The Value of Health Insurance through Price Discounts

October 11, 2017 • Eric Barrette, PhD & Niall Brennan, MPP

The polarizing debate over health care reform in the United States, amid countless attempts to repeal and replace the Affordable Care Act, has obscured the core purpose of having access to health insurance coverage — especially affordable coverage.

Health insurance is a financial bulwark that serves two main roles. On one hand, it protects insured Americans from financial risks associated with unforeseen medical events, like cancer or a serious injury, the way auto insurance provides protection from the financial impact of a car crash.

At the same time, health insurance offers a means of securing lower prices for almost all health care services — both planned and unplanned. Large insurers routinely negotiate with health care providers for prices that are substantially less than the providers’ billable or “list” prices. This effort to manage overall costs insulates insured consumers from the full cost of health care.

However, uninsured Americans generally do not have access to these price discounts for health care service use. Sometimes their costs are written off by providers or uncompensated care programs. But in many cases, uninsured individuals face a significant financial burden.

An estimated 28.2 million Americans under age 65 lack health insurance. A report by the Henry J. Kaiser Family Foundation illustrates the ripple effect on this population. In 2016, 30% of uninsured non-elderly adults said they were paying off at least one medical bill over time — and three-quarters worried about paying medical bills if they get sick. Medical expenses can threaten people’s financial well-being and lead them to tap savings, borrow, have trouble paying for necessities, and face stressful calls from debt collectors. Lack of insurance can also affect their health: People without insurance coverage have worse access to care than insured individuals; 20% of uninsured adults in 2016 went without needed medical care due to cost, the Kaiser report says. [Article Continues]

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