Uninsured Myths and Realities

THE UNINSURED PHENOMENOM ñ MYTHS AND REALITIES

There continue to be myths about who makes up the uninsured population and how the problem could be addressed. These misconceptions have impeded policy makers and the public from gaining a better understanding of who the uninsured are and why the problem is growing so rapidly in a period of strong economic growth.

MYTH 1 ñ People who are uninsured are unemployed.

REALITY – Most of the uninsured either work or are dependents of workers. There were almost 24 million uninsured workers in 1995, which represented approximately 60 percent of the entire uninsured population. Most of the remaining uninsured are dependents of workers.

MYTH 2 – A strong economy reduces the ranks of the uninsured because more people are employed and are eligible to participate in employer-sponsored health insurance programs.

REALITY – The economy generated 5.5 million jobs between 1993 and 1995, yet the number of people who were uninsured continued to grow by one million in each of these years. The number of Americans without health insurance was over 1.6 percentage points higher in 1995 than in 1990, an increase of 5 million uninsured individuals. Based on tabulations from the March 1996 supplement to the Current Population Survey, 40.3 million, some 17.4 percent of nonelderly Americans were uninsured throughout 1995. Recent government reports indicate that nearly 20 percent of the non-elderly population were uninsured in early 1996, an estimated 44.5 million persons. What seems clear from these results is that the problem of the uninsured cannot be solved solely by rapid and sustained economic growth, or even by the on-going expansions of Medicaid. These numbers are based on projections in employment by industry and structural changes in the labor market.

MYTH 3 ñ Continued economic growth would eventually address the uninsured problem.

REALITY — It is estimated that conservatively 47 million people will be uninsured by the year 2005, if current trends continue. The uninsured population is growing rapidly in the best of economic times. A serious economic downturn or recession would add substantially to that number.

MYTH 4 — With managed careís ability to control costs, employers have been able to continue to provide health insurance to employees.

REALITY ñ Employer-sponsored health insurance continues to decline. Even as health insurance premium increases slowed in the mid-1990ís, declines in these premiums did not reach small businesses. Rising health care costs continue to discourage these companies from offering health insurance.

Today, many small businesses cannot afford to offer health insurance to their employees, or, if coverage is offered, the costs may be too high for the employee to purchase individually or for his or her family. Further, health insurance may be only offered only to the employee and not to dependents.

There are other reasons for the decrease in employer coverage. Many mid-size and large employers have cut back on health insurance benefits. These employers have not filled positions when they downsized, and subsequently they often hired contingent workers who are not offered insurance. Higher costs may also jeopardize coverage for early retirees who need this coverage. Retirees are high cost users of the health care system, and early retirees without health insurance would further strain our already fraying safety net system.

Health care costs are rising faster this year (6 percent) than during the last three years (2-3 percent annually), placing more of a financial burden on employers who are facing large premium increases in 1997 and 1998. This situation will disproportionately impact small businesses. Small employers who are currently offering health insurance may be forced to drop health insurance coverage in the face of huge premium increases.

MYTH 5 — Most of the uninsured workers in the United States are located in manufacturing firms that have experienced recent economic problems.

REALITY — The largest and growing segment of uninsured workers (accounting for 5 million workers in 1995) work in the service sector, which is the fastest growing part of our economy. The small business service sector is where most of the jobs in our economy are being created. However, many small businesses do not offer health insurance because of high health insurance premiums, so new workers in this sector are often without coverage. This vulnerability exists even if health insurance is offered, because many of the workers in these small businesses are working on a contingent basis and are not eligible to receive health insurance benefits.

MYTH 6 — The uninsured person is typically middle-aged, unemployed, lower-income and able to obtain care from primary care providers through acute care hospitals.

REALITY -Todayís profile of the uninsured person is a young adult with children, between the ages of 19 and 39, whose household income is between $20,000 and 60,000 annually, who is a contingent worker, in a small business in the service sector. Many of these uninsured individuals in middle-income families do not have the disposable income to purchase individual or family health insurance outside of a group insurance arrangement. Many families are unable to purchase any kind of health insurance because of competing priorities such as housing, clothing and food.

MYTH 7 ñ Uninsured people receive timely and appropriate medical care as do people with health insurance benefits.

REALITY – Studies have shown that people without insurance are less likely to receive care or to delay seeking needed medical care for acute medical problems. This problem adds to the cost of their care because in many cases their medical condition has become more serious, producing adverse outcomes that will need extensive follow up care. Further, uninsured individuals are less likely to receive primary care or preventive services, which could prevent medical conditions from becoming worse.

MYTH 8 ñ Through contractual arrangements with health plans, employers have been able to deflect cost shifting from providers.

REALITY ñ Some of the largest employers have been able to ward off price increases due to cost shifting, but small businesses have remained vulnerable to cost shifting because they do not have the necessary clout to obtain low premium increases. As the Medicare and Medicaid programs cut back payments to providers of $115 billion over the next five years, providers may shift costs to private sector patients to make up part of the difference. This “hidden tax” on employers ultimately raises premiums, making it more difficult for them to continue to provide health insurance. It is the middle-income worker, in smaller businesses, who is most affected by these actions.