Wealth, Income, And The Affordability Of Health Insurance

By Didem M. Bernard, Jessica S. Banthin and William E. Encinosa
Health Affairs
May/June 2009
There have been debates over how many uninsured people can afford insurance but refuse to purchase it.
The difference in purchasing power between the insured and the uninsured is not fully revealed by income comparisons. Median income of the privately insured was 2.9 times the median income of the uninsured in 2002-03 ($53,130 versus $18,404). However, median net wealth among those with private insurance was 23.2 times that of the uninsured ($78,472 versus $3,384). This discrepancy is even larger when we focus on families in the individual market. Median net wealth among those with nongroup insurance was 34.6 times that of the uninsured without access to employer coverage ($105,819 versus $3,057). Our results suggest that assets are an important determinant of effective affordability, undermining the notion that many people are uninsured by choice.
http://content.healthaffairs.org/cgi/content/abstract/28/3/887

By now you must be annoyed by those on the right who repeatedly claim that we do not have a problem with uninsured individuals. They say that the actual problem is that we are not counting them properly. Most of the uninsured would be insured, if only they showed a little more personal responsibility.
Many of the uninsured have incomes that are low enough to establish their eligibility for public programs. But those denying the problem would exclude these individuals from the count because they are “technically insured,” but merely too lazy to enroll. This ignores the multiple logistical barriers that make it impossible to enroll everyone who is eligible.
Many others without insurance are “illegals” who do not have their immigration papers in order. As long as we continue with national policies that include these individuals in our workforce, regardless of immigration status, then we have to accept the fact that they are part of our intrinsic economy and will access our health care system. Excluding them from the count would understate the issues we face when trying to figure out how to finance the care of uninsured individuals.
Although these undercounters dismiss most of the uninsured as failures of personal responsibility, they do remain conflicted on higher-income individuals who elect not to purchase insurance. Some consider these to be individuals who are exercising their right to freedom of choice – the freedom to self-insure instead of purchasing an insurance plan. Others consider these to be free riders who transfer the risk of catastrophic costs to the rest of us who are already paying our share.
But are these really individuals who are simply declining to purchase coverage they can afford? With health care costs now averaging $16,700 for an employed worker with a family of four, that takes quite a bit out of a typical income of $60,000. Many of theses families have little in the way of assets, living paycheck to paycheck, and really don’t have enough money to purchase a reasonable health plan.
This Health Affairs study demonstrates that not only income but also net wealth are important determinants of whether or not health insurance is affordable. Expanding net wealth requires both a higher level of discretionary income and a longer interval to accumulate assets. Thus both income margins and time are variables that influence the affordability of health insurance.
Since current proposals for reform would use tax subsidies to help individuals and families purchase private health plans, does this mean that we need to establish an eligibility grid that includes both income and net assets as variables? If we did, we might see an epidemic of personal failure based on the inability of so many to master the logistical requirements of the eligibility grid. (Have you tired calculating your precise net wealth recently?)
Why do we keep playing these games with all of the variables that go into determining our insurance status? Why don’t we simply make it automatic for everyone? If you exist, you’re covered.