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Everyday Citizen

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Health Coverage: Why Are People Uninsured?

by February 11, 2008 blog

More and more American workers are losing their health coverage in the workplace as employers increasingly refuse to offer it. The Americans most likely to go without insurance now are those earning less than $46,650 a year and the majority of these are fully employed. Most Americans don’t buy health insurance if they don’t get it at work, regardless of how much they earn.

Four out of five of “uninsured” Americans are employed. Either they are not being offered group health insurance through their employer (the most prevalent problem) or the premiums offered through their employers are priced higher than these employees can afford (this is the smaller group).

The greatest number of uninsured Americans are working and are not offered any group coverage through their jobs. Thus, their choices for health care coverage are very limited. Unable to qualify for group insurance, these working Americans must look to the “non-group insurance” market for their purchases.

Who are these people? Why are these Americans not buying the non-group policies?

The “non-group” policies are notorious for “non coverage” of real medical expenses. The non-group policies generally exploit a lawless frontier, in that most of the patient protections written into law in recent years only apply to those patients that have group insurance. Those with non-group are left, too often, to fend for themselves in a kind of Wild West type of uncertainty.

The two biggest problems in the non-group policy world are these:

1) Non-group policies tend to be unreliable in their reimbursements or payments for routine, usual, customary or necessary medical care. All may seem fine because the fine print may resemble what the subscriber has seen in other policies, however, most policies are written in vague legalese. In truth, the power lies with the insurance company and not the patient.

2) Non-group policies tend to not only have much greater premiums, co-pays, deductibles and co-insurance (what the patient pays) but these policies also are less regulated and their premiums widely vary. Even if a patient (policy subscriber) does his or her level best to try to obtain the best coverage for the best price, he or she may learn, after it’s too late, that the coverage just isn’t there and the premiums are increasing rapidly.

A mid-November Gallup poll found that the public is more dissatisfied than ever with out-of-control health care costs. An overwhelming 81 percent said they are dissatisfied with the cost of health care in this country, the highest figure recorded on this question since Gallup first started asking it in 2001.

Another recent study, this one by the Kaiser Family Foundation. found that:

Often considered an affordability problem, and for lower income families, the cost of premiums is undoubtedly a factor. Prices for non-group policies vary considerably: for example, over the 2006-2007 period, annual premiums for single coverage varied by age from $1,163 to $5,090, and between $2,325 and $9,201 for family coverage depending on the age and number of family members covered…This finding may be surprising given the potentially large financial and health risks that arise for individuals and families without health insurance coverage.
That same study seeks to assess at what income levels Americans are purchasing the non-group coverage when group coverages are not offered by their employers.

The analysis finds that relatively few people at lower incomes purchase non-group coverage, with one in 20 purchasing it among those with incomes at the federal poverty level ($18,660 for a family of four in 2003 dollars).

As income increases, the coverage rate increases, though even at four times the poverty level, only about a quarter of individuals purchased coverage. And among those with incomes at least 10 times the poverty level, only about half purchased coverage in the non-group market.

The multitude of payers (also called insurance companies) seeking to make profit from the uninsured only contributes to the unaffordability of the non-group policies offered – when they charge extremely high premiums and they do not cover many of the medical services. In some ways, these non-group insurance policies are exploiting people of lower income in the same way that the higher interest rate sub-prime mortgages and predatory lenders exploit people of lesser income. And, like those other industries, the non-group market is not as regulated.

The same Kaiser study, How Non-Group Health Coverage Varies with Income (pdf), examined health benefits and the self-employed. The self-employed were examined separately because they usually do not receive health insurance through an employer, and thus were more likely to purchase insurance directly.

What the study found is that only the upper income folks could afford the insurance purchase – and even then, even at the upper ends, too many were still uninsured. Only when family income was above 450 percent of the poverty line did close to half of the self-employed purchase insurance.

The Kaiser study looked at the percentage of individuals without other coverage options who purchased private non-group health insurance.

Not surprisingly, it found very low coverage rates at lower income levels, suggesting that many people at these incomes were unable to find policies that they felt were affordable.

It also show that while coverage rates rose steadily with income, even at high levels of income, most individuals did not purchase coverage (e.g., at four times the poverty level, only about a quarter of individuals purchased coverage).

Coverage rates were higher for the self-employed at all income levels, but even for the self-employed most remained uninsured until incomes exceeded four times poverty.

As our politicians talk about “health care reform” – few are openly talking about the unaffordability of the non-group coverages that individuals are forced to examine on the market. Some politicians are talking about making it possible for citizens to choose coverages like those offered to senators and congressmen. Are these politicians and candidates talking about non-group or group coverage? It’s important to differentiate because non-group coverage is usually not as affordable and not as comprehensive.

These Kaiser findings show that policy makers considering ways to encourage more people to purchase non-group coverage face a daunting challenge.