Healthcare Insurance: Unaffordable For Many

The high cost of health insurance is a burden for many Americans, with about half of adults finding it difficult to afford health care costs. The cost of health care can lead some to put off needed care, with one in four adults saying they have skipped or postponed getting health care due to the cost. The cost of prescription drugs also prevents some people from filling prescriptions, with about one in five adults not filling a prescription because of the cost. Health insurance subsidies are available to qualifying individuals to make monthly health insurance premiums more affordable, but middle-income individuals and families who make just above the subsidy cut-off do not qualify for subsidies. As a result, many people are left unable to afford health insurance.

Rising healthcare costs

The United States has the most expensive healthcare system in the world. In 2020, US healthcare costs totalled $4.1 trillion, accounting for 19.7% of the nation's GDP. By 2021, this figure had risen to $4.3 trillion, and in 2022, healthcare costs skyrocketed to $4.4 trillion. The Centers for Medicare and Medicaid Services (CMS) estimates that national health expenditures will reach $6.8 trillion by 2030.

There are several factors contributing to the rise in healthcare costs:

Ageing Population

The Baby Boomers, one of America's largest adult generations, are approaching retirement age. As a result, the population aged 65 and above is growing at an unprecedented rate. By 2030, 21% of the entire US population will be 65 or older, and by 2060, older Americans will make up almost a quarter of the population. This growth will contribute to rising healthcare costs in two ways: an increase in Medicare enrollment and more complex, chronic conditions.

Chronic Diseases

Six out of ten adults in the US have at least one chronic disease or condition, such as asthma, heart disease, high blood pressure, or diabetes. Chronic conditions often require long-term, complex, and resource-intensive medical care, including prescription drugs, emergency services, in-home medical care, and access to various support services. The treatment of chronic illnesses and mental health conditions accounts for about 90% of US healthcare costs, or roughly $3.7 trillion annually.

Drug Prices

Prescription drug spending in the US is high compared to other developed countries, with the average American spending about $1,126 on prescription drugs in 2019. This spending is expected to grow by 6.1% each year through 2027, due partly to the emphasis on specialty pharmaceuticals and precision medicine. Drug pricing strategies also contribute to rising costs, as manufacturers can set and raise prices as they see fit, with few regulations in place to prevent inflation.

Service Costs

The cost of healthcare services in the US is significantly higher than in other countries. For example, the average cost of a caesarean section in 2021 was $5,525, excluding fees associated with medical interventions, complications, or an overnight hospital stay. A 2017 report found that the average cost of a coronary artery bypass graft surgery in the US was $78,100, compared to only $11,700 in the Netherlands.

Administrative Costs

The US spent about $950 billion on healthcare administration in 2019, accounting for 25% of national health expenditures. The complex, multi-payor system in the US leads to inefficient processes and excess administrative spending, particularly in billing and insurance-related (BIR) costs.

Inflation

Inflation has also contributed to rising healthcare costs, affecting the costs of operations, supplies, administration, and facilities. Healthcare facilities have faced staff shortages and lower annual incomes, and while medical prices have not increased as rapidly as overall inflation, certain services and items, such as hospital services and equipment, have seen increased costs.

Income vs insurance premiums

Income versus insurance premiums is a critical issue in the affordability of healthcare insurance. The amount of money an individual or business must pay for an insurance policy is known as the insurance premium. The premium is determined by factors such as the type of coverage, the policyholder's age and location, and the claim history. For those without employer-provided insurance or eligibility for government programs like Medicare or Medicaid, the cost of insurance can be a significant burden.

The income of an individual or household is a crucial factor in determining eligibility for government subsidies to help with insurance costs. Subsidies are typically available to those with incomes between 100% and 400% of the federal poverty line. These subsidies can take the form of premium tax credits or cost-sharing subsidies, helping to reduce monthly premiums or out-of-pocket expenses like deductibles and copays. However, there is a steep cutoff for subsidies, known as the "subsidy cliff," where middle-income individuals just above the 400% threshold do not qualify for any financial assistance.

The cost of healthcare insurance can be challenging for those who do not qualify for subsidies. In such cases, individuals may have to opt for more affordable alternatives, such as short-term plans, or go without insurance altogether. This can lead to difficulties in accessing necessary healthcare services, as the cost of care can be prohibitive even with insurance.

Even with insurance, out-of-pocket expenses and rising premiums can pose financial challenges. About half of insured adults worry about affording their monthly health insurance premiums, and many rate their insurance as "fair" or "poor" regarding monthly premiums and out-of-pocket costs. This indicates that income levels play a significant role in an individual's ability to afford healthcare insurance and related expenses, even with the assistance of subsidies and alternative coverage options.

Functional impairments

The cost of healthcare can lead some to put off needed care. One in four adults say that in the past 12 months, they have skipped or postponed getting healthcare they needed because of the cost. Notably, six in ten uninsured adults (61%) say they went without needed care because of the cost.

The cost of prescription drugs also prevents some people from filling prescriptions. About one in five adults (21%) say they have not filled a prescription because of the cost while a similar share say they have instead opted for over-the-counter alternatives.

Those who are covered by health insurance are not immune to the burden of healthcare costs. About half (48%) of insured adults worry about affording their monthly health insurance premium and large shares of adults with employer-sponsored insurance (ESI) and those with Marketplace coverage rate their insurance as "fair" or "poor" when it comes to their monthly premium and to out-of-pocket costs to see a doctor.

Health insurance subsidies are available for those who do not get health insurance through their employer or are not eligible for Medicare or Medicaid. These subsidies can be in the form of premium tax credits or extra savings. Those who qualify for government subsidies typically have a household income between 100% and 400% of the federal poverty line.

• Difficulty with medication side effects
• Screening out environmental stimuli
• Sustaining concentration
• Maintaining stamina
• Handling time pressures and multiple tasks
• Interacting with others
• Fear of authority figures
• Responding to negative feedback
• Responding to change
• Severe test anxiety

Unexpected medical bills

Surprise medical bills can also occur when a patient's insurance plan only partially covers the cost of care, and the provider bills the patient for the remaining amount, which can be significant. This is especially common when patients receive care from out-of-network providers or facilities, as the costs can be much higher than what the insurance company has agreed to pay.

In the United States, the No Surprises Act, which came into effect on January 1, 2022, aims to protect patients from surprise medical bills. The Act prohibits balance billing and limits the amount patients can be charged for out-of-network services. It also establishes an independent dispute resolution process for payment disputes between insurance companies and healthcare providers.

Under the No Surprises Act, patients who are uninsured or self-paying have the right to receive a good faith estimate of their potential bill for medical services in advance of their care. If the final bill exceeds the estimate by a significant amount, patients may be able to dispute the charges. Additionally, patients with certain types of insurance, such as Medicare, Medicaid, or TRICARE, are already protected against surprise billing and are not at risk for unexpected medical bills.

While the No Surprises Act provides important protections for patients, there have been challenges with its implementation. A government forum designed to resolve billing disputes has received a much higher volume of cases than expected, and many remain unresolved. This highlights the ongoing challenges of surprise medical billing and the need for continued improvements in the healthcare system to protect patients from unexpected financial burdens.

Out-of-pocket expenses

Out-of-Pocket Maximums

To protect individuals from unlimited out-of-pocket expenses, health insurance plans have out-of-pocket maximums, which are caps on the total amount you must pay out of pocket each year for covered healthcare expenses. These maximums are set by federal law and vary depending on the type of plan and the number of people covered. For example, for 2022, the out-of-pocket limits were $8,700 for individual coverage and $17,400 for family coverage. It's important to note that these maximums reset annually.

Factors Affecting Out-of-Pocket Expenses

Several factors can influence the amount of out-of-pocket expenses an individual incurs. Firstly, the type of health insurance plan plays a significant role. High-deductible health plans (HDHPs) typically have lower monthly premiums but higher out-of-pocket costs. On the other hand, plans with higher premiums usually come with lower deductibles and out-of-pocket maximums. Additionally, the cost of medical treatment itself can vary depending on the type of service, the provider, and whether it is covered by insurance. Out-of-network services, for instance, can result in higher out-of-pocket expenses.

Impact of Out-of-Pocket Expenses

The high cost of out-of-pocket expenses can have significant consequences for individuals and families, especially those with low or fixed incomes. It can lead to financial strain, difficulty in paying for essential needs, and even medical debt. Moreover, high out-of-pocket costs can deter people from seeking necessary medical care, potentially resulting in delayed treatment or medication non-adherence. This can be particularly detrimental for individuals with serious or chronic illnesses, as they often require ongoing and costly medical care.

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