True Cost Uninsured

More People Think They are Covered by Health Insurance – but is the Coverage Good Enough?

Since 2008, the government’s healthcare focus has been to help uninsured people find coverage. However, a new problem has emerged with devastating consequences for everyday Americans. More than 30 million people in this country are underinsured, meaning that their out-of-pocket costs exceed 10 percent of their income. That means that almost one quarter of the non-elderly, insured population is in a situation where their medical bills are a financial burden – the kind of burden that insurance is supposed to take care of in the first place.

Although the level of underinsurance has risen since 2003, the Affordable Care Act (ACA)’s broad efforts to reduce uninsurance might actually make this underinsurance problem worse: the new plans sold on the marketplaces often have lower up-front premiums in exchange for higher deductibles (out-of-pocket costs) when patients seek care. The lower the metal level of the plan (i.e. gold, silver, bronze) the higher the deductible. Patients who select silver and bronze plans in order to have affordable premiums are often unable to afford the higher deductibles that come up down the road. Most of the time, patients do not realize that they are making this trade-off until the medical bills arrive after an expensive hospital stay or specialist visit.

People are more or less likely to be underinsured based on the kind of insurance plan they have. It would be natural to think that most underinsured people have Medicare or Medicaid plans, but a survey from The Commonwealth Fund found that 59 percent of people who are underinsured have employer-sponsored coverage. Put a different way, a full 20 percent of people who have insurance through their jobs are underinsured. This fact goes against the conventional wisdom that people who have insurance through their employer have adequate coverage.

The level of underinsurance among people who have employer-sponsored insurance has doubled since 2003, but those who purchase individual insurance coverage have become even worse off. Individual plans in the past were all purchased directly from an insurance company or broker, but now the plans are often found and purchased through an marketplace under the ACA. This group has seen its rate of underinsurance more than double since 2003, from 17 percent in 2003 up to 37 percent in 2014. While this group is small, the need for more adequate coverage is great.

What are the consequences of lower quality coverage? Recently a Gallup poll showed that one in three people has “delayed medical treatment for themselves or a family member due to concerns about cost” – a level not seen in 14 years. The Commonwealth Fund has found that, among these 30 million underinsured people, 26 percent skipped a test or treatment and 24 percent did not fill a prescription due to the cost. Making matters worse, people are going into medical debt: half of underinsured beneficiaries report debt of $4,000 or more.

The health and economic costs of underinsurance are even greater among those with chronic conditions. The Commonwealth Fund report found a 30 percent rate of underinsurance among people with chronic conditions – compared with just a 16 percent rate of underinsurance among healthier people. 24 percent of these underinsured, chronically ill patients report avoiding to fill or take a prescription medication – compared to just 7 percent of well-insured adults who also had chronic illnesses. These gaps between underinsured and well-insured people are significant and have persisted, even widened, over the last decade.

It is important to keep in mind that we have been talking about individuals with year-round insurance. The problems related to financial access and the cost of care are magnified for those who are uninsured. And while the number of uninsured is dropping under the Affordable Care Act, the newly insured people are not guaranteed full protection.

Consider the story of Karen, a 55-year-old single woman with two grown children. She lost her job at an advertising firm during the recession and had been uninsured for five years – until the second window of open enrollment in the fall of 2014. She has been earning enough income through freelance work that she does not qualify for Medicaid, but she is close enough to the federal poverty level to receive a subsidy to purchase coverage on her state’s new insurance marketplace. Priding herself on her deal-finding skills, she chooses a plan with a low monthly premium that still seems to provide decent coverage.

Three months after signing up for coverage, Karen visits her primary care physician and learns that she need to switch from the current diabetes medication she is taking to a more powerful, more expensive version to manage her blood glucose level. Undeterred by the extra expense because of her new insurance, she visits the pharmacy to pick up the prescription. She discovers that her plan only covers half of the cost and that, because of her deductible, she will have to pay more than one hundred dollars per month. Now she has a difficult choice between starting the new prescription – and therefore not being able to take as many trips across the country to visit her grown children – or sticking with her current, less effective medication.

While Karen’s story is made up, it is illustrative of the small but significant economic, social and health impact that underinsurance can have on the lives of everyday people.

The issue is starting to attract more attention, especially from Democrats, heading into the 2016 presidential election season. Rep. Jim McDermott (D-Wash) said: “We’ve got some 17 million more people covered … but they can’t access the care they seem to be entitled to. It costs too much to use the care. That’s the deceptive part about it.”

Along the same lines, the New York TimesAaron E. Carroll wrote: “In the quest for universal coverage, it’s important that we not lose sight of ‘coverage’ in order to achieve ‘universal.’ The point of improving access is, after all, to make sure that people can get, and afford, care when they need it.”

The consequences of underinsurance have made it more important to ensure that all consumers understand their insurance plans, from knowing the difference between monthly premiums and out-of-pocket deductibles to knowing their options when faced with a large medical bill. State and federal marketplaces, as well as insurance companies, can and should put more effort into helping people select the right plan for their health needs and financial resources. That is a goal that will benefit all stakeholders – providers, payers and patients – in our healthcare system.

NOTE: The views expressed here are those of the authors and do not necessarily represent or reflect the views of Healthcare, Inc. and HealthCare.com

Imran Cronk

About Imran Cronk

Imran is a contributing writer for HealthCare.com and has covered healthcare topics for The Atlantic, the Wharton Public Policy Initiative, and the Leonard Davis Institute of Health Economics. He is a research assistant at the University of Pennsylvania examining health economics, with a focus on health policy research and quality/safety improvement.

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