Cracks in Coverage:
The Precarious Position of the Uninsured and Underinsured in Vermont
Josh Hoxie
Social Science Research Center
Saint Michael’s College
Summer 2010
Table of Contents
ABSTRACT
INTRODUCTION
Why Uninsured?
Methodology
HEALTH INSURANCE: A PRIMER
It’s a Patchwork
What’s out there? Insurance Options in Vermont
Federal Poverty Level (FPL) Guidelines for 2009
Who’s In? The Insured
Who’s Out: The Uninsured
PERVERSE INCENTIVES
Who Else is Out? The Underinsured
Getting by: The Uninsured
INTERVIEWS WITH THE UNINSURED: FOUR PROFILES
Melanie, South Burlington
Jane, Plainfield
Doris, Barre
Stephanie, White River Junction
BAND AIDS ON BULLET WOUNDS: WHAT’S LACKING IN PUBLIC PLANS
Cost
Coverage
Precarious
What’s at Stake: It’s not just about insurance status
A BAD DEAL: BUYING PRIVATE INSURANCE
Cost-Benefit
FREE CLINICS AND FQHC’s
MOVING FORWARD: FEDERAL LEGISLATION
People Currently in the Cracks
STATE LEGISLATION
WHAT DOES IT ALL MEAN?
WHAT NOW?
Appendix 1.1
Appendix 2.2
Notes
ABSTRACT
The patchwork of public and private health insurance plans available to Vermonters leaves a population of people uncovered and thus vulnerable to paying for care out of pocket or foregoing necessary care. The fault lines in coverage options leave both the insured and uninsured in a precarious position when faced with serious medical expenses. This paper looks for where these fault lines are and what the implications are for people in Vermont who are uninsured or underinsured. Using statewide data from Department of Banking, Insurance, Securities and Health Care Administration (BISHCA) as well as case studies on the uninsured and underinsured, and interviews with health care professionals in the field, a look into the lives of people in the cracks and the contrived health decisions they must make is depicted along with policy implications for Vermont. The paper goes on to analyze the effects on Vermonters of the Patient Protection and Affordable Care Act passed by the federal government in March 2010 and recent state legislation that will affect health insurance in Vermont. The conclusion is that as long as there are insurance policies based on exclusion, there will always be a population who are left uncovered. The only policy that could include everyone would be a system in which the patchwork of coverage providers was unified into one coherent plan based on inclusion rather than exclusion.
INTRODUCTION
In the fall of 2008, a young couple in their mid-twenties walked into the People’s Health and Wellness Clinic in Barre, Vermont. The couple had the same form of diabetes and were both in to get a check up. They both had jobs, but neither had health insurance. They were relying on the free clinic for health care, paying as much as they could for the care. The couple both needed an annual eye exam, a procedure that could prevent the onset of impaired vision and blindness caused by their diabetes. The clinic does not have the staff to provide the procedure, nor does it have the resources to pay for it for all of its diabetic patients. Since the procedure costs hundreds of dollars, the couple could not afford to get the procedure. For months they saved their money and for Christmas gave each other an eye exam as their only present.[1] This couple’s story is not unique as the more than 47,000 Vermonters who lack health insurance are forced to either go without prescribed care or make sacrifices to get the care that those with coverage take for granted.
Most conversations regarding health insurance are very narrow and personal. People tend to want to know about their own health insurance and how any proposed changes affect them personally. “Will my premiums go up? Will I still have to pay a co-pay? Will it cover my condition?” This is very natural when you consider most people’s interaction with health care is in a doctor’s office or when they’re paying for care or insurance. However, when contemplating a system that will affect everyone in a population one needs to look beyond their personal experience and look at the whole system and consider all parties involved. Health care is a topic that affects everyone at some point in their life and health insurance will play a significant role in everyone’s life and the lives of families. The goal of this study is to take the reader out of the narrow discussion of “How will this affect me?” and open up the discussion to a more systemic understanding of what it means in Vermont to not have adequate health insurance. The goal after reading this study is to gain the perspective to see what it would look like if you fell through the cracks of the insurance system and were on the outside looking in. Where are these cracks? And what does it mean for the people that are in them?
This study looks at the challenges facing the health insurance “system” in the state of Vermont with an eye out for where the fault lines are. A few questions it attempts to answer are: Who are the uninsured Vermonters and why are they in the position they’re in? Are the uninsured the only group that is at risk? For people without insurance-- what is life really like and what are their options? Do they feel invincible or are they forced into this position by circumstance? These questions are methodically studied through qualitative in depth interviews with healthcare professionals, advocates, physicians, and uninsured people. A thorough analysis of the most up-to-date studies conducted regarding health insurance in Vermont contributes greatly to gaining a qualitative understanding of the current state of the state. Finally, there is a discussion of the effects of policy changes made in the past year as well as possible policy changes for the future.
Why Uninsured?
Nearly 45,000 people die every year from a lack of health insurance in the United States and uninsured people are 40% more likely to die prematurely than people with insurance.[2] Uninsured people are less likely to get preventative care, are more likely to be hospitalized for conditions that could have been prevented, and are more likely to die in the hospital than those with insurance.[3] The uninsured are five times less likely to have a usual source of care outside of an emergency room.[4] Uninsured people often spend 2.5 times what public and private insurance programs pay for identical care.[5] In Vermont, it is estimated that more than two working-age Vermonters died every month in 2006 due to lack of health insurance. Twice as many people died from lack of health insurance than from homicide in 2006 in the United States.[6] Nearly all statistics point toward better health outcomes for people with insurance over people without it. Despite these grim statistics there is a large population of people without health insurance.
With such dire correlations between lacking health insurance and poor health outcomes, why would anyone choose to go uninsured? In Vermont, the proportion of uninsured is much lower than national average thanks largely to a barrage of public insurance programs available to Vermonters, but one must wonder why there still exists a sizable population of uninsured Vermonters? Is it by choice, foregoing coverage due to a sense of invincibility? Or is it merely a question of cost-- insurance is too expensive for these people. One must consider who the uninsured are, what is standing between these people and health insurance. This paper goes through the major studies done on health insurance in Vermont and looks at why the gap in coverage continues to exist and what the difference is between being insured and uninsured. It also looks into the efficacy of individual insurance and the various options facing an uninsured Vermonter.
It is the hypothesis of this paper that for people not offered health insurance through their employer or through state programs, the private market for health insurance doesn’t offer an affordable option for people seeking insurance and the public insurance available leaves a sizable gap. Despite the plethora of public programming put in place to address the problem there still is a large amount of inequality in health care in Vermont. This is because the programs put in place merely contribute to the complexity and confusion of the patchwork of health insurance filling in gaps that exist in coverage without addressing the root causes of these gaps. The issues addressed by this paper are the inequalities of care and cost for Vermonters. The main risk caused by this inequality is foregoing preventative care and necessary care that would lead to better long term health outcomes and serious financial risks rooted in medical care. The reforms put in place to address these issues have been inadequate in their scope and execution since they do not address the growing phenomenon of underinsurance or the causes of uninsurance, but rather simply try to get people insurance regardless of cost or quality of coverage. These must be addressed in order to alleviate the problems described throughout this paper.
Methodology
In order to get a full understanding of both the network of insurance providers and the intricacy of the health insurance “system” one must investigate health insurance from both a macroscopic and microscopic level. To get the large picture of what health insurance in Vermont is like and how the pieces fit together, I interviewed professionals in the field of providing health care. I spoke to constituent advocates, private insurance brokers, the Healthcare Ombudsman, directors of community health centers and free clinics. These people had first hand knowledge of how the “system” fit together and where the cracks were. To get a more microscopic picture I interviewed doctors who dealt every day with health insurance companies and the bureaucracy involved. I interviewed uninsured Vermonters who saw day in and day out what life was like from the outside looking in and tried to learn from them why they lacked insurance. I assumed the role of an uninsured Vermonter and went through the process of trying to qualify for a public program or buy a private individual plan. This experience is recounted below in the section “A Bad Deal.”
I also consulted the most up to date studies and literature produced on the topic within the state and nationwide dealing with the uninsured and insurance reform. The most comprehensive study was produced by the Department of Banking, Insurance, Securities, and Health Care Administration (BISHCA) published in January of 2010 for the Vermont Senate Health and Welfare Committee. I consulted annual reports from the various health care providers in the state and health advocacy organization. The interviews conducted alongside the literature surrounding the topic created a wealth of data from which I could analyze and draw conclusions about where the cracks in the health insurance “system” in Vermont are and what effect (if any) public policy will have.
HEALTH INSURANCE: A PRIMER
When you look at the market for health insurance, one must consider why insurance exists at all for health care and what separates health care from other services. The market for health care is unlike other markets for goods or services because consumption of care is unlike consumption of other types of goods or services. There is an asymmetry of information between the consumers of care and the providers. This asymmetry exists because of the complexity of the human body and the extensive training required of doctors who provide care. Patients tend to get care that is recommended to them by their doctor. It’s rare that people get procedures done for enjoyment as there is very little enjoyment to most people in things like waiting rooms and colonoscopies.
The demand for health care is not distributed equally throughout society. A small portion of society consumes a large proportion of medical care, while a large portion consumes little to no care. The sickest one percent of non-institutionalized people use more than half of the care consumed in the United States. The healthiest half of the population uses only three percent of care as measured by expenditure.[7] This means that some people use no care at all and are not affected much by insurance coverage outside of public discourse and payment for insurance. Treating illness, or receiving medical care, can be extremely costly with modern pharmaceuticals and procedures and thus is prohibitively expensive for most people to pay out of pocket for care when they get sick. The risk in health care is that you might get sick and have to pay for very expensive care. To afford this, you put some money aside into a pool that covers people when they get sick. The larger the pool, the wider the risk of getting sick is spread around and the more money pooled together to treat illness. This is the justification for insurance.
The way that people set aside money to pay for future care varies widely in the United States. The one constant is that everyone at some point will require medical care and in one way or another will have to pay for it. The most common way is through buying health insurance or getting insurance coverage through a public tax-funded program or an employer. If you are enrolled in a private or public insurance program then you are insured and if not, you are uninsured. Insured means that people are enrolled in a public or private program designed to in some way pay for care if they get sick. Uninsured means that people are not enrolled in any kind of program to pay for care and are liable to pay for any care they receive. There are some rules set in place that require people to receive life saving care regardless of ability to pay, but the rules vary greatly from state to state and the definition of what is “life saving” has been highly controversial. Within these two categories, there is a wide range of sub categories due to the wide range of insurance options that exist and the varying degrees of coverage for different medical events.
It’s a Patchwork
Before going into depth about the types of insurance available and distribution of these types among the general population in Vermont it is important to take a step back and look at the whole made up of all the individual parts. Most people refer to the conglomeration of insurance programs as a “system.” However, the word system implies cohesion and coordinated structure that unites all of the insurance options available that come together to finance the delivery of medical care. Financing care is essentially what all of the insurance programs, public and private, have in common since they do not actually provide the care. The development of the current insurance programs available grew organically through private companies and public programs produced by legislation. A more apt description of the way financing health care in Vermont is organized is “patchwork” rather than “system.” Patchwork more accurately describes the network of insurance programs which all exist to serve a segment of the population and offer coverage with a model of exclusivity. They finance care for people enrolled and exclude those unenrolled. Uninsured, or unenrolled, people do not fit into the patchwork and would require another patch to pull them into the fold or would require a shift away from the “patchwork” model to a “system” model that would cover all people and not just those that fit into one patch or another. For the rest of the paper, the conglomeration of insurance programs will be described as patchwork rather than system.
What’s out there? Insurance Options in Vermont
To discuss the population of uninsured Vermonters, we must first look at all of the insurance options available to Vermonters and look at the population that is insured. The three major private health insurance companies are Blue Cross Blue Shield (BCBS), MVP, and Cigna. People can either buy private insurance directly for themselves or enroll through their employer. Employer sponsored insurance represents the majority of private health care coverage and tends to be chosen by the employer. Individual insurance programs tend to be much more expensive and people can enroll as a family or as an individual.
The coverage options available within private health insurance tend to vary in title and benefits but all tend to fall into one major category with a few plans being hybrids of the major categories. The purpose of this description is not to list all the plans available in Vermont, but to give an understanding of the major types of plans offered.[8] The categories are Health Savings Accounts (HSA), Health Maintenance Organizations (HMO), Preferred Provider Organization (PPO), Point of Service (POS), and High Deductible (HD). An HSA is an account people can put money into before taxes are taken out that can be spent on health related expenses and reduce taxable income. An HMO, a PPO, and a POS are all networks of providers that are covered by the insurance company that allow varying degrees of choice and freedom within this network. The insurer limits coverage to this preferred network and puts most or all of the cost of out-of-network care on the individual. HD plans charge low premiums to enroll in the plan and leave the individual liable for the cost of care up to a predetermined amount called a deductible (generally several thousand dollars) before the insurance company begins to pay for care. For the purpose of this study, the focus being on the cracks in coverage, we will focus mostly on people not enrolled in these programs. However, programs that offer coverage, but still involve high risk for patients and high out-of-pocket expenses will be discussed in detail.