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Who Are the Uninsured and Underinsured?

Welcome! This article is part of a Medscape Physician Business Academy course, . Visit the Course Page to take the full course and receive a certificate.

There were high hopes for providing all US residents with health insurance after the 2010 passage of the Affordable Care Act (ACA). And as the name of the act implies, the ACA was also supposed to help make healthcare more affordable for everyone.

Neither of these things happened to the degree that was intended. The ACA was not fully implemented, and the number of uninsured or underinsured (those who have insurance but cannot afford out-of-pocket charges or have inadequate benefits) US residents has recently been climbing.

In 2020, an estimated 31 million US residents had no health insurance coverage and 38 million more had inadequate healthcare coverage — and were thus considered underinsured.

The Fall and Rise of the Uninsurance Rate

Although the ACA substantially reduced the ranks of the uninsured, that number has been inching back up again in recent years. According to Gallup, the percentage of US residents who were uninsured fell dramatically from 18% to 10.9% between 2010 and 2016, which is when the ACA came into effect, but then rebounded to 13.7% by 2018.

The law was supposed to virtually eliminate uninsurance, but that goal was dealt a heavy blow in June 2012 when the US Supreme Court ruled that states could opt out of the ACA's vast expansion of eligibility for the Medicaid program. As of 2021, 12 states have not expanded their Medicaid programs, although 38 states have done so.

Mainly because of differences in Medicaid coverage, states have widely different uninsurance rates. In 2020, Massachusetts had the lowest rate of uninsured adults at 3.39%, and Texas had the highest at 20.47%. In between were New York (6.06%), Oregon (8.03%), California (9.02%), Tennessee (11.74%), Arizona (11.94%), and Florida (14.64%).

The overall Medicaid population has been declining somewhat in recent years, apparently owing to a tightening of many states' Medicaid criteria, such as requiring more frequent verification of eligibility. From 2018 to 2019, the number of Medicaid enrollees who are not considered to be a part of the older population declined by 1.9 million, according to the Kaiser Family Foundation.

Removal of the ACA's tax penalty for not having insurance coverage in 2017 was another factor in the recent decline in coverage. But the biggest reason for lack of insurance is the growing cost of coverage. Lack of affordability was cited by 73.7% of the uninsured, according to a 2019 survey by the Centers for Disease Control and Prevention.

Who Are the Uninsured?

Contrary to widely held opinion, at least half of the uninsured have jobs. In 2019, 12.7 million of them had full-time jobs and 4 million had part-time jobs, together making up 53.6% of all uninsured people. The ACA requires large employers to offer insurance, but not small firms with fewer than 50 employees, where the employed uninsured work.

Children make up 4.4 million of the uninsured. They account for roughly 5% of all US children — a rate that is much lower than the 12.5% uninsured rate for all US residents who are under the age of 65. Like the overall uninsured rate, the rate for children fell to a historic low after the ACA started but has risen markedly since then.

Most of the uninsured — though not all — have low incomes. In 2019, 82.6% of uninsured people were in families with incomes below 400% of the federal poverty level. Although many of them are in states without Medicaid expansions, others are noncitizens who aren't eligible for Medicaid. 

Some of the uninsured could afford coverage but chose not to get it. In a survey by the Kaiser Family Foundation, about 21% of the uninsured said they did not need or want health insurance and 18% said signing up was too difficult or confusing.

Young adults often don't buy health insurance because they don't believe they'll need it and have the highest rate of uninsurance of any age group. About 15.6% of adults aged 19-34 years are uninsured compared with 11.3% for adults aged 35-64 years, according to the US Census.

Many uninsured people could have bought individual policies on state-based health insurance exchanges (or marketplaces) set up by the ACA. Premiums for lower-income purchasers are generously subsidized by the federal government and enrollment grew steadily during the Obama administration, reaching 12.7 million in 2016.

The Trump administration, however, made it harder to get coverage on the exchanges by halving the duration of the open enrollment period and reducing funding for outreach and enrollment assistance for all exchanges. Numbers of exchange enrollees fell each year of the Trump administration, for a total of 1.2 million fewer US residents buying policies on the exchanges. President Biden reversed the Trump-era actions when he came into office.

Of note, exchanges that were directly run by an individual state did relatively well when Trump was president, either increasing enrollment or remaining flat.

The ranks of the uninsured grew markedly during the COVID-19 pandemic. An estimated 5.4 million workers became uninsured when they were laid off because of the pandemic in early 2020, according to Families USA. The group added that this was the greatest loss of health insurance in a single year, but some of these people where rehired later in the year and regained coverage.

Who Are the Underinsured?

Unlike the uninsured, the underinsured actually have insurance policies, usually secured either through their jobs or on the insurance exchanges. But at the start of each year, they still have to pay all of their healthcare bill, without any coverage by the insurer. This puts them in virtually the same boat as the uninsured.

This fundamental problem for the underinsured is the deductible — the amount of money that the patient has to pay out of pocket before insurance kicks in. Many well-meaning policymakers initially supported using a high deductible as a way to stop healthcare inflation. They reasoned that when healthcare consumers paid a bigger part of the bill, they would become more cost-conscious.

But it didn't work out that way. What happened instead was that the high deductible prompted patients to simply forgo care. The high deductible was simply too high for them to manage.

How high is a high deductible? For 2021, the Internal Revenue Service defined it as $1400 for an individual and $2800 for a family. This amount, however, is the low end of the high deductible. The average deductible for an employee in 2020 was $1644, a level that exceeds the IRS figure and is more than double what it had been in 2010, when the average deductible for a single person was $646.

Insurers can set the deductible much higher than $1400, up to a maximum set higher each year under the ACA. In 2021, total yearly out-of-pocket expenses — including copayments and coinsurance, but mostly the deductible — cannot exceed $7000 for an individual or $14,000 for a family.  

People who buy coverage on the exchanges tend to have much higher deductibles than people who are insured through work. About 70% of people on the exchanges buy a silver plan, because it is the only level that qualifies them for a federal subsidy. The silver plan offers the second lowest premium available, but you have to agree to a high deductible. In 2021, the benchmark deductible for an individual in a silver plan was $4879, up from $3070 in 2014.

Many patients with even moderately high deductibles forgo care. In 2015, almost 30% of people with deductibles higher than $1500 for individuals avoided medical care, according to Families USA.

Even people with employer-based insurance, who have lower deductibles than exchange plans, say they can't afford them. In a 2019 survey, 1 in 6 of the employed said they had to make "difficult sacrifices" to pay for healthcare, such as cutting back on food, moving in with friends or family, or taking extra jobs; 1 in 5 said healthcare costs have eaten up all or most of their savings.

Short-Term Insurance Policies

In addition to high deductibles, underinsurance may also be caused by short-term insurance policies, which strip out many benefits to produce a lower premium. Normal policies cannot do this, because the ACA requires them to cover "essential health benefits," which comprise most healthcare.

Short-term policies, on the other hand, have large gaps in benefits. They typically don't cover preexisting conditions, preventive care, pregnancy and maternity, and immunizations, for example. The ACA allowed these plans to continue because they were only supposed to be used as a stopgap between regular coverage, such as when people change jobs.

Until recently, a short-term policy could only last 3 months and be renewed for up to a year. But the Trump administration extended the policy length to a year, with the possibility of renewal for 2 more years. Some states have stricter rules, but the result is that in many parts of the country, short-term policies can be used as a cheap, insufficient alternative to regular insurance.

What Does This All Mean?

What defines the uninsured and underinsured is their inability to pay for healthcare, which in turn makes it much less probable that they will get treatment, and when they do, they are less likely to pay for it.

The ACA was supposed to address this problem, and indeed it has markedly reduced the rate of uninsured individuals, but in the past few years those rates have been rising again. Many people who work can't get coverage through employment and in many states, they don't have access to Medicaid.

The ranks of the underinsured have also been growing, mainly due to the unstoppable rise of deductibles. The outcome is that healthcare coverage is becoming unaffordable for an ever-larger group of US residents. Doctors' offices and hospitals can expect to see more and more patients who are unable to pay their bills and are sicker because they deferred needed care.

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Welcome! This article is part of a Medscape Physician Business Academy course, . Visit the Course Page to take the full course and receive a certificate.


John Dickens; In K. Kim, MD, MBA; Beth A. Spurlin, MD, PhD, MBA

| Disclosures | January 01, 2022

Authors and Disclosures

John Dickens
MD/MBA student
University of Louisville School of Medicine
Louisville, Kentucky

Disclosure: John Dickens has disclosed no relevant financial relationships.

In K. Kim, MD, MBA
Executive Vice Chair and Professor of Pediatrics
University of Louisville School of Medicine
Louisville, Kentucky

Disclosure: In K. Kim, MD, MBA, has disclosed no relevant financial relationships.

Beth A. Spurlin, MD, PhD, MBA
Pediatric Emergency Medicine
University of Louisville School of Medicine
Louisville, Kentucky

Disclosure: Beth A. Spurlin, MD, PhD, MBA, has disclosed no relevant financial relationships.