Covering the Uninsured - a plan for 2009
One out of every six Americans lacks health insurance. The total number of uninsureds is 47.5 million or 15.3% of the U.S. population, according to the U.S. Census Bureau report issued August 2008. That total is decreased by 1.3 million from the 47 million uninsured Americans in 2006. . The demographic makeup of the uninsureds is surprisingly diverse and ever-changing. A gap in insurance coverage tends to be a temporary problem rather than a chronic condition for most Americans. Relatively few are uninsured for more than a year but the number who may be underinsured is increasing sharply. The number of Americans covered by employer-sponsored group health insurance declines each year but the number covered by individual insurance is growing sharply. Overall numbers of uninsured remain relatively stable. The uninsured are a widely heterogeneous group but the underlying issues that trigger a gap in coverage can be identified based on demographic characteristics. The majority of Americans without health insurance are financially able to afford coverage and adequate insurance choices are currently available. The overall number of people without health insurance could be most effectively reduced be addressing the specific reasons for lack of coverage within each demographic niche of the uninsured population. Partnerships between public entities and private enterprises are most likely to be successful in expanding coverage to non-poor Americans.
The number of uninsured has remained relatively stable for years, but the makeup is changing and our understanding of this uninsured population and the controlling influences issues that has dramatically improved in recent years.
On April 25, 2008, the National Institute for Health Care Management (NIHCM) released an 20 page report titled "Understanding the Uninsured: Tailoring Policy Solutions for Different Subpopulations". This new report pulls together the latest data and is the most complete research on this topic since the comprehensive 2003 study funded by the Robert Wood Johnson Foundation titled "The Uninsured: A Study of Health Plan Initiatives and the Lessons Learned Report" based primarily on U.S. census data. The latest report confirms most of the earlier indications but emphasizes its findings in a more direct manner and makes clear recommendations on the methods that will be successful in moving toward universal health coverage in the United States. The combined results of all available research contradicts the premise behind many of the legal propositions being considered by various state governments. The data also calls into question the logic of either of our Democratic presidential candidates' proposal directed at covering the uninsured. This article summarizes the points made in the new report in relation to MedSave.com's plan of action and the changes that may result from the new information.
Majority of uninsured are affluent
The majority of people who become uninsured come from affluent households. U.S. census data cited for 2001 showed that 57% who became uninsured had household income of more than $75,000. This corresponds to households that rank in the top 25% of income. A person who suddenly faces the need to pay for health insurance from personal income might not be willing to give up their current lifestyle and make the financial changes that would be necessary to place health insurance higher on their list of financial priorities. In studies where people were asked the price of available health insurance, they tend to overestimate the cost. This indicates that the affordability issue may be at least partly matter of perception. MedSave.com believes that consumer education should focus on the risks to personal lifestyle, especially adverse consumer credit reporting, that results from inability to pay unexpected medical bills. A large portion of personal bankruptcies and the majority of home loan foreclosures are associated with chronic medical conditions. Education should focus on both insurance and non-insurance solutions, including the proper use of health savings accounts and other cash reserves. Most uninsured Americans qualify for and can afford health coverage under programs that exist today, but make an economic choice to allocate their income to other goods and services instead. One source indicate that people often perceive health insurance premiums as being higher than they really are and that 25% would immediately decide to purchase coverage if they knew the real price.
When addressing this group of affluent individuals, emphasis should be placed on three key points: 1) high quality health coverage is easily available and affordable, 2) focus on health insurance for catastrophic expenses, not as a means to pay for most ordinary health care, and 3) expect total health care costs to be our second largest expense, falling only below housing. Personal financial planning should incorporate these considerations.
Life transitions cause short term gaps in coverage
The largest group of unemployed people can be classified as being in a life transition. This includes individuals who are physically relocating to a new community, have recently graduated, changed employment, started a business, are getting married, getting divorced, etc. They are only temporarily without health insurance. They do not view their status as a chronic problem. Other studies indicate that a typical American has about six short term gaps in health coverage over a lifetime.
Of the 45 million uninsured people in America, most will eventually find health insurance without any assistance. Seven out of ten uninsured people who have access to a computer and a bank card could immediately enroll in major medical insurance within ten minutes at a cost of less than $200 month. Viewed from this perspective, the overall statistics of uninsured are not as alarming.
We believe that it is important for our policymakers to realize that at any given moment some percentage of people will be in transition from one type of health coverage to another and that gaps in coverage due to changing life circumstances are inevitable and not necessarily cause for alarm.
Effects on medical care
The effects of not having health insurance are not as great for the individual as many might imagine. The consumer spending for health care appears to be largely unaffected by insurance. An average uninsured individual spends almost the same amount out-of-pocket for health care as the average person with health insurance; about $600 per person per year according to an August 2008 report by Kaiser Fondation. Uninsured people received about $56 million in care paid or donated by others including the government, doctors, charities in 2007. The average dollar value of health care received by an individual without health insurance was about $2,000 in 2007 vs. about $3,500 for an individual who is covered by health insurance. After adjusting for the probability of some overutilization of health care services due to the availability of payment through insurance, the difference in treatment received is still significant but not does not rise to the level of "crisis" as is often presumed.
Americans' difficulties affording health care seems to be largely independent to the issue of health insurance, since the same difficulties in accessing care were reported by those with health insurance and those without insurance in similar proportions. One in five Americans reported delaying or avoiding necessary medical care in 2007 due to the cost, according to the Center for Studying Health System Changes. About 80% of those who reported difficulties were covered by health insurance. In fact, a recent article by The Washington Post (8/20/08) indicates that "underinsurance" may pose a greater problem for quality of care than lack of insurance and a more difficult issue to address over the long term. The Post reports that "Two-thirds of the working-age population was uninsured, underinsured, reported a medical bill problem or did not get needed health care because of cost in 2007" (emphasis added). Assuming this is true, then these other issues represent a problem that is potentially more than four times larger than the uninsured problem. (Assuming the cumulative issues affect medical care of 67% of the population vs. 15% uninsured alone).
Age of uninsured
Most of the uninsured are adults. The Children's Health Insurance Programs (CHIP) that are federally sponsored and administered independently in each state have been successful in raising awareness of the importance of health insurance for children. Because health insurance for children is inexpensive, regardless of whether a public or commercial insurance is used - we have been successful in reducing the overall number and proportion of uninsured children. Still, the NIHCM's report emphasizes that one in four uninsured children are eligible for free or minimal cost coverage but are not enrolled despite massive efforts to promote the availability of coverage. The number of children without health insurance dropped to 8.1 million in August 2008 (11%) as compared to 8.7 million in 2006 (11.7%).
The percentage of uninsured children is less than the percentage of any age group of adults. Uninsured are roughly evenly distributed among all other age groups. Slightly higher numbers without insurance are prevalent among young adults (20-29) and pre-Medicare (55-64) age groups.
College students and recent graduates are frequently uninsured
A number of sources indicate that one in four college students have no health insurance and that the percentage of uninsured increases following graduation from college. Orion reported that 46% of students recently surveyed indicated interest in a health insurance plan coverage beyond graduation. This college, like others, chose to partner with a private sector health plan administrator to market the plan to students. Colleges or their Alumni associations typically share in the financial revenue generates from sales to students and graduates. The problem with this approach is that there almost as many unique health insurance needs as there are students who need coverage. A single health plan is unlikely to be the best match for ant more than 2-5% of the students who need coverage. A better approach, we believe, is for universities to partner with independent health insurance services that can help students find and enroll in any available health plan. This approach could boost the effectiveness of matching graduates with a suitable and affordable health plan to above 80%.
Gap in coverage between jobs
Workers who have a gap in employment may go several months without health insurance. Many do not realize that a low cost type of coverage called "short term medical insurance" is available specifically designed to provide protection from catastrophic expenses during these periods. Unfortunately sis states currently restrict the use of this coverage under outdated insurance laws. As a result, residents of Massachusetts, New Jersey, New York, Vermont, Rhode Island and Washington state face extraordinary difficulties finding affordable coverage during gaps in employment. The links on each of these state point to the inadequate few available low cost insurance options available in these states. We endorse proposals that would allow unemployed workers to obtain low cost health insurance that is legally available in most other states, without restriction on their current state of residence.
Employers and insurers could have an impact through more assertive role in the enrollment process of interim coverage when employees are terminated from group health insurance plans. We support the proposal that employers be encouraged to amend their employee benefit plans to include "default enrollment provisions" for terminated and newly hired employees. These default enrollment provisions have become highly effective in recent years for increasing the number of employees who benefit from employer-sponsored retirement benefits including 401(k) plans. Consumer advocates praise these provisions because they make financially prudent choices the default standard, rather than automatically exclude and deny benefits to an employee who does not take specific affirmative actions to obtain benefits. Most employer-provided health plans could easily be amended to include provisions that enroll employees in conversion coverage with the initial premium paid from either the last paycheck or another available employee benefit plan. (Current law already allows health insurance premium in these circumstances to be paid from a health savings account, health reimbursement arrangement or even a retirement savings account so no legislative action is necessary). MedSave.com expects expand support to employers who wish to add default provisions to their health plans. The service is expected to be available at no cost to employers based on existing online enrollment technologies.
COBRA is not significant
The provision of federal law designed to give employees the ability to temporarily continue their health coverage following termination from a group health plan is useful in only a very limited number of circumstances. Employees who are terminated from their jobs often do not receive full information about their health insurance options in time to make financial arrangements. MedSave.com estimates that commercial insurance options represent a better value to about 90% of COBRA-eligible individuals who compare their insurance options following termination from group coverage. compare In 2009 a federal subsidy will effectively reduce the cost of COBRA coverage to the point where it will be comparable in price to commercial short term medical insurance for many older workers. Still, the timing of COBRA notifications typically requires terminated employees to act quickly to pay for the three months of coverage at once, including, by that time, one month or more of time already passed prior to the notice. Group coverage typically costs more than $1000 per month for family coverage and few people can come up with the initial cost for COBRA coverage - even with a 65% government subsidy - especially if they are now without a paycheck due to a recent termination from employment.
COBRA's effectiveness is also diminished by the legal exemptions which make the coverage unavailable. COBRA protection is not available to the employees of smaller companies nor to situations where an employer terminates a health insurance plan. Since employer-provided health insurance is voluntary and not required of the employer, there is no assurance of continued coverage. No recommendation is made to change COBRA provisions. COBRA is essential and highly valuable to a small group of Americans who might otherwise be uninsured. It is important to recognize the practical limitations of COBRA and therefore, the inability of this legal provision to be a significant factor in addressing the issue of uninsured Americans.
Newly hired employees are not covered immediately
Most group health insurance plans require a 90 day waiting period before coverage starts. Interim coverage is usually available, but many human resources professional say that they are unfamiliar with these health plan options. It would be relatively simple to train HR staff to assist new employees by directing them to available short term medical insurance as temporary coverage during this probationary period. Short term medical insurance is available in 46 states and usually utilizes online enrollment systems to offer immediate issue coverage and ID cards. Employers could help employees and reduce the incidence of uninsured without incurring additional costs by adapting "default enrollment provisions" into their employee benefit plans as discussed above. This default provision would simply presume that newly hired employees will be enrolled into a short term medical insurance plan on a salary-deducted basis unless they indicate otherwise and provide evidence of other coverage.
A solution for immigrants
New U.S. residents are not eligible for most health insurance plans regardless of legal status or citizenship. A special health insurance program called "Inbound Immigrant" is available in all state to all immigrants who entered the United States within the past two years. This insurance is available without regard to health history and has been singularly effective in solving the health insurance availability to this niche of the population. We no longer see this as a problem area, except
Lower income individuals
The number of newly uninsured coming from low income households (income below $25,000) has increased at only one-fifth the rate as from the highest income group (household incomes above $75,000), according to the previously cited census data. While this data is more than five years old, we believe that the trend continues. Loss of insurance is not unduly a low income problem. Still, this group cannot be ignored.
A significant number of low-income individuals often do not know that they are eligible for state-assisted coverage. This accounts for more than 14 million of the total or 1 out of every 3 uninsured Americans. One in four uninsured children is eligible for free coverage under existing programs. Publicity budgets for these programs tend to be under-funded so that promotion of these plans is inadequate. Low income Americans lose coverage when they become ineligible for various Medicaid programs due to change in income, residence, or simply because they have difficulty handling the process necessary to obtain benefits. Many who have applied for any type of public welfare benefits - even temporary loss of income insurance - would agree that the process is unreasonably difficult. Other issues including mental health difficulties may compound the difficulties these individuals face in obtaining health benefits. No specific proposal is made to address the issues of this group of uninsured Americans.
Low income combined with a lack of employer-provided health benefits is the controlling factor for one out of every five uninsured people. Many believe these people are at the greatest risk of neglecting long term health care needs. Entry level health insurance plans like "Basic Health Insurance" offered on a group basis and paid through salary deductions of perhaps $15 to $30 per week are the best immediate approach toward a solution.
Individuals with chronic health problems face financial strains
Everyone, regardless of their medical problems, is eligible for health coverage under at least one open-enrollment health plan. Yet many have complained that information is scarce and that they can not access the enrollment process for these health plans. This coverage is expensive and often beyond the financial means of a person who is facing other serious difficulties. Chronic medical conditions are frequently associated with a drop in household income. Diabetics are particularly affected. This condition is at epidemic levels in the United States and is often accompanied by other obesity-related medical problems, lower income and high lifelong medical expenses. Because of the increased pressure often accompanied by anxiety over health care costs, these individuals are at larger risk to become victims of health insurance scams and often make mistakes when shopping for health insurance.
We believe that the best immediate service we can provide to these individuals is to help provide education about existing health insurance options and help avoid scams and mistakes when enrolling in health insurance. Those with chronic health conditions are well-advised to address the economic reality that the actions they take to address their health insurance issues may well dictate their future financial well-being.
Health insurance and health care are still available
Federal law known as HIPAA has been effective in ensuring that all Americans are eligible for at least one type of health insurance. HIPAA does not address health care costs so, as a result, many of the available health insurance plans are unaffordable to large number of uninsured. The majority of our nation's health care facilities have a policy that no one is refused basic medical care due to lack of insurance of the inability to pay for it. Finally, our state welfare programs combined with a wide range of private and public health care programs ensure that all Americans who cannot afford to pay for health care eventually become eligible for some type of cost-subsidized plan after they have exhausted most of their personal income and assets. The net effect of these policies on our current health care system is that:
1) Emergency care facilities take a disproportionate share of uninsured care in a financially inefficient manner and this cost of treatment is re-allocated to those who do pay for medical care.
2) A disproportionate number of individuals who are looking for health insurance already have a significant pre-existing medical condition that makes it impossible to find high quality insurance at an affordable price.
3) Some people are emboldened to go without medical insurance knowing that the odds of being denied crucial medical care are small.
4) the proposition that we must become financially destitute before becoming eligible for publicly health care is distasteful to many people, especially younger and modest income citizens. These groups tend to favor a socialistic approach to universal health care.
We believe that it is important to maintain perspective by recognizing that despite our difficulties financing and administering health care systems, the fact is that no one is left lying on the sidewalk outside of an emergency room.
Defining "universal coverage"
We, as a nation, have not reached a consensus on the definition of "universal coverage". For some this means a single payer government-controlled health care system that provides the same level of medical care for all. For Massachusetts residents, it means a law that requires each person to buy health insurance or else face tax penalties. For others, including MedSave.com, it means the availability of coverage for basic health care at affordable prices without regard to health, income, employment status. We believe that in a capitalistic economy will always reflect a tiered level of access to health care. It is fiscally unrealistic, for example, that we could provide state-of-the art medical care intended primarily to prolong life on a universal basis to all of our elderly citizens.
Regardless of the health care system used of the definition of the term "universal coverage" that we adopt, it is important to recognize that we will never reach 100% coverage. Even countries that have free socialistic health care report that some percentage of citizens who are either in transitory situations or otherwise "fall through the cracks". Economists in various publications state that a goal of about 96% coverage at any given moment might be the highest we could achieve under any U.S. health insurance system.
New health insurance products
There is little evidence that the introduction of additional low cost health insurance products will immediately affect the number of uninsured. We believe that innovation and ongoing development of health insurance is necessary to keep pace with changing medical treatments and trends. Most health insurance companies interviewed for the NIHCM report showed interest in offering a low cost limited benefit insurance and many have made application with state insurance departments to offer more of these products in the near future. Slow state approval of new and innovative insurance products is perceived as an obstacle to lower priced health insurance. MedSave.com supports proposals that would make it possible for individuals to purchase insurance that is legally available in a location other than their state of residence.
The number of Americans with individual health insurance (as opposed to employer-sponsored group coverage) is expected to grow by 400% within the next few years. Continued development of new insurance products that appeal to consumer taste will likely accelerate this trend. We are concerned that some consumers, especially younger and lower income individuals, are strongly attracted to the lowest cost health insurance plans with attractive front end benefits like coverage for doctor visits but provide inadequate protection for more serious medical treatment. This risk was frequently on of the primary reasons cited by states that restricted the sale of low cost limited benefit health plans. While consumers' rights to choose among a wide range of health plan choices are clearly valuable, these market freedoms are only efficient when consumers are well-informed on health insurance issues.
Health insurance brokers
The NIHCM report says that insurance brokers are important for the success of health insurance to small businesses. Low cost health plans not offered through brokers were not as likely to be successful. Individual health insurance does not commonly rely on brokers but usually relies on flyers, advertisements and direct online enrollment.
Mandated coverage is not welcome
The NIHCM report does not recommend a mandate to require health insurance. U.S. voters show increasing distaste for insurance mandates of any type. California voters recently defeated a proposal to require everyone to carry health insurance. Massachusetts, the only state with a legal requirement for health insurance, recently hit economic stumbling blocks in executing the vision. It is not possible to legislate affordability of health insurance and more than it is possible to legislate that gasoline of grocery prices be more affordable. Legislative initiative in many states are misguided and will only result in further health insurance crisis like the situation in Massachusetts or New Jersey. New Jersey experimented with health insurance legislation in the 1990s that triggered one of the nation's worst levels of uninsured individuals and health insurance prices that are often higher than typical mortgage payments. In contrast, states with the least restrictive health insurance regulation now have a wider range of affordable health plans available than ever before. MedSave.com cites the recent proliferation of affordable limited benefit health plans Core Health Insurance that is available regardless of health history. More of these types of commercial health plans will be introduced in the near future in all states that allow this type of coverage. Proposed legislation in many states level as well as campaign rhetoric in the Presidential primaries pose a threat to this type of affordable health coverage. Lawmakers in all states should be urged to restrain efforts to make significant changes that would disrupt health insurance markets. Consumer choice - including the choice to not participate - is an invaluable component of the American ideal and our free-market economy.
MedSave.com believes that the well-intentioned consumer advocacy group "Cover the Uninsured" ( www.covertheuninsured.org ) erred in promoting legislative changes as the primary means toward universal health coverage. Consumer groups like this would be more effective in meeting their objectives by working within the existing system in developing non-insurance programs and insurance partnerships. Another organization called "Families USA" took a radical approach to pushing for health care legislation through a media propaganda campaign in early April 2008 that linked pre-mature deaths to the lack of health insurance. Mainstream medical picked up on the sensational story in many states but the majority of readers did not buy into the story. The campaign might have back-fired since public opinion sentiment against legislative mandates has increased in the following weeks.
Group health insurance mandates
Group health insurance is subject to more mandated coverage provisions that raise the premium price over time. Increasing prices then prompt employers to drop the coverage. Despite this long term economic trend, state governments continue to add additional provisions to their health insurance laws and more employers continue to drop health insurance coverage. The number of Americans covered by group health insurance declines by about 1% each year while the number covered by less regulated individual insurance is increasing by about the same amount.
There is no proposal in the NIHCM report or elsewhere to deregulate group health insurance. We do not know why, but we presume that significant deregulation is not seen as a viable option.
Public/private partnerships hold the most potential
The new NIHCM report emphasizes the potential of partnerships between public entities and private commercial enterprises as our most likely opportunity to boost the overall level of health insurance coverage. MedSave.com, a private commercial business, is likely to pursue partnerships with public and non-profit entities to promote health insurance education and the availability of one-on-one counseling for individuals who need health insurance. Our affiliation with "OnlineAdviser" a free public service that provides help . OnlineAdviser services were reduced due to lack of funding in 2007.
In total, about 16% of all Americans (translating to about 46 million people) lack health insurance. The statistics are not significantly affected by age, sex, income, employment status or location. The ratio is higher within certain demographic groups; up to 25% of all college students, part-time workers and employees of small businesses and an even higher percentage of recent U.S. immigrants. The cost of treating these uninsured is paid by those who do have health insurance - primarily by employers who pay for group coverage for employees - and by taxpayers though various public assistance programs. The NIHCM findings "suggest strongly that private health insurance plans can play an important role in extending coverage to some uninsured Americans". MedSave.com concurs with NIHCM that the number of uninsured can be reduced through partnerships between private and public sector to educate Americans about health insurance options that are currently available. Employer-provided health plans should evolve to include default enrollment provisions for those employees not eligible for the regular health coverage due to termination, recent hiring or part-time status.
We do not believe that any of the proposals contained in the recent NIHMC report or any other source effectively address the core underlying issue of health care cost inflation. We agree with the NIHCM's conclusion that addressing health insurance without addressing underlying health care costs will not be effective.