Unfamiliar faces: who are the uninsured? Health insurers and policymakers who know the answer are more likely to contribute to solving the problem.

Key Points

* Currently, 43.6 million Americans--8.5 million of whom are children--are either uninsured or underinsured.

* The uninsured population isn't a homogenous group. Understanding the makeup of the uninsured population helps insurers structure and price products.

* Many insurers fear a federal employer mandate for health coverage would be a costly, onerous answer to the growing uninsured problem, especially for small-business owners.

* Insurers are advocating for possible solutions such as refundable tax credits; subsidized, high-risk purchasing pools; more flexibility for states to pay for employee premiums; and federal grants for innovative state programs.

They come from all walks of life. While some are unemployed and living below the national poverty level, others are working professionals earning salaries of more than $75,000 a year. For Jessica, a 34-year-old professional from a Philadelphia suburb, being among the nearly 44 million Americans without health insurance was something she never thought possible. But after losing her job several months ago, Jessica said in an interview for this article that her current low-waged, temporary assignment as a customer-service representative leaves her no choice. Rent, food, car payments and utilities leave little to pay for health-care coverage, and she feels her only option is to go without.

Jessica is not alone. Although common perception often identifies the uninsured as poor and unemployed, the reality is quite different. Eight out of 10 uninsured people in the United States are in working families, but they either aren't offered health insurance or can't afford what's offered.

Health insurers are joining state and local governments in the fight against the growing problem. Many are relying on demographic breakdowns of the uninsured population to help craft solutions, including developing adequately priced products to meet the needs of the uninsured.

A Growing Problem

The several-year respite from growth in the number of uninsured Americans has ended. Today, the number of individuals without health insurance totals more than the number of all elderly Americans, five times the number of Americans with cancer, more than the number of Canada's total population and 40 times the number of Americans with HIV/AIDS, according to the Census Bureau and the Kaiser Family Foundation.

And the numbers continue to escalate. Every two hours, another 465 Americans lose their health insurance, according to America's Health Insurance Plans. In addition, affordability is a growing issue. Sen. John Kerry, D-Mass., the presumptive Democratic presidential candidate, estimates that total family health insurance premiums have increased by $2,777 in the past four years.

According to 2002 Census figures, 43.6 million Americans--8.5 million of whom were children--were either uninsured or underinsured, an increase of more than 2 million individuals from 2001. Between 22 million and 32 million of the current uninsured population lacked insurance for the entire year. And the uninsured population isn't a homogenous group. Instead, it includes low-income workers who don't have access to or can't afford employer-sponsored coverage; working families; many young adults who feel invincible and elect not to buy coverage; unhealthy Americans who can't obtain insurance at any price; and early retirees not yet eligible for Medicare. In addition, about 9 million of the uninsured are eligible for public programs, but many aren't even aware of their eligibility.

"The key to understanding the uninsured is that it's not a monolithic group, but rather a set of different people facing different challenges, and there are a variety of solutions that can have an immediate and positive impact," said Leonard Schaeffer, chairman and chief executive officer of WellPoint Health Networks Inc.

The rise in the uninsured population is going hand in hand with skyrocketing costs. Medical costs for this population are expected to rise to nearly $125 billion this year. In addition, a recent study by the Kaiser Commission on Medicaid and the Uninsured said that uninsured Americans could incur nearly $41 billion in uncompensated health-care costs this year, with federal, state and local governments paying for as much as 85% of the care. If the United States provided coverage to all the uninsured, the cost of additional medical care provided to the newly insured would be $48 billion--an increase of 0.4% in health-care spending's share of the gross domestic product, according to the study. The study also shows that even with uncompensated care, people uninsured for the entire year can expect to receive about half as much care as people who are fully insured.

A startling number of the uninsured aren't receiving necessary care. The Institute of Medicine estimates that about 18,000 Americans die each year of treatable diseases because they don't have health coverage.

Segmenting the Population

As the number of uninsured people increases, so does the pressure on private insurers. "People still seek care even if they don't have insurance and may not seek it as early as they should, but do so when it gets to be acute or catastrophic," said Kevin Seitz, chief executive officer of Blue Care Network, the HMO affiliate of Blue Cross Blue Shield of Michigan. "This means providers incur a cost from a population that doesn't largely have funds to pay for it, and then providers look to us for higher rates because of the pressures they face from a revenue point of view."

Understanding the makeup of the uninsured population helps companies look at how to structure their products and determine whether they need to change something about a product to make it more attractive for an employer to offer coverage, said Ray Baxter, senior vice president of community benefit for Kaiser Foundation Health Plan Inc.

"The same size doesn't fit all," said Schaeffer of WellPoint, which organizes its structure by customer segment, "and we have to understand the customer very well in order to build products that will appeal to the segments." A demographic breakdown, for instance, helps companies design products for young adults, many of whom lack health coverage because they elect not to purchase it, aren't offered coverage from their employers or feel somewhat immortal and less vulnerable to needing health-care services. Currently, about 19% of the uninsured population are between the ages of 18 and 24.

Carriers also can gear products to those in need in various geographic locales. For example, the greatest proportion of the uninsured live in the South and West, with the largest percentage in California, New Mexico and Texas. States such as Iowa, Massachusetts, Minnesota, Rhode Island and Wisconsin have the lowest percentage of uninsured individuals. In addition, segmenting the population helps insurers break down language and cultural barriers and reach out to various ethnic groups. Today, nearly 22% of the uninsured U.S. population are black and slightly more than one-third of the uninsured population are Hispanic.

"It's important for health insurers to he aware of the demographics so they can effectively participate in crafting solutions, but I think it is even more important for policymakers to be aware of this to assist in legislative and regulatory solutions," said William Marino, chief executive officer of Horizon Blue Cross Blue Shield of New Jersey. Together, he said, the two sectors can work to help bring about regulatory and legislative changes and offer products and services to different segments.

A demographic breakdown also helps alleviate misconceptions about the population. For example, the fastest-growing segment of the population are those who make more than $75,000 a year and are electing not to spend their income on insurance, said Marino.

A Silver Bullet?

Although most insurers feel the uninsured situation will continue to get worse before it gets better, some are proposing solutions to the problem.

Some carriers believe the answer may lie in full tax deductibility of, for instance, premiums for people without employer-sponsored health insurance, while others favor some type of refundable tax credits for certain sectors. Other insurers believe the creation of subsidized, state-level, high-risk purchasing pools would help individuals with expensive claims to receive care.

AHIP suggests several steps to help those in need. One is that among the approximately 15 million uninsureds with incomes ranging from 150% to 300% of the poverty level, eligible individuals with access to employer-subsidized coverage should be provided with credits that could be used to subsidize the cost of the employee contribution. In addition, the association said young adults should be encouraged to open flexible, tax-advantaged health spending accounts, and the government should prefund such accounts on a sliding-scale basis beginning at perhaps $500 for those at 150% of the poverty level, phasing down as income rises. AHIP also recommends that bridge loans be provided to help workers maintain their coverage when they become temporarily unemployed.

"The problem is absolutely susceptible to great improvements if we can get policymakers to understand the demographic makeup of the uninsured, and if they go at it in three simple steps to attack it: offer tax incentives to those who can't afford coverage, enroll those eligible for existing government-sponsored programs into those programs, and change the perception of affordability to those who can afford coverage," said Schaeffer of WellPoint.

On top of those initiatives, the Blue Cross Blue Shield Association is advocating that states have greater flexibility to pay the employee premium for those eligible for Medicaid and the State Children's Health Insurance Program as an alternative to enrolling them in public programs, and that SCHIP be expanded to cover everyone with incomes at or below the federal poverty levels. In addition, the association advocates federal grants for innovative state programs, including collaborative (insurers, physicians, hospitals) private programs to expand health coverage; community health centers that provide health care to the uninsured; and subsidies to state high-risk pools.

The nation's economic status will likely steer the direction of the problem. "The number of insured is a direct function of the strength of the economy--as the economy turns around, we'll see more people covered and fewer uninsured," said Schaeffer. What used to be classified as "jobless recovery," he added, is now turning to a "jobs recovery," and if that continues, the uninsured problem can be expected to decline precipitously, he said.

The federal government recently has proposed several solutions. U.S. Senate Republicans proposed a wide range of tax credits, subsidies and discounts to different groups, while House Democrats offered a three-bill package containing measures that previously have been introduced--something they say could cover more than half of the uninsured. Senate Democrats also joined the fight recently by calling on Congress to pass legislation by the end of 2006 to provide all Americans the opportunity to purchase health insurance that is the same as, or better than, coverage available to members of Congress, at the same or lower rates.

Looking for Solutions

Helping the uninsured is also at center stage in this year's presidential campaign. President Bush is calling for a plan that would cost $70 billion over 10 years and would expand coverage to 4.5 million Americans by providing tax credits to low- and moderate-income workers to help them buy coverage. Kerry, on the other hand, has a plan to cover all uninsured children and most uninsured adults--a plan estimated to cost $650 billion over 10 years and that would be financed by a rollback of the Bush administration's tax cuts for those who earn more than $200,000 a year. The plan also would pick up 75% of the cost of catastrophic care, as long as businesses pass the savings back to workers through reduced health-care premiums, according to the New York Times.

But the solution can't be achieved in small political circles, said Kevin Hill, executive vice president of sales and business development for Oxford Health Plans Inc. "Rather, it has to be a collaborative effort involving all the individuals who can help provide a better infrastructure to offer coverage, educate individuals on the importance of coverage and work on funding or taxation strategies to address affordability challenges," Hill said.

The prior push by some advocates for a federal mandate that would require employers to provide healthcare coverage for employees is something insurers fear would be an onerous answer for the millions of uninsured individuals and their employers.

The Blues association opposes federal employer mandates. "About 98% of large employers already provide coverage, and the problem really is at the small end," said Alissa Fox, executive director of policy. "A lot of the employer-mandate proposals suggest exempting small employers from the mandate, but that really doesn't solve the problem. Small employers would like to offer coverage, but the problem is affordability. Instead, we should help them with financial subsidies and a variety of initiatives to address rising healthcare costs."

One example of such a mandate came in 2002 when Sens. Edward Kennedy, D-Mass., and Jon Corzine, D-N.J., introduced a bill that would mandate that employers with more than 100 employees make available health insurance coverage at least as generous as that provided to federal workers for both employees and their dependents. Congress, however, didn't pass the bill.

"The problem with government intervention is that the devil is in the details," said WellPoint's Schaeffer. "Everyone has high hopes and good motivation, but the history of health-care legislation has been unintended consequences. We would pass something to solve this problem, but it would only create a new problem." Texas, for example, passed a number of benefit mandates, but health care became unaffordable for a lot of people, he added.

Many insurers fear businesses--especially small-business owners--will bear the brunt of a federal mandate. "Already a lot of businesses have their backs against the wall to afford what they have. If we create the scenario where we put additional pressures and financial responsibilities on employers, we'll see a lot more of them fold, and that works right into the death spiral with more people not having coverage," said Graham Bailey, a spokesman for Blue Cross & Blue Shield of Kansas. Currently, 54% of low-wage workers in businesses with fewer than 10 workers don't have coverage.

"Are you going to tell the local dry cleaner with five employees that he has to offer health insurance to every employee at a cost that could be about $8,000 to $9,000 a family?" asked Horizon's Marino. "You'll drive him out of business." While he said a federal mandate wouldn't be negative for Horizon's business, especially since it would generate more business for insurers, he called it "bad public policy" to tell employers that they have to offer coverage.

Some insurers also fear the impact of proposals that call for rate controls on the industry, health professionals and employers. "If the government limits rates and mandates a set of benefits, the question then is can those benefits all be provided within that rate limit," said Baxter of Kaiser Permanente.

But the problem that needs to be solved isn't access to coverage but rather the affordability of coverage, said Oxford Health's Hill. He said many states are doing a good job at requiring health plans to participate in the individual market, but the cost of that insurance still prohibits many individuals from purchasing coverage.

Company Initiatives: Products, Publicity, Pooling

Many insurers and corporations are trying to find their own ways to drive down the rising number of uninsured individuals.

Blue Cross & Blue Shield of Kansas, for instance, is not only creating affordable products to help get more people covered across the state, it's also launched an extensive public educational campaign through print and on the Web, made numerous presentations to civic and community organizations, and created an advertising campaign for members and the general public. In the 1990s, the company began a "Caring Program for Children" and helped more than 13,000 uninsured children receive necessary care before the program ended after 10 years to make way for HealthWave--the State Children's Health Insurance Program. In addition, the company has donated $100,000 to local health clinics and recently another $30,000 to help them come through the recent flu season. The Kansas Blues also is among a handful of insurers that took part in the annual Cover the Uninsured Week in May--a week-long, national effort sponsored by the Robert Wood Johnson Foundation to raise awareness about people without health insurance.

WellPoint Health Networks Inc. is reaching out to those without health coverage through its WellPoint Foundation--among the largest corporate foundations in the United States. The foundation, which was created in 2001, recently rolled out a $5.5 million program aimed at enrolling eligible people into existing government programs in states where WellPoint operates. WellPoint also is educating its agents and brokers about untapped markets and offering them continuing-education classes to better understand misconceptions uninsured individuals have about insurance and affordability.

Some companies are targeting specific sectors. For instance, Regence BlueCross BlueShield of Oregon designed a health plan for children and grandchildren who aren't covered under their parents' health plans and who aren't eligible for Medicaid or SCHIE Blue Cross of California's California Indian Health Care Program offers affordable coverage to all 103 federally recognized Native American tribes throughout the state.

Major corporations also are joining the fight. More than 50 Fortune 500 companies, including IBM, General Electric, Honeywell, Ford, Sears, McDonald's and Shell Oil, recently announced they were joining to form the Affordable Health Care Solutions Coalition to provide a pool that could cover as many as 4 million uninsured workers. The pool would allow the companies to get health coverage for their workers at a lower price than they could if they negotiated coverage individually. As proposed, the pool would extend coverage to part-time, contract and temporary workers, consultants, independent agents and vendors. The coverage also would be made available to employees who, because of tenure, aren't yet eligible for coverage; retirees who are younger than 65 but who are ineligible for insurance; former employees who have exhausted their 18-month COBRA benefits; and children of employees who are students but who are no longer eligible for health coverage.

Learn More

Blue Cross & Blue Shield of Kansas Inc.

A.M. Best Company # 60070

Distribution: Captive sales force; independent agents/brokers

Blue Cross Blue Shield of Michigan

A.M. Best Company # 60081

Distribution: Internal sales force; agent brokers

Horizon Healthcare Services Inc.

A.M. Best Company # 64022

Distribution: Brokers, benefit consultants, direct

Kaiser Foundation Group of Health Plans

A.M. Best Company # 64585

Distribution: National consulting houses, regional brokers and brokerage firms, membership exchanges, direct

Oxford Health Plans Inc.

A.M. Best Company # 60022, 68933, 68934, 68716

Distribution: Independent agents/brokers

WellPoint Group/Blue Cross of California

A.M. Best Company # 68970

Distribution: Independent agents, brokers and consultants, direct

For ratings and other financial strength information about these companies, visit www.ambest.com

A Look at the Population

* Nearly 44 million Americans, or a little more than 15% of the total U.S. population, are uninsured.

* The number of uninsured children is about 11.6% of all children, or 8.5 million.

* Eight out of 10 uninsured people are in working families.

* Uninsured people aged 25 to 44 account for about 51% of uninsured, nonelderly adults. Ages 18 to 20 account for 8.2%; ages 21 to 24 account for 15.2%; and ages 45 to 54 account for 16.1%.

* The greatest proportion of the uninsured live in the South and West, influenced, in part, by the influx of uninsured in the border states.

* About 20% or more of the population in three populous states--California, Florida and Texas--are uninsured, accounting for one in three uninsured people.

* Urban and rural nonelderly residents are about equally likely to be uninsured. More than four times as many uninsured people live in urban areas because of the population distribution in the United States.

* The U.S. foreign-born population is nearly three times as likely to be uninsured as the native population and twice as likely to have insurance as noncitizens.

* Non-Hispanic whites account for slightly more than 50% of the uninsured nonelderly population. They have an uninsured rate (12.5%) that is only slightly more than half the rate of blacks (21.6%) and slightly more than one-third of the rate for Hispanics (34.1%).

* About 16 million women lack health coverage, and nationally, 17.7% of women aged 18 to 64 are uninsured.

* About 17% of the nonelderly population gels coverage from public sources, such as Medicaid, Medicare and the health-care systems for active and retired military personnel and their families.

* Almost 29 million of the uninsured have household incomes of $25,000 or more, compared with 14.8 million in households earning less. (The federal poverty guideline for a family of four was $18,100 in 2002 and has increased to $18,850 in 2004.)

* Among the entire population aged 18 to 64, workers are more likely to have health insurance (82%) than nonworkers (74.3%). Among those in poverty, workers are less likely to be covered (52.6%) than nonworkers (61.9%).

* About 53% of young adults aged 19 to 29 have problems with access because of cost, and 52% are unable to pay medical bills.

* Periods of time without health insurance--measured on a monthly basis--tend to be short in duration, with about 74.7% over within one year.

Sources: U.S. Census Bureau (2002); Cover the Uninsured Week; Kaiser Family Foundation; Blue Cross Blue Shield Association; Employee Benefit Research Institute; Commonwealth Fund Task Force; and Health Care Coverage in America.