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The Coming Plague

As access to affordable healthcare gets more and more out of reach for the middle class, will lawmakers finally pay attention?

By Joy Lanzendorfer

Carol and Dan Jones aren't sure if they can afford health insurance anymore. Self-employed Forestville residents (their names have been changed to protect their identities), they have been struggling with their health insurance ever since their former insurer, Health Plan of the Redwoods, went bankrupt last May.

Tired of waiting on government bureaucracy to provide them with a new insurer, the Joneses took matters into their own hands and applied for insurance with Health Net. Health Net accepted Carol but rejected Dan because, according to the company's height-to-weight chart, Dan was five pounds overweight.

"That's how nitpicky they are," says Carol. Finally, as a result of the HPR situation, the Joneses were redistributed by the California Department of Managed Health Care into a Blue Shield plan, but at a much higher cost: $500 monthly payments and a $2,000 deductible. When they applied to get into a more reasonable plan with Blue Shield, the insurance company also accepted Carol but turned down Dan--on the grounds that he had once dislocated his shoulder.

The Joneses have since put in an appeal to Health Net, but until they get an answer, they are left with the difficult decision of paying the higher rate or going without insurance. As long-term successful freelancers, they are part of a growing group of people who, though secure financially, are faced with the threat of no health coverage.

The Creeping Plight

There is little data tracking the uninsured in Sonoma County. The most recent numbers showed that in 2001, 46,000 people in Sonoma County were uninsured, or roughly 12 percent of the population, according to the UCLA Center for Health Policy Research. Though health experts all agree that the number continues to grow, no one knows by how much. However, there is little doubt that the number is seeping into the middle class.

While the ranks of the uninsured have always included minorities, the unemployed, immigrants, service employees, and other poor people, in the last few years the number has begun to move into higher income brackets, even affecting people who make several times above the poverty level.

"It's true, the number of uninsured is reaching into the middle class in Sonoma County," says Kathy Ficco, executive director for St. Joseph Health System's Medical Access program. "Especially with the downturn in the economy and recent layoffs. People are being forced to make tough decisions like, 'Should I pay my car payment or my health premium?'"

"It is definitely creeping into the middle class and above," says Cathy Frey, director of health policy and development for Redwood Community Health Coalition. "It is affecting people who make $50,000, $60,000, and even $70,000 a year. Of course, $20,000 of that alone goes to rent."

"The vast majority of those who've been laid off have good incomes, sometimes two or three times above the poverty level," says Bob Schultz, physician-in-chief at Kaiser Permanente in Santa Rosa.

But the problem is as much a national issue as it is a regional one. Of the 41 million people uninsured in the United States, the newest levels of uninsured include people in middle- and upper-class income ranges. According to the U.S. Census Bureau, 1.4 million Americans lost their health insurance in 2001, mostly due to layoffs or higher premiums. The largest subgroup of the newly uninsured, about 800,000 people, have incomes over $75,000.

Locally, the reasons behind the number of uninsured moving into higher income brackets is threefold, namely the increase in premiums for employers, the layoffs in the tech and other industries, and the failure of HPR.

Although California is one of the largest economies in the world, it has the third highest rate of uninsured residents in the nation, right behind Texas and Arizona. In 2001, 4.5 million nonelderly California residents went without healthcare, and an additional 1.7 million reported having gone without insurance in the proceeding year, for a total of 6.3 million Californians without healthcare at some point in the last two years, according to the UCLA research center.

Of those that are insured, 63 percent get healthcare from their employers. The long-established link between employment and insurance works fine until a large number of people lose their jobs or until premium rates rise and businesses pass the cost on to their employees. Both of these issues are factoring into the current crisis.

Few Jobs, Fewer Insured

Sonoma County employers have seen health insurance rate increase 30 percent to 40 percent in the past year. This is much higher than they've seen in the recent past, though businesses have been dealing with steady increases in the double digits for the last few years.

Because of this, the cost to insure employees is drastically higher than it was even three years ago. Many employers, especially small businesses, can no longer afford to offer healthcare insurance. And others, rather than eliminating insurance altogether, are making employees shoulder more of the cost.

The employee is then caught between a rock and a hard place. Either healthcare is eliminated completely or it costs more. When faced with slower wage growth and the rising cost of living along with increasing premiums, workers often begin to drop coverage for their families or drop healthcare altogether.

Either way, even though they are still working, employees often end up uninsured. In fact, in 2000 the Harry J. Kaiser Family Foundation estimated that 18 percent of the uninsured in California had at least one full-time worker in the household. And even when the economy was doing well in the mid 1990s, very few employers were able to significantly expand health insurance.

"We saw a slight stabilization of the number of uninsured during the mid 1990s because employers were offering more benefits," says Alina Salganicoff, vice president of the foundation. "But it certainly wasn't what you would expect considering how well the economy was doing."

When the uninsured aren't taken care of in the most flush of times, you can expect that when the economy goes down the problem will only get worse. A report by the Center for Studying Health System Change says the current economic downturn will have an "ominous" effect on businesses' ability to offer health insurance.

And then, of course, there are the layoffs, which also increased the number of middle-class uninsured. Unemployment in Sonoma County increased to 4.5 percent this December, up from 2.6 percent in December 2000, and the job market is tight with more people getting laid off every month, according to the Economic Development Board. The hardest hit industry continues to be the tech industry, with a 14 percent decrease in filled positions since December 2001.

When people are laid off, employers are often required by the state to offer COBRA, a state-sponsored program that allows former employees to continue coverage under the company's health insurance. The problem is that COBRA can be very expensive, and only a quarter of workers tend to keep it.

When higher-paid workers get laid off, they are often making good salaries and can keep COBRA. Pretty soon, though, savings get depleted, and the cost of insurance is too high for unemployment compensation. It gets harder to keep up the payments and at that point, the worker often drops the insurance.

"We saw one man who was in the tech field and recently laid off," says Ficco. "He was doing consulting to make ends meet, but his income was unsteady and he couldn't afford COBRA anymore. So he and his wife dropped COBRA, and they kept it for their daughter. Eventually, that got too expensive as well, and he enrolled his daughter in the Healthy Families program. He and his wife have been going without health insurance ever since. That kind of story is getting more common."

But while these recently laid-off people are faced with tough choices about where and how to spend their money, at least they have the money to spend on healthcare if they need to, explains Schultz.

"The cost of living is so expensive here, but then again, people make their choices," he says. "I do think a lot of the recently laid-off people are young and healthy, so healthcare just isn't that high a priority for them."

The demise of HPR left thousands of Sonoma County residents floundering in the healthcare system. Though the Department of Managed Health Care redistributed 335 people into new insurance plans, many, like the Joneses, were faced with much higher premiums.

"We've definitely had examples of people struggling after HPR," says Mary Szecsey, executive director of West County Health Centers and a board member for Palm Drive Hospital. "One person told us that when she looked into getting an individual policy, it cost more for her than her employer was paying for the entire group policy under HPR."

Insurers prefer group policies because the mix of unhealthy and healthy patients balances out the risk. When it comes to individual policies, the risk increases, and so insurers are a lot pickier about insuring people and charge a lot more for patients with even fairly common health problems such as high blood pressure or high cholesterol. Statistically speaking, people with those problems are more likely to need care, and so the insurance companies hedge their bets by charging those people more.

In the Joneses' case, the insurance company used their doctor's medical records to assess--and reject--Dan. The doctor wrote a point-by-point letter refuting the rejection, something the Joneses deeply appreciate.

"Our doctor has been extremely helpful in all this," says Dan. "He says he's seen a 12-year-old girl get refused for insurance because of a knee injury, and he himself has had trouble getting insured."

The fact that some insurance companies use doctors' charts to decide whether someone can have reasonable insurance rates or be covered at all puts pressure on doctors to protect their patients. It gives weight to everything they write down and may even increase the incentive to be dishonest on records.

Bottoming Out

The plight of the uninsured will get worse before it gets better. Governor Gray Davis' proposed state budget cut designed to fill the staggering $26 billion budget deficit includes cutting Medi-Cal spending by roughly $3 billion. Medi-Cal is the California sponsored medical assistance program for the poor and uninsured.

Fewer people will be eligible for Medi-Cal under Davis' plan, and "extra" benefits, such as vision and dental, would be slashed. In addition, physicians who carry Medi-Cal would see 10 percent less in reimbursement from the program. Since doctors are already only being reimbursed for 30 cents on every $1, fewer doctors would be able to afford to carry Medi-Cal. Health professionals have said the bill is "awful" and will put up even more barriers for people to get care.

"If the budget proposal passes, you will see a swelling in the ranks of uninsured," says Salganicoff. "With a reduction in eligibility and cuts in spending, less people will get care and even more people will be uninsured."

California isn't alone in its plans to cut state-sponsored insurance. A study by the Kaiser Commission on Medicaid and the Uninsured says 49 states plan to cut Medicaid in 2003, and 32 states, including California, have cut it in the recent past.

Though Medi-Cal cuts are more likely to affect lower income people, the cuts mean more stress on the overall system. When people are uninsured, their options are reduced to health clinics and emergency rooms. Because California law requires hospitals to treat all patients who enter the emergency room, many uninsured people use it as their doctor, something that greatly taxes the already overburdened hospitals.

But in the case of the middle class, people are more likely to handle smaller health problems themselves.

"In the middle class, people have the $45 to go to the doctor if a health problem comes up," says Frey. "Where that becomes an issue is when there is a catastrophic healthcare problem, and suddenly they are looking at paying $50,000 instead of $45."

And people with no health insurance ignore preventive care. A person who can only afford to treat acute problems will probably skip over ongoing care, like doctor's visits, mammograms, immunization, and other things that lead to early detection. A lack of care can also aggravate ongoing problems that at one point could have been easily treated but which become serious medical issues by the time they warrant a trip to the emergency room.

The Silver Lining

The one bright spot in the number of insured seeping into higher income brackets is that it may get more attention from lawmakers.

"Yes, it's unfortunate, but it's true," says Frey. "As the ranks of uninsured hit the middle class and a large group of individuals call Dr. Smith because of a knee injury and find they can't afford a visit because they don't have the insurance, the tide will start to change. It won't happen overnight but will in the long haul."

Then again, the extent which the middle class is suffering from no health coverage is hard to estimate in part because of a social stigma around being uninsured. People sometimes feel ashamed of their uninsured status and so are less likely to talk about it. Thus, data tracking the uninsured may pass these people by. For the same reason, the group may not have as much effect politically.

Many uninsured people feel that the taint surrounding their health insurance status follows them into the doctor's office.

"They feel stigmatized," says Salganicoff. "They feel they don't get treated as well by doctors and have second-class care. Of course, health providers say this isn't the case. But then again, what's the first thing they ask you for when you go to the doctor? Your insurance card."

As the problem continues to get worse nationally as well as in California, lawmakers are beginning to take notice of the healthcare crisis. Major proposals in Congress right now look at tax breaks for individuals and businesses to buy health insurance or to expand eligibility for Medicaid and Children's Health Insurance Programs, according to the New York Times.

And, locally, more people are supporting the idea of a universal healthcare system. The Joneses, who lived in Canada for some years and saw its government-sponsored system firsthand, are for universal healthcare.

"It's true that Canada's health system has problems," says Carol. "It's not perfect. But it's not as bad as it is here. Here, when you get sick, the first thing you think is, 'Can I afford a doctor, and how much is this going to cost?'"

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From the January 30-February 5, 2003 issue of the North Bay Bohemian.

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