'Underinsured' May be the Next Healthcare Crisis

"The financial health insecurity that comes from being underinsured is substantial and puts people's health and well-being at risk," says The Commonwealth Fund President David Blumenthal, MD.

High-deductible health insurance plans have been touted as a means to expand coverage to millions of people who otherwise could not afford it.

New reports out this month suggest that high-deductible non-group plans are not a silver bullet, however, and that while the premiums may be affordable, the costs of accessing care remains prohibitively high.

A survey released this week by The Commonwealth Fund found that 31 million adults ages 19–64 with health coverage were "underinsured" in 2014, and that oftentimes these underinsured people skimped on care because it was too expensive.

"The financial health insecurity that comes from being underinsured is substantial and puts people's health and well-being at risk," The Commonwealth Fund President David Blumenthal, MD, said at a news conference Tuesday. "If health insurance costs continue to be shifted to consumers this insecurity will deepen."

Sara Collins, the lead author of study, and vice president, Health Care Coverage and Access at The Commonwealth Fund, says "underinsured" status considers an insured adult's out-of-pocket costs during a year of coverage and the plan deductible. Premiums are not factored.

"Someone is underinsured if their out-of-pocket costs excluding premiums over the 12 prior months are equal to 10% or more of household income," Collins says, "or if their out-of-pocket costs excluding premiums are equal to 5% or more of household income if their income is under 200% of the federal poverty level, which is about $23,000 for an individual and $47,000 for a family of four, of if their deductible is 5% or more of household income."

Collins says that after nearly doubling between 2003 and 2010 the number of underinsured adults held constant between 2012 and 2014.

"However, growth and the proliferation and size of deductibles threatens to increase underinsurance in the years ahead," she says. "Underinsured adults tend to skimp on needed healthcare and many are accumulating medical debt that is damaging their credit ratings and depleting their savings."

The effects of group coverage under the Patient Protection and Affordable Care Act were not factored into The Commonwealth Fund's report because people insured for a full year in the survey had coverage that began before the PPACA's major coverage expansion going into effect.

"The Affordable Care Act improves the quality of insurance coverage for people who lack job-based health benefits, but many marketplace plans and individual marketplace policies come with high deductibles," Collins says.

"The law has only limited ability to improve the cost protections of large employer plans. New approaches to benefit design are needed to better protect consumers from healthcare costs and encourage the use of timely care. System-wide efforts to lower the underlying rate of medical cost growth with those savings shared with consumers will be critical."

The Commonwealth Fund report's findings are in line with a Families USA report this month which also found that that one-in-four people who bought non-group health insurance in 2014 went without needed care because they couldn't afford it. That report blamed deductibles of $1,500 or more as the leading cause for the skipped care.

"It is critically important that consumers be able to afford all of these types of care," the report says. "Not getting follow up care to treat an illness or not taking needed medications can result in people facing avoidable, more serious health problems and more expensive healthcare costs down the road."

'Blunt Instrument'
Wendell Potter is a former health insurance executive who has become an ardent critic of the health insurance industry. He says high-deductible plans are a windfall for commercial insurance providers. "To them right now this is an ideal scenario," Potter says. "They are collecting premiums, which continue to go up every year, but every year they are shifting more of the costs to the consumers."

"As you look at trend lines, you'll see the deductibles keep going up every year too but median household income is not keeping pace with these increases," he says. "The insurance industry is really doing quite well because they are taking in money in premiums, but they aren't paying nearly as much out in payments to medical providers that they were in the past because people have to pay so much out of their own pockets before their coverage kicks in."

Blumenthal rejects suggestions that high-deductible plans are simply a windfall for insurance companies.

"That doesn't mean [the underinsured] aren't getting any benefits. It means they are still not adequately protected against the cost of illness," he says. "I don't think it is fair to conclude that their insurance isn't worth anything. Their condition would potentially even worse, they might be paying 20%, 30%, 40% of their income or more than their income on an annual basis if they had no insurance at all."

"One of the clear questions that arises is are people who were previously uninsured better off with insurance, even though they are underinsured? That's likely to vary from individual to individual, but on balance I think the answer is yes." Potter says high-deductible plans have been used as a "blunt instrument" that doesn't factor an individual's income along with deductibles.

"It can be refined to take into consideration that people who are of modest means are going to have to go without care if they are in a plan with a high deductible," he says. "It's something that policy makers and employers and payers are going to have to look at because people are going without the care they need. In the long run, that is going to be a problem for payers and for society."

"Keep in mind that this strategy was promoted by people who can easily afford to put 'skin in the game,'" Potter says. "I can remember several years ago when that was a term that was used by CEOs of big insurance companies. They can easily meet a deductible. They had not walked many days in the shoes of people who are of modest means and don't know what it is like to make a choice between going to the doctor or putting food on the table, or picking up a prescription or make the car payment. They just don't have a clue what it is like to be an average American."

Collins says prohibitively high front-end costs are not the best way to achieve better health outcomes at a lower cost.

"People who are underinsured or who have deductibles that are high relative to their income are skimping on healthcare they need; not filling prescriptions, not getting preventive care tests, not going to the doctor when they were sick," she says.

"It suggests that high front-end out-of-pocket costs do deter people's use of healthcare services that they need. This points to the need for innovation in benefit design that encourages people to get the healthcare they need rather than delay that care."