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Many High Earners Among 45 Million Uninsured

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New figures from the U.S. Census Bureau show that 16% of the 45 million U.S. residents who lacked health coverage in 2003 had annual household incomes over $75,000 per year.

The number of high-income uninsured U.S. residents grew 4.5% between 2002 and 2003, to 7.6 million. That compares with an increase of 3%, to 37.4 million, in the number of uninsured with annual household incomes under $75,000.

The census results could help health insurance company and agent groups defend proposals to offer different solutions for low-income, moderate-income and high-income uninsured people, rather than setting up a single, government-run program for all uninsured U.S. residents.

But Hanns Kuttner, a senior economist at the Economic Research Institute on the Uninsured, Ann Arbor, Mich., warns against assuming that the census figures prove the existence of a big, untapped market for private individual health coverage.

“Whats unknown is how long people are without health insurance,” Kuttner says.

Anecdotal evidence and some surveys suggest that many high-income uninsured people are people who are moving quickly from one group health plan to another, Kuttner says.

The federal government and state governments have worked hard in recent years to expand coverage for some low-income U.S. residents, such as children.

Although the percentage of U.S. residents with individual or employer-sponsored health coverage fell to 68.6% in 2003, from 69.6% in 2002, expansion of government insurance programs held down the increase in the overall uninsured rate, which rose to 15.6% in 2003, up from 15.2% a year earlier.

Experts point out that high-income residents may have many reasons for lacking health coverage.

One reason is that some “high-income” U.S. residents feel as if they are just getting by. An annual income of $75,000 may not go very far for a family living in New York, San Francisco or other communities with high costs of living.

Other high-income people may do without health coverage because they are “between jobs,” are too sick to qualify for coverage, or belong to religions that discourage the use of conventional health care.

From an economists point of view, in many cases, “the people at this income level who didnt buy health insurance have a lower taste for health insurance” than lower income people without health coverage, Kuttner says.

A high percentage of low-income uninsured people might race to buy health coverage if they had extra cash, but high-income people who received extra cash might be far more likely to spend the cash on something other than health coverage, Kuttner says.

But he agrees that society needs to find some way to encourage high-income uninsured people to buy health coverage.

Today, “there are a bunch of implicit social subsidies for people without health insurance, and high-income people are able to get those subsidies,” Kuttner says. “Everybody can go to the hospital after an accident.”

In some cases, society as a whole bears the burden of paying for care for uninsured, high-income people who receive catastrophic hospital bills, Kuttner says.

America’s Health Insurance Plans, Washington, says 66% of likely voters surveyed in 17 key presidential “battleground” states earlier this year favored a tailored approach to helping different types of uninsured people. Only 27% favored a single program to cover all of the uninsured, AHIP reports.

AHIP is recommending that the government expand and improve government health programs to help low-income people, improve special “risk pool” programs to help people with health problems, and use tax incentives and direct subsidies to help healthy, relatively high-income uninsured people buy private health coverage.

The National Association of Health Underwriters, Arlington, Va., also is supporting a combination of expanded risk pool programs for people with health problems and tax incentives for other uninsured people.

“Refundable tax credits are a simple and realistic way to extend private health insurance coverage to uninsured individuals and their families who are in most need of assistance,” says Janet Trautwein, NAHU vice president of government affairs. “We strongly believe that the tax credit should be made available in both the individual market as well as through the employer-based health insurance system.”

Tax incentives and programs such as the new health savings account program could help reduce the number of high-income uninsured Americans by “increasing their taste” for health coverage, Kuttner says.

But Kuttner says public and private organizations might have better luck with expanding and promoting temporary health insurance programs, to reach the large number of high-income people who are suffering from a temporary lack of health coverage.

In theory, the census figures on the uninsured are supposed to include only individuals who lacked health coverage for an entire calendar year. But, in reality, the question is confusing, he says.

Studies have suggested that the Census Bureau counts far too many Americans as being chronically uninsured but misses many Americans, including many high-income Americans, who face temporary loss of health coverage, Kuttner says.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 3, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.