Are you underinsured?
The percentage of Americans considered "underinsured'' has tripled since 2003, according to a recent analysis in the policy journal Health Affairs. In 2007, more than twenty-five million Americans found themselves with inadequate health insurance, meaning that consumers spent a significant amount of their income on health care needs that their health insurance policies failed to cover.
The Commonwealth Fund classifies people as underinsured if they had insurance all year, and either:
- spent more than 10% of their income on out-of-pocket medical expenses, OR
- had an income level below 200% FPL and spent more than 5% of income on out-of-pocket medical expenses, OR
- had a deductible that took 5% or more of their income.
We can prevent underinsurance by setting basic standards for health insurance.
The federal Affordable Care Act of 2010 provides major consumer protections against underinsurance, including:
- A requirement that all health insurance plans sold in the U.S. from 2014 on must include a package of essential health benefits (EHB), as defined by the U.S. Institute of Medicine. The IOM will release a final report withrecommendations for the EHB in early fall of 2011.
- An end to lifetime and annual benefit limits.
- An actuarial value standard, so every plan sold must cover a given percentage of a patient population's care; this will give consumers much more information about the adequacy of coverage before they buy it.
- Income-based subsidies to ensure that Americans' annual out-of-pocket expenses remain at manageable levels relative to income.
Additional standards that California could enact to reduce underinsurance and medical debt include:
Limit Out-of-Pocket Expenses: Set yearly caps on how how much insurance companies can require patients to pay out-of-pocket for care, including deductibles and co-pays. Legislation to do this was sponsored by Health Access and introduced in 2009 as AB 786 (Jones). This would eliminate the need for subsidies to keep out of pocket costs low.
Make it possible for consumers to compare plans before 2014: Even before 2014, California could label health insurance plans so consumers know how much coverage it offeres. Currently, consumers have no information to go on except insurance companies' own marketing materials, which are often misleading or deceptive. Legislation to do this has been sponsored by Health Access and introduced as AB 1334 (Feuer).
Health Insurance Standards in California
California has some of the strongest patient's rights laws in the nation, but those laws vary widely according to the kind of insurance you have.
If you have an HMO, Blue Cross PPO or Blue Shield PPO, your consumer rights are protected by the Department of Managed Health Care (DMHC). Health insurance plans regulated by DMHC are governed by California's Knox-Keene Act, which sets minimum coverage standards and other important consumer protections.
If you have a PPO from any insurer other than Blue Cross or Blue Shield, or any other kind of health insurance product such as a high-deductible plan or a limited benefit plan, your consumer rights are protected by theDepartment of Insurance (CDI). Health insurance plans regulated by CDI are governed by the California Insurance Code, which has no minimum coverage standards.
More resources on underinsurance:
- Testimony to the Institute of Medicine: Essential Health Benefits - The testimony of Anthony Wright to the Institute of Medicine. (March 2, 2011)
- Health Access: "Underinsurance and Medical Debt"
- Consumer Reports: "Hazardous health plans: coverage gaps can leave you in big trouble" 6/09
- Community Catalyst: "When Coverage Fails: Causes and Remedies for Inadequate Health Insurance,"
- California Healthcare Foundation: "Check the Label: Helping Consumers Shop for Individual Health Coverage" 6/08
- Center for American Progress: "Coverage When It Counts: How much protection does health insurance offer and how can consumers know?"
- Robert Wood Johnson Foundation, "Limited Benefit Plans,"
- Health Policy Institute, Georgetown University, "Health Insurance Regulation by States and the Federal Government: A Review of Current Approaches and Proposals for Change" 4/06
- National Women's Law Center, "Nowhere to Turn: How the Individual Health Insurance Market Fails Women" Fall 2008