Insights on the Uninsured in the Workplace

PPACA is designed to encourage the 51 million uninsured to enter the marketplace in 2014. Since this population has been largely unexplored, the management consulting firm Oliver Wyman did a survey of the uninsured in September, in efforts to uncover their demographics, healthiness, attitudes and preferences towards health care. Because we focus on employers and their benefit plans, we thought it would be interesting to look at these survey results in light of the currently “Waived” and “Ineligible” populations within employer environments. Of course, the number one source of “Waived” is likely to be employees opting to participate in their spouse’s employer-based plan, but let’s explore what insights this survey provides about those who are truly “Opting Out.”

Engaging coverage

The survey finds that when asked to choose between buying insurance and paying a penalty, 76% of the uninsured would elect to purchase coverage. The study based their analysis on the presence of an individual mandate and the commensurate penalties, provisions which may change in June, and the authors chose to model the full penalties under the individual responsibility provision of health care reform, which don’t take effect until year three.

Accepting future adjustment of the numbers after the Supreme Court rules, this 76% election, about 39 million of the currently uninsured, says something about our opt-in rates for currently waived and currently ineligible employees. The study notes that while “uninsured Americans overwhelmingly see value in coverage, few really understand their options…” This is true of health care today, including employer-sponsored coverage. Education can equal participation. As employers determine the best route for their plans in 2014, it is vital that consultants can assist employers as they communicate options to employees, both opted in and waived, in a way that will align with the benefits strategy. 

State exchange:  innovation or limitation?

The study’s authors make some interesting assertions about how this rapidly expanded individual market may cause a boom in product innovation.  Their argument is based upon the fact that we will have 39 million new “customers” making individual purchase decisions based upon their individual preferences.  This is in opposition to the current environment, where the majority of health insurance is purchased through an employer who has taken a “one-size-fits-all” approach to benefits. 

The study goes on to test the sensitivity of uninsured consumers as to their willingness to spend more based upon differences in product design.  The study outlines options that could reduce health care costs which interest different segments of the individual market, including wellness options that are currently part of some plans, like maintaining a healthy body weight or quitting smoking.  It also polled this group’s interest on options that are not widely available, like receiving a majority of medical care at retail clinic in a pharmacy or retail store to reduce costs, or paying extra for 24-hour-a-day, seven-day-a-week access to doctors. The authors conclude that this “is a promising situation for a retail market intended to push health care toward better, cheaper coverage.”  

But, as the authors accurately state, “It remains to be seen whether any or all of these specific alternatives will ultimately be permitted in the exchanges.”  It is equally possible that this marketplace innovation will be inhibited by the regulatory controls on the distribution mechanism.  Said another way, the fact that these new individual products must be distributed through public health insurance exchanges may act as a limiting factor on the innovation which would otherwise occur in a marketplace less regulated.

Income and subsidies

Not surprisingly, the single most determining factor as to whether the uninsured would purchase insurance (even in the presence of an individual mandate) was the net cost of the insurance premiums after subsidies, relative to family income.  (See the chart here for a breakdown that the survey details.)  Based upon the way the premium subsidies are constructed, the study found that middle income consumers are less likely to purchase insurance than the lowest income group. 

The study authors again insert an opinion as to how the future of health care reform may roll out.  They assert that there will be “significant pressure to reduce subsidies.”  They note this:

This price sensitivity could work against ACA.  Health care costs are rising… faster than the Consumer Price Index and the tax revenue that ultimately pays for government programs.  It will be difficult for the federal government to increase subsidies at the same pace as medical trend – especially if the eligible uninsured numbers continue to grow through layoffs and continued unemployment.

Health care is becoming more expensive at a rate faster than people are generating the income to pay for it. As a result, even though the affordability measure is set to index, which this article fails to mention, there is a chance that it won’t keep pace with medical inflation unless medical inflation slows.  More and more individuals can be expected to push over the 9.5% affordability threshold and be eligible for subsidized exchange coverage. To keep the total cost to the government system of providing subsidies, the threshold would have to rise year-over-year to make sure more and more people don’t become eligible. Incidentally, a provision for this was added during the reconciliation process.

The Three Groups of Uninsured

What we found most interesting was the identification by the authors about three distinct segments within the uninsured population. The segments they note are “Struggling and Unengaged,” “Want to be Healthier,” and “Engaged to Save.” (The chart below gives a summary of the information included in the article.) They highlight that the former two are similar to segments found in the employer-sponsored market.

We wonder, however, about the presence of the “Engaged to Save” segment in the employer-sponsored market today, as non-participants. This group contains uninsured who are lower middle class, a bit younger than the other two segments. They are healthy but price-sensitive, willing to do nearly anything to reduce their health care costs.  These are individuals who may have waived coverage in the employer-sponsored market, a decision that was likely spurred by cost-consciousness and a lack of education on the benefits. This is the group that employers can key in to if the best version of their plan in 2014 requires participation.

The survey authors draw an interesting conclusion about the differences among the three segments of uninsured Americans, stating that some of them “might be willing to trade the traditional broad network of doctors for discounts on healthy groceries.”  For employers who need to keep their employees on coverage to best optimize their plans, this could have implications for increased employer-sponsored options in wellness programs and excepted benefits. 

Looking ahead

As 2014 approaches, and as the decision from the Supreme Court in June looms ahead, employers must begin considering how PPACA will affect their company’s benefits strategies.  It is vital that employers have a tactical strategy in place, rather than reacting in response to the changes after they are in place.  Surveys like these will allow consultants and employers to be aware of the changing demographic, especially as it relates to waived and currently ineligible employees.

This article was first featured in the March 6th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

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