From ‘un’ to ‘under:’ Coverage gap is health-insurance challenge

Marianne Udow-Phillips is director of the Center for Healthcare Research & Transformation.

The Affordable Care Act has a particular focus on reducing the number of Americans without health insurance, but being insured is only one piece of the coverage picture.

For decades, U.S. health reform efforts have largely been centered on the uninsured. In the 1990s, when the Clinton administration proposed a version of national health reform, approximately 14 percent were uninsured. By the time Congress started considering the ACA in 2009, that percentage had increased to over 16 percent.

There is little doubt that when measured by America’s uninsured population, the ACA is a success. Today, national survey data indicate that number has dropped to 11 percent – the lowest since the early 1990s. In Michigan, early estimates show about a 25 percent reduction in the uninsured population between 2013 and 2014, the year the most significant coverage changes took effect.

But the real challenge for health plans, employers and policy makers is ensuring that health insurance enables consumers to get access to the care that they need, when they need it. Many individuals today have coverage, but cannot afford the cost-sharing required to access care. This “underinsurance” is the coverage gap now faced by many of the insured.

Michigan has had particular success in reducing the numbers who are uninsured, both because of the Healthy Michigan Plan – the state’s expanded Medicaid program – and through statewide efforts to enroll people through the Health Insurance Marketplace. Michigan’s growth in coverage has exceeded all national and state projections.

The ACA, anticipating that increased coverage may not equate to greater access, requires coverage of certain preventive services with no cost-sharing; provides reductions in cost-sharing for other services for those below certain income levels; and caps the total amount of consumer cost-sharing to $13,200 per family ($6,600 per individual) in 2015.

Yet, these safeguards may not be enough. Those who get coverage in the regulated markets may still pay more than they can afford, and the safeguards don’t apply to people with grandfathered, employer-sponsored coverage.

In our Center’s latest Cover Michigan Survey, more than one-fifth of those with insurance reported that they had delayed needed care, with cost cited most frequently as the reason for the delay. In our work in Washtenaw County and across Michigan, we hear from hospital leaders, federally qualified health centers and safety net clinics that charity care is now being redefined to focus on people who are insured but cannot afford their copays and deductibles.

Underinsurance is not a new problem and not one created by the ACA. In 2013, more Michigan residents were underinsured (1.2 million) than uninsured (about 1 million). Over the past several years, employers have been increasing copays and deductibles. In 2014, 41 percent of employees nationally had deductibles of $1,000 or more, compared to only 10 percent in 2006. These trends are only likely to grow, in part because of the planned “Cadillac tax,” beginning in 2018, on health plans that are valued above a certain threshold ($27,500 for families in 2018). And, in part, because employers do not see alternatives for reducing health care spending.

Deductibles and copays serve a purpose. As the Rand Corporation showed, people use less health care when they must pay for a portion themselves. But, Rand also showed that when copays and deductibles are applied across the board, the use of effective treatments drops equally with the use of ineffective treatments.

Delaying care can raise costs to purchasers in the future as an employee’s condition worsens and more costly treatments are needed. That’s why Mike Chernew, Mark Fendrick and colleagues at the University of Michigan’s Center for Value-based Insurance Design argue that copays and deductibles should be structured to encourage the use of high-value services and discourage the use of low-value ones.

It is in everyone’s interest – employers, consumers, health plans and policy makers –
to make sure that needed care is provided effectively and on a timely basis. The core underinsurance problem is health coverage that includes barriers to consumers getting care that prevents or manages chronic medical conditions.

If we do not take a value-based approach to high-deductible health plans, everyone suffers: hospitals, doctors and safety net providers with bad debts; employers with higher long-term costs and consumers with poor health, despite being insured.