By Ryan M. Nunley, MD, and the Washington Health Policy Fellows
Editor’s note: Throughout 2008, the “Ahead of the Curve” series by the Washington Health Policy Fellows will highlight various healthcare issues important to the national presidential election. The first column focused on the uninsured; this issue highlights the underinsured.
Although many people can define the term “uninsured,” not as many know what “underinsured” means. Underinsured people have some form of health insurance, but lack the financial protection needed to cover out-of-pocket medical care expenses.
A more formal definition of underinsured individuals includes people who are insured all year but have at least one of the following qualifiers:
- Medical expenses greater than 10 percent of annual income
- An annual income less than 200 percent of the federal poverty level and medical expenses greater than 5 percent of annual income
- Health plan deductibles equal to or greater than 5 percent of annual income
Compared to adequately insured adults, the underinsured have limited access to care similar to the uninsured. More than 16 million people (aged 19-64) were underinsured in 2003, in addition to the 45 million people who were estimated to be uninsured.
Why are people underinsured?
Several factors contribute to the increasing number of uninsured and underinsured individuals in the United States. Welfare-reform initiatives have limited the ability of many unemployed, low-income individuals to access Medicaid coverage. Low-income individuals may lack health insurance because they are unemployed, because their employers do not offer insurance as a benefit of employment, or because they cannot afford it. Even people who are insured may find that their ability to access needed medical services is inhibited by significant cost-sharing requirements.
Overall, approximately 35 percent of adults in the United States are under- or uninsured. Both under- and uninsured adults are more likely to forgo needed care than those who have adequate coverage. Rates of financial stress for the underinsured are similar to those for the uninsured. As the population of under- and uninsured patients has grown, the burden of caring for medically indigent patients has fallen primarily on state-supported or university referral hospitals, community health clinics, and other government-supported healthcare facilities.
Is cost-shifting increasing the numbers of underinsured?
The health insurance industry is in the midst of significant change. Employers and health insurance companies are looking for ways to moderate premium increases by offering new insurance products that shift more of the financial burden of health care to the individual. Ever-increasing healthcare costs and insurance premiums have spurred a move away from more comprehensive insurance benefits for the population younger than age 65 years. Trends instead point toward plans with higher deductibles, patient cost-sharing, and more restricted benefits. These shifts could increase the number of patients whose exposure to high medical costs is greater than their income, posing a greater financial risk for patients who have insurance but lack the financial resources to absorb these cost shifts.
Faced with several consecutive years of double-digit premium increases and the demise of managed care options, small businesses in particular have moved to insurance plans with sharply higher deductibles. Larger firms are also moving toward high-deductible plans.
Recent federal policies have also accelerated the move toward increased patient cost-sharing with the establishment of tax-protected health savings accounts (HSAs), available only to individuals whose insurance policies have deductibles of at least $1,000 per person. Some healthcare reform proposals put forth by presidential candidates would also encourage such high-deductible plans. Although the United States already stands out among industrialized countries for the high share of medical costs its citizens pay out-of-pocket, trends point to still greater patient and family exposure to medical care costs in the future.
Efforts to redesign the health insurance industry have proceeded with little regard to patients’ or their families’ ability to pay or the consequences of exposure to financial risk. Increasing patient cost-sharing may leave insured adults without adequate financial protection in the event of illness and may result in an increase in the number of underinsured Americans. If inadequate protection erects barriers to appropriate care, market trends could undermine the central goals of health insurance: to facilitate timely access to care when needed and to protect patients from costs that would be catastrophic relative to their income.
Starting a downward spiral?
The adverse effects of increased cost-sharing on patient access to timely care can be particularly acute for low-income populations. Plans rarely adjust cost exposure based on income. Moreover, higher cost-sharing, by design, shifts costs to sicker populations. The combination of poor health and low income increases the risk of access barriers and financial stress.
A recent Canadian study of the impact of increased patient copayments for prescription drugs for the elderly and welfare recipients found that both populations cut back their use of essential drugs, which, in turn, led to higher rates of serious adverse events and emergency department visits. A study of copayments for medications among Americans with chronic illnesses similarly found that as copayments increased, patients reduced their use of drugs; among patients with diabetes, the use of antidiabetic drugs dropped by 23 percent. Another U.S. study that followed chronically ill adults over the course of 4 years found that higher cost-sharing reduced care for both serious and minor symptoms.
In general, these studies indicate the need to proceed with caution when changing the design of health insurance plans to avoid putting patients—particularly the poor and sick—at increased financial risk.
The impact on healthcare policy
Concerns that inadequate insurance can contribute to reduced access to care and financial hardships have long been recognized. The extent of the underinsured problem among nonelderly U.S. adults, however, has not been well identified. Policy makers need to address the needs of the growing number of uninsured and underinsured patients in the United States by conducting periodic national updates on the number of underinsured Americans and by monitoring the impact on access to care.
Patients with inadequate or no healthcare insurance face difficulties accessing care and are less satisfied and less confident about the quality of care they receive. Although greater cost-sharing has been proposed as a way to decrease the escalating cost of medical care and help moderate healthcare cost inflation by encouraging people to become more prudent consumers of healthcare services, little attention has been paid to the downsides of such an approach. Advocates of insurance redesign often envision coupling high deductibles with employer-funded or personally funded HSAs that could be used to pay front-end costs. But in the current marketplace, insurance policies rarely include adjustable patient cost-sharing or out-of-pocket limits, depending on income.
Rising healthcare costs and access to affordable insurance are prominent issues and will be the focus of much debate during this presidential election year. Overall, new policies and research are needed, focusing on the current health insurance cost-sharing designs and the effects they may have on the growing number of underinsured patients. Policymakers need to pay attention to the adequacy of healthcare insurance and the effectiveness of the care patients receive. Otherwise, an increase in the number of underinsured Americans could undermine our nation’s health, productivity, and financial security.
The Washington Health Policy Fellows include Aaron Covey, MD; Samir Mehta, MD; Sharat K. Kusuma, MD; Alok D. Sharan, MD; James Genuario, MD; Anil Ranawat, MD; Ryan M. Nunley, MD; A. Alex Jahangir, MD; and John Flint, MD. References for this article are listed below.
Did You Know?
- Nearly 16 million adults with full-year coverage were underinsured in 2003.
- One out of every three adults in the United States is either uninsured or underinsured.
- Underinsured adults are more likely than those with more adequate coverage to face have plans with higher cost- sharing features, plan limits, and more restrictive benefits.
- Despite their more limited coverage, underinsured adults often incur high out-of-pocket costs.
- One-third of the underinsured rated their insurance negatively, about double the rate of those with more adequate insurance.
- The underinsured were are more likely than those with more adequate coverage to be insured by sources other than employer-based plans than those with more adequate coverage.
- Schoen C, Doty MM, Collins SR, Holmgren AL: Insured but not protected: How many adults are underinsured? Health Aff (Millwood) 2005;Suppl Web Exclusives:W5-289-W285-302.
- Lurk JT, DeJong DJ, Woods TM, Knell ME, Carroll CA: Effects of changes in patient cost sharing and drug sample policies on prescription drug costs and utilization in a safety-net-provider setting. Am J Health Syst Pharm 2004;61(3):267-272.
- Adams D, Wilson AL: Structuring an indigent care pharmacy benefit program. Am J Health Syst Pharm 2002;59(17):1669-1675.
- Gabel J, Claxton G, Gil I, et al: Health benefits in 2004: Four years of double-digit premium increases take their toll on coverage. Health Aff (Millwood) 2004;23(5):200-209.
- Gabel JR, Pickreign JD: Risky business: When mom and pop buy health insurance for their employees. Issue Brief (Commonw Fund) 2004;(722):1-8.
- Hussey P, Anderson GF: A comparison of single- and multi-payer health insurance systems and options for reform. Health Policy 2003;66(3):215-228.
- Collins S: The affordability crisis in U.S. health care: Findings from the Common wealth Fund Biennial Health Insurance Survey. Issue Brief (Commonw Fund) 2004;1-8.
- Davis K. Will consumer-directed health care improve system performance? Issue Brief (Commonw Fund) 2004(773):1-4.
- Tamblyn R, Laprise R, Hanley JA, et al: Adverse events associated with prescription drug cost-sharing among poor and elderly persons. JAMA 2001;285(4):421-429.
- Goldman DP, Joyce GF, Escarce JJ, et al: Pharmacy benefits and the use of drugs by the chronically ill. JAMA 2004;291(19):2344-2350.
- Wong MD, Andersen R, Sherbourne CD, Hays RD, Shapiro MF. Effects of cost sharing on care seeking and health status: Results from the Medical Outcomes Study. Am J Public Health 2001;91(11):1889-1894.
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