THE UNDERINSURED

While there are some gaps in the available data on the uninsured, the underinsured present an even greater challenge for researchers. Being uninsured, generally defined as lacking health insurance coverage, is a condition that can be measured with some degree of certainty. By contrast, there is no standard definition of "underinsured" and no consistent way to measure this population. Underinsured is a term generally thought to describe individuals who are exposed to significant financial loses or unable to obtain needed care because their insurance coverage is inadequate. The problem for analysts involves distinguishing what is considered adequate coverage from inadequate coverage.

One research team, Short and Banthin, has developed two alternate definitions of "underinsured" and has attempted to quantify the number of non-elderly individuals who fall into this category. (footnote 7) First, they define the underinsured as those who are at risk for out-of-pocket expenditures of more than 10 percent of their income if they experience a catastrophic illness. Using this measure, they estimate that as many as 29 million Americans -- about 18.5 percent of those with private insurance -- were underinsured in 1994. No separate estimates were generated for individual states. However, if the national average is applied to Connecticut's privately insured population, that figure would represent over 400,000 underinsured state residents.

The second definition involves comparing the actuarial value of a plan's benefits package with that of the largest federal employee plan. Individuals with plans less generous than the federal employee package would be considered underinsured. According to this definition, an estimated 15.7 percent of the nation's non-elderly population was underinsured in 1994.

In addition, the researchers looked at specific plan provisions, including lifetime benefit limits; maximum out-of-pocket expenditures for covered services; coverage of outpatient prescription drugs; and coverage of at least 30 days of inpatient mental health services and 30 outpatient visits. Based on this more comprehensive set of measures, Short and Banthin found the following:

• Nearly half had plans with out-of-pocket expenses of $1,500 a person or $3,000 per family;
• More than half had plans with a lifetime coverage limits; and
• Nearly one-third had plans that lacked coverage for 30 outpatient mental health visits a year.

The table on the following page contains a more complete summary of their findings on the underinsured.

Characteristics of the Underinsured
The underinsured share many demographic characteristics with the uninsured. In general, according to either definition presented above, those who work for smaller employers, those who had lower incomes and those in poorer health had the greatest risk of being underinsured. In addition, individuals with non-group policies were more likely to be underinsured than those covered by group insurance plans.

Using the catastrophic illness definition, two age groups are disproportionately represented among the underinsured: young adults (ages 19-24) and early retirees or adults near retirement (ages 55-64). Young adults generally have lower incomes and are less likely to work at jobs that have comprehensive insurance coverage. Early retirees or those near retirement are not yet eligible for Medicare and tend to have a greater need for medical services than members of younger age groups.

Percent of the Privately Insured Population Under Age 65
by Demographic Characteristics: 1994

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