Deborah Costillo of Bon Aqua, Tenn., pays $700 per month in premiums for herself and her husband in her employer-sponsored insurance plan. But when her husband had to have a cyst removed from his neck at the hospital, the plan said it wasn't covered. It took the Costillos, whose household income totaled about $40,000, nearly four years to pay off the $4,500 debt.
Costillos are one example of a trend in health-care financing:
As premiums rise at double-digit rates and managed-care options
erode, employers have sought to manage their own costs by offering
insurance products that shift financial risk to workers. The result
is a growing number of individuals who risk becoming part of the
rising class of the underinsured.
The 2002 film "John Q," in which an insurance company refuses to cover a heart transplant for Denzel Washington's character's son, brought increased attention to the issue of what insurance plans will and will not cover. Definitions of "underinsured" vary, but generally include people who have insurance plans but whose medical expenses (excluding premiums) amount to 10 percent or more of their post-tax income, or 5 percent or more of their income if that income is below 200 percent of the federal poverty level.
A recent study by the Agency for Healthcare Research and Quality, which used the above definition of "underinsured," found that 17.1 million people under age 65 were underinsured in 2003, including 9.3 million people with employer-based insurance. The researchers did not have access to comprehensive data on their participants' health insurance plans, so the study's results were limited to tallying money participants actually spent, and services they received. As a result, the number of people who would fall into the underinsured category if they encountered catastrophic illness may be much higher.
"What this means for this group of the insured is that they are often going without health care, not filling prescriptions, getting treatments," said Cathy Schoen, senior vice president of the Commonwealth Fund and one of the authors of a 2005 study on the underinsured. "When you compare underinsured adults, they look quite a bit like the uninsured."
One major expense for consumers comes in the form of higher deductibles. The continued rise in health care costs in the United States has led many employers -- especially small businesses -- to offer insurance plans with high deductibles, more patient cost sharing and sometimes less-comprehensive benefits.
In fact, at least one government program was established in response to those higher deductibles. The 2003 Medicare bill established health savings accounts (HSAs) for individuals in high-deductible health plans to pay for medical expenses using pre-tax dollars. In 2006, "high-deductible" meant a minimum deductible of $1,050 for an individual or $2,100 for a family.
"The change in the marketplace trend toward higher deductible coverage threatens to grow the number of underinsured, although it might make a dent in the uninsured," said Gail Shearer, director of health policy analysis at the Consumer's Union.
Some policy-makers, and the insurance industry, defend high-deductible coverage as one viable means to provide health insurance coverage for more people. Mohit Goshe, spokesman for the American Association of Health Plans, said that consumers need to research the many available plan options to make the best choice for individual needs.
"Our industry is around to offer many different types of products," Goshe said. "Our function is to proliferate products across the marketplace that appeal to many different types of people."
Health care cost drivers
Though they offer different policy approaches to the issue of the underinsured, the health insurance industry, consumer groups and research professionals all agree that the rising cost of health care is creating a roadblock for affordable health coverage.
There are many reasons for these rising costs. One that Shearer, Schoen and Goshe point to is inefficient health care. A study in the New England Journal of Medicine, for example, found that patients get the recommended health care they need only 54.9 percent of the time.
"One-half the time we are providing medical treatment that is not the best and wasting medical resources," said the Consumer Union's Shearer.
But high-quality health care in the long run costs less, Goshe said.
Also, high health care costs can be a vicious cycle in the case of the underinsured, said Schoen. Expensive medical bills can leave consumers unable to pay, forcing practitioners to rely on collection firms, therefore driving up the administrative costs of doing business, she said.
Finally, hospital fees have risen dramatically in the past few years, in part to cover the cost gap of those who rely on underfunded public insurance, such as Medicaid, according to Goshe.
State and local responses
Several states, and the city of San Francisco, have implemented initiatives designed to reduce the number of uninsured. However, Schoen and others say, with current trends in health care cost distribution, these plans run the risk of merely moving people from uninsured to underinsured.
Maine's Dirigo plan, for example, is aimed at extending coverage to the uninsured, but a rising number of residents are beginning to enter the underinsured category due to the large number of high-deductible plans that are the mainstay of small businesses, which make up much of the state's economy.
Due to the income levels in Maine, professionals such as teachers and nurses are eligible for Dirigo, and some have switched from their high-deductible plan to Dirigo.
"The hidden story in this whole debate is the growing number of underinsured people," said Trish Riley, director of Maine's Office of Health Policy and Finance and author of the initiative.
In San Francisco, the Health Access Program, which will take effect July 1, 2007, will allow previously uninsured people access to both preventive and catastrophic care from health care providers within the city. So when the plan goes into effect, participants in the program will have access to the care they need in the case of a catastrophic illness, while the underinsured in San Francisco will continue to face potentially staggering health care costs.
The Access plan is designed for those who have no prior coverage, said the program's director, Tangerine Brigham.
"Underinsurance is a significant issue, but Access is dealing with a different part of the problem," said Brigham.
Therefore, the policy debate must continue, health care experts say.
"We used to think black and white, a box for the insured and a box for the uninsured and now we have seen you can be insured and not be OK. We are going to start having a policy debate about what constitutes acceptable insurance," Schoen said.