Health Insurance: Counting The Under-Insured

Are you concerned that your favorite baseball player isn’t pulling his weight for the home team? Our parents would have been content to track his batting average, but today you would undoubtedly follow his on base percentage as well. It’s an arithmetic enhancement of the original ratio; instead of simply dividing his hits by the number of times at bat, you’d include his walks in the numerator too.

What if it’s too cold to sit outside and watch the game? You’d better check the wind chill temperature before you leave home! Although our parents would have been content to simply note the actual temperature, you’d prefer to subtract a few degrees to account for the impact of air currents.

Economists make the same mathematical adjustments when assessing our economic health. They no longer simply note the inflation rate; they now modify it to calculate the core rate, which excludes highly volatile items such as food and gasoline. Likewise, they modify unemployment rates by counting individuals who are working, but who are nevertheless under-employed.

And what about the health care industry, the economic sector that is threatening to devour our government budgets? Years ago, policy analysts simply tracked (and hoped to minimize) the rate of the uninsured. Today, though, they’re modifying that statistic to include another group.

Counting The Under-Insured

Once upon a time, health insurance was health insurance; citizens either possessed it or lacked it. Generally speaking, if Americans were covered by health insurance policies, they knew that they would be reimbursed for the costs of all medically necessary services.

To be sure, there were (and still are) annual cost caps on coverage levels. But years ago, the costs of care were much lower, and thus the caps were very rarely reached. And even when that occurred, insurers could often be persuaded to waive the caps for charitable purposes, or providers could be persuaded to provide the services without billing the insurers.

Today, though, uninsured Americans are not the only citizens who are concerned about obtaining access to medically necessary services. The medically under-insured must be concerned as well, given that truly comprehensive health insurance policies are becoming much rarer.

Et Tu, Empire Blue?

By the next quarter, for instance, many small business owners in New York State who are insured by Empire Blue Cross Blue Shield will be trading down to much skimpier health insurance policies. They’re not doing so on a voluntary basis; instead, Empire is phasing out many of its traditional full-fledged plans and transitioning firms to a handful of less desirable ones.

Can’t those business owners switch to plans offered by other insurance companies? Well, yes … but only four other insurers are still serving New York’s small business community. And according to Crain’s New York Business, only three (Oxford, Emblem, and Aetna) are maintaining a sizable commitment to the market.

A total of three firms cannot possibly maintain a truly competitive economic market. And considering that Blue Cross Blue Shield traditionally played the role of the nation’s “safety net” insurance provider, its retrenchment from New York’s small business market is undoubtedly complicating health policy.

Aflac, Aflac!

Although the rate of the uninsured is closely tracked — it’s now 16.3% of the American population, or 49.9 million citizens, and climbing — the rate of the “not fully insured” is not as well known. And yet that’s the true number of Americans who are at risk of coverage denials for medically necessary services.

Many of the small businesses that are reluctantly trading down to less desirable Empire policies would probably be included in this statistic. The tens of millions of consumers who are covered by Aflac would likely be included as well. Interestingly, the firm explicitly acknowledges that its product “helps pay (for) what Major Medical Insurance doesn’t.”

How important is the plight of the under-insured? From a health care policy perspective, they might be even more costly to the nation’s health care system than the uninsured. That’s because the uninsured will often “make do” without any care at all, or will learn to utilize charitable programs such as Federally Qualified Health Centers. The under-insured, though, will tend to rely on their limited coverage options until their coverage “caps” are triggered, and then throw themselves into our overburdened system of hospital emergency rooms.

A Quarter Of The Population

Last September, the Commonwealth Fund defined the “under-insured”  as citizens who possess health insurance policies, but who must spend a very large amount of their income on medical expenses. They estimated that 29 million Americans were underinsured in 2010, 80% more than the 16 million who were underinsured in 2003.

With America’s population now standing at 312 million, they represent 9.3% of all Americans; thus, a staggering 25.6% (i.e. 16.3% + 9.3%) of all citizens are not fully insured. With firms like Empire continuing to withdraw from major market segments, this rate will likely continue to increase for the foreseeable future.