Comprehensive, not Catastrophic

Thursday, June 28th, 2007

* New Health Access Paper Calls for Comprehensive Coverage
* Shows “Catastrophic Coverage” Not Meaningful to Majority With Minimal Assets
* Majority of Californians Could Lose All Savings Under Gov’s Minimum Mandated Plan

New on the Health Access WeBlog: Blue Cross Ad; Maternity Coverage; Denied for Heartburn

As the weeklong “Road to Reform” tour wraps up with a major health care rally in Sacramento today, a new report reveals the need for Californians to have comprehensive, rather than catastrophic, coverage. The Health Access Foundation released a paper showing that many middle-income California families, who lack significant assets, would not benefit and possibly be burdened by such high-deductible plans.

The report, “Thin Protections: High Deductible Plans Provide Little Comfort for Asset Poor Middle-Income Families” shows how middle-income Californians are already living on the financial edge. With a high deductible health plan, more than half of the state’s families could still lose all of their life savings in one year, from a single major medical incident.

These findings are central to the discussion on health reform and the inclusion of high-deductible plans. Governor Arnold Schwarzenegger’s plan includes a reliance on high-deductible health plans as a minimum standard, forcing all Californians, even those with employer-based or public coverage, to have at least a plan with a $5,000 deductible and $10,000 out-of-pocket cost maximum. There would be no subsidies for Californians above $25,500/year, or $42,000/year for a family of three.

Proponents of high deductible plans instead tout them as “catastrophic coverage,” as financial security to protect a family’s assets in an emergency.

However, this pre-supposes that the individual or family has assets to protect. This Health Access paper surveys the literature on the savings and debt of California families, and concludes: providing or requiring high deductible health plans does not provide a benefit to a majority of Californians, who have minimal assets to protect.

A review of the literature on Californian’s assets and debts reveals:
* 40% of Californians have a net worth of $7,000 or less, including their car, 401(k) plans, savings, although excluding any home equity. An additional 20% have a median net worth of just $12,333.
* This 60% of California would, with a $5,000 deductible and out-of-pocket maximum of $10,000, would likely have to, in the best case scenario, deplete all savings and sell the family car to deal with one major medical incidence in just one year. A chronic condition over several years would bankrupt such families.
* While most people have their savings invested in their home, California ranks 49th in homeownership among the 50 states. In California, a majority of income groups, even up to those who make up to $50,000/year, do not own a home, as is the case with significant percentages of those even above that income (40% of all Californians, and those between $50,000-$75,000/year, also don’t have a home).

Consumer advocates argue that Californians need comprehensive coverage, not the catastrophic coverage that would still leave many middle-class families financially vulnerable. Under a high-deductible plan, many middle-class families would still be wiped out by a one major medical incident, or face bankruptcy if they have an ongoing chronic condition. Advocates state that paying a premium, even a cheaper one, isn’t worth it if the insurance doesn’t provide needed care upfront, or provide financial security after an emergency. For these middle-income families, these high-deductible plans would be a burden, not a benefit.

Health advocates have also attacked high deductible health plans as discouraging the needed care that health coverage is supposed to provide. Compared with the overall population, patients with high deductibles are half as likely to go to the doctor, half as likely to fill a prescription and half as likely to go to an emergency room. While some high deductible plans may provide some limited preventative care upfront, none provides the disease management of chronic conditions that are proven to not only improve health outcomes, but also save health care costs.

The report can also be found at

Consumer advocates have argued that any health reform plan should have guarantees of affordability, not just for the premium, but for the deductible and overall out-of-pocket exposure. Health Access will release another paper next week that focuses on defining affordability for consumers.

This message was a theme of the It’s Our Healthcare “Road to Reform” tour, a four-day, six-city series of events starting in San Diego on Monday and ending today in Sacramento with a boisterous rally. The public campaign continues to move forward, working to involve regular California consumers in the health care debate, at:

Health Access California’s resource page on health reform is at our website at:

Our blog, updated daily, has other updates on the health reform debate this year:

Health Access California promotes quality, affordable health care for all Californians.

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