Most poor folks who don’t have health insurance would if they could afford it. We’ve settled that.
But that’s the problem – health insurance is just not affordable – today. And costs are not going down, in fact the latest data indicates employers will see another 10%+ jump next year – which will certainly lead to fewer employers offering coverage, fewer employees opting for coverage, and more folks without health insurance.
We’ve seen in Massachusetts that reducing insurance premiums does increase coverage, but the premium levels are still too high for some.
Leaving aside the uncomfortable realities of the real world, what is the correlation between ‘price’, defined as a percentage of family (not household) income, and insurance coverage takeup?
Here’s one data point from one of Bob Laszewski’s posts on Massachusetts –
“The state has seen a gain of only 18,000 Massachusetts residents with incomes above 300% of the poverty level in the Commonwealth Choice plan. That’s because it costs $7,000 – 12,000 a year for a family of four to buy the baseline health plan that includes a $2,000 single/$4,000 family deductible before most benefits are available. A family of four with an income of at least $61,000 (300% of the federal poverty level) would not qualify for a subsidy.”
One study suggests that family income should not be the only metric used when assessing ‘affordability’, as total financial assets, home ownership status, and other indicators may strengthen the correlation with take-up rates.
A paper on the topic was authored by Kate Bunford and Mark Pauly in 2002. (full version here) They used two different methods to determine affordability, one based on income and the other on the coverage purchased by similar folks with similar incomes. Perhaps unsurprisingly, there’s a wide discrepancy in the results obtained from the two methods.
Here’s an excerpt from a summary of their report.
“the insurance-adjusted poverty rate for adults aged 25-64 in 2000 was 10.5 percent; on that basis, health insurance is unaffordable for 10.5 percent of adults aged 25-64. For the whole sample, using the poverty line as a benchmark, 71 percent of the currently uninsured population could afford health insurance coverage…
…Using the threshold that 80 percent of similar households purchase insurance, they find that around 25 percent of the uninsured could afford coverage based on peer comparisons.”
Pauly and Bunford conclude that “Depending on the parameters chosen in our definition, we find that health insurance was affordable to between 24% and 55% of the uninsured in 1998.”
I’d note that the the summary states the “affordability of health insurance, measured in various ways, is not a particularly accurate predictor of whether a person will obtain coverage. It is certainly not the only explanation of observed patterns of insurance coverage.” I’d also note that Bunford and Pauly’s methodology is the basis for that conclusion; they looked at insurance takeup rates and analyzed similar populations, while other analyses relied on survey research.
What does this mean?
More research needs to be done.
Aug
13
There is no question that health insurance is a serious financial stretch for many people, but I also know people who are middle class and uninsured. They claim they can’t afford health insurance, yet they are able to afford a nice car and car insurance. The real problem is that health insurance is a big ticket item with no perceivable payoff unless you are one of the unlucky and get seriously hurt in a traffic accident or develop cancer. In my case, I have a child who is a pediatric cancer survivor. We are fortunate to live in a state with guaranteed issue. When my husband was between jobs, I looked into family insurance and found it would cost us $24,000 a year. That is definitely a big ticket item, yet we were ready to go for it. Luckilly, my husband found a new job with insurance. We would have gladly paid the $24,000 though, because we knew the how bad the alternative could be – we had already paid 80K in out of pocket charges for my son and we knew how fast costs could explode if he relapsed. Most people do not have that kind of firsthand knowledge, so they don’t see why they should pay that much money.
It’s interesting that people blame the poor for having misaligned priorities. They say the same as the person above. A poor person has a nintendo or iPod, a new car, or a large house. What’s more important those things or your health. When one looks at the ROI of a new car versus health insurance it becomes clear. Spend $12,000 for a car (and have it paid off very quickly) that will last several years or $12,000 minimum for one year’s skimpy coverage only. There is a disconnect between actual health care and insurance. I personally would rather pay for health care directly instead of a middleman with fat wallets.
I know a few people that live well above their means. A big, fully loaded suv, nice living arrangments, spends lots of money, eating out, etc. Yet, they have no IRA, minimum car and home insurance and above all, no health insurance. They have to have auto insurance. I am a little surprised that they have home insurance. They claim that they do not need health insurance, since they are not sick. So I ask, what about the future and their answer is…”who cares.”
People usually have home insurance because their mortgage requires it. Basically, there are a lot of people out there who only purchase insurance because it is mandated, by their mortgageholder, or by the state motor vehicle laws, or whatever. They would buy health insurance only if they had to.
I am no fan of the insurance companies (with the “fat wallets”) but believe me, you can’t pay for health care directly when you are faced with something like cancer. I think my son’s treatment cost over a million dollars when all was said and done for. We were insured and still paid 80K out of pocket. Nobody can save for eventualities like a cancer diagnosis. That is what insurance is for.The problem is, when a lot of people don’t purchase insurance because they don’t think they need it, the costs of their care gets dumped on everyone else because we generally don’t like to see people dying in the streets for lack of care. Some type of insurance, either privately-based, or governmental, take your pick, has to be universally mandated for the system to work.
The nice car doesn’t cost as much as health insurance, that’s for darn sure, so I fully understand why someone would drive the optioned-out Tahoe, but not purchase health insurance. They don’t see the value. From the point of view of the person or family with few health issues, the health insurance, at $12K a year, gives them little tangible return. Even if they only pay 25 percent of the premium and their employer pays 75, that’s $3K a year, not counting copays, deductibles or non-covered expenses, which is about equal to the payments on the Tahoe if they financed it over 7 years. And the Tahoe gives them a ride to work every day, trips to the store, trips to Grandma’s, and looks great doing it.
The buyer doesn’t see the value.
I’m not saying any of this is right. Buying the Tahoe and not the health insurance is short-term thinking. My family of four had actual healthcare expenses last year of $51,000 (not “charges”, but the actual amount paid to providers), but our out-of-pocket (employee share of group premiums plus copays plus non-covered expenses) was less than $4,000 because we have coverage.
But that just goes to prove my point. Value is innately tied to perception. My perception is quite different than that of someone who has not incurred any major health expenses. Few people have the self-discipline (or at least nagging parents saying “get health insurance”) or foresight or imagination to pay for something whose tangible value doesn’t reveal itself until after you needed it.
When you can show someone value in health insurance, then they will buy. Until then, its Tahoes, iPods and plasma screens (the latter two of which can be had for less than ONE MONTH’s premiums) for a significant portion of the 47 million uninsured.
Life can be unpredictable, cruel and unfair. The main purpose of health insurance should be to cover those potentially huge expenses that will be incurred if you suffer a catastrophic medical event such as a traffic accident, cancer diagnosis, premature birth with complications, etc. You can be perfectly healthy today and be in an accident or receive a cancer diagnosis next month. You never know. Evidently, most people don’t value the peace of mind that comes with health insurance protection as much as I do.
Perhaps people think they will be treated even if they don’t have insurance and let the rest of society cover the costs. Or, they have few or no assets, so even if they receive huge bills, they will declare bankruptcy and lose little. In the meantime, they can spend their income on things that provide short term pleasure and gratification.
Free riding is unfortunate. My personal preference would be for a voucher system that would provide high deductible coverage for catastrophic events financed by a dedicated tax. People could buy supplemental coverage out of pocket to provide more robust coverage if they want. This is probably the only way to assure at least catastrophic coverage for people who earn less than 300%-400% of poverty level income ($21,200 for a family of four) which is quite a large chunk of the population.