Insured But Not Covered: The Problem of Underinsurance

Posted on by Karina

Yesterday, the Energy and Commerce Subcommittee on Oversight and Investigations held a hearing on “underinsurance” and medical debt. While the Census Bureau reported last month that there are over 46 million Americans without health insurance, an often overlooked issue is “underinsurance.” In 2007, the Commonwealth Fund found that among Americans who do have health insurance, 25 million are “underinsured” — having health insurance policies that do not adequately cover their health care costs, frequently with huge out-of-pocket costs from high deductibles and co-pays. While some are underinsured because the policy is all they can afford, policy holders often believe they are covered only to be met with loopholes and hidden limits when a health crisis occurs.

Sara Collins with the Commonwealth Fund explains that part of the growing problem of underinsurance (up 9 million in just four years) is due to policies costing more and covering less. In the last decade alone, premiums have risen 131%–three times what wages have and many employees are shouldering the burden by paying greater out-of-pocket costs:

David Null from Garland, TX testified on what happened when his daughter Tatum was diagnosed with liver failure. While the Null family had health insurance covering emergency situations, they learned when Tatum was on life support that their policy would only cover $25,000:

Tatum laid in the ICU clinging to life. Her brain swelling from the poisons accumulating that her liver normally removes. The doctors told us she was the sickest kid in the hospital and they struggled constantly just to keep her alive. She had only days at best to live. In the midst of all this, the transplant department administrator came to me and said we needed to talk about insurance and walked me to a council room. As we walked I thought to myself, “Aren't I glad we picked up that policy when we did. Wonder what he wants to talk about”. We sat down and he proceeded to explain that my insurance had a 25,000 max and Tatum had reached that after the first night. She had no more insurance from this point forward and its hospital policy to collect a $200,000 deposit to proceed. I couldn't believe this was happening. Could this be true? Surely it's a mistake because this is the big oh no I was buying protection from. Now my precious child lies just down the hall struggling for her life. Suddenly, not only were we facing the possible death of our child but now the financial death of our family at the same time. How could this be happening to us when we have insurance for this?

Catherine Howard of San Francisco, CA chose a low premium, high co-pay health insurance policy she thought “was perfect for a young, healthy person.” Diagnosed with breast cancer at 29, she survived to tell her story:

After my breast cancer diagnosis in August of 2004, I thought I was covered. I had done the right thing; I had insurance. But I discovered that the health plan that I was paying for didn't cover a large part of the cancer care that I required, and I was on the hook for tens of thousands of dollars in uncovered expenses. I had to pay for 30 percent of all the services that the policy covered in the hospital. And it didn't even cover all the services I needed. I remember staring at the needle of one shot. It cost $2,100, and thinking, “I have to pay $600 dollars for this today.”

Nathan Wilkes from Englewood, CO had health insurance coverage from his employer with a million dollar limit for each family member. When his son was diagnosed severe hemophilia, he learned a million dollars did not go very far. Nathan shares not only what happened, but their continuing struggle to be adequately covered:

In April 2007, Thomas, who was almost 4 years old, hit the $1 million lifetime cap of our employer-based insurance policy with United Healthcare. Our only option was to enroll him in the state high risk pool, CoverColorado. We worked with CoverColorado for months in preparation, but they couldn't accept him until he officially reached the cap. To make sure that we would not have a gap in coverage we tried to track our cap on a daily basis. Although we were in constant contact with United Healthcare they could never accurately tell us exactly how close we were to reaching the cap — even in the final few days of being covered. In the end, the inability of United Healthcare to help coordinate our claims left us with significant out-of-pocket expenses.

For far too many in America, what is a health crisis can quickly turn into a financial crisis as well. The Commonwealth Fund found that more than one-quarter of Americans with medical burdens and debt are unable to even pay for basic necessities:

More Than One-Quarter of Adults Under Age 65 with Medical Bill Burdens and Debt Were Unable to Pay for Basic Necessities

Subcommittee Chairman Bart Stupak (D-MI) asks the witnesses about the financial hardships they have endured:

Rep. Stupak:You said your family relied on credit card and home equity to stay afloat. How much medical debt did you finance through credit? Wilkes: It was spread out around several years. I even had to cash in my life insurance policy and spend out our savings. We get stacks of statements and bills from the hospital, so it is impossible to keep track. Even the insurance company could not keep track.”

Chairman Stupak asks Dr. Sara Collins about some of the findings and research on the state of health care in America:

Rep. Stupak:You indicated that the most rapid growth of underinsured are people between $40-$60,000 dollars of income. You would not have any statistics because the economy took a nosedive of last year – I am sure that the underinsured and uninsured figures would be greater, would they not? Collins:That’s right. It is also compounded by the fact that income growth has dropped between 2007 and 2008. Health care costs are rising at 6% per year. We know more employers are cutting back on their benefits. People have lost their jobs which means they are behind on the individual market or are uninsured. Those numbers are have probably worsened.

Rep. John Dingell (D-MI) asks the witnesses about how their policies limited their career options and the difficulty of finding, and understanding, their health insurance policies:

Mr. Null:We found shopping for insurance to be very confusing. In fact in Texas, it requires a licensed agent in order to even come talk to you about policies it’s so confusing. My wife and I are both college educated, we believe that we’re able to make good decisions. But being able to look at these policies and tell a difference — for instance, this policy we were on when Tatum had her illness, it was only 25% less than the one I was on previously…it was only 25% less and yet the cap was 1/40th of a comparable policy. No, we did not recognize any thing on those lines when we were shopping for that policy. Had we had seen something like that, it would have raised red flags. And we probably would have recognized it for being be worthless piece of trash it was.

Rep. Mike Doyle (D-PA), a licensed insurance agent for over thirty years, finds Mr. Null’s insurance policy utterly misleading and confusing:

Rep. Doyle:Mr. Null, I wanted to put your policy on the screen…when you look up there and it shows you that Part IV surgical at 100%, how did you read that when you first bought that policy? Did you read that to mean that they would cover 100% of surgery? Mr. Null:”Yeah, in Texas that is what that means.” Rep. Doyle:…Then you go a couple of pages further and there is another schedule that lists different procedures and what they will pay the procedures. Did you have any idea what these procedures actually cost? Mr. Null: No, I had no idea…

Rep. Doyle:When we talk about transparency, this is one of the things that we have to help consumers with. If it says you’ll pay $5,000 for a procedure and the procedure costs $25,000, then would you have bought the policy?Mr. Null:Well, no, that would not seem like 100% to me.

Section 133 of the House health insurance reform bill addresses the consumer protection issue Rep. Doyle and Mr. Null discuss — stopping health insurance companies from hiding behind incomprehensible fine print and requiring them to make their policy documents available in “plain language” so Americans know what they are actually paying for:

(a) Accurate and Timely Disclosure-

(1) IN GENERAL- A qualified health benefits plan shall comply with standards established by the Commissioner for the accurate and timely disclosure of plan documents, plan terms and conditions, claims payment policies and practices, periodic financial disclosure, data on enrollment, data on disenrollment, data on the number of claims denials, data on rating practices, information on cost-sharing and payments with respect to any out-of-network coverage, and other information as determined appropriate by the Commissioner. The Commissioner shall require that such disclosure be provided in plain language.
(2) PLAIN LANGUAGE- In this subsection, the term `plain language’ means language that the intended audience, including individuals with limited English proficiency, can readily understand and use because that language is clean, concise, well-organized, and follows other best practices of plain language writing.

Rep. Stupak asks Tatum Null if she has anything to add to her father’s testimony:

I just want to say that knowing what’s going on right now, I do want to be able to live my American dream and right now I’m not able to — so hopefully you can fix that.

Tatum, and all the witnesses, shared the profound ways in which underinsurance has affected their lives and their futures. Chairman Henry Waxman (D-CA) answers Tatum’s plea stating, “Tatum, I want to assure you that if we enact the legislation, your future will be very bright”:

I want to say to all of you, what happened to you is wrong. It’s wrong in this country that people should be forced into bankruptcy, that Tatum should face a future where she may not get insurance under the way things operate now, bankruptcy becomes the only way to wash your hands of these debts – and you all had insurance. Tatum, I want to assure you that if we enact the legislation, your future will be very bright, it’s not going to be hindered by your inability to get insurance. Yours, or anybody else’s in this country. Insurance should be that we spread the costs over a broad population and then those who need the care will have it available to them. But the insurance companies look at it differently. They want to avoid having to pay money, so they don’t want to cover people who might be a risk. They will exclude you if you have a pre-existing condition. They put lifetime caps, they have annual limits on the costs they will pay. There are so many things they do to avoid living up to what you expected you bought when you paid for your insurance coverage.

Inaction is not an option. Without reform, the cost of health care for the average family of four is projected to rise $1,800 every year for years to come–and insurance companies will make more health care decisions. Two out of three personal bankruptcies in 2007 were a result of medical debt and last year, more than half of Americans postponed medical care or skipped their medications because they couldn’t afford it. The House health insurance reform bill addresses the root causes of underinsurance–Tatum, and all Americans, will be in charge of their health and fiscal well being, not the insurance companies. Some of the provisions in the bill that add stability, security and quality:

A ban on lifetime and annual caps on the amount insurers will pay

No denying coverage for pre-existing conditions (like diabetes or cancer)

No excessive out-of-pocket expenses, deductibles or co-pays

No discriminatory insurance pricing based on health status, gender, or occupation

No deductibles or co-pays for preventive care

Affordability credits so that lower-income families can afford coverage and can access care

Required core set of benefits to ensure coverage for essential health care services

Watch the full archived webcast of this hearing and read prepared testimonies>>

Learn more about the health insurance reform bill and what’s in it for you>>

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