A number of ominous signs point to a continuing decline in health insurance coverage in the United States. Health care costs are rising, increases in health insurance premiums outpace the limited growth of typical family incomes, continuing changes in the workplace diminish the availability of employer-sponsored health insurance (ESI), unemployment is climbing, and severe pressures on state budgets threaten to reverse the recent expansion of public coverage for children and adults (Baicker and Chandra, 2006;
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America’s Uninsured Crisis: Consequences for Health and Health Care 2 Caught in a Downward Spiral Abstract: This chapter examines the dynamics underlying the continuing decline in health insurance coverage. Health care costs and insurance premiums are growing at rates greater than the economy and family incomes. Employment has shifted away from industries with traditionally high rates of coverage (e.g., manufacturing) to service jobs (e.g., in wholesale and retail trades) with historically lower rates of coverage. In some industries, employers have relied more heavily on jobs without health benefits, including part-time and shorter-term employment, and contract and temporary jobs. Overall, fewer workers, particularly among those with lower wages, are offered employer-sponsored coverage and fewer among those offered insurance can afford the premiums. For many individuals and families without employer-sponsored group coverage, nongroup coverage is prohibitively expensive. With a severely weakened economy and rising health care costs, some states will face pressures to cut their recent expansions of public programs for low-income children and adults. Large increases in unemployment will further fuel the decline in the number of people with employer-sponsored coverage and put additional stress on state Medicaid and State Children’s Health Insurance Programs (SCHIP) programs. A number of ominous signs point to a continuing decline in health insurance coverage in the United States. Health care costs are rising, increases in health insurance premiums outpace the limited growth of typical family incomes, continuing changes in the workplace diminish the availability of employer-sponsored health insurance (ESI), unemployment is climbing, and severe pressures on state budgets threaten to reverse the recent expansion of public coverage for children and adults (Baicker and Chandra, 2006;
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America’s Uninsured Crisis: Consequences for Health and Health Care Bernstein, 2008; Chernew et al., 2005; Dorn et al., 2008; Gould, 2007; Holahan and Cook, 2008; Reschovsky et al., 2006; Smith et al., 2008). This chapter begins with a brief description of the uninsured population and then explores the forces underlying current trends in private and public health coverage. SNAPSHOT OF TRENDS IN HEALTH INSURANCE COVERAGE1 Sources of Health Insurance The workplace has been the source of health coverage for several generations of Americans. Today, most privately insured people continue to be insured through their job or the job of a family member (Figures 2-1 and 2-2). However, since around 2000, ESI coverage has been on the decline. Among adults, ESI coverage dropped by 5 percentage points between 2000 and 2007, from 69.3 percent to 64.3 percent. ESI coverage of children also fell during this time period—from to 65.9 to 56.8 percent—but the decline was offset by rising enrollment in Medicaid and the State Children’s Health Insurance Program (SCHIP). During this period, many states expanded eligibility, ramped up outreach, or streamlined application processes to expedite eligible children’s enrollment in these public health insurance programs (Coughlin and Zuckerman, 2008; Smith et al., 2008). Approximately 2.9 percent of the nonelderly population is insured through the TRICARE or CHAMPVA2 military-related health insurance programs (Fronstin, 2008a). Only a small proportion of the population purchases private health insurance outside the job setting. In 2007, an estimated 6.8 percent of the nonelderly population had individually purchased health insurance coverage. This percentage has been relatively steady for more than a decade (Fronstin, 2008a). Who Are the Uninsured? In 2007, there were 45.7 million people without health insurance in the United States, 5.9 million more than when the IOM issued its initial 1 Because nearly 98 percent of the U.S. adult population over age 64 has health insurance coverage through Medicare or other sources (DeNavas-Walt et al., 2007), this chapter focuses on trends in coverage for the nonelderly population. References in the text to “adults” refer to 18- to 64-year-olds; “children” refers to the under-18 population. 2 TRICARE is a health benefits program sponsored by the Department of Defense for military retirees and families of active duty, retired, and deceased service members. CHAMPVA refers to the Civilian Health and Medical Program for the Department of Veterans Affairs, a program for disabled dependents of veterans and certain survivors of veterans.
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America’s Uninsured Crisis: Consequences for Health and Health Care FIGURE 2-1 Percentage of U.S. children under age 18 with employment-based coverage, Medicaid or SCHIP coverage, and uninsured, 2000-2007. *SCHIP = State Children’s Health Insurance Program. Children who are otherwise eligible for Medicaid or have other insurance coverage are generally not eligible for SCHIP. NOTE: This figure does not show individuals with sources of health insurance coverage other than employer-sponsored insurance, Medicaid, SCHIP, TRICARE, or CHAMPVA. SOURCE: Fronstin (2008a). Reprinted, with permission, from EBRI Issue Brief, 2008. Copyright 2008 by Employee Benefit Research Institute. report on uninsurance in 2001 (Box 2-1) (DeNavas-Walt et al., 2008; IOM, 2001). This includes 36.8 million nonelderly adults—nearly 1 in 5—and 8.1 million children—more than 1 in 10 (Table 2-1). These recent estimates show a small increase in the number and percent of Americans with health coverage from 2006 to 2007. However, the source of the increase was not a strengthening of private health insurance, but an expansion in government health insurance programs, including Medicaid, Medicare, and military health care. From 2006 to 2007, the proportion of the nonelderly adult population enrolled in a government-sponsored health plan increased from 27.0 percent to 27.8 percent (DeNavas-Walt et al., 2008). During the same period, the proportion of the population in a private health insurance plan fell from 67.9 percent to 67.5 percent. The decline in private coverage occurred in both employment-based and direct-purchase health plans.
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America’s Uninsured Crisis: Consequences for Health and Health Care FIGURE 2-2 Percentage of U.S. adults ages 18-64 with employment-based coverage, Medicaid or SCHIP coverage, and uninsured, 2000-2007. *SCHIP = State Children’s Health Insurance Program. Adults are generally not eligible for SCHIP, but several states have been granted special federal approval to receive enhanced matching funds for coverage of parents of children enrolled in SCHIP and pregnant women. NOTE: This figure does not show individuals with sources of health insurance coverage other than employer-sponsored insurance, Medicaid, SCHIP, TRICARE, or CHAMPVA. SOURCE: Fronstin (2008a). Reprinted, with permission, from EBRI Issue Brief, 2008. Copyright 2008 by Employee Benefit Research Institute. Uninsurance affects a broad swath of American households—as it did when the IOM first studied the topic. The uninsured population includes poor and middle-income people, members of one- and two-income families, white and black people, non-Hispanics and Hispanics, native-born and naturalized citizens and undocumented immigrants, children, adolescents, young adults, people reaching middle age, people approaching retirement, and early retirees. Statistics on the age, race and ethnicity, immigration status, household income, and work status of the uninsured, nonelderly population are presented in Appendix B. Some low-income children and adults are eligible, but not enrolled in a public health insurance program (Table 2-2). Overall, an estimated 15.9 percent of the uninsured population is eligible for Medicaid or SCHIP
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America’s Uninsured Crisis: Consequences for Health and Health Care BOX 2-1 Estimates of the Uninsured U.S. Population from Leading Federal Surveys There is no question that tens of millions of people in the United States are uninsured, but there is some confusion about what appear to be conflicting counts of the uninsured population. The most prominent federal surveys used to develop estimates of the number of people without health insurance in the United States are described and compared below. Unless noted otherwise, estimates of the insured and uninsured population in this report are drawn from the health insurance component of the Annual Social and Economic Supplement of the Current Population Survey (CPS) conducted annually by the U.S. Census Bureau. Estimates of the number of uninsured people vary because the objectives and design of the surveys vary. Some of these differences are described below. In 2007, the CPS estimate was that 45.7 million people in the United States—or 17.2 percent of the nonelderly population—lacked health insurance. Current Population Survey (CPS). The CPS is the most widely cited source on health coverage. Every March, the U.S. Census Bureau asks respondents about their health coverage during the previous year in an annual supplement to a monthly labor force survey. The objective is to estimate the number of persons uninsured for the entire previous year, although most experts believe that many respondents provide answers that reflect their insurance status at the time of the interview. Compared with other federal surveys, the CPS tends to report the highest estimate of the number of people lacking coverage for a 1-year period. Medical Expenditure Panel Survey (MEPS). MEPS is a set of surveys of families and individuals and their medical providers and employers. MEPS is cosponsored by the Agency for Healthcare Research and Quality (AHRQ) and the National Center for Health Statistics (NCHS). In addition to collecting data on health coverage, MEPS collects a broad range of data on the cost and use of health care. Respondents are surveyed several times during the year and asked if they were uninsured at any time since the previous interview and then asked for the time period without coverage. MEPS can produce estimates for a point in time during the year, at any point in the year, and for the entire year. MEPS estimates the number of individuals without coverage for at least 1 month of the year. In 2006, 68 million or 26.7 percent of the nonelderly population met the MEPS definition of being uninsured. National Health Interview Survey (NHIS). The NHIS is a cross-sectional survey conducted by the NCHS to monitor trends in illness, injury, and disability and to track progress toward achieving national health objectives. Respondents are asked to report their health coverage at the time of the survey and during the previous year. The NHIS produces point-in-time estimates (uninsured at the time of the interview), intermittent estimates (uninsured part or all of the previous year), and long-term estimates (more than a year at the time of the interview). For the first 9 months of 2007, NHIS estimates of the uninsured nonelderly population in the United States were 43.4 million (16.7
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America’s Uninsured Crisis: Consequences for Health and Health Care percent) at the time of the interview; 54.1 million (20.8 percent) for sometime during the year; and 31.1 million (11.9 percent) for more than a year. Survey of Income and Program Participation (SIPP). SIPP is a longitudinal survey, conducted by the U.S. Census Bureau, in which the same group of respondents is asked approximately every 4 months about their health insurance coverage during the preceding 4 months. SIPP produces estimates of the number lacking insurance at a particular point in time, for part of the year, and throughout the entire year. SIPP also provides analyses of the distribution of income, wealth, and poverty, and of the effects of federal and state programs on the well-being of families and individuals. For 2005, SIPP estimates for the uninsured nonelderly population were 27.6 million (10.7 percent) uninsured for all 12 months, 65.9 million (25.6 percent) uninsured for at least 1 month, and 45.2 million (17.6 percent) uninsured in the month of December. SOURCES: Chu and Rhoades (2008); Cohen et al. (2007); Congressional Budget Office (2003); Economic Research Initiative on the Uninsured (2006); State Health Access Data Assistance Center (2006). TABLE 2-1 Number and Rate of Uninsurance Among Children and Adults, 2007 Number (in millions) Percent uninsured Total 45.7 15.3 Nonelderly, under 65 45.0 17.2 Children ages 0-17 8.1 11.0 Adults ages 18-64 36.8 19.6 Adults over age 64 0.7 1.9 NOTE: Tabulations from the March 2008 Current Population Survey. SOURCE: DeNavas-Walt et al. (2008). health coverage (AHRQ Center for Financing Access and Cost Trends, 2008). Most uninsured people in the United States are citizens. A substantial percentage of the uninsured population is made up of lower- to middle-income U.S. citizens who are not eligible for Medicaid or SCHIP. In 2005, citizens—with annual family incomes less than three times the federal poverty level (FPL) and ineligible for Medicaid or SCHIP—made up 41.4
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America’s Uninsured Crisis: Consequences for Health and Health Care TABLE 2-2 Comparison of the Uninsured and General U.S. Population Under Age 65 by Selected Categories, 2005 Category Uninsured population (%) General population (%) People who are eligible for Medicaid or SCHIP 15.9 17.2 Noncitizens 17.7 7.0 U.S. citizens with family incomes greater than three times the federal poverty level (FPL)a 24.9 49.0 U.S. citizens with low- and middle-incomes who are not eligible for public coverageb 41.4 26.8 Low- and middle-income citizens ages 19–34 without children 13.7 5.8 Other low- and middle-income citizens 27.7 21.0 Total 100.0 100.0 NOTE: Each category is mutually exclusive. Tabulations are based on the January-June 2005 Medical Expenditure Panel Survey. Details may not sum to totals because of rounding. a Citizens with “higher incomes” are those with family incomes that exceed three times the FPL. In 2005, the FPL was $21,386 for a family of four. b Citizens with “low- and middle-incomes” are those with family incomes less than three times the FPL. SOURCE: AHRQ Center for Financing Access and Trends (2008). percent of the uninsured population, but only 26.8 percent of the general population. Some citizens—adults without children—are more likely to be uninsured because eligibility for public support is often linked with having a child. Hispanics (of any race) and blacks are disproportionately uninsured compared to their numbers in the overall population. In 2007, blacks3 made up 13.3 percent of the general population, but 16.7 percent of the uninsured population (DeNavas-Walt et al., 2008). The Hispanic population was most likely to be uninsured. Hispanics made up 15.4 percent of the population but almost one-third (32.3 percent) of the uninsured population. Job differences explain some but not all of the disparity. Hispanic workers have the lowest rate of employer-sponsored coverage of any racial or ethnic group (Gould, 2008). In 2007, 67.4 percent of Hispanics over the age of 15 were in the civilian labor force, only slightly 3 Includes multiracial blacks and blacks of Hispanic and non-Hispanic origin.
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America’s Uninsured Crisis: Consequences for Health and Health Care more than the overall population (U.S. Census Bureau, 2008).4 Yet many Hispanic workers are employed in industries associated with low wages and limited health benefits, such as sales, building and grounds cleaning and maintenance, and food preparation and serving (Kochhar, 2005).5 Rutledge and McLaughlin analyzed 20 years of pooled SIPP data to assess the trends in uninsurance among Hispanics (Rutledge and McLaughlin, 2008). They found that the decline in coverage among Hispanics occurred among both U.S. born and immigrants and was primarily driven by a decrease in private coverage. THE FORCES BEHIND THE DOWNWARD SPIRAL IN HEALTH INSURANCE COVERAGE Rising Costs Are Driving the Decline in Health Insurance Coverage Most analysts agree that rising health care costs are the principal force driving the declines in health insurance coverage (Chernew et al., 2005; Cooper and Schone, 1997; Holahan and Cook, 2008). Health care costs—in both the private and public sectors—have been growing faster than the overall economy for decades. In 2006, health care spending averaged $7,026 per person in the United States (Catlin et al., 2008; Centers for Medicare & Medicaid Services Office of the Actuary, 2008b). From 2000 to 2006, per capita health care spending grew by 47 percent compared to the 34 percent increase in gross domestic product (Centers for Medicare & Medicaid Services Office of the Actuary, 2008c). The trend is expected to continue (Congressional Budget Office, 2008; Ginsburg, 2008; Paulson et al., 2008; U.S. Government Accountability Office, 2008). The Centers for Medicare & Medicaid Services projects that total U.S. health care spending will almost double between 2008 and 2017 (Keehan et al., 2008). Employer-Sponsored Insurance Health insurance has been associated with the workplace ever since the 1930s when it was introduced as a fringe benefit of employment (Moran, 2005). However, the rapid growth in health care costs has made it increasingly difficult for employers to offer health coverage for their workers. 4 This compares with 64.4 percent of the total U.S. population over age 15 in the civilian labor force. 5 For additional research on health insurance trends in the Hispanic population, also see: Buchmueller et al. (2007); Fronstin (2008a,b); Hargraves (2004); Holahan and Cook (2005).
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America’s Uninsured Crisis: Consequences for Health and Health Care In addition, many workers with access to ESI have found it increasingly difficult to pay the employee premiums associated with taking up their employers’ offers of coverage (Chernew et al., 2005; Cooper and Schone, 1997; Fronstin, 2008a; Holahan and Cook, 2008; U.S. Government Accountability Office, 2008). Chernew and colleagues analyzed the decline between 1989 to 1991 and 1998 to 2000 in ESI in two cohorts of nonelderly Americans living in 64 large metropolitan statistical areas (Chernew et al., 2005). The researchers concluded that the rising cost of health insurance premiums was the principal factor underlying the decline in health insurance, leading to their conclusion that uninsurance will increase further if, as expected, health care costs continue to outpace income growth. Growth in health insurance premiums for ESI coverage has far outpaced wage growth and family incomes. Between 1999 and 2008, the cumulative rate of increase in family premiums (119 percent) was substantially greater than the increase in workers’ earnings (34 percent) (Kaiser Family Foundation and Health Research & Educational Trust, 2008a,b). Many employers and workers are finding that premiums are simply unaffordable. In 2005, nearly three-quarters of uninsured workers reported that they had declined employers’ offers of employer-sponsored health insurance because of the high cost (Fronstin, 2008a). As shown in Figure 2-3, the average annual single and family premiums for an employer-sponsored plan more than doubled from 1999 to 2008 (Kaiser Family Foundation and Health Research & Educational Trust, 2008a). Premiums for single individuals increased from $2,196 in 1999 to $4,704 in 2008, while family premiums increased from $5,791 in 1999 to $12,680 in 2008. The aging of the so-called baby boom generation is likely to exacerbate the rising costs of health care (Congressional Budget Office, 2008). Many people born between 1946 and 1964 are now reaching the age when serious health problems emerge, the need for health care heightens considerably, and medical expenses climb. In 2007, 13.1 percent of 50- to 64-year-olds were uninsured—7.1 million individuals (Table 2-3) (Economic Research Initiative on the Uninsured, 2008). The rate of uninsurance among 50- to 64-year-olds is lower than most other age groups, but it is rising at a faster rate than other age groups. And, this is occurring as the sheer size of this population group reaches historic levels. Recent trends in employer-sponsored retiree health coverage are a contributing factor. In a 2008 survey, the Kaiser Family Foundation and Health Research & Education Trust found that large employers are increasingly unwilling to sponsor retiree health benefits for new employees (Kaiser Family Foundation and Health Research & Educational Trust, 2008a). Overall, fewer employers offer retiree ben-
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America’s Uninsured Crisis: Consequences for Health and Health Care FIGURE 2-3 Average annual premiums for single and family employer-sponsored coverage, 1999-2008. *Estimate is statistically different from estimate for the previous year shown (p < 0.05). SOURCE: Kaiser Family Foundation and Health Research & Educational Trust (2008a). This information was reprinted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation is a nonprofit private operating foundation, based in Menlo Park, California, dedicated to producing and communicating the best possible information, research, and analysis on health issues. TABLE 2-3 Changes in the Number and Percentage of Uninsured People in the Nonelderly U.S. Population by Age Group, 2000-2007 Age group Year 2000 2001 2002 2003 2004 2005 2006 2007 Number uninsured (in millions) Under 18 8.4 8.2 8.2 8.1 7.7 8.1 8.7 8.1 18 to 29 11.7 12.1 13.1 13.7 13.6 14.0 14.5 14.0 30 to 49 13.1 13.9 14.9 15.4 15.7 15.7 16.2 15.7 50 to 64 5.0 5.2 5.6 5.9 6.0 6.6 7.1 7.1 Uninsured rate (in percent) Under 18 11.6% 11.3% 11.2% 11.0% 10.5% 10.9% 11.7% 11.0% 18 to 29 25.7 26.6 28.3 29.3 28.7 29.1 29.5 28.2 30 to 49 15.4 16.2 17.3 18.0 18.4 18.5 19.2 18.7 50 to 64 11.7 11.8 12.1 12.3 12.1 12.8 13.4 13.1 SOURCE: Economic Research Initative on the Uninsured (2008).
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America’s Uninsured Crisis: Consequences for Health and Health Care efits than in the past and, when retiree health benefits are offered, it is with higher premiums and higher patient cost sharing (Fronstin, 2008b). Lower- and Middle-Income Workers The rising cost of coverage is particularly burdensome for lower-income workers. Although employees’ percentage share of ESI premiums has been stable, average employee premium costs have increased steadily. Between 1999 and 2008, the average annual employee premium contribution for family coverage rose from $1,543 to $3,354 (Kaiser Family Foundation and Health Research & Educational Trust, 2008a). Shen and Long studied the decline in ESI between 1999 and 2002—a period encompassing both economic growth and recession—in order to determine whether the downward trend in coverage was related to decreasing offers from employers or to increasing numbers of employees deciding not to take up offers of coverage (Shen and Long, 2006). They found that, in 2002, both changes were occurring—workers with family incomes lower than twice the FPL were far less likely to be offered an ESI plan than higher income workers earning two to four times the FPL (55.4 percent vs. 78.6 percent) and lower-income workers were less likely to take up an employer’s offer of coverage (75.5 percent vs. 83.7 percent). An analysis of data from MEPS provided to the committee by the AHRQ Center for Financing, Access, and Cost Trends indicates that the take-up of ESI coverage among lower-wage workers continued to decline through 2005 (AHRQ Center for Financing Access and Cost Trends, 2008; Cooper and Schone, 1997). Family take-up rates dropped from 75.8 percent in 1996 to 66.8 percent in 2005 for workers earning $7.00/hour or less and dropped from 86.1 percent in 1996 to 82.4 percent in 2005 for workers earning between $7.01/hour and $10.00/hour. Many middle-income workers, although not as vulnerable as lower-income workers, are also at risk of losing employer-sponsored coverage. In the Shen and Long study described above, both low- and middle-income workers experienced a 3 percentage-point drop in ESI coverage from 1999 to 2002 (Shen and Long, 2006). The Changing Workplace The American workplace has undergone significant change in the last decade. Since 2000, the occupation, firm size, and industry mix has changed; the gender and age distribution of the labor force has changed; and the importance of part-time, part-year, and contractual workers has changed (Bernstein and Shierholz, 2008; Gould, 2007; Haas and Swartz, 2007; Holahan and Cook, 2008; Reschovsky et al., 2006; Shen and Long, 2006). Health insurance coverage varies substantially across these different
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America’s Uninsured Crisis: Consequences for Health and Health Care TABLE 2-4 Percentage of Private Sector U.S. Workers with Access to and Coverage by Their Employers’ Health Insurance, by Occupation, Firm Size, and Industry, 2000-2007a 2000 2001 2002 2003 2004 2005 2006 2007 All workersa 58.9 58.2 57.3 56.4 55.9 54.9 55.0 55.4 Occupations White collar 65.0 64.5 63.1 62.4 62.4 61.2 61.4 61.9 Blue collar 59.0 58.1 57.1 56.4 54.8 53.9 53.4 53.9 Service 33.9 33.3 31.6 28.7 29.4 28.7 28.9 29.5 Other 26.7 27.9 30.4 25.8 23.9 24.7 25.4 22.2 Firm size 24 or fewerb 36.2 34.9 35.0 34.4 33.6 32.6 32.6 32.1 Less than 100 43.9 43.4 42.6 42.0 41.0 40.4 40.1 40.1 100–499 65.9 64.8 64.8 63.7 63.2 61.7 62.0 63.1 500 or more 69.6 69.3 68.6 67.9 67.6 66.6 66.6 67.1 Industryc Agriculture, forestry, fishing, and hunting 37.1 29.1 25.8 26.1 29.5 27.1 Arts, entertainment, recreation, accommodation, and food services 32.5 30.4 30.5 30.6 29.7 31.9
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Construction 47.5 44.8 42.4 42.4 44.1 44.1 Educational, health, and social services 59.4 59.4 60.2 57.5 58.4 60.2 Financial, insurance, real estate, and rental and leasing 65.8 65.5 65.2 64.4 65.4 65.1 Information 73.0 71.3 70.1 72.3 71.6 72.7 Manufacturing 72.7 73.0 71.8 71.2 70.9 70.2 Mining 78.4 76.8 79.1 73.4 74.3 73.9 Other services (except public administration) 40.1 38.9 39.2 39.5 35.9 37.4 Professional, scientific, management, administration, and waste management services 57.4 55.1 55.8 54.7 56.1 56.0 Transportation and utilities 66.9 65.7 66.8 63.6 61.6 63.0 Wholesale and retail trade 53.9 52.9 52.7 51.9 51.2 51.6 aPrivate-sector, wage and salary workers, ages 18 to 64, who worked at least 20 hours per week and 26 weeks per year and received employer-provided health insurance through their own job. The employer had to pay at least part of the insurance premium for the coverage to qualify as employer-provided coverage. bPersonal communication, E. Gould, Economic Policy Institute, November 7, 2008. cIndustry classifications changes make it impossible to compare 2006 with years earlier than 2002. SOURCE: Gould (2007, 2008). Reprinted, with permission, from EPI Briefing Paper, 2007. Copyright 2008 by the Economic Policy Institute.
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costs for nongroup coverage can be exceedingly high because the individual subscriber pays the entire cost without a contribution from an employer. Moreover, health insurers typically subject applicants for individual policies to underwriting (i.e., assessment of their health status and recent use of services) if they want coverage (Merlis, 2005). Individuals who apply for nongroup health insurance may be denied a policy because they or a family member have a preexisting condition or are employed in occupations viewed as high risk. In most states, the insurer may deny coverage completely, impose either a permanent or temporary preexisting condition limitation on coverage, or charge a higher premium based on health status, occupation, and other personal characteristics. Individual medical insurability also depends on how recently one has been covered by a group health plan. Applicants with recent group coverage have some protections under the federal Health Insurance Portability and Accountability Act (HIPAA) (P.L. No. 104-191).7 For example, HIPAA guarantees access to continued coverage for individuals with recent ESI coverage who change or lose jobs. HIPAA rules allow the states to specify some of the key terms of coverage (Kaiser Family Foundation, 2008). Most states offer HIPAA-eligible residents who are quoted high premiums access to a state high-risk pool; but the coverage can be expensive, include high cost-sharing requirements, and offer only limited benefits. HIPAA’s rules do not protect individuals from future increases in premiums. As a consequence, someone who suffers serious medical condition or trauma may be charged extremely high premiums (Pauly and Lieberthal, 2008). Beyond HIPAA-related rules, a few states have regulations that are designed to promote access to nongroup coverage by requiring guaranteed issue of nongroup policies, limits on preexisting condition exclusions, and caps on premiums (see Appendix C for details by state on regulations addressing access to individual health insurance policies). Six states, for example, require that all insurers offer all applicants a health policy regardless of health status: Maine, Massachusetts, New Jersey, New York, Vermont, and Washington (Kaiser Family Foundation, 2008). An additional six states have an insurer of last resort, Blue Cross Blue Shield, which must offer everyone a policy: District of Columbia, Michigan, North Carolina, 7 Individuals eligible for coverage under HIPAA regulations are guaranteed the right to purchase individual coverage with no preexisting condition exclusion periods when they leave group coverage. To be eligible, the individual must have at least 18 months of prior coverage, uninterrupted by more than 63 consecutive days. The last day of prior coverage must be in a group plan and, upon leaving group coverage, the individual must elect and exhaust any available COBRA (Consolidated Omnibus Budget Reconciliation Act) continuation coverage or similar state continuation coverage. See Kaiser State Health Facts for more information about individual market guaranteed issue: http://www.statehealthfacts.org/comparetable.jsp?cat=7&ind=353.
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Pennsylvania, Rhode Island, and Virginia. However, guaranteed issue requirements do not provide limits on the cost of policies—so, many are unaffordable. ECONOMIC PRESSURES THREATENING PUBLIC COVERAGE EXPANSIONS It is possible that additional millions of low-income Americans would be uninsured today were it not for recent state and federal efforts to expand coverage. As noted previously, states and the federal government have substantially increased health coverage among low-income children and to a lesser degree among adults in the last decade, by expanding eligibility, conducting outreach to people already eligible, and expediting enrollment in Medicaid and SCHIP. And, as this report was being finalized, Congress reauthorized the SCHIP program (P.L. No. 111-3). Every state has implemented an SCHIP program (Centers for Medicare & Medicaid Services Office of the Actuary, 2008a). The primary beneficiaries of SCHIP programs have been children, particularly those with family incomes between 100 percent and 200 percent of the FPL. State SCHIP programs have targeted benefits to these children because their family income is too high for them to qualify for Medicaid, but too low for their parents to afford private family health insurance coverage. According to estimates based on the NHIS, rates of uninsurance among children in low-income8 families fell by more than one-third between 1997, the year before SCHIP was implemented, and 2005 (Ku et al., 2007). Recently, many states have moved to further expand enrollment in publicly subsidized programs. Between 2006 and 2007, 35 states enacted expansions in Medicaid or SCHIP eligibility for children and/or adults (Table 2-5). In 2008, 10 states implemented or authorized eligibility expansions for children (Ross and Marks, 2009). It is now clear that some states may be unable to sustain recent expansions in Medicaid and SCHIP given the severity of the current economic crisis. During the last economic downturn, some states restricted enrollment procedures that led to steep declines in children’s enrollment (Ross and Marks, 2009). When states face budget gaps, they must cut expenditures, raise taxes, or dig into state reserves. As of January 2009, state budget shortfalls were projected to total $350 billion through fiscal year 2011. At the time this report was being drafted, many states forecast budget deficits and were either putting expansion plans on hold or considering cuts to their Medicaid and SCHIP programs (Dorn et al., 2008; Johnson et al., 2009; Smith et al., 2008). 8 Low income in this analysis was defined as less than 200 percent of the FPL.
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TABLE 2-5 States Expanding Publicly Subsidized Coverage to Children or Adults, 2006-2007 Children Adults Children Adults Number of states 26 18 Missouri √ √ Alabama Montana √ Alaska √ Nebraska Arizona √ Nevada √ Arkansas New Hampshire California New Jersey √ Colorado √ New Mexico √ Connecticut √ New York √ √ DC √ North Carolina √ Delaware √ North Dakota √ Florida Ohio √ √ Georgia Oklahoma √ √ Hawaii √ Oregon √ Idaho Pennsylvania √ Illinois √ Rhode Island Indiana √ √ South Carolina √ Iowa √ √ South Dakota Kansas √ Tennessee √ √ Kentucky Texas √ √ Louisiana √ Utah Maine Vermont √ Maryland √ Virginia Massachusetts √ √ Washington √ Michigan West Virginia √ Minnesota √ Wisconsin √ Mississippi Wyoming √ SOURCE: McDonough et al. (2008). Copyrighted and published by Project HOPE/Health Affairs as McDonough et al., A Progress Report on State Health Access Reform, Health Affairs, 27(2): w105-w115, 2008. The published article is archived and available online at www.healthaffairs.org. Nevertheless, states appear committed to the programs, especially with respect to expanded eligibility. As this report was prepared, few states had acted to reverse eligibility expansions for Medicaid or SCHIP (Johnson et al., 2009; Smith et al., 2008). Most states are looking for savings in a variety of other areas, such as provider reimbursements, pharmacy controls, and benefit reductions, or new sources of revenue such as patient cost-sharing and increasing the cost of premiums. Only two states reported new limits on eligibility for public insurance in 2008: Rhode Island lowered the maximum income eligibility for parents from 185 percent to 175 of the FPL
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(Ross and Marks, 2009), and Maine established a waiting list for SCHIP coverage and froze enrollment for childless adults (Smith et al., 2008). The U.S. Department of Labor announced in January 2009 that 2.6 million jobs had been lost in 2008 (U.S. Bureau of Labor Statistics, 2009). By the end of December 2008, the U.S. unemployment rate had reached 7.2 percent, bringing the total number of the unemployed to 11.1 million. Numerous studies show that rising unemployment, which causes people to lose their employer-based health insurance coverage, as well as to experience reductions in family incomes, leads to a rising demand for Medicaid and SCHIP coverage. Dorn and colleagues, for example, used 1990 to 2003 state-level data from the CPS and other sources to estimate the impact of unemployment on health insurance coverage. The researchers concluded that a 1 percentage point rise in the national unemployment rate would increase Medicaid and SCHIP enrollment by 1 million (assuming no cutbacks in eligibility) (Dorn et al., 2008). In addition, they found that a 1 percentage point rise in the national unemployment rate would increase the uninsured population by 1.1 million. As shown in Figure 2-4, three states—Maine, Massachusetts, and FIGURE 2-4 States moving toward comprehensive health care reform. SOURCE: Kaiser Commission on Medicaid and the Uninsured (2008). This information was reprinted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation is a nonprofit private operating foundation, based in Menlo Park, California, dedicated to producing and communicating the best possible information, research, and analysis on health issues.
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Vermont—have enacted and are implementing plans to achieve universal health coverage (Kaiser Commission on Medicaid and the Uninsured, 2008). In Massachusetts, 439,000 previously uninsured individuals had obtained health insurance as of March 2008. In Maine, 23,000 individuals and more than 725 small business had obtained coverage through Maine’s initiative, “Dirigo Choice,” as of February 2008. Vermont began implementation of “Catamount Health” in October 2007, and 5,704 individuals had enrolled as of September 2008. As this report was drafted in late 2008, an additional 14 states had reform plans under way: California, Colorado, Connecticut, Illinois, Iowa, Kansas, Minnesota, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Washington, and Wisconsin (Figure 2-4). The downturn in the U.S. economy is likely to stymie many states’ efforts to expand public health insurance coverage. In California, for example, the state assembly approved ambitious legislation to expand coverage in 2007, but soon after, the state senate rejected the bill. CONCLUSION Health insurance coverage has declined over the last decade despite increases in public program coverage, and will continue to decline. There is no evidence to suggest that the trends driving loss of insurance coverage will reverse absent concerted action. Rising health care costs and a severely weakened economy threaten not only employer-sponsored coverage, the cornerstone of private health coverage in the United States, but also threaten recent expansions in public coverage despite the recent reauthorization of SCHIP. Health care costs and insurance premiums are growing substantially faster than the economy and family incomes. Employment has shifted away from industries with traditionally high rates of coverage (e.g., manufacturing) to service jobs (e.g., in wholesale and retail trades) with historically lower rates of coverage. In some industries, employers have begun to rely more heavily on jobs without health benefits, such as part-time and shorter-term employment and contract and temporary jobs. Overall, fewer workers, particularly among those with lower wages, are offered employer-sponsored coverage and fewer among them can afford the premiums. And, early retirees are less likely to be offered retiree health insurance benefits than in the past. For many people without employer-sponsored health insurance, nongroup coverage is prohibitively expensive or unavailable. Some states are under extreme economic pressure to cut their recent expansions of public programs for low-income children and adults. Sharp increases in unemployment will further fuel the decline in the number of people with employer-sponsored coverage and add even greater stress on states’ Medicaid and SCHIP programs.
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