We spend a lot of time talking about the uninsured problem in this country. For a variety of reasons, including 1) high health insurance premiums, 2) confusion about eligibility for financial assistance, and 3) a failure to prioritize health care coverage, millions of Americans remain uninsured.
What we don’t talk as much about is the under-insured problem in this country. Many people who have health coverage go without needed care because their plan is not comprehensive enough; the high out-of-pocket costs prevent them from accessing care.
A recent article from Managed Healthcare Executive discusses this problem. The article refers to a survey conducted by the Kaiser Family Foundation and Los Angeles Times which found that “40% of nonelderly adults with employer-based health insurance have difficulty paying their medical bills.” Half of those respondents reported that “they or a family member has skipped or postponed healthcare in the past year because of the cost.”
It turns out that “income volatility” is a big part of the problem. The article defines income volatility as a period of several months during the year in which a family’s income “unexpectedly increased or decreased.”
While Health Savings Accounts can help consumers pay for out-of-pocket medical expenses, even when their income goes down, many people do not have an HSA. As a result, some use credit cards to pay their medical bills, but others simply go without needed care.
While most people in the survey were able to afford primary care visits, which are often covered by a flat-dollar copayment, “larger copays or healthcare not covered or partially covered by insurance — dental, vision care, physical therapy, diagnostic testing, serious injury or illness, and chronic issues such as diabetes — presented financial problems.”
Health Care Consumerism
Some would point out that this sounds a lot like healthcare consumerism, a solution the insurance industry has been pushing for the past two decades. As Rand explains, the whole idea behind consumerism is to give people some “skin in the game” so they’ll act with discretion in regards to medical care. When we spend our own money, we tend to make different decisions than when someone else is paying the bill. By increasing member cost-sharing, consumers “will have more incentive to make prudent, cost-conscious decisions about using health care, which, in turn, should drive down overall health care costs” and reduce unnecessary utilization.
All of that, at least in theory, is true. But a key component of health care consumerism is choice. Consumers evaluate the situation and decide whether their condition truly needs medical attention. If consumers are responsible for the cost of care up to a certain dollar amount, they may choose a generic over a name-brand drug, a home remedy over a doctor visit, or an urgent care center over an emergency room.
However, when people’s income decreases and they truly cannot afford care at all, then there is no choice. Instead of evaluating their options, considering cost and quality, and making better healthcare decisions, people simply forego care altogether; even though they may have health insurance, they cannot afford to use it. That’s the opposite of consumerism.
As the nation struggles to pull out of the COVID-19 pandemic, it’s easy to predict that income volatility will remain a challenge for many families. And that means that this issue is likely to continue for the foreseeable future.
So what can agents do?
Well, if we can predict that people will have trouble paying for certain health care expenses, one solution is for them to purchase a more comprehensive plan. Another is to purchase supplemental coverage to help fill in the gaps in their health coverage. And a third is to contribute to a Health Savings Account so the funds will be available when out-of-pocket expenses arise. The problem with all of these solutions is that people whose income fluctuates from month to month may not be able to afford any of them.
It’s a bit of a catch-22: consumers need more coverage because their income is volatile, but, because their income is volatile, they can’t afford any of the solutions.
Obviously, we as agents are unable to change our clients’ financial situation. We simply sell products that help them finance their healthcare and protect them from catastrophic loss should a serious illness or injury occur. What we can do is remind clients that unexpected health care needs do arise and that they need to have a plan in case this happens to them. We can ask them what they would do if they had a sudden change in income and point out the different solutions we offer that could protect them should they experience income volatility.
Ultimately, it will be their decision, but they can only make an informed decision if we educate them about the risks. And, nowadays, a change in income seems to be just as likely as the risk of a big medical claim, so it’s important that our clients consider this risk when making a coverage decision.