A Big Insurance Problem: Too Little Coverage

I talk to a lot of people about their experiences using our healthcare system, and many of the complaints I hear are from people who have health insurance but are still scrambling to cover their healthcare bills. Their share of the premiums alone costs more than a family vacation, and then they're faced with rising deductibles, copayments, and, increasingly, limits on coverage for various services on top of that. What good is having insurance, they wonder, if they're saddled with serious bills when they get sick?

A new study reports that the number of people who are "underinsured" has grown 60 percent in the past four years, to 25 million. Middle- and upper-income families make up the fastest-growing share of this group; rates for those with incomes of $40,000 or more nearly tripled, to 11 percent. Families with incomes under the poverty level (about $20,000), however, had the highest rate of underinsurance, 31 percent.

"Underinsured" can be defined in many ways, of course. For this study, published this week in the online version of the journal Health Affairs, researchers at the Commonwealth Fund included people who spent 10 percent or more of their income on medical expenses (or 5 percent if they were low income), or people who had deductibles that equaled at least 5 percent of their families' annual income. I recently wrote about underinsurance of a different sort, faced by people with limited-benefit health insurance policies who struggle with caps on covered services and other limits that can boost their out-of-pocket costs significantly.

In many ways, people who are underinsured look a lot like the nearly 50 million people who don't have insurance at all: They skip doctor visits, don't fill prescriptions, and forgo preventive screenings. That doesn't necessarily solve the financial problem: Forty-five percent in the Commonwealth Fund study reported that they had a hard time paying their bills, had been contacted by a collection agency, or had changed their way of life in order to pay their medical bills. The study is based on a survey of more than 2,600 adults conducted last year.

If your employer offers you only one health insurance option, that's going to be the one you go with, even if it's full of holes. But about half of covered workers are employed by companies that give them a choice of plan. If that's the case, evaluate your options carefully, and don't limit yourself to comparing plan premiums alone. High deductibles, for example, can be problematic if you have a chronic illness or suddenly need medical care. I recently took a look at research showing that too often people in high-deductible health plans don't have the money to cover the deductible if they get sick. Make sure you understand what other expenses and limits you may face, including caps on services and out-of-pocket maximum amounts (or a lack thereof). Then make the best choice you can, given your healthcare needs.