The actuarial squeeze on low and middle income families
Provision Under Consideration for Merged Senate Health Bill Would Harm Needy Families
By January Angeles and Judith Solomon
Center on Budget and Policy Priorities
October 26, 2009
A family of three earning $27,465 a year before taxes — that is, at 150 percent of the poverty line — would have to pay $1,318 a year for health coverage under a proposal that Senate negotiators are considering for a merged health reform bill that they would bring to the Senate floor.
This is related to efforts that Senators working on the merged bill are making to cap the cost of insurance premium contributions at 10 percent of income for households that earn between 300 and 400 percent of the poverty line, rather than at 12 percent of income as under the Finance Committee bill. To help pay for this change, they reportedly are also considering increasing the amounts that very low-income households would be required to pay.
http://www.cbpp.org/cms/index.cfm?fa=view&id=2962
And…
Trends In Underinsurance And The Affordability Of Employer Coverage, 2004-2007
By Jon R. Gabel, Roland McDevitt, Ryan Lore, Jeremy Pickreign, Heidi Whitmore and Tina Ding
Health Affairs
June 2, 2009
Health plans covered slightly fewer expenses in 2007 than in 2004, but out-of-pocket spending grew more than one-third because of growth in overall health spending.
Underinsurance rose from 2004 to 2007 as the actuarial value of employer-based health insurance declined slightly, from 81.4 percent of the bill to 80.1 percent. The major change in benefit design during these years was an increase in the percentage of plans with deductibles and an increase in the average deductible level.
In the United States, if you are sick and earn a modest income, then you are probably underinsured—even if you have employer-based health coverage.
http://content.healthaffairs.org/cgi/content/full/28/4/w595
Comment:
By Don McCanne, MD
The best private insurance available today - employer-sponsored health plans - have an actuarial value of 80%. That means that the insurance pays 80% of the covered costs of health care and patients are responsible for the other 20%. Patients also are usually responsible for out-of-network services and for services and products that are not benefits of the plans.
The Health Affairs article by Jon Gabel and his colleagues shows that plans with an 80% actuarial value are not providing adequate financial protection to individuals with modest incomes who need health care. Having a plan with an 80% actuarial value can place you in the ranks of the underinsured.
Basic coverage under the proposals before Congress would provide an actuarial value of 65% or 70%. That means that the patients would be responsible for the remaining 30% or 35% of health care costs, although the proposals would limit the total amount for which the patients are responsible under the plans. Patients also would be responsible for out-of-network services and for services and products not covered by their plans.
If there is a cap on out-of-pocket spending, then why should the precise actuarial value make difference? Simply, the lower the actuarial value, the greater the likelihood that the patient will have to spend the full amount up to the cap. Thus more individuals will be negatively impacted. Also, the amount of the cap makes a very big difference. The proposed caps on out-of-pocket spending, when added to the patient’s share of the premium, create a financial hardship for most low and middle income individuals and families.
Members of Congress are particularly concerned about the high costs for those at income levels wherein the subsidies supporting the premiums are phased out. Not only do they understand that making health care unaffordable is not wise policy, but they also understand the backlash that would likely occur when the most productive sector of our society finds out what hit them.
The report from the Center for Budget and Policy Priorities demonstrates how desperate our legislators are to find a way out of this highly flawed financing proposal that hits their base supporters the hardest. To soften the impact on middle income individuals and families, they are investigating a proposal to increase the amounts that low income families would have to pay, even though they already can’t pay the current levels proposed. Perhaps they calculate that, at election time, bankrupting individuals without a political voice is a safer than facing a backlash from the base supporters.