Reforms Have Potential To Change Insurance Map Of The Country

Thirty-two million people under age 65 were underinsured in the United States in 2012, which means they had health coverage but it provided inadequate protection against high health care costs relative to their income, a recent Commonwealth Fund report finds. The first report to examine the underinsured at the state level, it finds that the rate of underinsured ranged from a low of 8 percent in New Hampshire to highs of 16 percent in Mississippi and Tennessee and 17 percent in Idaho and Utah.

Low- and middle-income families were most likely to be affected: 13 percent—4 million—of the underinsured were middle-income, earning between about $47,000 and $95,000 for a family of four, and 81 percent—26 million—were low-income, earning less than 200 percent of the federal poverty level, or under $47,000 a year for a family of four.

In addition, 47 million people were uninsured in 2012—a decline of nearly 2 million from 2010, likely due in large part to the Patient Protection and Affordable Care Act’s (ACA) early provision to expand dependent coverage for young adults.

Coverage expansions. Before the major expansions of the ACA began to be implemented this year, a total of 79 million people under 65 were uninsured or underinsured, and therefore at risk for not being able to afford needed health care or for facing debt from medical bills in 2012. Nationally, 29 percent of people were uninsured or underinsured, ranging from 14 percent in Massachusetts to 36 to 38 percent in Florida, Idaho, Nevada, New Mexico, and Texas.

The ACA’s Medicaid expansion and health insurance reforms are appropriately targeted to those Americans who are most likely to be unable to afford insurance or needed health care, according to the report, America’s Underinsured: A State-by-State Look at Health Insurance Affordability Prior to the New Coverage Expansions. Based on their incomes alone, 20 million of the underinsured in 2012, as well as 24 million of the uninsured, would qualify for Medicaid under the ACA.

However, millions who are poor will not have any new coverage options. In states choosing not to expand Medicaid, more than 15 million underinsured and uninsured people have incomes below poverty—earning less than $23,550 a year for a family of four. Unless their states expand Medicaid, there will be no new coverage options—either Medicaid or premium assistance—available to them.

“The vast majority of people struggling to afford health care are low- and middle- income, and exactly the people the ACA was designed to help,” said Commonwealth Fund senior vice president Cathy Schoen. “This report demonstrates that the health reform law was accurately targeted toward the needs of the uninsured and underinsured. However, if all states don’t expand Medicaid, millions will still go without health insurance and health care.”

Help with high costs. The ACA also would help those with high health insurance costs, the report found. Twenty-nine million people with coverage paid more out-of-pocket for their premiums in 2012 than they would have to pay under the health reform law if they were eligible to participate in Medicaid or receive tax credits. They include:

• About 11 million who could potentially be helped by expanded Medicaid or premium assistance.

• About 12 million people with high premium costs relative to their incomes who are covered by employer-based plans have incomes too high to qualify for Medicaid. Some may be eligible for premium credits if they are paying more than 9.5 percent of their income for self-only coverage. In addition, those who are employed by small employers may benefit from insurance market reforms and the small business marketplaces that may yield more affordable options for some of those businesses.

• About 6 million people with high premium costs are enrolled in other public coverage programs, and may not be eligible for the new options.

The report, which analyzes premium costs, insurance status, and income state-by-state, defines people as underinsured if they have health insurance but still spend 10 percent or more of their income on medical costs, or 5 percent or more if they are low-income. Overall, states in the Northeast and Upper Midwest fared better than states in the South and West.

The report also found the following:

• Twenty percent of middle-income people were uninsured or underinsured in 2012. At the state level, middle-income uninsured and underinsured individuals ranged from 9 percent of the population in Hawaii and Massachusetts to 28 percent to 31 percent in Texas, Alaska, and Wyoming.
• Sixty-three percent of people living below the poverty level and 47 percent of living just above poverty were uninsured or underinsured.

“The fact that nearly 80 million people in this country were at risk of not being able to get needed health care because they can’t afford it, or face the prospect of burdensome debt, is evidence of the shortfalls in our system of health insurance coverage, which the ACA was designed to address,” said Commonwealth Fund president David Blumenthal. “It will be critical to monitor the law’s impact to determine whether it’s achieving its goals of ensuring that these millions of Americans gain access to affordable, stable, comprehensive coverage.”

Consequences of plan choices. The report noted that many plans offered in the marketplaces require a large degree of cost-sharing, but people with low or moderate incomes who select silver-level plans will receive significant cost-sharing protections.

It will be important going forward to make certain that people understand the full implications of their choices in the new health insurance marketplaces, and in particular, that choosing low premium plans in the bronze category could result in higher total out-of-pocket expenses as a result of higher deductibles and copayments. Lower premium plans also may restrict their choices of providers more than higher premium plans in the silver category.

The report concluded that reforms have the potential to change the insurance map of the country. Uninsured rates have been falling through 2013, with early indications of a continued decline in 2014 as millions have signed up for either marketplace coverage options or Medicaid. The report provides state-by-state baselines prior to these reforms to assess change and compare states over time.

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