The recession is forcing consumers and their insurance advisors to face a troubling reality: Even many Americans with good incomes and solid health insurance can have large gaps in their benefits.
A while back, when the housing market was strong and applying for credit card limit increases was easy, relatively high-income families facing expensive health problems sometimes coped by taking out home equity loans, or maxing out credit cards.
Today, the real estate slump and credit market crash have reduced those options.
Meanwhile, “group health insurance plans at work aren’t as comprehensive as they used to be, which means employees are on the hook for more out-of-pocket expenses not covered by their health plan,” says Tom Gilligan, a senior vice president at Colonial Life & Accident Insurance Company, Columbia, S.C.
Health care experts say strategies for helping clients cope with health benefit gaps include prevention, insurance products and creativity.
Gaps are growing partly because carriers, employers and consumers all are looking at increasing out-of-pocket costs as a method for holding down premium costs.
Gaps also are growing because carriers, employers and government agencies see increasing consumers’ out-of-pocket costs as a tool for encouraging consumers to think about the true cost of health care.
In the U.S., consumers are paying a smaller percentage of health care costs now than they were in 2000, or in 1970.
Consumer out-of-pocket spending amounted to just 26% of the 2007 private health care payments, down from 30% in 2000, and down from 62% in 1970.
Mercer, New York, a unit of Marsh & McLennan Companies Inc., New York, estimates that the typical deductible for an individual in an employer-sponsored preferred provider organization plan is now about $1,000.
Typical out-of-pocket maximums are $2,000 for single coverage and $4,000 for family coverage.
But many families–even those with incomes exceeding 400% of the federal poverty level, or about $80,000 for a family of 4–suffer from medical bill problems when out-of-pocket expenses exceed just 2.5% of family income, according to researchers at the Center for Studying Health System Change, Washington.
A $2,000 maximum would exceed 2.5% of annual income for a single worker earning less than $80,000 per year, and a $4,000 maximum would exceed 2.5% of annual income for a family earning less than $160,000 per year, the researchers write.
The Commonwealth Fund, New York, estimates the percentage of underinsured U.S. residents in households earning more than $100,000 per year rose to 7% in 2007, from just 1% in 2003.
Consultants at PricewaterhouseCoopers L.L.P., New York, have predicted that the underinsured will be attracting far more attention in coming years than in the past.
“In 2009,” the consultants say, “we could see more debts for hospitals, more cost-shifting to commercial plans, and more patients delaying or foregoing care” as a result of underinsurance.