BOSTON — The number of Americans paying more for health insurance policies that cover less has increased 60 percent since 2003, a troubling trend that is exacerbated by and contributing to the economic crisis, according to a Community Catalyst report released on April 15. When Coverage Fails: Causes and Remedies for Inadequate Health Insurance outlines the implications of a growing “underinsurance” problem, and urges government leaders to act to ensure families who purchase insurance get the coverage they need.

“Underinsurance is coverage on quicksand, and it’s putting the financial and physical well being of American families at risk and threatening our already weakened economy,” said Susan Sherry, Deputy Director of Community Catalyst. “As our federal and state government leaders work to expand health care coverage, we urge them to put in place common sense protections that limit families’ financial risk and guarantee essential benefits are included in all insurance products.”

Approximately 25 million Americans—one in five insured adults—are underinsured, a problem that is intensified in the down economy due to the direct link between underinsurance and medical debt. Job loss and other financial strains make it hard to pay out-of-pocket costs that many plans require, leaving many underinsured individuals more likely to incur medical debt or forgo necessary treatments. Medical debt is also a drag on the economy – it is a factor in about half of all bankruptcies and was also an underlying cause of 15 percent of delinquent mortgage payments to Freddie Mac in the first half of 2008.

The report identifies two primary factors that put people at risk of becoming underinsured
and are most likely to cause medical debt: large payments (deductibles, co-insurance or co-payments) when enrollees need care, and lack of coverage for necessary services. Premiums, which have risen faster than average wages over the past decade, often add to the financial burden.

Cost-sharing requirements have had a devastating impact on Maryann and David Jandris and their family in Leehigh Acres, Fla. They have private health insurance, and they earned a combined income of $120,000 a year before Maryann quit her job to care for their daughter Kery, who has ulcerative colitis. In 2007, Kery required ten hospitalizations and four surgeries – treatments totaling over $1.3 million dollars. Although the insurance covered a significant portion of those costs, the $30-$50 co-payments for prescription drugs and 20 percent co-insurance left the Jandris family swimming in debt.  As a result of their plan’s cost-sharing requirements, this once-solidly middle-class family recently lost its home to foreclosure and drained its retirement plan.

To prevent stories like the Jandris’ and so many others, the report calls on government leaders to:

  • Guarantee minimum standards for health insurance.  Set limits on families’ financial liability and guarantee that basic services, such as hospital, physician, and emergency care and prescription drugs, are covered.
  • Eliminate or restrict limited-benefit plans. A number of states promote limited-benefit plans with the good intent of expanding coverage and offering lower premiums, but these should be a last resort. States where these plans are offered should strengthen consumer protections by setting maximum out-of-pocket limits and improving coverage requirements.
  • Work to eliminate waste in our health care system. Controlling health care costs is critical to reducing underinsurance. Government leaders should support paying hospitals and doctors for improvements in health, not quantity of services delivered; ban pharmaceutical and medical device industry gifts to prescribers to curb aggressive marketing that distorts prescribing and drives up drug costs; and require the coordination of care to ensure the sickest individuals are getting the right care at the right time to prevent further complications.

“When Coverage Fails: Causes and Remedies for Inadequate Health Insurance” can also be found at

About Community Catalyst
Community Catalyst is a national non-profit advocacy organization dedicated to quality affordable health care for all.  Since 1997, Community Catalyst has been working to build the consumer and community leadership required to transform the American health system.  With the belief that this transformation will happen when consumers are fully engaged and have an organized voice, Community Catalyst works in partnership with national, state and local consumer organizations, policymakers, and foundations, providing leadership and support to change the health care system so it serves everyone—especially vulnerable members of society.  For more information, visit