The Impact of Health Reform on Underinsurance in Massachusetts: Do the insured have adequate protection?
By Sharon K. Long
Urban Institute
October 2008
In an attempt to protect individuals from underinsurance, as part of that health reform effort Massachusetts established a standard for “minimum creditable coverage” (MCC) that outlines the key benefits that must be included in an individual’s health insurance plan if it is to satisfy the state’s new individual mandate for health insurance coverage. The required benefits, which are intended to protect those with insurance from high health care costs, include preventive and primary care, prescription drugs, a maximum on the annual deductible and a maximum on out-of-pocket spending, among other things.
In brief, underinsurance means that an individual’s health insurance does not adequately protect him or her from high health care costs in the event of a serious illness or accident. A complete assessment of the adequacy of insurance coverage requires detailed information on the coverage and cost-sharing provisions of the individual’s health insurance plan. Given the data available in our survey, we are limited to a narrower focus that considers the individual’s out-of-pocket (OOP) heath care costs. (Note that this is OOP costs for health care beyond the premium that the individual pays to purchase private coverage.) High OOP health care costs provides a conservative, lower-bound estimate of underinsurance as it only captures inadequate insurance coverage for those who had high health care costs in the last year. Consequently, this measure of underinsurance does not include any of the individuals with similar health insurance coverage who did not have high health care costs during the year.
We follow the approach used by Schoen et al. (2005, 2008) and use two standards to assess underinsurance:
(1) Having OOP costs of 10 percent or more of family income–a threshold that has been used in prior studies of underinsurance, and
(2) Having OOP costs of 5 percent or more of family income for low-income families (defined as those with family income less than 200 percent of poverty)–a threshold for financial risk that is consistent with cost-sharing provisions in the State Children’s Health Insurance Program (SCHIP).
Given the limitations of our data, the measure of underinsurance reported here provides a conservative measure of the extent of underinsurance in Massachusetts.
Drop in Underinsurance. In fall 2006, at least 4 percent of all working-age adults with full-year insurance coverage in Massachusetts were underinsured under the first definition of underinsurance (10 percent or more of family income in OOP health care costs) and at least 7 percent were underinsured under the second definition. Under health reform, the share of insured adults who were underinsured under both definitions dropped by about 2 percentage points between fall 2006 and fall 2007, down to about 3 percent and 6 percent underinsured, respectively.
http://www.urban.org/UploadedPDF/411771_mass_underinsurance.pdf
Results restated in a summary by The Commonwealth Fund:
In fall 2006, 7.3 percent of all Massachusetts adults were underinsured (using the definitions above: out-of-pocket costs equal to 10% or more of income for higher-income people, 5% or more for lower-income people). After the enactment of health reform, that share declined to 5.6 percent.
http://www.commonwealthfund.org/publications/publications_show.htm?doc_id=711279
Many news reports now tout the success of the Massachusetts health care reform program in reducing the numbers of the uninsured, even though falling far short of universal coverage. This new report also suggests that the rate of underinsurance may have declined, an important point since it was feared that efforts to make the plans more affordable would defeat the financial security that the plans should provide.
Massachusetts already had higher regulatory standards for their insurance products, but to be certain that coverage would be adequate under this program, they established a standard for “minimum credible coverage,” with benefits “intended to protect those with insurance from high health care costs.” How well has that worked?
Using estimates that omit many instances of underinsurance, this study shows that the rate of underinsurance is still over three-fourths of the rate that existed before the program was initiated. A program that eliminates less than one-fourth of the problem targeted should not be considered a successful program.
Of particular concern is that those individuals who are currently healthy, the majority of all insured, were not considered to be underinsured even if their coverage is not adequate to protect them against financial hardship should they develop significant medical problems in the future. Since one of the most important functions of insurance is to protect against unforeseen losses, the incidence of underinsurance is far greater than this study would indicate.
Massachusetts really needs to take another look at the single payer model of reform. By design, single payer includes everyone and eliminates the financial hardships of underinsurance. Their current reform model will always fall short of those goals.
