We have health insurance for several reasons, but one of the big ones is to protect us from high medical bills when we get sick. But insurance, it turns out, may not be the protection that many people think it is. Illness and medical bills are big reasons behind fully half of all personal bankruptcies, affecting about 700,000 households per year, according to a new study. And most of those households had insurance.

What the researchers wanted to know: Of the approximately 1.5 million bankruptcies each year, how many had illness or unpaid medical bills as a big contributing factor?

What they did: Researchers from Harvard Medical and Law Schools examined 1,771 bankruptcy filings from five different court districts all across the country, a representative sample of all bankruptcies. With cooperation from trial judges, they looked at the court records. They also got the people filing as debtors to fill out questionnaires about the reasons for their debt, and followed this up with telephone interviews. In addition, researchers personally interviewed a subset of these people in their homes.

What they found: These were working- class or middle-class people, and 76 percent of them had health insurance when they first got sick. (Many lost this coverage because the insurance was through their jobs, so it disappeared when they couldn't work.) Half of the bankruptcies were caused, in part, by illness and medical debt. Their median debt was about $16,500, and the major part of that debt was payments to doctors and hospitals. Families initially tried to pay the debt for several months, says Elizabeth Warren, a bankruptcy expert at Harvard Law School. Sixty-one percent went without needed medical care to make payments, 30 percent had a utility shut off, and 22 percent cut back on their food.

What this study means to you: Insurance is not the safety net many of us assume. A combination of illness, loss of job and income, and high medical bills can drive people into bankruptcy. "Insurance that disappears when you are sick is like an umbrella that melts in the rain," says physician David Himmelstein, one of the investigators.

Caveats: Medical debt is not specified as such in court records. So the researchers had to rely on questionnaires, phone interviews, and home visits to get the specifics. But those questionnaires were filled out in the middle of a court filing, when debtors were under penalty of perjury. "At few other points in life are full disclosure and honesty so aggressively emphasized," the researchers write.

Find out more: Find out more about health insurance problems by reading Living on the Edge by Susan Brink, U.S. News & World Report, Oct. 14, 2002.

Read the article: Himmelstein, D. U. et al. "Illness and Injury as Contributors to Bankruptcy." Health Affairs. Feb. 2, 2005, Web exclusive.

Abstract online: http://content.healthaffairs.org