High deductibles leaving the underinsured with thousands in medical debt

In 2014, 23 percent of adults 19 to 64 years of age who were insured all year had such high out-of-pocket costs and deductibles relative to their incomes that they were underinsured, according to a report by the Commonwealth Fund. This represents a doubling of the proportion of underinsured since 2003. The report also states that the share of continuously insured adults with high deductibles tripled from 3 percent in 2003 to 11 percent in 2014. These high deductibles led to high medical debt for a large proportion of underinsured.

The Patient Protection and Affordable Care Act (ACA) expanded access to insurance, but employer coverage—which, pre-ACA was generally more comprehensive than individual market coverage—has become more expensive, leading companies to share the increased costs with their employees in the form of higher deductibles.

Underinsured. An individual is underinsured, according to the Commonwealth fund if:

  • out-of-pocket costs over the prior 12 months were equal to 10 percent or more of household income;
  • out-of-pocket costs are equal to 5 percent or more of household income if income is under 200 percent of the federal poverty level; or
  • the deductible is 5 percent or more of household income.

The report states that the deductible component is an indicator of the financial protection offered by the plan and the risk of incurring costs before a person uses the plan.

The findings showed that approximately 31 million adults aged 19 to 64 are underinsured, which represents no statistical change compared to 2010 and 2012. This group, which includes adults with Marketplace plans and adults with individual market plans, is dominated largely by people in employer plans, at 59 percent. Among adults with employer plans, 20 percent were underinsured in 2014—up from 10 percent in 2003 and 20 percent in 2012. Among those with individual market and Marketplace plans, 37 percent were underinsured in 2014, up from 17 percent in 2003, but statistically unchanged compared to 2012, when 45 percent were underinsured. The report also found that underinsured rates were highest among those with Medicare, with more than 42 percent underinsured in 2014.

High deductibles. Deductibles are a growing cause of underinsurance. The Commonwealth Fund found that the number of insured adults with no-deductible insurance fell from 40 percent in 2003 to 25 percent in 2014. In that same time period, deductibles grew in size, with more than 11 percent of adults having a health plan with a deductible of $3,000 or more, compared to 1 percent in 2003. Fifty-one percent of underinsured adults reported having problems with medical bills or debt, and 44 percent reported not getting needed care because of cost. Debt loads of $4,000 or more were a problem for about half of underinsured adults and 41 percent of privately insured adults with high deductibles. Struggles with medical debt are widespread throughout the nation, regardless of individuals’ income and employment.

For more information, visit http://www.commonwealthfund.org/publications/issue-briefs/2015/may/problem-of-underinsurance.

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