Single women should save $390,000.00. Note: Women have a higher life expectancy rate than men.
• Couples are expected to save $635,000.00.

EBRI further stated that these numbers may seem a bit high; however, they are based on a 90 percent chance of having enough money in retirement to pay for health costs. In other words, there is a 10 percent chance that individuals will not have enough money to meet health insurance needs. So far, considerably less is needed if you are willing to accept a 50-50 chance of having enough money for health insurance. However, these estimates do not include any savings for long-term care, nor do they include basic living costs for food, clothing, or shelter. Therefore, additional funds are needed just to meet the cost of living.
If the SAHIE are accurate, then 15.2 percent of Alabama's uninsured population is at a disadvantage when it comes to health and personal finances.

Research has proven a direct correlation between health, including mental health, and how financially secure an individual might be. Drentea (2000) examined how credit card debt contributes to stress and the correlation between "age, debt, and anxiety." A sampling of subjects in Ohio revealed that "anxiety does increase with the ratio of credit card debt to income, and with being in default; but credit card debt accounts for little of the age-anxiety association. Stress regarding overall debt does explain some of the age effect. In addition, stress also explains some of the effect of the credit card debt to income ratio, and all of the effect of default on anxiety." In other words, in the life of an individual where debt is an issue, debt causes anxiety and stress, and anxiety and stress could affect a person's overall mental and physical health. A younger adult may experience more anxiety and stress financially because of the demands and responsibilities encountered during their life cycle.

Researchers O'Neil, Prawitz, Sorhaindo, Kim, and Garman (2006) stated that "self-reported health effects of financial problems included anxiety, insomnia, headaches, and depression, as well as inability to afford or access recommended health maintenance practices and health care services." The researchers go on to say that "poor health can result from or result in financial distress, or both." For example, overdue medical bills can delay medical treatment and lead to inadequate treatment or stress. Consequently, a person's credit history can be damaged without the means to pay for medical care, which causes stress.

Small reductions in the cancer and heart disease cases can save Americans trillions of dollars according to University of Chicago economists Murphy and Topel (2003). Obesity, now considered a national epidemic, costs the country billions of dollars in medical costs and productivity (U. S. Dept. of HHS, 2004). According to the Centers for Disease Control and Prevention (U.S. Dept. of HHS, 2003), a 10 percent weight loss could reduce an overweight person's lifetime medical costs by $2,200-$5,300K.

In a video transcript, Dr. E. Thomas Garman, professor emeritus and fellow of Virginia Tech University (2008), cited a number of studies that demonstrated a direct correlation between stress and financial difficulties.

In closing, health problems caused by financial distress could potentially cost employers and uninsured persons lots of money. Adopting healthy habits such as good nutritional diets and physical activity can improve your quality of life, while reducing stress and potentially high medical bills.

Fronstin, P., Salisbury, D., and VanDerhei, J. (May 2008). Savings needed to fund health insurance and health care expenses in retirement. Employee Benefit Research Institute. Retrieved October 10, 2008.

Murphy, K. M. and Topel, R. H. (2003). Measuring the gains from medical research: An economic approach. Chicago: University of Chicago Press.

O'Neil, B., Prawitz, A. D., Sorhaindo, B., Kim, J., & Garman, E. T. (2006). Changes in health, negative financial events, and financial distress/financial well-being for debt management program clients. Association for Financial Counseling and Planning Education, 17, (2). 46-63.

O'Neil, B., Sorhaindo, B., Xiao, J. and Garman, E. T. (2005). Financially distressed consumers: Their financial practices, financial well-being, and health. Association for Financial Counseling and Planning Education. Retrieved September 3, 2008.

United States Census Bureau 2000. (March 2007). Health insurance coverage for Alabama counties, 2000: Experimental. Retrieved October 10, 2008.

United States Department of Health and Human Services. (2003). Preventing obesity and chronic diseases through good nutrition and physical activity. Preventing Chronic Diseases: Investing Wisely in Health. Retrieved October 8, 2004.

United States Department of Health and Human Services. (March 9, 2004). Citing "dangerous increase" in deaths, HHS launches new strategies against overweight epidemic. News Release. Retrieved October 10, 2008.

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