Insured, but Bankrupted by Health Crises

Health advocates warn of the dangers of the underinsured – the millions of Americans who have a basic form of health insurance, but not enough to cover a chronic or catastrophic illness. This group of people represents a “great hidden risk to our health care system” according to the below article published in the New York Times.  More and more people are facing financial hardship and burden due to the rise in healthcare costs and increased out-of-pocket expense.

New York Times

 

Health insurance is supposed to offer protection — both medically and financially. But as it turns out, an estimated three-quarters of people who are pushed into personal bankruptcy by medical problems actually had insurance when they got sick or were injured.


And so, even as Washington tries to cover the tens of millions of Americans without medical insurance, many health policy experts say simply giving everyone an insurance card will not be enough to fix what is wrong with the system.
Too many other people already have coverage so meager that a medical crisis means financial calamity.


One of them is Lawrence Yurdin, a 64-year-old computer security specialist. Although the brochure on his Aetna policy seemed to indicate it covered up to $150,000 a year in hospital care, the fine print excluded nearly all of the treatment he received at an Austin, Tex., hospital.


He and his wife, Claire, filed for bankruptcy last December, as his unpaid medical bills approached $200,000.


In the House and Senate, lawmakers are grappling with the details of legislation that would set minimum standards for insurance coverage and place caps on out-of-pocket expenses. And fear of the high price tag could prompt lawmakers to settle for less than comprehensive coverage for some Americans.


But patient advocates argue it is crucial for the final legislation to guarantee a base level of coverage, if people like Mr. Yurdin are to be protected from financial ruin. They also call for a new layer of federal rules to correct the current state-by-state regulatory patchwork that allows some insurance companies to sell relatively worthless policies.
“Underinsurance is the great hidden risk of the American health care system,” said Elizabeth Warren, a Harvard law professor who has analyzed medical bankruptcies. “People do not realize they are one diagnosis away from financial collapse.”
Last week, a former Cigna executive warned at a Senate hearing on health insurance that lawmakers should be careful about the role they gave private insurers in any new system, saying the companies were too prone to “confuse their customers and dump the sick.”


“The number of uninsured people has increased as more have fallen victim to deceptive marketing practices and bought what essentially is fake insurance,” Wendell Potter, the former Cigna executive, testified.


Mr. Yurdin learned the hard way.

(more…)

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US Out-Of-Pocket Health Costs Up 34% In 3 Years

More information detailing the rising cost of healthcare with less coverage provided.  The average worker receives no more benefits in 2008 than he or she did in 2004. In fact, they may receive less, but his or her out-of-pocket expense is greater now than compared to 2004.

By Kristen Gerencher

 

Americans with job-based health insurance saw their protection from higher out-of-pocket costs erode between 2004 and 2007, especially those who were sick and of modest means, according to a new study.

The majority of people with health insurance, about 160 million Americans, receive it through their jobs.

“American families with employer-based coverage were worse off in 2007 than they were in 2004,” said Jon Gabel, lead author of the study that was published in a June 2 Health Affairs Web exclusive. “This is during a period of time when the economy was expanding.”

The authors conclude that a growing number of people are underinsured, a term that refers only to what they pay out of pocket for medical services. Health-care affordability, which includes out-of-pocket costs plus employees’ premium contributions, also has taken a big hit.

Comparing expected health spending among different types of health plans, financial protection was greatest for those in health maintenance organizations (HMOs), the study found. Of five chronic conditions surveyed, patients with breast cancer suffered the highest out-of-pocket costs.

Workers faced an annual average of $729 in medical-services costs in 2007, including deductibles and other forms of cost-sharing such as co-payments and co-insurance. That’s up 34% from 2004, when the average out-of-pocket burden for those with employer coverage was $545.

With job-based health plans picking up 80% of total costs in 2007, they covered a slightly smaller percentage of overall expenses than they did in 2004 as more workers confronted plans with deductibles and as deductible levels were set higher, according to the study. But the main reason for rising out-of-pocket costs was the growth in overall health spending.

 

Going To Extremes

 

The report showed a widening gap between adults who need to tap their health insurance to cover medical visits and those fortunate enough not to need to use their benefits much. Adults with chronic medical conditions drove higher spending for both their health plans and themselves.

At the two extremes, the average out-of-pocket expense for the 50% of workers with the lowest health spending grew 23% to $85 in 2007. But expenses jumped 42% to $8,703 among the highest-spending 1% of workers, the study found. For the highest spending 10% of workers, the average out-of-pocket costs amounted to $3,364, an increase of 39% since 2004.

For some patients, co-insurance may seem like a small sum – set at 10% or 20%, for example, when services are from an in-network health provider – but costs can add up quickly as absolute dollar figures rise. Insurance paid for 84% of the bill for five selected chronic conditions: asthma, breast cancer, diabetes, chronic obstructive pulmonary disease and hypertension, the study found.

Breast-cancer patients faced the biggest sticker shock. Even though insurance paid for more than 90% of a bill that averages $66,489, they had the largest out-of-pocket spending, the study found. Breast-cancer patients paid an average $6,250 for their treatment. Patients with chronic obstructive pulmonary disease had the second highest out-of-pocket costs, at $2,200 a year.

“When that figure gets really high, even though you may be only paying 10% of the bill, it’s still a lot of money for somebody of modest means,” Gabel said. “For some high rollers…$6,000 for breast cancer is not much of a financial penalty, but it is for someone earning $30,000 a year.”

The researchers used simulated bill paying of actual claims histories in Thomson Healthcare’s MarketScan database to apply the spending of a large sample of adults to a representative national sample of employer-sponsored health plans.

In 2007, 71% of people earning 200% of the federal poverty level (about $41,300 a year for a family of four) who were among the top 25% in health-care spending were underinsured, the study found.

“In the United States, if you are sick and earn a modest income, then you are probably underinsured – even if you have employer-based health coverage,” the researchers wrote.

Overall, the recession may exacerbate the trend toward eroding financial protection as employers become more sensitive to the rising costs of workers’ health insurance, Gabel said.

“I would expect to see significant increases in cost-sharing in the next few years at a time when households are going to be less able to pay for it,” he said.

The study was conducted by researchers from the National Opinion Research Center and Watson Wyatt Worldwide, with funding from The Commonwealth Fund.

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Senate Report Finds Insurers Wrongfully Charged Consumers Billions

Another in the continuing series of reports about routine underpayment of health care for out of network coverage by the insurance industry.  Consumers need an Advocate to help reduce health care bills.

By David S. Hilzenrath
Washington Post Staff Writer
Wednesday, June 24, 2009

Health insurers have forced consumers to pay billions of dollars in medical bills that the insurers themselves should have paid, according to a report released today by the staff of the Senate Commerce Committee.

The report is part of multi-pronged assault today on the trustworthiness of private insurers by Commerce Committee Chairman John D. Rockefeller IV (D-W.Va.). It comes at a time when the insurance industry is battling efforts to offer consumers a public alternative to private health plans.

At a hearing this afternoon, Rockefeller’s panel is slated to air allegations by a former industry insider that insurers have put profits before people’s health.

The report released this morning alleges that insurers have systematically underpaid for so-called out-of-network care. The issue has been brought to light in past litigation and investigations, including a probe by New York Attorney General Andrew Cuomo.

Cuomo described it last year as “a scheme by health insurers to defraud consumers by manipulating reimbursement rates.” A dozen insurers have reached settlements with Cuomo agreeing to change their practices.

Many Americans pay higher premiums for the freedom to go outside an insurer’s network of doctors and hospitals. When they do, insurers typically pay a percentage of what they call the “usual and customary” rates for the services. How insurers determined the usual rates had long been opaque to consumers and difficult if not impossible for them to challenge.

As it turns out, insurers typically used numbers from Ingenix Inc., which was a wholly owned subsidiary of the big insurer UnitedHealth Group. As such, Ingenix had an incentive to produce benchmarks that low-balled usual and customary rates and shifted costs from insurers to their customers, the report said.

Making matters worse, Ingenix got all of its data from the same insurers that bought its benchmark information, the report said. Insurers that contributed data to Ingenix often “scrubbed” their data to remove high charges, and Ingenix further manipulated the numbers, removing valid high charges from its calculations, the report said.

Cuomo found that insurers systematically under-reimbursed New York consumers by up to 28 percent, the report said. Earlier this month, New York’s Department of Insurance issued a regulation prohibiting insurance companies in New York from obtaining data on usual and customary charges from anyone with a conflict of interest.

In March testimony to Rockefeller’s committee, UnitedHealth Group’s chief executive expressed regret that there was a conflict of interest inherent in his company’s relationship with Ingenix, the report said.

But chief executive Stephen J. Hemsley also said UnitedHealth stands by “the integrity of the Ingenix data” and the way UnitedHealth “used the data to make reimbursement decisions.” He said the company worked with Cuomo to transfer its databases to an independent, nonprofit entity.

Ingenix bought one of its original databases in 1998 from the Health Insurance Association of America, a precursor to the industry’s main trade association and lobbying group.

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