A Closer Look: Out-of-Pocket Health Care Spending and the "Underinsured"

October 1, 2012

What It Means to Be “Underinsured”

A high household health care cost burden—generally presented as a percentage of household income—can be an indicator that a household (or someone in it) is “underinsured.”  While there is no commonly agreed-upon definition of underinsured, researchers frequently consider a person to be under-insured if he/she has insurance coverage but spends more than 10 percent of total household income on health care (including both premium expenditures and out-of-pocket costs). 

The RWJF DataHub: “High Health Care Cost Burden”

The new Robert Wood Johnson Foundation (RWJF) DataHub, using health expenditure data from the 2010 and 2011 Current Population Survey[1], provides estimates of the percent of individuals nationally and at the state level who are in families that face a high health care cost burden (defined as “the share of individuals who are in families where out-of-pocket spending on health care, including premiums, accounted for more than 10 percent of annual income”).  The DataHub reports that, nationally, an estimated 18.3 percent of individuals are in such families.  Wyoming has the highest percentage of individuals in this category, at 26.2 percent.  At the other end of the scale, only 10.9 percent of individuals in the District of Columbia fall into this group.  Minnesota ranks 16^th for the proportion of individuals in families with a high health care cost burden, at 21.1 percent. 

What’s Going on in Minnesota?

The measure used by the DataHub isn’t an exact equivalent to the common understanding of “underinsured” as defined above, since the DataHub analysis includes people with and without health insurance.[2]  So, you might think that Minnesota, with its relatively low uninsurance rate of 9.0 percent, would do really well on this indicator when compared with states like Texas that have much higher rates of uninsurance (24.1 percent).  However, many things in addition to the uninsurance rate can influence the share of a state’s residents with a high health care cost burden, such as the price of health care services, population characteristics and health care needs, and state-specific health care markets. For example, a relatively high share of Minnesota’s insured population is covered by high-deductible health plans, through which people pay lower monthly premiums but face higher levels of initial out-of-pocket spending compared to other types of coverage.  At 14.3 percent, Minnesota ranks second among states in its percentage of residents enrolled in high-deductible insurance, behind only Vermont at 19.9 percent.  Hawaii, at 0.3 percent, reported the lowest percentage of residents with high-deductible health coverage.[3]

It is also worth noting that, while the percent of Minnesotans in families with a high health care cost burden is higher than the national average, the rate is comparable to that in neighboring states, like Wisconsin and Iowa.  Additionally, Minnesota does hold a high ranking among states for other RWJF DataHub indicators, including indicators of healthier lifestyles, public health, and social determinants of health.