The Surge of the Underinsured

Much of the tragedy of our unreformed health care financing system is hidden. We don't find out how poorly we are covered by our health policy until we have a serious illness. An interesting report from the Commonwealth Fund shows the fastest growing population segment is those who are underinsured, not those who are uninsured.

The uninsured population has grown about 54 percent between 1993 and 2008, rising from about 30 million to 46.3 million in 2008. Since the full impact of the Great Recession was felt in 2009, and since those who can afford to keep employer-based health insurance as a result of COBRA for up to 18 months would only now be losing coverage, even at this point in 2010, the number of uninsured is probably less than 55 million, and this would represent an increase of 83 percent over 15 years.

The following charts show that the number of underinsured has grown by 62 percent in only the four years from 2003 to 2007. Conversely, those who are adequately insured in the population under age 65 (Medicare provides universal coverage for those 65 and older), dropped from 65 percent to 58 percent in the four year period. The cause? An 8.8 percent increase in the uninsured, and a 62 percent increase in the underinsured.

No one chooses to be either uninsured or underinsured. It happens because adequate health insurance for a family, at a cost of $15,000 per year, is unaffordable to a rapidly growing percentage of American families. Adequate health insurance is defined, for this post, as insurance which limits medical expenses to not more than 10 percent of family income for those with incomes exceeding 200 percent of the Federal Poverty Level (currently $44,100 for a family of four). For those with incomes below 200 percent of the Federal Poverty Level, adequate health insurance would protect against medical expenses exceeding five percent of income. Another test of the adequacy of health insurance is that the deductible of the policy should not exceed five percent of income.

Health insurance costs are regressive. Because those with lower incomes require more protection (defined as lower deductible and maximum out-of-pocket limits) than those with higher incomes, they either pay higher premiums, or join the ranks of the underinsured, or, worse, the uninsured. To retain some coverage, larger deductible and out-of-pocket limits are accepted as the price of keeping coverage affordable. But larger deductibles and out-of-pocket maximums, rising far faster than wages and salaries, leave more families vulnerable to financial shocks resulting from serious illness.

All of the health reform proposals go a long way toward making health coverage affordable. Tax credits will be provided to those earning less than $88,000 per so that the uninsured, and the surging numbers of underinsured will be able to obtain coverage that provides real protection from the financial impact of a serious accident or illness. The following table shows the alternatives being considered:

Since healthcare is used in large quantities only rarely, most will never know they are inadequately protected until a serious illness strikes. Then, faced with enormous bills left after their health insurance has paid its contractual obligations, too many families are faced with bankruptcy. A study in the American Journal of Medicine in August 2009, found that medical problems contributed to 62.1 percent of bankruptcy filings in 2007, before the onset of the Great Recession. This comes after federal bankruptcy filing requirements were significantly tightened by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

So our nation, at this defining moment, has an important choice to make. Do we pass health reform legislation which will make health insurance available to another 30 million Americans? Do we make adequate health coverage that provides real protection affordable for the middle class? Or do we turn our back on our neighbors by defeating health reforms today, then spend years raising funds for neighbors facing the crushing costs of serious illness by attending pancake breakfasts, spaghetti dinners, charity auctions, walk-a-thons and garage sales?

Americans have always looked out for each other. We help each other dig out after major snowstorms, or build sandbag dikes to hold back flood waters. We donate money and attend fund-raising events to help a friend, a neighbor, and sometimes a complete stranger get the health care they need, whether they are uninsured, whether their health insurer has denied coverage for a bone marrow transplant as "experimental", or whether a family is simply left with crushing debt after insurance has paid its share of medical bills. We are the most generous nation on earth when it comes to assisting with natural disasters in Haiti, Chile or Banda Aceh, Indonesia. It is time we started taking care of each other, so no American has to count on his or her ability to raise money when serious illness strikes, in order to get needed healthcare. We can take a giant step in the right direction by enacting the President's health reform proposal.