Thursday, June 17, 2010

qotd: NHIS uninsured report portends underinsurance for most

(This message was sent out a several hours ago, but seems to have been lost in cyberspace. If the original message eventually shows up, please excuse the duplication.)

Centers for Disease Control and Prevention (CDC)
National Center for Health Statistics
June 16, 2010
Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, 2009
by Robin A. Cohen, Ph.D., Michael E. Martinez, M.P.H., M.H.S.A., and Brian W. Ward, Ph.D.

In 2009:

46.3 million (15.4%) were uninsured at the time of the interview

58.5 million (19.4%) had been uninsured for at least part of the year

32.8 million (10.9%) had been uninsured for more than a year

Estimates of enrollment in HDHPs, CDHPs, and FSAs:

Based on data from the 2009 NHIS, 22.4% of persons under age 65 years with private health insurance were enrolled in a HDHP (high deductible health plan), including 6.3% who were enrolled in a CDHP (consumer-directed health plan) and 16.1% who were enrolled in a HDHP without a health savings account (HSA). Enrollment in HDHPs increased from 17.5% in 2007 to 22.4% in 2009. There was a significant increase in enrollment in HDHPs without HSAs and in CDHPs.

Based on data for 2009, among persons under age 65 with private health insurance, 20.2% with employment-based coverage were enrolled in a HDHP, compared with 46.9% of those with a private plan that was directly purchased or obtained through means other than employment. The percentage of persons covered by employment-based private plans that are HDHPs increased from 15.6% in 2007 to 20.2% in 2009. The percentage of persons covered by directly purchased private health plans that are HDHPs increased from 39.2% in 2007 to 46.9% in 2009. For persons under age 65, approximately 8% of private health plans are directly purchased. HDHPs constitute a growing share of both employment-based and directly purchased health plans.

In 2009, among persons under age 65 with private health insurance, 20.4% were in a family that had a FSA for medical expenses. This is an increase from 2007, when 16.7% of persons under age 65 with private insurance were in a family with a FSA.

Comment:  Although the net loss in insurance coverage for 2009 left another 3 million individuals without coverage, the media response is tempered by the anticipated expansions in health care coverage under the Patient Protection and Affordable Care Act (PPACA). What is being missed in the media reports is a new trend revealed in this survey that will result in an exponential increase in the rates of underinsurance.

A few facts:

* 20.2% of individuals with employer-sponsored plans have high deductible health plans (HDHP)

* 46.9% of individuals with private plans purchased outside of employment have HDHPs

* 72% of those with HDHPs do not have health savings accounts

* PPACA will require plans to have an actuarial value of only 60 percent

Much has been written about how high deductible health plans (HDHPs) result in underinsurance for the majority of Americans, so little will be said here other than to point out that those with medical needs do not receive all of the care that they should have when faced with the financial barrier of a high deductible before they can access the benefits of their health plan. Insurance should improve access to necessary care rather than impair it.

Although the right-wingers in the policy community tout health savings accounts (HSAs) as the solution for making deductibles affordable, there are several flaws. First, close to three-fourths of HDHPs don't even have an HSA component. For those that do, excess expensive and burdensome administration is being wasted on managing the HSAs which are really no different from the patient paying the expenses out of personal savings, except for the very modest tax advantage of the HSA. Whether in an HSA or in a personal savings account, it is still the patient's own money that is being spent. If the HSA or the personal savings account were empty, as might be expected for individuals with medical problems, then the high deductible remains as a barrier to care.

Another approach is to set up a flexible spending account (FSA) instead of an HSA. One-fifth of individuals are in families that already have FSAs through their employment. These are even less rational than HSAs since it is the employee's own pre-tax money that is deposited into the FSA, yet any funds remaining at the end of the year are forfeited. How smart is that?

There is a coalescence of trends that makes it likely that HDHPs will become the standard for most of us with private coverage. To slow the increase in insurance premiums, employers are starting to convert to HDHPs, and one-fifth of them have already done so. Plans in the individual market are much less affordable except for HDHPs. Almost half of those purchasing plans in the individual market have now switched to HDHPs. Because of concerns about high insurance premiums, the drafters of PPACA decided on an actuarial value of only 60 percent for private insurance plans (the patient pays 40 percent of the costs of care). Large deductibles and high coinsurance are used to keep the actuarial value down. Adverse selection of plans will low deductibles will cause a premium spiral that will make those plans unaffordable, forcing even more individuals to choose HDHPs. With these trends it seems that the future will hold little option for most of us not eligible for government programs, other than to enroll in HDHPs.

Since PPACA provides subsidies for both the premiums and out-of-pocket spending, does it even matter if the plans have high deductibles? Since the alleged purpose of high deductibles is to decrease the use of health care by making patients sensitive to health care prices, then it makes no sense to add the administrative excesses and expenses of removing a benefit in the form of the deductible and adding it back in in the form of administered subsidies if the patient ends up bearing only a negligible portion of the costs, thereby jettisoning price sensitivity. As the means- tested subsidies diminish, the deductibles may have more significance, but not for those who are responsible for most of our health care costs - the 20 percent who use 80 percent of our health care.

Will the insurance exchanges obviate the need for HDHPs? When they crafted the PPACA model, it was clear that premiums for comprehensive plans were already too high. That is why they decided on reducing the actuarial values of the plans - 60 percent for the least coverage, though premium subsidies will apply to silver plans with a 70 percent actuarial value. Silver plans will still require high deductibles since they fall short of the typical employer-sponsored plan with an actuarial value of 80 percent or more. 

Since the cost sharing would still be excessive for most individuals and families, PPACA provides for cost sharing credits that would have the effect of increasing the actuarial value on a sliding scale based on income - 70 percent for those at 250-400% of the federal poverty level (FPL) and up to 94 percent for those with incomes at 100-150% FPL. 

There is concern that the combined premium plus the cost sharing for the exchange plans is still too high for most families, but these are the levels that Congress decided would be necessary because of their arbitrary decision to limit how much of the costs would pass through the federal budget.

But what is really ridiculous is that merely to avoid an efficient system with a single, publicly financed universal risk pool, they designed an administratively complex system of variable actuarial values, with variable premium subsidies, with variable cost sharing credits, which will drive the plans to introduce high deductibles as the national standard, when high deductibles have already been demonstrated to be a perverse policy for controlling costs.

Remember, by continuing on our current PPACA course, we are going to see an explosion in high deductible health plans, to the detriment of people who need health care. Of course, we could change course and enact an improved Medicare for all without any deductibles. We wouldn't need price sensitivity if we had our own public health care monopsony.

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