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CCH® BENEFITS — 6/26/08

Cost Shift To Insureds Puts Middle Class At Financial Risk

From Spencer's Benefits Reports: Health insurance cost-containment efforts, which shift costs to insureds through higher premiums, deductibles, and other cost-sharing features, have led to a significant growth in the number of insured adults ages 19 through 64 who are underinsured, according to a study recently conducted by The Commonwealth Fund.

From the year 2000 to 2007, health insurance premiums rose by 91%, compared to a 24% increase in wages, and the average deductible among small business plans has tripled. Low- and moderate-income families face “cost burdens” in case of an illness, the study researchers said, and middle-income families also are affected—the number of underinsured rose sharply between 2003 and 2007 among middle-income insureds.

As of 2007, some 25 million insured adults younger than age 65 were underinsured—a 60% increase since 2003, the study, How Many Are Underinsured? Trends Among U.S. Adults, 2003 and 2007, found. The study report was published in the June 10 online version of the journal Health Affairs.

The rate of increase was highest among those with incomes in excess of 200% of the federal poverty level, where underinsurance rates nearly tripled. Overall, 42% of U.S. adults were underinsured or uninsured. The underinsured report high levels of access problems and financial stress, the Commonwealth Fund study noted.

The study data came from The Commonwealth Fund’s 2007 Biennial Health Insurance Survey, a nationally representative telephone survey of 3,501 adults ages 19 and older living in the continental United States, conducted by Princeton Survey Research Associates International from June 6 through Oct. 24, 2007. In 2007, 72% of adults were insured all year, 10% had been uninsured at some time during the previous 12 months, and 18% were uninsured at the time of the survey.

Insureds were considered underinsured if their estimated out-of-pocket spending for medical care represented 10% or more of household net annual income, but 5% for low-income insureds (those with income below 200% of the federal poverty level), or their deductible equaled or exceeded 5% of their net annual household income. Underinsurance rates increased the most rapidly among higher-income adults. The share of underinsured nearly tripled among adults with incomes of 200% of the poverty level or greater.

About 75 million adults, or 42% of the younger-than-age 65 adult population, either had no health insurance or had inadequate coverage (up from 35% in 2003), with 72% of these in lower-income households and 27% in higher-income households. For 17.2% of the insured population in 2007, out-of-pocket expenses were at least 10% of their annual household income; and for another 11.8%, it was 5% (among low-income). For 62% of the insured, their deductibles were at least 5% of their incomes. “An estimated two in five underinsured adults spent 5% or more, and one-fifth spent 10% or more, of family income on premiums—more than three times the premium-to-income pattern in the comparison group,” the study noted.

The rate of full year, adequate health insurance coverage, along with the underinsured rate, rose in 2007, substantially among middle- and higher-income insureds, as follows:

More than two-thirds (69%) of the uninsured and nearly one-third (31%) of the underinsured did not seek necessary care in the past year due to cost, the study discovered. This population also was more likely to experience problems with care coordination and with communications. “Differences in patient care experiences and financial problems between the three insurance groups underscore the importance of adequate insurance for both access and economic security,” the Commonwealth Fund study observed.

The study concluded, “As health costs continue to grow faster than income and evidence accumulates regarding variable quality and inefficient resource use, there is growing recognition of the need for coherent strategies that combine coverage with payment and other policies to change directions and move toward a more inclusive and higher performing, high-value health system.”

For more information, visit http://www.healthaffairs.org.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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