New Study Shows That Health Insurance Can be Afforded by Fewer Families

The majority of uninsured American families who are not covered by group health insurance through an employer cannot afford to buy health insurance, according to a new study by the Department of Health & Human Services' (HHS) Agency for Healthcare Research and Quality (AHRQ).

Washington, D.C. - infoZine - Some experts have suggested that because 23.8 million uninsured Americans under age 65 who do not have access to employer-based health insurance have incomes above the federal poverty line, they can afford to purchase policies if they so choose. But new data show otherwise.

"Wealth, Income, and The Affordability of Health Insurance," published in the May/June 2009 issue of Health Affairs, shows that measuring families' median net worth—the value of their savings plus other assets minus debt rather than just income—provides more precise estimates of the percentage who could purchase policies if they chose to do so. Until now, most studies have used income alone to estimate how many more Americans could be covered by health insurance.

"This study has important implications for defining who can afford to pay for health insurance in the next wave of health care reform," AHRQ Director Carolyn M. Clancy, M.D., said. "We need accurate, evidence-based findings to ensure that we are providing policymakers with reliable information."

Using national survey data, the researchers found that the median net worth of families who purchased health insurance was $105,819—nearly 35 times greater than the median net worth of only $3,057 for families who were uninsured. Median net worth means that half the families had net worth above or below that amount.

In contrast, the median income of families who purchased health insurance was $41,086—only 2.3 times greater than the median income of $17,690 for families who were uninsured.

The researchers, who used 2002 and 2003 data from AHRQ's Medical Expenditure Panel Survey, also found that 4.1 percent of families with access to employer-based health insurance were poor (family income below 100 percent of the federal poverty line) and 11.1 percent were low income (family income 100-199 percent of the federal poverty line). In contrast, among families without access to employer-based health insurance, 33.8 percent were poor and 28.4 percent were low income.

According to Didem Bernard, Ph.D., an AHRQ economist who led the research, the standard model based on income alone used by economists works well for estimating who will enroll in employer-based health insurance. However, it does not work well for who will purchase non-group coverage because it overestimates health insurance enrollment for people with low net worth and underestimates for people with high net worth.

Is the employer-based insurance system unsustainable?

As the Obama administration and lawmakers in Washington debate the scope and details of comprehensive health reform, they might consider talking to two small-business owners in New Hampshire who embody the frustrations, difficulties and gut-wrenching business decisions that are a daily part of the nation’s patchwork health-care system.

When it comes to providing health benefits to his employees, Bill Hurley of the Seacoast print firm Infinite Imaging says that with each passing day he feels more and more like the character Howard Beale in the movie, “Network” — he’s as mad as hell and can’t take it anymore.

“Our (health insurance) rates increased 30 percent last year, and this is unsustainable. It’s making all small businesses less competitive every time we go through this,” said Hurley.

Hurley, who has been an outspoken advocate for health reform, covers 55 percent of his employees’ premium costs. “When our premiums go up $50,000 or $70,000, that is money we don’t have to hire new employees or buy equipment. Only an idiot doesn’t know that (the current system) is a disincentive to investment.”

Bill Hurley of Infinite Imaging in Portsmouth: ‘We don’t have a health-care system as much as health insurance system.’

Hurley, who has 27 employees, said that he has always attempted to pay a “livable wage” to his workers but is finding it harder to do so because of rising health insurance premiums. Often, the employees’ cost is so high that, particularly younger workers, decide they can’t afford to pay premiums and will roll the dice and go without coverage.

“We’re a successful company,” said Hurley who has five color printing shops from York, Maine to Exeter. “I pay $16 an hour, and they can’t afford health insurance? What is wrong with that picture?”

Nancy Clark, owner of The Glen Group, a marketing and advertising agency in North Conway, said the rising insurance premium costs are leading her to the brink of what was once unimaginable – choosing between laying off workers or offering health benefits.

“I’m not the only one who says this is crippling us,” said Clark about the recent 31.5 percent increase in insurance premiums her company of 14 employees was hit with. “I don’t know what the solutions are, but it would not be good for any business if health insurance becomes more of a luxury benefit.”

Clark, who said she scrambled to find the best and most affordable plan possible, decided on a lower-premium, high-deductible heath savings account, which she believes is a tight-wire walk for her employees. And, she said, she’s concerned that it doesn’t provide enough incentives for preventive care.

“I’m forced to change the type of coverage so I can offer something, but what I would like to see is accountability on the part of health insurers who tell us increases are necessary, but I don’t get any explanations,” she said. “(Reform) is beyond my control but I do know it has to start with the insurers.”

As the only employee to try an HSA, Hurley has played guinea pig for his company, but he doesn’t believe it’s a suitable replacement for current coverage.

Hurley said he has given up on the current system because it’s a mirage.

“If you listen closely, the for-profit insurers care most about maximizing returns for their shareholders and throw it in your face when they give multimillion-dollar bonuses to executives as they raise our premiums,” Hurley said. “We don’t have a health-care system as much as health insurance system, and that distinction illustrates the problem we have.”

Growing pressures

‘I don’t think the public sector is capable of running a program with a break-even budget … I have to break even every year,’ says Charles Baker, president of Harvard Pilgrim Health Care. (Courtesy photo)

Of course, Clark and Hurley are not alone.

Adrienne Rupp of the Business and Industry Association of New Hampshire said small and large businesses feel the brunt of the health-care crisis daily. It remains among their top concerns.

“How do we go about reducing premiums?” asked Rupp, who added that constant shifting in the system and added legislative mandates to increase coverage (and premium costs) make it increasingly harder to keep premium rates from rising.

“These are all very good proposals,” she said about legislative efforts to expand coverage on a wide range of programs. “But when you start adding them up, who ends up paying for them?”

By most people’s reckoning, the pressures are only going to grow for employers, health-care providers, insurers and the public sector.

According to a recent study by Families USA, almost 85 percent of New Hampshire’s uninsured population of 279,000 are members of working families. As the recession deepens, the number grows daily — more than 14,000 Americans are said to be losing their employer-based health care coverage each day.

“What kind of system and kind of country do we have that depends on a job to have health care?” asked Hurley who advocates for a single-payer system alternative. “We can’t be doing in two years what we are doing today.”

Charles Baker, president and chief executive of Harvard Pilgrim Health Care, has heard all the complaints about health insurance and no shortage of talk about reform during his tenure. Harvard Pilgrim provides insurance to more than a million members in Massachusetts, New Hampshire and Maine and has been consistently rated among the top plans in the country.

According to Baker, prophecies of doom and unsustainability are par for the course. “If someone had told me 10 years ago that we would be basically looking at double-digit (premium) increases over the next 10 years and the number of uninsured would rise 40 million, I would have said, ‘There’s no way that’s sustainable,’ “ he said.

Baker said the recession has taken a toll on health insurers. “We have seen a drop of total membership,” he said. “We think employers are not filling positions and shrinking the size of their workforce.” Harvard Pilgrim itself has had to deal with rising premiums by reducing coverage.

His diagnosis includes the reality that massive government programs such as Medicaid and Medicare are the prime forces in determining health costs and can’t be ignored. He also said he’s skeptical of reforms that would bring public sector plans into a much wider marketplace — and provide a competitive advantage.

“Will there be a public carrier in the commercial market and what will that mean for local carriers like us?” said Baker. “I don’t think the public sector is capable of running a program with a break-even budget, and we already have Medicaid and Medicare with trillions in unfunded liabilities. I have to break even every year.”

nhbr.com