Do Your Premiums Help Cover the Uninsured?

  • Share
  • Read Later
Solus-Veer / Corbis

As the U.S. Congress debates health-care reform, American families are already picking up the tab for universal health coverage. That's the finding of a new report released March 24 by the Center for American Progress (CAP), a Washington-based liberal think tank.

It's a long-established practice for medical providers such as hospitals and physicians to charge uninsured patients higher prices than patients with health coverage for the same care. (Insurers can negotiate cheaper prices through contracts and because of volume.) What the new study suggests, though, is that providers often pass along the cost of treating the uninsured to their insured patients. Its analysis found that families pay, on average, as much as $1,100 extra and individuals $410 extra in health-care premiums each year in order to cover the cost of treatment to uninsured patients who cannot afford to pay their bills. That amounts to as much as 8% higher premiums due to the lack of universal health care in the U.S. "So many Americans think that universal coverage is for the uninsured," says Senator Sheldon Whitehouse, a Rhode Island Democrat who has been a vocal advocate of health-care reform. "This is the hidden tax we all pay for our failure to insure all Americans." (Read "The Health Crisis Hits Home.")

Moreover, the new report bases its projections on 2005 census data. That means, amid the current economic downturn, that as the number of uninsured Americans rapidly grows, this so-called hidden tax could be much higher than the findings suggest. In December and January alone, as many as 14,000 people per day lost their insurance coverage, the CAP study shows. A second report, released earlier this month by the nonprofit Families USA, found that about 87 million people — roughly 1 in 3 Americans — went without health insurance for some period between 2007 and 2008. "The huge number of people without health coverage is worse than an epidemic," says Ron Pollack, executive director of Families USA. "Almost everyone in the country has had a family member, neighbor or friend who was uninsured." (Read the five truths about health care in America.)

Most health-care providers rarely turn away patients in need of medical care. This is particularly true of hospitals, whose emergency rooms are mandated by federal law to provide treatment regardless of a person's ability to pay. That leads to millions of dollars in unpaid medical bills each year. Thus, when providers negotiate contracts with HMOs, for instance, they try to recoup some of those losses by raising prices for insured patients, which in turn leads to higher premiums. Because insurance markets are state-by-state entities with disparate regulations, residents of certain states — such as Montana, West Virginia and Texas — pay a higher hidden tax than others. "A hospital seeks out dollar figures when it can," says report author Peter Harbage, a health-care analyst at CAP.

Harbage's organization has close ties to the Obama Administration; its head, John Podesta, is a key adviser to the President, who has kept health-care reform high on his domestic-policy agenda. Without reform, the CAP report estimates, families will be paying $1,300 in additional costs annually by 2013.

But legislating an expansion of health coverage may not be a cure-all to high premiums. One way the Obama Administration and certain Democrats in Congress have suggested to pay for an overhaul of the health-care system is by taxing employer-provided health benefits, which some government officials estimate could provide up to $200 billion in additional tax revenues for national health care. Meanwhile, a second report released March 24, by the nonpartisan Economic Policy Institute (EPI) think tank, shows that implementing such a tax may actually increase the ranks of the uninsured and raise premiums for people with coverage. "Taxing health-insurance benefits would encourage the young and healthy to opt out of [risk] pools," says author Elise Gould, EPI's director of health-care-policy research. "Upon their exit, premiums would likely rise for those remaining." (Read about what your health-care plan won't cover.)

The Obama Administration has offered few details thus far as to how it plans to institute comprehensive health-care coverage. In a letter to Congress March 24, however, the health-insurance industry — including America's Health Insurance Plans and the Blue Cross and Blue Shield Association — indicated it would be willing to stop charging higher premiums to people with a history of medical problems if all Americans were required to purchase health plans. Such a measure, as the CAP report suggests, could be the first step to saving all Americans money.

See TIME's Pictures of the Week.