In a humble attempt to clarify some of the issues surrounding the healthcare reform debate, I am writing a series on the topic. The first installment related to the uninsured. In today’s post, I will address another very important piece in the healthcare puzzle, the underinsured.

While everyone has heard about the plight of the 46 million uninsured in America, few people know who the underinsured are.

A person is considered to be underinsured if he/she has some kind of health insurance (including employer-based insurance) but still has to pay high out-of-pocket fees when seeking medical care. A more formal definition includes people who are insured all year but have at least one of the following qualifiers:

  • Medical expenses greater than 10 percent of annual income

  • An annual income less than 200 percent of the federal poverty level and medical expenses greater than 5 percent of annual income
  • Health plan deductibles equal to or greater than 5 percent of annual income

The latest estimates put the number of the underinsured at 25 million people, an astonishing increase from only 16 million in 2003. And that number is only likely to increase as the current recession squeezes employers to increase premiums and out-of-pocket costs on their employees.

So big deal, some people have to pay more than others when they see the doctor or if they are hospitalized -- why is that so important for the healthcare reform debate? The alarming reality is that the underinsured look a lot like the uninsured! How can that be when they already have coverage? Well, let’s take a look at the numbers.

Studies show that 53% of underinsured people (compared to 68% of uninsured ones) do not see the doctor when they are sick, do not fill their prescriptions and do not get recommended tests or treatments because of the high out-of-pocket costs that they have to incur. That means that they are foregoing or delaying needed medical care. Moreover, 45% of them have difficulty paying their medical bills, have been contacted by collection agencies for unpaid bills and have changed their lifestyles to pay their bills. In fact, a 2005 study by Harvard University showed that 75% of medically-related bankruptcies occur for people who have health insurance, i.e. the underinsured.

What all of this means, is that the underinsured, just like the uninsured, because of inappropriate coverage, are ending up at the Emergency Room. And when they can’t pay their bills, the hospital shifts the cost to the government and private insurance plans. Which in turn will increase their premiums, co-pays and deductibles, and thus more people become underinsured in this never-ending vicious circle.

The problem of the underinsured is just as important to healthcare reform as that of the uninsured. But what is even scarier about the underinsured is that most of them assume that they are well-covered until they get sick. And that is when one bad diagnosis might mean a life-long of financial troubles for them, and huge unnecessary costs on the healthcare system overall.