Soaring Premiums -> Surging Underinsured

Drew Altman, Ph.D., president and CEO of the Kaiser Family Foundation, writes an excellent piece describing the serious erosion of health insurance benefits. Those who bought their own health insurance, from 2004 to 2007, still paid 52 percent of their health expenses, on average, out of their own pocket.

How is this possible? Through a clever insurance marketing tool the insurance industry refers to as a "buy-down." If insurance premiums get pushed up fast enough, the rational response of consumers is to beg for relief. Insurers commonly suggest that the increase can be mitigated or even eliminated by switching to a policy with higher deductibles or greater cost sharing, which provides less protection for the consumer. As a result, we have a surging number of Americans who are underinsured, many unknowingly. These people are a serious illness or accident away from a financial shock when they find the insurance they have been paying for provides far less protection than they need.

Imagine a family of four earning $70,000, and carrying individual coverage with a $3,500 deductible, 20 percent coinsurance to $6,000, and $40 office visit co-pay. If, in the midst of a snowstorm, their car slid into a bridge abutment, causing serious injuries to two family members, the family could be liable for two deductibles of $3,500 each, plus two out-of-pocket maximum's of $6,000 each, representing a total hit to the family budget of $19,000. How many families could come up with an amount equal to more than 27 percent of their annual income within 30 days of insurance making its payments to doctors and hospitals? And, in addition to these costs, these two individuals would be liable for $40 office visit co-pays each time they needed to see one of several physicians throughout the course of their recovery, even though they met their deductible and out-of-pocket maximum for the year. All of this is further exacerbated by the fact that the primary wage earner (or all wage earners) could be out-of-work while they recover. Not everyone has a ready supply of sick-leave that will ensure income continues uninterrupted during an extended convalescence. So, imagine having a debt of $19,000, coupled with a six week absence from work, and the pay that goes with it. Now that $19,000 debt represents almost 31 percent of the $61,923 this family would earn for 46 weeks of work.

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.

What Health Reform Does in 2010

The President's weekly address today is devoted to the health care reform debate.  He lays out the immediate benefits to small business, individuals, those covered by Medicare, and those uninsured because of pre-existing conditions. If the bill is passed, these are benefits that will take effect this year.  Federal subsidies to help with the cost of insurance premiums for low and middle income taxpayers and the development of the insurance exchanges, where we'll be able to choose from a range of qualified benefit plans from many health insurers will come later.  The full text of the address is provided after the jump. 

Maybe We Can All Just Get Along

The Kaiser Family Foundation Health Tracking Poll for February shows the country divided equally with 43% in favor and 43% opposed to health reform.  But large majorities of Democrats, Independents and Republicans support key elements included in health reform legislation, arguing strongly that passing health reform will ultimately win broad support from Americans.  Fortunately, these areas represent the core elements of any of the health reform proposals being considered.  Here's a table summarizing areas where large majorities agree: