Underinsured and overlooked: The growing problem of inadequate insurance

Beyond the uninsured lie the underinsured, people who have coverage, just not enough to keep from getting soaked by medical bills.

By — Posted April 4, 2005

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The lack of insurance is a widely recognized problem in the United States, but what about the lack of adequate insurance?

Tens of millions of Americans have coverage that still leaves medical bills they cannot afford to pay, according to estimates by Consumers Union, the publisher of Consumer Reports.

While lawmakers grapple with the problem of uninsured Americans, the underinsured are still below the radar. Inadequate insurance is not a new issue, but its complex nature continues to make it difficult for Congress to grasp, let alone address.

Now some physicians fear the problem is growing. They are seeing it regularly in their practices, often in the form of unpaid bills.

The culprit is increasing deductibles and other forms of cost sharing that employers are turning to in the face of steeply rising health care costs. For example, the average deductible in PPO plans rose by 40% between 2001 and 2004.

"Traditionally it was just the person who had a lousy insurance policy," said Jeffrey Kaufman, MD, a vascular surgeon in Springfield, Mass. "More recently, we have started to see these patients come in where they have a high-deductible policy and all of a sudden they can't pay the deductible."

Dr. Kaufman said he had seen an increasing number of patients with deductibles and other out-of-pocket costs, such as co-pays and coinsurance, that add up to thousands of dollars. One of his patients has out-of-pocket costs that exceed $6,000 a year. That's 20% or 25% of the patient's family income, he said. "They have coverage, but someone's going to go with a bill that's not fully paid."

Although he said the problem had not yet had much impact on his practice's bottom line, he is worried it could become more common.

"The problem with high-deductible policies is that there is no stop-loss feature for the physician," Dr. Kaufman said.

Those worries are well founded, experts said.

"Underinsurance is going to become a dramatic issue in the next two or three years," predicted Thomas Bodenheimer, MD, MPH, an adjunct professor in the Family and Community Medicine Dept. at the University of California, San Francisco, School of Medicine.

"More and more people are going to have plans that have huge deductibles and very large co-pays. Even HMOs now are beginning to have co-pays for hospital care that are quite significant, in addition to the deductible," Dr. Bodenheimer said.

Part of the trend toward higher deductibles is being driven by the growing popularity of consumer-driven health insurance offerings, which industry estimates are between 3% and 5% of the private insurance market. These products usually couple high-deductible coverage with some financial incentive for the employee.

Employers, eager to rein in benefit costs, are increasingly turning to them. Congressional lawmakers also have seized on one type of this product -- tax-advantaged health savings accounts -- as a way to broaden access to insurance. Many doctors like the concept because it gives patients control over their health care dollars and can reduce the hassle of dealing with insurers.

But the growth of consumer-driven plans and high-deductible coverage in general has a downside, some experts said. Patients might not be able financially to handle these products or understand how they work.

"People are still very much of the mindset that all the doctor is entitled to is what the insurance pays, and if the insurance doesn't cover it, well, that's too bad," said George Schneider, MD, an internist who practices just outside of Milwaukee.

Patients have grown accustomed to someone else paying their medical bills, said Dr. Schneider, who estimates that his practice has to write off about $1,000 to $1,250 in bad debt a month because patients can't or won't pay out of pocket.

It is too soon to judge the insurance trend, said Susan Pisano, spokeswoman for the trade group America's Health Insurance Plans.

The industry has been working to develop new products that meet market demands, she said. Patients want the ability to choose their own physician, even if it costs more. Employers want lower premiums so that they can continue offering benefits, she said. Increased cost sharing is the compromise.

"But I don't want to indict a new product just because it needs some smoothing out," she said.

Mind the gaps

The growing complexity of health benefits also can be a problem.

Patients often get little more than a summary of what have become increasingly complicated benefits packages, experts said.

A study of medical debt by the Commonwealth Fund, a private foundation that finances research on health and social issues, showed many patients ended up with unpaid bills because they exceeded spending limits or received services they didn't realize were not covered.

"To me, that suggests that people don't understand their insurance policies very well," said Jennifer Edwards, deputy director of Commonwealth's Task Force on the Future of Health Insurance.

People also end up with expenses due to unknowingly going out of network. For example, a patient might go to a hospital that's in the plan's network, but end up with an anesthesiologist who is not, Edwards said.

The push to high-deductible health insurance and innovative cost-sharing arrangements may be further confusing patients, said Alan Sager, PhD, director of the health reform program at the Boston University School of Public Health. Patients are unsure of who is responsible for medical expenses.

Physicians confirm that.

"People come in. They have insurance. They show us their card. But they have no idea what's covered. It's not first-dollar coverage like it was a few years ago," Dr. Schneider said.

There is a learning curve, said Elizabeth Sell, spokeswoman for Aetna. That is why companies such as hers are placing a greater focus on consumer education to ensure that patients understand what their coverage is, she said.

Education, however, will resolve only part of the problem.

Just because someone has health insurance doesn't necessarily mean they are covered, said Karen Pollitz, project director at the Institute for Health Care Research and Policy at Georgetown University, Washington, D.C. In an anecdotal study conducted in conjunction with the American Diabetes Foundation, Georgetown researchers found that some people with diabetes keep paying their health insurance premiums even if that means they will not be able to afford their routine medical costs, Pollitz said.

They couldn't simultaneously pay for test strips and their insurance, but were too afraid of going without any coverage to stop paying premiums. In those cases, having insurance actually led to their diabetes worsening, she said.

"Something is not always better than nothing," Pollitz said.

Patients with inadequate health insurance can face obstacles to receiving appropriate care that might not even be faced by uninsured patients, said Robert Tufel, MPH, executive director of the National Brain Tumor Foundation, based in San Francisco.

"It's ironic, but because they have insurance and they may also have a job, there are fewer resources for them than somebody who doesn't have a job and doesn't have insurance," he said.

For example, their insurance might not pay for the drugs they need, while at the same time, being insured makes them ineligible for the drug-assistance program they could access if they had no coverage, Tufel said.

Dr. Schneider noted, "We have people who try to come into the free clinic [who] have insurance, but they can't afford their deductible."

And it's not just the patients with high-deductible health coverage who have problems, Tufel said. "It certainly seems like the benefits are being reduced, and getting what you are entitled to is more and more of a struggle both for doctors and for patients."

The situation is troubling for physicians.

"The American Medical Association is concerned when any patient forgoes necessary medical care because of cost issues," said AMA Chair J. James Rohack, MD. "Providing appropriate health care coverage to America's patients is a major social issue for our country -- one that physicians, patient groups and policy-makers must work together to solve."

Congressional inaction

But lawmakers are often just as confused about the health care system as patients, said Georgetown's Pollitz. That has made it difficult for them to understand where the gaps in the system are.

The situation is further complicated by the fact that often health insurance is adequate until someone gets sick. "If you don't need services, a deductible doesn't bother you," Dr. Bodenheimer said.

Health insurers are taking steps to ensure that patients in high-deductible plans still have access to screening and preventive health services, but for patients who develop a sudden or severe condition, underinsurance has been and is likely to continue being a persistent problem, experts said.

Despite the complex nature of the problem of the underinsured, Congress has taken steps to alleviate it in the past.

Dr. Bodenheimer was initially drawn to the issue many years ago because of a 60-year-old patient in his private practice who was admitted to the hospital after a heart attack. The next day she was told that her insurer was not going to cover the stay. The company deemed her heart disease a preexisting condition because of an earlier diagnosis of high blood pressure.

"She was devastated and actually signed out of the hospital, went home and about five days later had another, more severe heart attack. This for me was a dramatic example of someone who apparently was insured, but she wasn't covered for the most important thing that happened to her," he said.

Lawmakers recognized that problem in the 1990s. Now, such lifetime preexisting condition clauses are largely prohibited under the Health Insurance Portability and Accountability Act of 1996.

In the future, politics has to play a bigger role in ensuring that people not only have health insurance, but that it offers appropriate coverage, Dr. Sager said.

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When insurance isn't enough

People with medical debt generally are underinsured, with plans featuring high deductibles and other cost sharing.

medical debt
medical debt
Deductible $500 or more25%14%
Plan denied reimbursement40%19%
Reached limit of coverage27%12%
High out-of-pocket expenses54%24%

Source: The Commonwealth Fund Biennial Health Insurance Survey, 2003

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Discount cards often deceptive

As health insurance trends drive some people into plans that leave them underinsured, others gravitate toward an alternative that can leave them even more vulnerable -- medical discount cards. Often people mistake these products for a cheaper form of regular insurance.

While there are some legitimate companies offering medical discount cards, it is often hard to tell them from fly-by-night operations that promise a steep discount but deliver little more than confusion, according to a recent Commonwealth Fund report.

For the study, researchers at Georgetown University's Health Policy Institute purchased five discount cards available in the Washington, D.C., area. They found that several of the cards raised concerns because they were sold using high-pressure sales tactics, misleading or inaccurate promotion, and exaggerated claims of savings. They also had difficulty finding participating doctors.

Physician practices are also sometimes tricked by these schemes, not realizing that the cards don't pay insurance claims, said Mila Kofman, an assistant research professor and lead author of the report.

The companies that offer these cards fall into a regulatory no-man's-land. Attorneys general in a few states have been able to pursue them on fraud and deceptive marketing prohibitions. But many of these firms close before regulators can come after them. The full report is online (link.

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