Coronavirus could financially cripple many Americans

Americans’ health may not be the only thing at stake as the coronavirus continues its unrelenting spread in the U.S. The virus could also prove financially crippling for many individuals.

“There are all kinds of pathways for people to be financially affected by this,” said John Graves, an associate professor of health policy at Vanderbilt University.

There are more than 114,000 confirmed cases across more than 100 countries and regions. The U.S. has more than 750 confirmed cases of COVID-19 — the virus’ official name — and at least 26 Americans have died.

States such as California, New York and Oregon have declared states of emergency, several universities have suspended in-person classes and more and more businesses are encouraging employees to work from home.

Some health experts believe the situation in the U.S. will become much more serious in the coming weeks.

One of the most acute financial strains for Americans if they get the coronavirus will be related to cash flow — the loss of a paycheck for those who can’t go to work or dramatic reductions in revenue for business owners whose foot traffic evaporates, according to experts.

The U.S. is one of the only developed countries that doesn’t require workers to get paid time off when they’re sick.

Roughly a quarter of working Americans don’t have paid sick leave, according to the Bureau of Labor Statistics. Low-income Americans are much more at risk — only 31% of the bottom tenth of wage earners get paid sick days, while 94% of the highest earners enjoy the benefit.

Further, 54% of Americans report not being financially prepared to manage a contagious disease outbreak that furloughs them for several weeks, according to Prudential Financial.

“I think the major thing is, essentially being out of work for 14 days for most Americans is a very strong financial hit that many people can’t absorb,” said Gerard Anderson, a professor of public health at Johns Hopkins University.

“If people, for financial reasons, are reluctant to go to the hospital or doctor, the epidemic can spread much faster,” he said.

Some policymakers and employers are stepping in to alleviate the financial pain.

For example, New York City will give zero-interest loans of up to $75,000 to small businesses with more than a 25% drop in sales. Darden Restaurants, which owns chains like Olive Garden and Longhorn Steakhouse, is offering paid leave to hourly workers.

The Trump administration is also weighing an economic relief measure that could include a payroll tax cut and paid sick leave.

However, sick-leave policies most likely wouldn’t cover other knock-on effects of the coronavirus, like the cost of child care if one’s kids have to stay home from a school that’s been shut down for an extended period, said Carolyn McClanahan, a medical doctor, certified financial planner and director of financial planning at Life Planning Partners in Jacksonville, Florida.

Coronavirus-related fears has also driven a dramatic pullback in U.S. stocks, with the S&P 500 down 19% from its recent high as of the market close yesterday. That could crimp cash flow for retirees reliant on income from their investment portfolios and near-retirees getting ready to retire.

Medical care for infected individuals could also be costly, depending on the scope of insurance coverage, severity of the illness and ultimate policy response from health officials.

Government officials have moved to defray some of the costs. Private health insurance companies have agreed to cover coronavirus treatment and waive co-payment fees for coronavirus testing, Vice President Mike Pence said Tuesday at a White House meeting with insurance company executives.

Uninsured patients would still incur costs for testing. Nearly 28 million non-elderly Americans were uninsured in 2018, according to the Kaiser Family Foundation. People of color are at higher risk of being uninsured, according to the non-profit.

The cost of a test for an uninsured patient could be close to $500 at a doctor’s office, while one at a hospital would likely be at least $1,000, according to Anderson, who said costs could vary widely depending on the institution.

Then, of course, there’s the cost of care if one were to test positive, which varies depending on a person’s insurance and its various cost-sharing components.

About 80% of people with insurance through an employer have deductibles, which is the cost a person pays out of pocket before the insurer starts paying for care — and which most families likely haven’t met because it’s still early in the year, Graves said. Those deductibles are often around $1,500 to $2,000, he said.

Many plans also typically have co-insurance charges of roughly 15% to 20% for an in-network doctor, he said. (So, a patient would be on the hook for 15% to 20% of costs beyond a deductible.) However, co-insurance for an out-of-network doctor could be much higher — perhaps around 70%, Graves said.

“There are ways exposure to high costs can seep through that are unpredictable,” Graves said.

Individuals who don’t require hospitalization will likely incur relatively small out-of-pocket costs, Anderson said.

But patients who do require hospitalization could expect a hefty bill, potentially between $75,000 and $100,000 for 10 days, between the cost of a hospital stay and various drugs and treatments, Anderson said.

While insurance would cover some of that, it almost certainly wouldn’t cover the full price tag, he said.

There are some steps Americans can take now to brace for a financial shock, McClanahan said. Try reducing unnecessary expenses, and put money aside for emergency savings; minimize debt; and make sure your investment portfolio matches the amount of risk you can take both financially and psychologically, she said.

“When will the economic effect hit you personally? You don’t really know,” McClanahan said.