Under-insured patients: What physicians need to know

The Affordable Care Act of 2010 (ACA) extended health insurance to previously uninsured millions of Americans. Yet many insured adults, even those with employer-sponsored coverage, find they still can’t afford the care they need. Individuals who are “underinsured” represent a growing challenge for policy makers, insurance companies and providers.

Sara R. Collins, Ph.D., has spent nearly two decades studying insurance affordability and coverage as a vice president of The Commonwealth Fund. Collins is lead author in the latest in a series of studies by The Commonwealth Fund on the state of health insurance coverage in the United States, a project that began in 2001. She spoke recently with Medical Economics® about the study’s findings, and their implications for the future of health care. The interview has been edited for space and clarity.

Medical Economics®: How do you define the term underinsured?

Sara Collins: Since about 2003, we have been tracking though our biennial health insurance survey the number of adults who are insured all year but have high out-of-pocket costs or deductibles relative to their income. We defined someone as underinsured if their out-of-pocket costs are 10% or more of their income, or, if their income is under 200% of the federal poverty level, if their out-of-pocket costs are 5% or more of their income.

We have a separate measure of risk of being underinsured. Deductibles are what we use as a very rough measure of benefit design. So if someone’s deductible is 5% or more of their income, they’re also counted as underinsured.

ME: Most Americans receive their health insurance through their employer, and it seems that gives them enough coverage to meet most of their needs. But your survey shows that 25% of adults in employer-sponsored plans fall into the underinsured category. Why is that?

SC: That is a very good question. If we look at the share of people who are underinsured overall, that is largely driven by people in employer plans, because there are just so many people in employer plans. The share of people in employer-based plans who are underinsured has climbed from about 17% in 2010 to about 28% in 2020. And this growth has really been driven by the proliferation of the number of people who have deductiblesand the size of those deductibles.

In 2010 only 6% of people with employer plans had deductibles that amounted to about 5% of their income. Bu 2018 that share was 15%. So it’s really been driven by this risk of out-of-pocket exposure people experience in employer plans.

ME: The survey also shows a lot of overlap between issues of race, income and insurance status. Can you talk about that and why that relationship exists?

SC: The core coverage problem in the United States, even 10 years after passage of the Affordable Care Act, continues to be concentrated among people with low and moderate incomes, both in insurance and affordability. And this is driven by several factors that are still with us: lack of Medicaid expansion in 12 states; people working in multiple jobs and potentially churning in and out of insurance coverage. [Another factor is that] a lot of people work part time, and those jobs generally don’t come with insurance benefits. Then [there are] also complex Medicaid and ACA marketplace eligibility rules. For example, someone who works multiple jobs may have fluctuations in income that can make them eligible or ineligible depending on the time of year, such as farm workers. Their income might go way up in the summer and bump them out of eligibility for Medicaid. So much about the way people work affects whether they have insurance coverage.

And people of color are disproportionately represented among people with lower incomes, so that’s one reason we see higher rates of uninsurance among Blacks and Hispanic patients. Those differences have fallen over time, just as they’ve fallen between people with higher incomes and lower incomes.

The other major factor is the immigrants who may be living in the country illegally who are not eligible for subsidies under the ACA or Medicaid.

ME: Why have deductibles become so high?

SC: In commercial plans, the prices insurers pay providers are the major determinants of the cost of health care in private markets. And since premiums are primarily driven by costs, these prices also drive growth in premiums. So in order to keep premiums low, employers have tried to share more of those costs with their employees in the form of higher deductibles and other kinds of cost-sharing.

And what’s also important to keep in mind as an employee, as your health care costs grow to be a larger share of your compensation costs, employees are also making wage concessions. So their income isn’t growing. So that means the deductible becomes even a larger share of someone’s income as it grows and income growth doesn’t keep pace. And people who face high deductibles or have high out-of-pocket costs are much less likely to get needed health care.

So there’s a circular aspect to this phenomenon of rising provider prices, the impact of insurance costs and people’s demand for care from the providers whose prices seem to be one of the main culprits.

ME: Is that tradeoff between premiums and deductibles a dynamic that plays out on the ACA exchanges?

SC: It does, for sure. If you look at our report, you see that rates of underinsurance are even higher in the individual market than on employer plans. So even though a lot of the growth in underinsurance is coming from employer plans, people with individual market plans tend to have much higher deductibles. There’s just no countervailing pressure. Under the ACA, exchanges are not allowed to negotiate down price differences. Some insurers, such as California, has been very experimental in terms of getting price concessions from employers. But in general, the marketplaces haven’t had a lot of leverage to lower premiums and deductibles.

ME: How does lack of insurance or underinsurance affect individuals’ care decisions?

SC: We find that people who are uninsured, are insured part of the year but not other parts of the year or who are underinsured are much more likely to report not getting health care because of costs. In our most recent survey, more than half of adults who were uninsured for any time during the prior year reported not getting health care due to cost. This could include not filling a prescription, not getting specialist care, not going to the doctor when they’re sick, not getting a recommended follow-up test or treatment.

ME: Does that contribute to the disparities in health outcomes among racial and ethnic groups?

SC: Adequate insurance coverage is not the only determinant of access to health care, but it is the most important one. And that was the consensus of the Institute of Medicine in 2003, I believe, so this predated the Affordable Care Act.

But there is no question that insurance coverage is the most important factor. We know that there are other issues, race equity issues, in people’s ability to get high-quality health care, but people at least need to have good health insurance in order to make that first step to access.

ME: How does that also affect a family’s or individual’s overall financial situation?

SC: We find that people with inadequate coverage, particularly if they’re uninsured or have a gap in their coverage or are underinsured, are much more likely to report problems paying their medical bills. [This leads to] not being able to pay their bills, being contacted by collection agencies about unpaid bills and carrying debt over time. It’s directly related to problems paying bills.

We also find that people who report problems paying medical bills experience long-term financial issues. They’re much more likely to say they used up all their savings to pay their bills or that they had a downgrade in their credit rating because of unpaid bills. So it’s a problem that is specific to health care, but it does flow over into other aspects of people’s lives. We even find that about 25% of people report having to cut back on food, heat or electricity because of medical bills.

ME: Is it fair to say that although the ACA reduced the number of uninsured Americans, it didn’t address the problem of underinsurance or even made it worse?

SC: What’s important to remember is that the essential health benefits requirement for individual market plans and limits on out-of-pocket cost exposures, bans on preexisting condition exclusions in health plans, no annual or lifetime benefit limits, are very important provisions in terms of protecting people from catastrophic-type costs that people were regularly experiencing in individual market plans.

And we even see it now in plans that don’t comply with the Affordable Care Act, such as short-term policies, where people are paying premiums for very skimpy coverage that leaves them very exposed to health care costs. And if people get coverage through the marketplaces, and their incomes are below 250% of poverty, which is about $32,000 for an individual, they’re eligible for plans with reduced cost-sharing that include lower deductibles. But as you move up the income scale, people are exposed to increasingly higher out-of-pocket costs and increasingly higher deductibles.

In 2020, in the 38 states where the federal government ran their marketplaces, the average deductible for a silver level plan was about $8,100. So that’s a pretty high deductible. And it’s why we see the higher underinsured rates in individual markets still. So there has been improvement, but there is still a ways to go to lower those underinsured rates in the individual market.

ME: How is the COVID-19 pandemic affecting the problem of underinsurance?

SC: I think what we’re seeing in our biennial survey, which was in the field from January through June of [2020], is that there’s just a persistent vulnerability among working-age adults and their ability to afford health care. And this could worsen if the pandemic continues and the economic downturn continues.

And that is because, aside from many people losing their health benefits because they’ve lost a job, if people’s incomes aren’t growing, or their business revenue is taking a hit, if out-of-pocket costs don’t change, or if their deductibles don’t change or the premium contributions don’t change, that means that health care is going to take up a larger and larger share of Americans’ incomes over the next year. So it will have the effect potentially of worsening the number of people who are exposed to high costs relative to their income.

ME: Of course, that will depend on how long the pandemic lasts.

SC: That’s right. Right now the economic downturn has affected people in some industries more than others. We know that people in retail and food and beverage and accommodations have been the most likely to lose their jobs. And those tend to be industries that usually don’t offer health benefits. So a lot of people were already uninsured in those in those jobs or had coverage through Medicaid or whatnot.

But if the downturn continues, the question is whether we will see job loss in other industries that do tend to come with benefits, or just an overall drop-off in income growth or flattening in income growth that’s widespread through the economy.