Today, illness and disability can lead to financial ruin for a family.  Health reform will make health insurance coverage more secure and affordable even when a family’s income changes, improving economic security and reducing hardships on struggling families.

Cher worked hard to achieve her dream of becoming a dental hygienist.  Even when she was in school and it was hard to afford, she and her husband bought health insurance.  At age 31, Cher was diagnosed with a rare autoimmune disorder that led to kidney failure.  To treat the disease, she had to endure multiple hospitalizations, lab tests, medications, chemotherapy, and lots of doctors visits.

Cher’s insurance company immediately denied claims, insisting that her disorder was a pre-existing condition.  During her 10 months of dialysis, Cher wrangled with her insurer over her denied claims.  Ultimately, a financial coordinator working with Cher to help get her kidney transplant approved, helped her overcome the insurer objections to get the care she needed.  She received a kidney transplant from her brother in 1999 was able to resume work.

A few years later she was diagnosed with an antibiotic resistant staph infection and herniated discs.  Due to her previous kidney treatment and transplant, she was not a candidate for surgery.  The conditions were debilitating to the point that she could no longer work and was granted disability.

At this point she was paying premiums of $850 a month for her policy in the individual market. With her medical bills and just one income for the family, they would have had to declare bankruptcy if Cher’s parents had not let them move in and helped with bills.

They struggled financially, but worked hard to get to a place when they could buy their own home.  When Hurricane Ike hit Galveston in 2008, their home was seriously damaged.  They went $30,000 into debt reconstructing their home, but were still able to make their monthly payments until Cher’s husband got sick last year. At age 46, he was diagnosed with stage IV appendix cancer.  He has since also been diagnosed with type 2 diabetes.

He has good insurance through his work, but due to surgeries, hospitalizations, and chemotherapy, he is just about to exhaust all of the leave he can take from his job.  A bad reaction to his treatment led to his readmission to the hospital last week on the day he planned to return to work.  He has since returned to work; however, his absences have resulted in small paychecks.  If he misses more work, his job and benefits will be at risk.

With a diminished income, they now have medical and credit card bills piling up and creditors calling nonstop.  Cher doesn’t see any option other than bankruptcy this time. She thinks that she won’t lose her house in the bankruptcy, but doesn’t know how they will make their monthly payments if neither of them can work.

At a time when Cher wants to focus only on helping her husband get healthier, she is racked with worry about their financial future. She cannot believe with how hard they have worked and their focus on being responsible citizens that a series of really bad luck could result in the degrading position she is in.

How the Current System Fails People with Serious Health Needs like Cher

• Insurance companies can deny coverage for treatment related to pre-existing conditions.  Insurance companies can challenge a newly diagnosed condition as “pre-existing” long after people have enrolled in coverage and have been paying premiums each month.
• Having health insurance coverage does not protect people from having enormous and unaffordable out-of-pocket costs for health care. High deductibles, coinsurance, expensive prescription drug copays, etc., leave families with coverage exposed to significant out-of-pocket costs.
• Having insurance does not necessarily mean you have protection from financial ruin in the case of serious illness.  More than 60% of bankruptcies are due to medical problems, and of those, 75% had insurance when they got sick.

Health reform will end some of the worst insurance company abuses and make health coverage more secure and stable, reducing hardships on struggling families like Cher’s.

Top Three Ways Health Reform Will Help Cher:

1. Insurance companies will not be able to reject people with pre-existing conditions, charge them higher premiums, or deny their care once they are covered.
2. Health reform caps the amount of exposure families at every income level will have to out-of-pocket costs.  On top of that low- and moderate-income families—including families like Cher’s whose income drops due to illness and disability—will get sliding scale help with premiums and out-of-pocket costs in Exchange coverage.
3. Insurance companies cannot impose lifetime and annual dollar limits on coverage, keeping coverage from “running out” in cases of serious illness.

For nearly 30 years he had an individual health insurance policy his parents first bought for him in the 1960s.  In the 1990s, his insurance company refused to renew his policy, he thinks because he’d had a heart attack.  He applied for coverage with other insurance companies and was rejected because of his pre-existing conditions. Considered “uninsurable” by insurance companies, Bruce enrolled in risk pool coverage, the only source of coverage that cannot reject individual applicants in Texas.

Bruce’s risk pool coverage comes at a steep price.  His premiums just to cover himself are $10,000 per year.  By law, premiums in the Texas high risk pool cost twice as much as comparable policy in the private market.

In addition to steep premiums, Bruce pays significant out-of-pocket costs.  His annual deducible is $2,500, and on top of that, he pays out-of-pocket for copays, coinsurance and health care services not covered by the high risk pool, like dental services.  He estimates that he spends about $20,000 a year in out-of-pocket health care costs on top of his $10,000 annual premiums.

Even though he has to pay and arm and leg for it, Bruce feels fortunate to have been able to maintain coverage and believes that without it, he would not have made it to age 61.

How the Current System Fails Self-employed People like Bruce

• In Texas, self-employed people cannot buy coverage like small businesses in the “group market.” In the group market, small employers cannot be turned down for coverage.  Instead, the self-employed have to buy coverage on their own in the individual market, in which insurance companies routinely reject applicants with pre-existing conditions.
• People with serious health conditions will never be able to buy coverage in the individual market, and can only get very expensive coverage in the high risk pool, if they can afford it.
• Treatment for pre-existing conditions can be excluded for up to 18 months in Texas for coverage offered to self-employed people in the individual market—6 months longer than the waiting period in coverage sold to small businesses in the group market.

National health reform provides help to the 13.1 million self-employed Americans like Bruce, who are left to try to buy health insurance in the individual market, where insurance companies can reject people with pre-existing conditions.

Top Three Ways Health Reform Will Help Bruce:

1. Insurers will not be able reject applicants with pre-existing conditions or set premiums based on a person’s health status.
2. With health reform, Bruce will be able buy his coverage in the Health Insurance Exchange (just like members of Congress), where he can choose among competing insurance companies and buy good coverage at the average price for a 61-year old in Austin.  This will save him thousands of dollars each year.
3. Like everyone buying coverage through the Exchange, Bruce’s policy will have an out-of-pocket cap of $5,950 a year ($11,900 for families).  This reliable limit on the out-of-pocket health care costs a person will face in a year provides economic security for families and protection from medical bankruptcy that does not exist for many people today.

Andrea arrived home to an unwelcome surprise. Her insurance company sent her a letter explaining that the doctor who treated her son in the NICU was not a part of the provider network. Despite the urgency of her son’s condition and the fact that she was not given a choice of which doctor would treat her son in the NICU, the insurance provider refused to pay for the bulk of the NICU doctor’s charge of $1,145.

I just couldn’t believe that something like this was allowed to happen in America, we spend close to 25 percent of our gross income on total medical expenses a year, and it’s just getting more and more expensive every year.  At some point people aren’t going to be able to afford it.

In the end, the doctor gave Andrea a 50% discount on the amount she owed.  Shortly after, she was slammed once again with expensive out-of-network doctor fees when she had to take her infant son to the emergency room.  This time she got a bill for $600, of which the insurance company would only consider paying $200.  Because Andrea had not met her annual deductible at that point, she had to pay the full $600, and the insurance company only credited $200 of it toward her deductible.

Andrea filed appeals to her insurance company both times she was hit with unexpected out-of-network bills. All of her appeals were denied.

Concerned about future emergency visits, Andrea asked her insurance provider to clarify where she should take her son if he required urgent care.  She was told that no emergency room doctor in the entire state of Texas was in her plan’s network. She says of this revelation, “I just couldn’t believe that something like this was allowed to happen in America.”

Andrea’s family spends more than $7,000 a year on their health care premiums. She thought insurance would protect her household from crippling out-of-pocket health costs, but they currently pay close to 25 percent of their gross income on medical care expenses. With the rising costs of health care, Andrea worries about the point where her family will not be able to afford to pay for care.

How the Current System Fails People with Coverage like Andrea

• All too often, patients are unexpectedly hit with big bills for out-of-network charges that are beyond their control.  Even when patients are careful to go to a network hospital, they may be treated by non-network ER doctors, anesthesiologists, or other providers.
• Often, when a consumer appeals an insurance company decision, insurance policy provisions allow the insurer to be the final judge on the matter, even though the insurer has a financial stake in the outcome.
• Having insurance does not necessarily mean you will be able to afford the health care you need.  Many health insurance policies have high deductibles, expensive prescription drug copays, etc., leaving families with coverage exposed to significant out-of-pocket costs.
• Having insurance does not necessarily mean you have protection from financial ruin in the case of serious illness.  More than 60% of bankruptcies are due to medical problems, and of those, 75% had insurance when they got sick.

Health reform will help ensure that an insurance policy covers what you need and does not leave people exposed to huge medical costs, providing more economic security for families like Andrea’s.

Top 3 ways health reform will help families like Andrea’s:

1. Provider network standards. Health insurance sold in the Health Insurance Exchange (http://www.kff.org/healthreform/7908.cfm )  will be required to offer an adequate provider network as defined by the Secretary of Health and Human Services. This focus will hopefully ensure that no policies are sold through the Exchange that have no ER doctors in-network in the whole state.
2. Stronger appeals process. Health insurance companies will be required to have an effective internal appeals process, as well as an external (independent) appeals process that meets consumer protection standards.  Health reform makes grants available to states to establish an Office of Health Insurance Consumer Assistance or Health Insurance Ombudsman, that among other important functions, will assist consumers with filing appeals and complaints.
3. Capped exposure to out-of-pocket costs and affordable coverage. Health reform caps the amount of exposure families at all income levels will have to out-of-pocket costs.  On top of that, for low- and moderate-income families, premiums and out-of-pocket costs in Exchange coverage will be reduced on a sliding-scale.

• 2010 Early Deliverables:  New high-risk pool; some immediate consumer protections and insurance reforms; premium rate disclosures and oversight;
• Major Coverage Reforms in 2013 or 2014:  Health Insurance Exchanges create marketplace for insurance under new reforms that prohibit denial or pricing based on health status; premium assistance and out-of-pocket caps, Medicaid expansion for poorest; individual and employer responsibility with exemptions for small firms and financial hardship; 
• Improved Medicare coverage for prescription drugs and preventive care
• Both bills fully paid for through budget savings and revenue increases:  both reduce federal deficit by more than $100 billion in the first 10 years, and continue to reduce it in the second decade.

Key Differences to Negotiate:

• Financing:  House progressive income taxes versus Senate excise taxes on high-cost health benefits.
• Affordability: House much better for low-income premiums and all incomes on cost-share and benefits; Senate premiums better for moderate-income.  Obvious solution = best of both bills, but where will the money come from?
• Exchanges and Insurance Regulation:  House bill tighter oversight, more consumer-friendly regulation of the insurance industry, Health Insurance Exchange greater negotiation power.
• Abortion:  Both bills prohibit direct federal support or subsidy for abortion coverage.  Issue is whether Exchanges can sell coverage that includes abortion as an “add-on” paid for by the consumer.
• Public Option:  House has a moderately weak model and Senate has none, though would have OPM contract with insurers to offer minimum of 2 plans that meet “qualified health plan” standards and at least one of these must be non-profit.
• Employer Responsibility:  House includes a “pay or play” provision, Senate charges employers penalties only if their employees actually access subsidized coverage.
• Undocumented immigrants:  Senate bill prohibits undocumented from buying insurance through the exchange, even with their own funds.  House does not and Congressional Hispanic Caucus opposes Senate language.
• Closing the Medicare Part D “doughnut hole”:  How to pay for this is the issue.

For more on the differences, see the Community Catalyst blog and the House Tri-Committee staff comparison of key differences

• Adopting the House bill’s stronger affordability measures for families below 250 percent of the federal poverty income guidelines; and
• Requiring the House’s much stronger standards for a Health Insurance Exchanges–whether through a single national exchange or state-level exchanges–to empower exchanges to negotiate with insurers and deliver better value to individuals and small businesses.

You can read the full letter here.

Inspired by recent statements by Senator Hutchison, Professor Uwe Reinhardt’s November 27th post at the New York Times’ Economix blog explains that rationing occurs whenever uninsured Texans choose between spending their cash on care or other necessities, when seniors on Medicare face uncovered “doughnut hole” medication costs or must pay one-quarter of the $700 cost to get a colonoscopy.  Reinhardt takes us back to Economics 101, reminding us that markets are designed to ration scarce resources by price, saying “free markets are not an alternative to rationing.  They are just one particular form of rationing.” 

Professor Paul Starr, probably the best-known scholar of the history of American Medicine, explains in his op-ed that Health Insurance Exchanges with strong reform regulation authority are key to “the basic aim of reform (which) is to create a more efficient and equitable system for health insurance and health care and to provide subsidies so everyone can afford coverage.  Those who obtain insurance individually or through small businesses now get a rotten deal in the market.”  Starr comments that the House’s Exchange provisions are far stronger than the Senate model, and he calls for speeding up the implementation of expanded coverage to 2012, instead of the House’s 2013 and the Senate’s 2014 timelines.

A new study from the Economic Policy Institute examines the continued decline in coverage through job-based health insurance. From 2000-01 to 2007-08, the percentage of Texans covered by employer-sponsored insurance declined 7.3 percentage points, from 59.7% to 52.4%.  The experience in Texas reflects a national trend, though the decline in Texas was more severe than in most states.  Low- and moderate-income Americans were hardest hit and saw the largest declines in job-based coverage.  Had the job-based coverage rate not fallen, another 1.5 million Texans would have had employer-sponsored insurance in 2007-08.

The continued erosion of job-based coverage is a disturbing trend that signals the need for change.  National health reform proposals being debated in Congress do two things that will help: (1) shore up employer-sponsored insurance, and (2) provide real access to affordable coverage for people who do not get insurance through work. 

National health reform bills provide different incentives to large and small employers to help shore up employer-sponsored insurance.  Almost all large employers offer coverage today, so the bills provide a meaningful incentive for large employers to not drop their coverage by requiring some large employers to offer insurance or pay a penalty.  For small employers, most of whom do not offer coverage today, there is no penalty for not offering coverage.  Instead, bills provide generous tax credits to help eligible small businesses afford to offer coverage.

Even if the proposals above stop the hemorrhaging in employer-sponsored coverage, many still won’t have access to it.  All health reform bills allow such individuals to buy coverage through a health insurance exchange, where they can’t be turned down for pre-existing conditions, and low- and moderate-income individuals will pay premiums on a sliding scale.