The Crisis of the Uninsured Is Far from Over 

by Devon Herrick, NCPA, Tuesday, September 25, 2012

The number of people who lack health coverage fell to 48.6 million in 2011 — down slightly from 49.9 million the year before, according to the U.S. Census Bureau. A bright spot in the new report is that about 407,000 fewer adults between the ages of 35 and 44 were uninsured in 2011.

In addition, the number of uninsured children and young adults fell by about 841,000 — likely because more of their parents had jobs, or they could be on their parents’ health plan.

However, the crisis of the uninsured is far from over. Moreover, it is unlikely to be resolved by the Patient Protection and Affordable Care Act (ACA) — the federal health reform law. The Congressional Budget Office (CBO) estimates that 30 million people will remain uninsured a decade from now when the ACA is fully implemented. One of the stated goals for passing the ACA was to boost access to health coverage. Yet, a significant number of people will remain uninsured even after the law is fully implemented.

Effect of Health Reform on the Number of Uninsured. When they go into effect in 2016, penalties for going without health coverage will be far less than the cost of coverage — if the penalties are enforced at all. Many people will opt to pay the penalty, which is only 2.5 percent of income, rather than pay much more for health coverage. And some of these individuals undoubtedly know they can sign up for insurance in the event they become sick without being penalized for a pre-existing condition.

A further concern is that up to 30 percent of businesses will likely find it to their advantage to drop their employee health plan when their workers have access to subsidized coverage in the state health insurance exchanges, beginning in 2014.

Up to half of the uninsured were expected to gain coverage after states expand Medicaid eligibility to all legal residents earning up to 138 percent of the federal poverty level ($15,415 for one person, or $31,809 for a family of four). But this is unlikely to occur now that the Supreme Court has ruled that states are not required to expand state Medicaid programs. About 14.7 million uninsured residents live in households with incomes of $25,000 to $50,000 per year. They earn too little to easily afford expensive family plans costing more than $12,000 per year. However, most in this group will not qualify for Medicaid after the ACA is implemented. Some may decide to forgo signing up for subsidized coverage in the exchange knowing there is no penalty for waiting until the unlikely event they need costly care.

Finally, about 13 million foreign-born residents are uninsured — accounting for one-quarter (27 percent) of those who lack health coverage. Nearly half (44 percent) of foreign-born noncitizen residents currently lack health coverage. Only immigrants who have been legal residents for more than five years qualify for public coverage, and most will not qualify for health insurance subsidies in the new health insurance exchanges.

How Serious Is the Problem? In 2011, just over 84 percent of U.S. residents, or 260.2 million people, were privately insured or enrolled in a government health program, according to Census Bureau data. It is generally overlooked that the proportion of Americans without health coverage has been relatively stable over time. The rise in the uninsured over the past decade was largely due to population growth, immigration, the recession — and in some instances — individual choice. Typically, those who lack insurance are uninsured for only a short period of time — more than half will have coverage within a year.

Who Are the Uninsured? The uninsured include diverse groups, each uninsured for a different reason.

Low-Income Families. Some 19.2 million uninsured adults and children live in households earning less than $25,000 annually. [See the figure.] Many in this group qualify for Medicaid or CHIP but are not enrolled. Indeed:

• A BlueCross BlueShield Association survey found nearly one-third of the uninsured are eligible for public coverage but not enrolled.
• The Urban Institute estimates that about 5 million uninsured children qualify for CHIP or Medicaid but have not enrolled.
• Three to six million people identified as uninsured may already be covered by Medicaid or CHIP but erroneously told the Census Bureau they were uninsured because they do not associate Medicaid with insurance coverage according to a report published in Health Services Research.

Middle-Income Families. Nearly 14.7 million of the uninsured lived in households with annual incomes above $50,000 — over half of them (7.5 million) in households with incomes that exceed $75,000 annually. Arguably, many in this group could afford some type of health insurance — possibly a high-deductible plan.

The Young and Healthy. About 19.2 million 18-to-34-year olds are uninsured. Most are healthy and know they can pay incidental expenses out of pocket, making health insurance a low priority. When people are healthy they have little incentive to participate until they need care. An unintended consequence of new federal regulations requiring insurers to accept all applicants regardless of health status is that many people will — rationally — wait until they become sick to purchase health insurance.

Middle-Aged Adults. The percentage of adults in this age group who are uninsured has been inching up for a decade. Job losses and the economy are likely causes. More recently, there is also the possibility of early retirees forgoing coverage knowing they will be guaranteed coverage when the individual insurance exchanges are up and running in 2014. However, in 2011 about 13.4 million 45-to-64 year olds were uninsured — virtually unchanged from 2010.

Conclusion. The CBO estimates that up to 30 million people will remain uninsured even after the ACA is fully implemented. Perversely, regulations will encourage employers to drop their employee health plan. These and other incentives will induce millions of individuals to forgo coverage until they need costly medical care.

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Devon Herrick is a senior fellow with the National Center for Policy Analysis.