Job losses, uninsurance and underinsurance

"People who are underinsured end up facing almost identical problems as the uninsured. The difference is, they paid for the privilege."

This observation by Karen Pollitz, director of the Health Policy Institute at Georgetown University, is a harbinger of what will happen very quickly among workers in the U.S. in 2009 -- employed and laid-off.

Three pieces of data are the dots to connect that get you to Pollitz's Maxim:

- The pace of job losses and depth of the recession

- COBRA costs.

- $1,000 -- the new deductible.

The Federal Reserve of Minneapolis analyzed 10 post-war recessions since 1948 and looked at the level of job losses during the first twelve months of each. The chart on the left illustrates the Minn. Fed's data. Job losses in the first twelve months of the 2007 recession (that is, the one we're in now) exceeded 1969, 1990 and 2001 levels, and approach the job losses of 1960 and 1981. The Fed warns that more job losses are expected in 2009.


The Wall Street Journal's Real Time Economics column of January 9, 2008 took these data further to point out that productivity in the U.S. has significantly declined and will drive an even deeper recession in 2009. Their data appear in the table on the right.

Adding in December 2008's job loss of 524,000, job losses for 2008 totalled 2.6 million.

Health Populi's Hot Points: Let's say each of those 2.6 million workers can access COBRA benefits for extending health care for 18 months. We know that the average monthly COBRA cost eats up 84% of the average monthly unemployment benefit, as I highlighted in Health Populi on January 12. Monthly COBRA costs can even exceed the monthly unemployment payment in many states, from Alaska to South Carolina.

Thus, unemployment can quickly lead to uninsurance.


Some Americans are still lucky enough to be employed, with generous employers providing a health benefit. But such employers in the midst of the recession are looking for ways to stem health cost increases -- they were doing so in fairly good times, and now in the 2007-9 recession, are intensely concerned about health benefit costs. The tool of the year for managing health costs is the $1,000 deductible. It is unclear whether a $1,000 deductible drivers so-called health consumers to self-ration care they need or motivate them to seek needed care. In the short-run, evidence shows that $1,000 in a time of recession looks like "my money" that competes in the household budget with food, shelter, and fuel.

Kaiser's analysis, shown at left, illustrates that the $1,000 deductible is most prominent in smaller firms -- the firms where we look to job growth prospects in the U.S.

Karen Pollitz's sobering mantra -- that people who are underinsured face similar problems to the uninsured -- is surely, sadly correct. The question then, is how much longer the recession will last, how many jobs will be further lost, and how long can the U.S. do without health coverage for all -- regardless of employer size, regardless of employment status.