By Sara R. Collins, Munira Z. Gunja, Michelle M. Doty
The Commonwealth Fund, October 18, 2017
Congress intended for the ACA to do more than expand access to insurance; it aimed for the new coverage to allow people to get needed health care at an affordable cost.
For people covered by employer-based insurance — which includes more than half of Americans under age 65, or more than 150 million people — plans were historically far more comprehensive and cost-protective than individual market coverage. However, over the past decade, premium cost pressures have led companies to share increasing amounts of health costs with workers, particularly in the form of higher deductibles. At the same time, income growth has been sluggish, leaving families increasingly pinched by health care costs.
Estimated 41 Million Adults Are Underinsured
As of July 2016 through November 2016, 28 percent of U.S. adults ages 19 to 64 who were insured all year, or an estimated 41 million people, were underinsured. This is more than double the rate in 2003 when the measure was first introduced in the survey, and is up significantly from 23 percent, or 31 million people, in 2014.
The underinsured population is predominantly composed of people in employer plans: 56 percent of underinsured adults had coverage through employers at the time of the survey. This reflects the fact that the majority of insured adults have employer coverage. However, people with coverage through the individual market, including the ACA marketplaces, and Medicare beneficiaries who are disabled adults under age 65, are disproportionately represented among the underinsured.
The share of adults who were underinsured has climbed over time in each coverage group. Among adults with employer-based coverage at the time of the survey, 24 percent were underinsured, which is more than double the rate in 2003, and is up significantly from 2014. People working in small firms historically have had somewhat higher underinsured rates than employees of larger firms. But in 2016, the share of adults in firms with 100 or more workers who were underinsured climbed significantly to 22 percent — the same rate as among workers in small companies.
People with individual market coverage, including those in marketplace plans, are significantly more likely to be underinsured than people in employer plans. In 2016, 44 percent of adults with individual market policies, including marketplaces plans, were underinsured.
One-quarter (26%) of adults with Medicaid coverage — the poorest adults in the survey — were underinsured in 2016. Medicaid requires little cost-sharing, but because people eligible for the program have very low incomes, minor out-of-pocket costs can comprise a large share of income.
Adults under age 65 with Medicare who were continuously insured are by far the sickest group of covered adults in the survey — 77 percent have a chronic condition or are in fair or poor health — and the second-poorest after Medicaid enrollees. Many have very high health expenditures and low incomes. Almost half (47%) of adults in this group were underinsured in 2016.
Underinsured Rates in the Four Largest States
The survey drew an additional sample of people in the nation’s four most populous states. Adults in Florida and Texas were underinsured at higher rates than those in California and New York. Among adults who were insured all year, 32 percent of Floridians and 33 percent of Texans were underinsured compared with 21 percent of Californians and New Yorkers.
Higher Deductibles Are Increasingly a Factor in the Underinsured Rate
Between 2003 and 2016, deductibles were increasingly a factor in underinsurance: more people than ever before have plans with deductibles and more have deductibles that are high relative to income.
The share of privately insured adults who had health plans without deductibles has fallen by nearly half over the past 13 years, from 40 percent in 2003 to 22 percent in 2016. At the same time, deductibles have grown in size. By 2016, more than one of 10 (13%) adults enrolled in a private plan had a deductible of $3,000 or more, up from just 1 percent in 2003.
Deductibles are outpacing growth in many families’ incomes, and thus representing a greater share of income. In 2016, 12 percent of adults with insurance coverage all year, or 18 million people, had a deductible that comprised 5 percent or more of their income, up from 3 percent, or 4 million people, in 2003.
Deductibles that are high relative to income are more common in the individual market, but have grown increasingly prevalent in employer plans. Among those insured all year, about one-quarter of adults with individual market policies and marketplace plans had deductibles that equaled 5 percent or more of their income, up from 7 percent in 2003. Among people who had employer coverage, the share with a high deductible grew from 2 percent in 2003 to 13 percent in 2016.
Large deductibles have been most common among small employers, but in 2016 the share of workers in large firms with high deductibles climbed significantly. Among adults with health benefits through their own employer who were working part-time or full-time in companies with 100 or more workers, the share with a high deductible relative to income climbed to 13 percent, the same rate as in small-employer plans.
When we examined the data more closely in the individual market, we found differences by income that likely reflect the effects of the Affordable Care Act’s cost-sharing reductions. These reductions lower deductibles and other cost-sharing elements for lower-income enrollees in marketplace plans. In 2016, a smaller share of adults with incomes under 200 percent of poverty ($23,760 for an individual and $48,600 for a family of four) in the individual market had high deductibles relative to their income than did higher-income enrollees. In contrast, in employer plans, lower-income enrollees have higher deductible burdens than do higher-income employees because the deductible amount does not vary with income. We have found a similar pattern in analyses of other survey data since the ACA’s major coverage expansions in 2014.
Adults with Low Incomes or Health Problems Are at Greatest Risk of Underinsurance
People with low incomes in the United States are by far the most at risk of being underinsured. Among adults who had health insurance for the full year, 44 percent of those with incomes under 200 percent of the federal poverty level ($23,760 for an individual and $48,600 for a family of four) were underinsured in 2016, more than twice the rate of adults with incomes over 200 percent of poverty (20%). Low-income adults comprised 61 percent of the 41 million underinsured adults in 2016.
People with health problems are also at greater risk of being underinsured because of their relatively higher health care costs. Among adults who were insured all year, more than one-third (34%) of those in fair or poor health or those with a chronic health problem were underinsured in 2016, compared to 23 percent of those in better health.
Underinsured Adults Have High Rates of Medical Bill Problems
Greater cost exposure is leaving Americans burdened with medical debt. Half (52%) of underinsured adults reported problems paying their medical bills or said they were paying off medical debt. This is about the same rate as adults who were uninsured for some time during the year and more than twice the rate reported by insured adults who were not underinsured (25%).
Among adults with private coverage who had been insured all year, those with high deductibles were more likely to report problems with medical bills than those with low or no deductibles. Two of five (40%) adults with a deductible of $3,000 or more said they had difficulty paying their medical bills or had accumulated medical debt compared with 21 percent of those who did not have a deductible.
Among adults who were paying off medical bills over time, those who had high deductibles were carrying the largest debt loads. Nearly two of five (39%) privately insured adults with deductibles of $1,000 or higher were paying off accumulated medical bills of $4,000 or more.
Medical Bill and Debt Problems Have Long-Term Financial Consequences
Many adults who have struggled to pay their medical bills report lingering financial problems. People who are either underinsured or uninsured have the highest rates of such problems: both groups had higher debt loads and lower incomes than adequately insured adults. Half (47%) of underinsured adults who had problems paying medical bills or had medical debt said they had used up all their savings to pay their bills; 40 percent said they had received a lower credit rating because of their bills. Over one-third (38%) of underinsured adults with medical bill problems said they had taken on credit card debt to pay bills. About 6 percent of underinsured adults reported they had to declare bankruptcy.
Underinsured Adults Report Not Getting Needed Care Because of Cost
Underinsured adults are more likely to skip needed health care because of cost than are adults with more cost-protective insurance. More than two of five (45%) underinsured adults reported not getting needed care because of cost in the past year, including not going to the doctor when sick, not filling a prescription, skipping a test or treatment recommended by a doctor, or not seeing a specialist. This is twice the rate of continuously insured adults who were not underinsured (22%). It is also close to the rate reported by adults who were uninsured (52%).
Privately insured adults who had health plans with high deductibles were more likely than those with no deductibles to report cost-related problems getting health care. More than two of five (47%) privately insured adults who were insured all year with a deductible of $3,000 or more reported not getting needed care because of cost compared with 22 percent of adults who did not have a deductible.
Many underinsured adults with health problems reported difficulty getting appropriate care. Among underinsured adults with at least one chronic health condition, nearly a quarter (24%) said they had not filled a prescription for their condition or had skipped a dose of their medication because of cost, compared with 10 percent of those with adequate coverage.
Addressing the Key Driver of Insurance Costs: Health Care Cost Growth
Health care costs are the single largest factor in the growth of private insurance premiums in the United States. Insurers and employers have tried to manage premium growth by making consumers increasingly responsible through higher deductibles and other cost-sharing vehicles. Advocates of this approach argue that with more skin in the game, consumers will help to slow cost growth by choosing more-efficient providers and being more selective in the services they use. But years of experience with high-deductible health plans in the U.S. has yielded scant evidence that such a strategy is effective. Instead, as the survey findings indicate, many consumers have responded to higher deductibles by avoiding needed health care and skipping their medications.
Evidence suggests that consumers cannot do the heavy lifting required to reduce the rate of growth in medical costs in the United States.
By Don McCanne, M.D.
When the Affordable Care Act was crafted, a majority of Americans were enrolled in large employer-sponsored group plans which seemed to be working fairly well. It was decided that these plans should be left alone, other than slightly modifying them to ensure continued protection. Most enrollees seemed to be satisfied with these plans, and so President Obama said that you could keep them if you wanted to. Even today they tell us that that we would face a voter revolt if we tried to take these plans away from people and replace them with a more comprehensive single payer system.
This report reveals that protection provided by employer-sponsored plans is rapidly deteriorating, including in the highly touted large group plans. A relatively high percentage of individuals with these plans are finding that they are underinsured. They are experiencing financial barriers to health care and are suffering financial hardship when they must access that care. The percentages of individuals exposed are scattered through the excerpts above, and they are very significant.
Those who are fortunate enough to remain healthy and do not need much health care may be satisfied with their current plans, not realizing that they are only one serious illness or major injury away from being exposed to financial hardship. They assume that their insurance will take care of any problems, but the experience of those who need care has demonstrated the degree of deterioration in protection that has gradually taken place in recent years.
Those under 65 with long-term disabilities who are enrolled in Medicare are finding that their coverage is inadequate. That is why we need to improve Medicare if we are going to use it as a universal program that covers everyone. Although Medicaid has lower cost-sharing requirements, enrollees are low-income individuals who find that these modest out-of-pocket amounts may create a hardship. Individual and small group plans have traditionally provided more meager coverage, again leaving individuals financially vulnerable. Individual plans offered in the ACA exchanges have some protection for low-income individuals through cost-sharing reductions (if they are reinstated), but individuals with incomes above 250% of the federal poverty level are exposed to significant out-of-pocket costs because of the relatively low actuarial value of the silver plans. So now employer-sponsored insurance has joined the lineup of plans and programs that expose individuals to underinsurance.
It will only get worse. We spend too much and receive too little. We have been shifting to consumer empowerment by placing more of the burden on patients, but this report confirms that we are worse off for it. The report concludes, “Evidence suggests that consumers cannot do the heavy lifting required to reduce the rate of growth in medical costs in the United States.” The heavy lifting can easily be done by a well designed single payer national health program – an improved Medicare for all. Under such a program, nobody should be underinsured.
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