Deductibles rising, underinsurance rates worsening in individual coverage, survey finds

• In a survey, 42% with individual-market coverage were deemed “underinsured,” an increase from two years earlier.
• Also, 28% with employer-sponsored health plans were underinsured.
• Hospitals have not seen increased underinsurance rates affecting their bad debt and charity care costs so far this year.

Those with individual health plan coverage in 2020 had steeper deductibles and increasingly were underinsured, according to a biennial national survey.

The Commonwealth Fund survey, conducted in January before the start of the COVID-19 pandemic, questioned 4,272 adults who had commercial health insurance or were uninsured. Findings for adults with individual coverage, including those with coverage purchased in the Affordable Care Act (ACA) marketplaces, included:

• 42% underinsured, up from 40% in 2018
• 27% with deductibles that were at least 5% of income, up from 23% in 2018

The survey defined underinsured as:

• 12-month out-of-pocket costs, excluding premiums, comprising at least 10% of household income
• 12-month out-of-pocket costs, excluding premiums, comprising at least 5% of household income for individuals with incomes under 200% of the federal poverty level (FPL)
• Deductibles comprising at least 5% of household income

In contrast, the share of underinsured adults with employer-sponsored insurance (ESI) remained unchanged at 28%. The share of ESI enrollees whose deductibles were 5% of income decreased to 14% in 2020 from 15% in 2018.

The lack of affordability for unsubsidized enrollees in the individual market is acknowledged even by advocates of the ACA marketplaces. Democratic presidential candidate Joe Biden has proposed adding more subsidies for higher-income enrollees and linking subsidy calculations to Gold-level plans, instead of Silver-level plans.

“We’ll never have this situation where you have a 52-year-old who’s making $75,000 [and] can’t access an affordable healthcare plan,” said Chris Jennings, a Biden campaign adviser who’s considered a potential pick to lead the U.S. Department of Health and Human Services if Biden wins the election.

Although the Commonwealth Fund authors noted that more people were underinsured in ESI since those plans covered 122 million people, while only 15 million had individual coverage, they noted the pandemic-related recession was eliminating up to 25 million jobs and driving many to seek other options, like individual coverage.

“Given the loss of employer coverage and declining incomes among millions of people because of the COVID-19 pandemic, the marketplaces, along with Medicaid, could become more important than ever in insuring Americans,” they wrote.

Effects of unaffordability for healthcare consumers

When the authors queried the 40% of respondents who tried and then declined to buy individual-market coverage within the past three years, 71% cited cost as the main reason.

The authors noted that ACA marketplace enrollees with incomes of less than 250% of FPL were eligible for plans with reduced cost-sharing, including lower deductibles. But those with higher incomes faced deductibles that were as high as $8,150 for Silver-level plans in the 38 federally operated marketplaces in 2020.

Underinsurance status resulted in healthcare payment challenges similar to those faced by the uninsured. Among those designated as underinsured:

• 49% had a bill problem or medical debt
• 35% had medical bills and debt that were being paid over time
• 34% had problems paying or were unable to pay medical bills
• 19% were contacted by a debt collect agency over medical bills
• 18% had to change their way of life to pay bills

Among those paying off medical debt over time, 54% had incurred debt of at least $2,000.

No effect on hospitals yet

Overall, hospitals have not seen the financial effects of higher underinsurance rates so far this year.

Six months into the pandemic, bad debt and charity had decreased 6% year-over-year and were 9% below budget, according to a Kaufman Hall report on the finances of about 800 hospitals.

Bad debt and charity as a share of gross revenue fell 8% year-over-year and 10% below budget, although the share increased by 4% from June to July, which was the latest month examined.

Results differed by hospital size. Bad debt and charity as a share of gross revenue both decreased by about 15% year-over-year for hospitals with 25 or fewer beds, increased by about 1% at hospitals with 26 to 99 beds and decreased by 4% at hospitals with at least 500 beds.