The ‘Underinsurance’ Problem Explained

Who are the underinsured?

People who are described as underinsured have health benefits that don’t adequately cover their medical expenses. Often, consumers discover they’re underinsured the hard way – when they break a leg or have a serious illness, such as cancer, and their medical bills exceed their benefits enough that it is difficult for them to pay.

In some cases, people who are underinsured have coverage through employer-sponsored plans; they have high out-of-pocket expenses or skimpy benefits. In other cases, consumers have bought coverage on the individual market that covers only catastrophic costs. Some polices might feature high deductibles and co-payments, as well as exemptions for specific conditions or expensive treatments, or limit annual and lifetime benefits.

How many people are underinsured?

Health experts say that the number of people who are underinsured is rising rapidly, and that the problem is increasingly affecting the middle class, as well as people with lower incomes. An estimated 25 million Americans between the ages of 19 and 64 were underinsured in 2007 – a 60 percent increase since 2003, according to a study in the journal Health Affairs.

Individuals were considered underinsured if they spent more than 10 percent of their incomes on out-of-pocket medical expenses (5 percent if they were low-income) or more than 5 percent on deductibles. Low-income adults were at the highest risk of being underinsured.

The increase in the underinsured is partly due to the fact that as health care and insurance costs have gone up, employers have bought policies with higher deductibles and co-payments and asking their workers to pay a greater share of the premiums.

What kinds of problems do the underinsured face?

Some of the underinsured avoid going to the doctor or getting prescriptions filled because they can’t afford it. Others end up with medical debt and other severe financial problems.

Often, sicker or older (those just short of qualifying for Medicare) people are underinsured because they can’t afford comprehensive coverage. One reason? Only 18 states limit how much insurers can base premiums on factors such as age, health status and gender.

How will the health overhaul proposals affect the underinsured?

The major proposals being debated in Congress would require insurers to provide a minimum set of benefits that are designed to take care of most patients’ needs. In addition, the proposals would limit consumers’ out-of-pocket costs – as long as they stay within network – and would prohibit insurers from imposing annual or lifetime limits on coverage.

In addition, the legislation would bar insurers from basing enrollees’ premiums on health status and gender. Backers say that these regulations would make it easier for people to afford coverage that would reduce the number of underinsured. Moreover, pending proposals would provide subsidies for people who have low or modest incomes, in an effort to make comprehensive coverage more affordable. And Medicaid, the state-federal program for the poor and disabled, would be expanded to include more lower-income people.

Sources:

The Commonwealth Fund 

Kaiser Family Foundation:
Side by Side Comparison of Major Health Reform Proposals 
State Variation and Health Reform

The NewsHour: More Than 25 Million Americans Underinsured, Study Finds