Middle-Class and Uninsured

http://www.dallasnews.com/sharedcontent/dws/img/03-10/0317uninsured.pdf

Through the two recessions that America has weathered during the first 10 years of the 21st century, there has been an increase in both the long term unemployed and the inability of people to be able to afford health insurance - and, an employer's capacity to offer it.

In a new report, published yesterday, "Barely Hanging On: Middle Class and Uninsured", the Robert Wood Johnson Foundation documents that, while the situation has been tough for everyone, it's America's middle class that has been the hardest hit.

The report shows that the number of middle-income earners who obtained health insurance from their employers dropped by 3 million people from 2000 to 2008. Just 66% of people in families earning roughly $45,000 to $85,000 are now insured through their employer - a drop of 7% from 2000 to 2008.

Employer-sponsored insurance (ESI) has long been the mainstay of health coverage for middle-class families who typically do not qualify for government insurance programs. Among middle-income Americans, only about half of the decline in employer-sponsored coverage from 2000 to 2008 was offset by government insurance programs like Medicaid.

According to the National Center for Policy Analysis, a conservative think tank based in Dallas, the majority of middle-income families who don't have health insurance rejected an opportunity to buy it. With nearly 40% of America's 46 million uninsured living in households earning more than $50,000 annually (and half of those greater than $75,000 annually), rejected the insurance is a "choice" that's being made based on value. Basically, medical insurance costs too much for something that doesn't cover enough.

Employers have to choose between either passing on costs to workers who cannot afford the increase and therefore drop coverage, or paying more for their employees' coverage at the cost of creating and preserving jobs.

We see two problems with all of this: first, for obvious reasons, the young and healthy 29 year old rejects health insurance because, as we said above, it costs too much for something that doesn't cover enough, AND, that person doesn't need it! Until they do ... and then the rest of us pay ... and, second, the insurance companies have profit margins to cover (stockholders to satisfy) so it is in their best interests to drop coverage on those who are poor risks (people who have actually had medical claims [or large medical claims], and so, cost too much) and not allow coverage for potential new customers that have "poor" medical histories.

As we communicated in a prior post in 2009, roughly 20,000 people per year are "dropped" from insurance coverage for bad claims experience. After all, insurance is a "for profit" business. Any legislation which threatens the insurance industry's ability to maximize profits by, for example, ending the option to cancel coverage, is something the insurance industry is going to lobby against. Whether or not a health care bill passes this week, or next week, there are some aspects to that legislation that have virtue. Giving more value for the already high cost of health insurance would probably be a good thing. Raising prices to preserve profit margins while dropping those who are bad risks (by whose definition?) would continue to be a bad thing.