We Are All Underinsured - The Many Faces of UnderInsurance


by David Gimlett, M.D.


As the Affordable Care Act (ACA) kicks in we are moving into an era where a larger and larger percentage of our population will be unable to afford medical care and we will see an increase in an already high number of medically preventable illnesses and deaths and medically related personal bankruptcies. This will result from lack of control over medical inflation and a tidal shift of medical insurance policies into a lethal pattern of underinsurance. The ACA is predicted to decrease the number of uninsured Americans to about 30 million. (1)  Lack of medical insurance leads to at least 55,000 unnecessary deaths a year in the United States. But inadequate medical insurance also takes its toll and it is likely that this problem will worsen dramatically over the next few years in response to the ACA.


Definitions of underinsurance

By the common definition, individuals are considered underinsured if their out-of-pocket expenses are more than 10 percent of their income  (5 percent if they were low-income) or deductibles are more than 5 percent. By current definitions 44 percent (81 million) of adults ages 19–64 were either uninsured or underinsured in 2010. 29 million of these adults were underinsured.


 In reality, the formal definition of underinsurance needs to be revised.  As we will see, all of the factors listed below expose the fact that most of us are being denied access to appropriate, comprehensive medical care unless we pay for it out of our own pockets.  Another way of framing this is to state that to whatever extent our medical insurance is not paying our medical bills we are underinsured.  Also, underinsurance  is definitely responsible when any insured person  avoids needed medical care for financial reasons. This can take the form of not seeing a physician, or delaying to see one, not filling a prescription or partly filling one, and not following through on recommendations for testing, therapy or return appointments.  The fact that if you are in the top 5% of wealth or income you can afford to supplement your insurance when any medical bills arrive, only illuminates how you can deal with being underinsured. WE ARE ALL UNDERINSURED (2)


What are the many faces of underinsurance?

Low actuarial value

Even the policies sold on the new insurance exchanges will create financial problems because of their low actuarial values. The prescribed Silver plans will claim a 70% value but for reasons to be discussed they won’t even provide that. And if they did, the 30% left for the patient who has little or no liquid assets means assuming unrealistic debt or foregoing needed medical care. (3)


Lack of transparency

As an example,  frequently a patient will be held in the emergency area or even in a regular hospital room for 24-72 hrs. of what is billed as observation status. This is not a hospital admission so Part A of Medicare does not kick in but Part B or D does.  This shifts the coverage to higher deductibles and other out-of-pocket expenses. (4)


Deductibles

In 2007 12% of workers had medical insurance with at least $1,000 for single coverage. Six years ago, 12 percent of workers faced a deductible of at least $1,000 for single coverage. Now more than a third do, according to the Kaiser Family Foundation’s 2012 survey of employer-sponsored plans.  Increasingly a high-deductible plan is the only insurance offered on the job, even at big companies. These are often coupled with a Health Saving Account with employer and/or employee contributions. (5) The new exchange policies can have deductibles as high as $6,350 for singles and $12,700 for families.


Copays

Copays are fixed dollar amounts that the insured patient has to pay toward most services. They vary by service (office call, x-rays, pharmaceuticals, etc.), and policy terms which vary year to year. These can be very high including 100% of the cost of many generic drugs. 


Co-insurance

Co-Insurance is a percentage of any category of charges that is assigned to the enrollee in an insurance plan. These can easily add up to thousands of dollars during any one illness.


Defined contribution

More employers and pension plans are moving into defined contribution plans in which the employer contributes a defined amount each month and the later benefit is determined by the amount left in the fund. 


Benefit confusion causing out-of-pocket expenses

Frequently in our present system patients experience sticker shock when, after an illness, they discover that their insurance (Medicare or otherwise) doesn’t cover as much as they expected.(6)


Narrow networks

The morphing of insurance coverage into narrow networks of providers is another gambit for shifting costs to the patient, i.e., creating more underinsurance. (7)


Tiered pharmacy plans & the do-nut hole

Prescription cost is one of the first areas the underinsured skimp to save money.  The donut-hole in Medicare prescription coverage defies justification. 


Long term care, dental, optical, mental health, rehabilitation

Entire categories of health care are not covered by Medicare and other insurance plans. These all contribute to the medical bankruptcy rate which is going to continue to grow.


It is obvious that the insurance system doesn’t work.  WE ARE ALL UNDERINSURED. Every one of the above items (and the cost of administrating them) could be eliminated with single-payer medical financing, i.e. improved Medicare for all.


Suggested Reading:

1. Schoen, C, Doty, MM, Robertson, RH, Collins, S. Affordable Care Act Reforms Could Reduce The Number Of Underinsured US Adults By 70 Percent. Health Affairs 30 (9): 1762-1771, 2011. 

2. Gold, J. The 'Underinsurance' Problem Explained. Kaiser Health News, 

Sept. 28, 2009.

3. Lore, R, Gabel, JR, McDevitt, R, Slover, M. Choosing the “Best” Plan in a 

Health Insurance Exchange: Actuarial Value Tells Only Part of the Story. The 

Commonwealth Fund, August 2012.

4. Andrews, M. Observation Units Can Improve Care But May Be Costly For 

Patients. Health Affairs 30 (9): 1762-1771, 2013. (Clarify reference) 

5.  The Prevalence and Cost of Deductibles in Employer Sponsored 

Insurance: A View from the 2012 Employer Health Benefit Survey.

Kaiser Family Foundation, November 2012.

6.  Milliman Medical Index (MMI), 2013.

7.  Gimlett, D. Narrow Networks: Less Choice, More Cost Sharing. Health 

Care Disconnects, September 24, 2013.  


1,036 words


Tag lines: Affordable Care Act; underinsurance; actuarial value; deductibles; copays; co-insurance; defined contribution; out-of-pocket expenses; narrow networks; pharmacy plans; long-term care; dental benefits; optical benefits; mental health care; rehabilitation; insurance exchanges.