Obama vs. McCain: How the Underinsured Would Fare Under the Candidates' Health Plans

This is the fourth in a series examining how the candidates' health care proposals will affect ordinary people who live in the river town of Helena-West Helena, Arkansas, and how the press could cover that angle. Part I is archived here, and parts II and III are archived here and here.

Kevin A. Smith

You might say that Kevin Smith, age 46, has struck it rich in the health insurance lottery. He, his wife, and four kids have a family policy provided by his wife's employer -- Arkansas State University. She is a teacher and runs an early childhood education program in the area. The university's insurance comes with a low deductible, just $500, and his share of the premium runs only about $2900 a year, an insurance bargain these days. It's an eighty/twenty plan, which means the insurer pays 80 percent of a bill, and the insuree pays the rest. That's a bargain, too, considering that seventy/thirty plans are common. Copays for most services cost twenty dollars. "It's good insurance," Smith says. "But having said that, I have a stack of medical bills. I feel Michael Moore is right. The way the system works, it can break you." The 20 percent copayments applied to increasingly expensive medical services add up quickly.

Smith's family is typical of some 25 million Americans who may be underinsured; that is, their insurance, good or bad, does not cover all their medical care. According to The Commonwealth Fund, a New York City philanthropic and research organization, people are underinsured if they spend 10 percent or more of their income on out-of-pocket expenses. So far this year, the Smiths have racked up medical bills that totaled $7000, about 8 percent of the family income. Smith, who once worked for former Arkansas Sen. Dale Bumpers and Bill Clinton when he was governor, and served ten years in the Arkansas state senate until term limits forced him out, makes a good income between selling insurance and running a side business helping communities write grants. Still, the pile of medical bills is daunting, considering ongoing family expenses and looming college costs for his two sons.

The health services his family has used are nothing extraordinary, but they reflect the normal everyday care a family with four kids might need. It's the stuff, he says, that you can't plan for. His son suffered a concussion playing football. His wife broke a rib after a bicycle fall. Smith himself has had a couple of bike accidents. Last February, he finally paid off $3000 in bills, and was so excited he announced it to the staff in his office. The next day he fell off his bike on a rain-slick street and badly broke his arm and collar bone, and the cycle of medical debt began again.

Doctors sent him by ambulance to a specialist in Clarksdale, Mississippi. He got stuck with a $1000 bill not covered by insurance, and a doctor later told him the ambulance ride was unnecessary. Then, in May, he had another bicycle accident. Even though he suffered lacerations and a bruised a knee, he didn't go to the doctor. His shoulder is frozen, and it's hard for him to buckle a seat belt or shave.

He has been to his regular doctor, a chiropractor, and a physical therapist, all of whom have recommended an MRI costing about $1000. But he's stalling, trying to avoid adding that $200 copayment to what he already owes. This year, his doctor diagnosed environmentally-induced asthma which is going to require some expensive medications with twenty- and thirty-dollar copays. So far he's using free samples from the doctor to see which ones work best before buying costly drugs.

During his time in the Arkansas legislature, Smith learned a thing or two about health care. As an insurance agent, he sees "people all the time who are uninsurable, can't afford a policy, and fall through the cracks." Unexpectedly, he blurts out: "I wish we had single-payer. We would trade commissions (on health policies) for free health insurance in a New York minute." If his clients didn't have to worry about health care expenses and health policies, Smith says, they could afford to pay their other insurance premiums on time, or maybe buy a long-term care policy that some people need but cannot afford to buy. His business would do just fine.

But no candidate is talking about single-payer health care, so unless the candidates' proposals really will produce coverage for those without it, the Smith Insurance Agency will still have to put up with late auto, life, and homeowners' premiums from clients who also struggle to pay their medical bills. Not much is likely to change for Smith and his family, either.

How the family would fare under McCain

McCain's health proposals are geared toward encouraging employers like Arkansas State University to drop health insurance for their employees and encourage them to use tax credits to buy policies in the individual market. McCain would also require those with employer-based insurance to pay income taxes on the value of those benefits, perhaps another inducement to move into the individual market. For starters, though, Smith's asthma most likely makes him uninsurable if he buys on his own.

Assuming he could qualify medically, a comparable family policy currently sold by Arkansas Blue Cross Blue Shield costs about $5800. If he used the $5000 credit to buy such a policy, he might pay only $800 in premiums and save some money this year. Since this policy, like the one from Arkansas State, requires 20 percent coinsurance, he would still find himself with out-of-pocket expenses and a stack of bills. The under-insurance problem would not disappear, and down the road, there are other risks of switching.

As Smith and his wife get older, the $5000 credit buys less coverage because premiums in the individual market increase with a person's age. They could end up paying far more in premiums than if they stayed with their employer plan. Generally with these plans, a forty-year-old worker pays the same portion of the premium as a sixty-year-old worker, although premiums for the entire group may rise as the group itself ages. "I can't imagine this working for a lot of people. It won't work for me," he adds.

How the family would fare under Obama

Because Obama's proposals are so vague, it's hard to say whether the Smiths would benefit. Early on, Obama said that his proposed public plan would be available to small businesses and individuals without access to employer-based coverage or public plans. That seems to indicate he wouldn't be eligible for any kind of new public insurance option like those being promoted by Obama surrogates; that is, barring some huge legislative breakthrough that lets everyone buy into a Medicare-like plan that might offer cheaper premiums and comprehensive benefits -- in short, a better deal than private insurance, whether provided by employers or bought individually.

On the trail, Obama has promised that he has the secret sauce to lower insurance premiums by $2500 for a typical family. That implies his proposed cost control measures -- health IT, requiring hospitals to publicly report on costs and quality, and better management of chronic conditions -- will actually keep medical costs from rising. Experts now doubt that these ingredients will work. So unless and until there is real cost control, the Smiths will continue to be part of the growing number of Americans who are underinsured.

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