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Chapter 1. A Health Insurance System in Crisis?
- Russell Sage Foundation
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Chapter 1 A Health Insurance System in Crisis? S usan Mitchell* does not have health insurance. She is a freelance editor and writer who until three years ago was an employee of a medium-sized company in Washington, D.C. Health insurance had been part of her compensation. Susan writes public relations announcements and edits documents that are sent to the firm’s clients. When the company felt pressure to reduce its labor costs, it eliminated Susan’s job but asked whether she would work on a freelance basis, doing the same work she had been doing as an employee. By changing the terms of Susan’s employment, the company reduced its fringe benefit costs—Susan is no longer eligible for the company’s health insurance and pension benefits. She had the option to continue her health insurance coverage under a government provision known as COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985). COBRA enables people who have been laid off or who leave a job to continue in the group insurance policy for up to eighteen months as long as they pay 102 percent of the total premium themselves.1 For several months, Susan kept up the payments for the company’s health insurance. Then trouble began. Because the company offered a relatively generous policy, the total premium was $1,137 a month for coverage for two adults. Susan’s husband, Ed, works on commission as a wholesaler for small boat and marine products in the northern Virginia and Maryland area. The company Ed works for treats its salespeople as independent contractors and does not offer them a health insurance plan. Between them, the Mitchells earn about $70,000 a year, and they were confident that they could find good coverage for less than $1,137 per month. They discovered, however, that at fifty-four and fifty-three years *Susan’s name has been changed to protect her identity, as have the names of all the uninsured people I describe in the book. None of the people described is a composite. REINSURING HEALTH of age, they were viewed as suspect applicants. They applied to several insurance companies for individual health insurance but could only find policies that would cost them even more than they were already paying. Now they are uninsured, and Susan is looking for a job that offers a decent health insurance benefit. With each passing month, however, it is clear that Susan’s profession is changing: as it moves into the freelance realm, opportunities for editing and writing jobs are scarce with firms that offer permanence and benefits. THE UNINSURED ARE NO LONGER ONLY THE POOR In 2004, 45.5 million Americans under age sixty-five did not have any type of health insurance. Among them, 36.5 million were adults, and two-thirds of these adults were employed. Another 7 percent of the adults were actively looking for work, so only one-quarter of these uninsured adults were out of the labor force. Many working adults are in situations similar to that of the Mitchells: they are in jobs or employment circumstances that do not include employer-sponsored health insurance. Most Americans think of the uninsured as low-income people who work for small employers that do not offer health insurance or are temporarily unemployed. That image is partially correct. Among all people under age sixty-five without health insurance, the majority (70 percent) are poor or low-income. But as the number of uninsured has grown over the past twenty-five years, the likelihood that a middle-class person will be uninsured has increased too. Today one in ten working-age adults (twenty-three to sixty-four years old) with an annual income above the median household income ($44,430 in 2004)—putting them in the middle class—are uninsured; in 1979 only 6 percent fit this description.2 Over the past twenty-five years, more and more middle-class people like the Mitchells have found themselves uninsured or scrambling to pay for health insurance. Health insurance is now out of reach not only for lowincome people but also for a growing share of middle-class Americans. Until recently, if the economy was doing well, the proportion of the population with private health insurance increased. Because this was accepted wisdom, most of the incremental efforts to increase insurance coverage were targeted at the poor and near-poor. But the number of uninsured did not decline markedly during the late 1990s in spite of a...