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CR health insurance survey reveals 1 in 4 people insured but not adequately covered

August 6, 2007


CR study identifies emerging class of “underinsured” and
offers seven ways consumers can make the most of their own health plans

YONKERS, NY — A new Consumer Reports study identifies the “underinsured”—accounting
for 24% of the U.S. population—living with skeletal health insurance that barely covers their medical
needs and leaves them unprepared to pay for major medical expenses.
Forty-nine percent of people overall, and 43 percent of people with insurance said they were
“somewhat” to “completely” unprepared to cope with a costly medical emergency over the coming year.
Some 16 percent of the people surveyed had no health plan at all, including many working respondents
whose jobs didn’t offer insurance or who couldn’t afford the premiums of deductibles of the available plan.

When added to the population of “uninsured”—approximately 16% of the population—a total of 40% of Americans ages 18-64 have, at best, inadequate access to healthcare. The report, published in the September issue, also finds that most employers are struggling to keep up while the insurance behemoths
prosper from the misery.
In the first of a series of reports on America’s healthcare crisis, Consumer Reports paints a
profile of the “underinsured,” explains what it means to be insured but not adequately covered, and tells
of the costs and consequences for everyone, including people who are currently “well insured.” The
report is based on a survey conducted by the Consumer Reports National Research Center in May 2007, which sampled 2,905 Americans between ages 18 and 64. The survey found evidence of increasing frailty in the U.S. system of health insurance on almost all fronts.

The September issue of Consumer Reports also includes ratings of the best HMOs and PPOs, based on the experiences of 37,000 readers.

Defining “Underinsured”: Insured But Not Covered

People falling into the “underinsured” category have two or more of the following complaints about their health plans: It does not adequately cover costs of prescription drugs; doctor visits; medical tests; surgery or other medical procedures; catastrophic medical conditions; or the deductible is too high.
CR notes that the new emerging class of “underinsured” could be you or your neighbor. In the
CR survey, the median household income of respondents who were underinsured” was $58,950, well
above the U.S. median. Twenty-two percent live in households making more than $100,000. Still, many
of the “underinsured” don’t have the resources to keep up with the rising costs of deductibles and co-pays,
so much so that 43% reported that they postponed going to the doctor because they couldn’t afford it.

Twenty-eight percent told Consumer Reports they put off filling prescriptions. In addition to
digging deep into their savings, raiding their retirement accounts and running up credit card balances,
27% of the “underinsured” said they were still in debt to doctors and hospitals. Three percent said medical bills had forced them to declare bankruptcy.

Costs And Consequences

When compared to individuals deemed “well insured,” CR uncovered a huge disparity:

Well Insured
Prepared to handle unexpected major medical costs in next 12 months
Postponed needed medical care in past 12 months due to costs
Dug deep into savings to pay medical bills
Made important job-related decisions based mainly on health-care
Health plan does not adequately cover prescription-drug costs
Decisions about retirement affected by medical expenses (adults 50+)

Employers Struggle To Keep Up While Insurers Prosper

Because of the way health insurance works, insurers haven’t been paying much of a penalty for
failing to contain costs. Insurers typically keep around 15 and 25 percent of the premiums they collect. As
noted in the Consumer Reports investigation, the nation’s six biggest private health insurers collectively
earned nearly $11 billion in profits in 2006.

Employers are struggling to keep up: in the past five years, insurance premiums have risen three
times as fast as inflation. While employers by and large have not asked employees to pay a bigger share
of the overall premium, employees are still paying rising premiums.

In 2000, the average employee contribution for family coverage was $135 per month and in 2006
it was $248. People who work for small companies bear the biggest brunt because those companies have
fewer employees over which to spread medical risk. And lower paid workers also get hit hard because
premiums and co-pays typically cost the same for everyone, regardless of income.

Rating the Health Plans

In advance of the annual open-enrollment period—when millions of people who obtain health
care insurance through their employer or through Medicare have the opportunity to switch plans—
Consumer Reports National Research Center studied the experiences of 37,000 CR subscribers enrolled in
HMOs and PPOs.

CR found that one out of every five respondents was sufficiently disappointed with their plans
that they wanted to switch. The survey found that among readers who were not seriously ill, complaints
about gaining access to care typically hovered in the single digits. But the complaints were nearly three
times greater for those with a serious illness.

Only 67% of CR’s readers were completely or very satisfied with their HMO or PPO. Twenty one
percent complained about billing errors, while 25% said they had a problem with their primary care
provider and 36% said they had problems when they contacted their insurance company. Fourteen percent
of respondents in HMOs complained they had to wait a long time to get appointments, versus 8 percent in

CR also found that people who weren’t in the top rated HMOs had a much tougher time getting
needed care, especially for the seriously ill. PPOs have their limitations as well. Members of PPOs not
only have to pay for their coverage, they also report more difficulty receiving the reimbursements they’re
owed. Among those who contacted their health plan, 62% in the PPOs said it was due to a problem with
their bill or claim, compared to only 30% of HMO members. The ratings are available online along with
tips for choosing the right HMO or PPO.

Among the higher rated HMOs was Tufts Health Plan (MA, NH, RI), which has made noted
progress in the past two years, since CR’s last survey in 2004. Kaiser Permanente Northwest (OR, WA),
Independent Health (Western NY), Kaiser Permanente Northern California and Capital District
Physicians’ Health Plan (NY, VT) were also among the top rated.
Of the PPOs, which tend to provide a greater range of doctor choices, Anthem Blue Cross Blue
Shield of Connecticut, CareFirst Blue Cross Blue Shield (DC, MD, VA), Blue Cross Blue Shield of
Alabama, Blue Cross Blue Shield of Illinois, and Mutual of Omaha, which is leaving the PPO industry,
were among the top rated.

Can Health Insurance Be Fixed?

Some promising approaches have already gained traction at the state level. Maine, Massachusetts,
and Vermont have already passed laws aimed at providing health insurance to everyone, with help for
people who don’t get it through their jobs and can’t afford to buy on their own. Many other states are
considering similar laws, and presidential candidates have put forth a variety of proposals to broaden
coverage. Consumers Union, the nonprofit publisher of Consumer Reports, has advocated for universal
healthcare for most of its 70-year history. CU is working in California on reform that promotes highquality,
affordable care for all.

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Tildy La Farge (914) 378-2436 or Lauren Hackett (914) 378-2561
mlafarge@consumer.org lhackett@consumer.org



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