The Uninsured at the Starting Line in California: California findings from the 2013 Kaiser Survey of Low-Income Americans and the ACA

IV. Health Coverage and Financial Security

How the ACA Might Affect Low- and Moderate- Income Californians’ Financial Situation

Low-income families in California face multiple financial challenges on a daily basis, but a major challenge is the cost of health care. Insurance provides some financial protection for many low-income adults in California, but many still struggle to pay their share of premiums or other costs associated with care. Low-income adults without coverage are particularly vulnerable, facing even more financial strain than their insured counterparts. Both insured and uninsured low-income adults in California struggle with medical bills and debt. Coverage expansions, assistance with premium costs, and limits on out-of-pocket costs under the ACA have the potential to ameliorate the financial issues associated with the cost of health care.

Health care costs pose a challenge for low- and moderate-income families in California, even if they have insurance coverage.

Health care accounts for a major budget item for low-income families, and affordability is a concern for many. Even among those with insurance, the cost of insurance itself can be a burden. Seven in ten adults in California with employer coverage (70%) say they pay at least some part of their premium (data not shown), and adults with nongroup coverage pay premiums directly to insurers themselves. Of adults in California who pay at least some portion of their premium, those with low and moderate incomes are most likely to report difficulty paying these costs (Figure 21). Forty-one percent of low-income (≤138% FPL) adults and 36% of moderate-income adults (139%-400% FPL) in California who pay a share of the premium for employer coverage reported that their share is somewhat hard or very hard for them to afford, compared to 22% of higher-income (>400% FPL) adults with this coverage. For California adults with nongroup coverage, the rates are higher, with 76% of moderate income adults reporting difficulty paying their premiums. Since most adults with employer coverage share the cost of the premium with their employer, it is not surprising that rates of difficulty are higher among those with nongroup coverage, who pay the entire cost themselves.

Health care costs translate to medical debt for many l0w-income adults. While one in five (21%) uninsured adults in California have outstanding medical bills, many insured California adults also reported high rates of medical bills that are unpaid or being paid off over time (Figure 22). For example, 15% of adults with employer coverage and 11% of adults with Medi-Cal coverage reported having medical debt.

People may report medical debt but not have a problem paying that debt. However, when asked directly whether they had problems paying medical bills in the past year, notable shares of uninsured adults (14%) and adults with Medi-Cal (9%) reported that they did (Figure 22).  In many cases, the problems people had paying medical bills were severe. Many reported that medical bills caused them to either use up all or most of their savings, have difficulty paying for necessities, borrow money, or be contacted by a collection agency.

In addition to many low-income adults in California reporting that they experienced financial strain or difficulty with health care costs, many live with worry about their ability to afford costs in the future. The vast majority of uninsured California adults across all income groups reported that they lack confidence that they can afford either the cost of care for services they typically require (Figure 23) or the cost of care should they face a major illness (Figure 24). While not surprising, this finding indicates that uninsured adults in California are aware of the high cost of health care services, as even those with moderate or high incomes do not believe they can afford these costs.

One role of insurance coverage is to protect people against these costs, particularly unexpected costs related to major illnesses or accidents. However, notable shares of low-income insured California adults reported that they lack confidence in their ability to afford health care, given their current finances and health insurance situations. Nearly half of adults with Medi-Cal coverage reported lack of confidence in affording usual costs and over half reported lack of confidence in affording costs for a major illness; these findings appears to be driven by higher need among Medi-Cal beneficiaries (as those with disabilities reported particularly high rates) or worry about keeping coverage (as those who had problems with renewal also reported high rates) (data not shown). Of particular note is the finding that 45% of low-income adults in California with employer coverage do not feel confident that they could afford costs related to a major illness given their coverage and financial situation. Lack of confidence may reflect worry about affording out-of-pocket costs or concerns over limits on coverage.

Affordability provisions in the ACA may ameliorate some of the challenges that low-income insured Californians face in affording care. Under the law, qualified health plans must cover preventive services with no cost sharing and are prohibited from placing annual or lifetime caps on the dollar value of insurance coverage. In addition, plans may not exclude coverage for pre-existing conditions, which often were excluded from nongroup plans in the past and may have led to high out-of-pocket costs for insured individuals. Last, Californians who purchase coverage through Covered California and have incomes up to 400% FPL receive tax credits to help them pay for their premiums, and those with incomes up to 250% FPL also receive subsidies to help with cost sharing under their plans. As was the case in the past, people covered by Medi-Cal do not pay premiums and face only nominal cost sharing for services. However, given survey findings that many low-income insured people continue to face financial challenges related to health care, people may perceive even limited out-of-pocket costs to be unaffordable. It will be important to track whether there are ongoing financial barriers as people enroll in coverage and seek care.

Low-income families face fragile financial circumstances.

As discussed above, low-income California adults across coverage groups experience difficulty or worry about paying for health care. These challenges translate to expenses in other areas as well, and low- and moderate-income adults across coverage groups reported not being financially secure. However, adults in California who are low-income and uninsured or covered by Medi-Cal are particularly vulnerable to financial insecurity even outside of health care.  Among the low-income, uninsured adults are much more likely than adults with employer coverage to report that they feel generally financially insecure (Figure 25). Notably, adults with Medi-Cal coverage reported rates of financial insecurity closer to those of their uninsured counterparts. This pattern may reflect pre-ACA Medi-Cal eligibility rules, which targeted very vulnerable adults, such as poor adults with disabilities.

General financial insecurity translates to concrete financial difficulties in making ends meet. Uninsured adults and those on Medi-Cal are more likely than privately-insured adults (those with employer coverage or nongroup) to have difficulty paying for other necessities, such as food, housing, or utilities, with 59% and 66%, respectively, reporting such difficulty, compared to 18% of those with employer coverage and 31% of those with nongroup coverage (Table 5). While low-income adults (≤138% FPL) in California across the coverage spectrum reported high rates of difficulty paying for necessities, those with employer coverage reported the lowest rates in this income group. These individuals may have the stronger or more stable ties to employment than their counterparts with other or no insurance coverage. A similar pattern holds for people’s ability to get ahead financially, either saving money or paying off debt.

While similarly high levels of adults across income and coverage groups reported that they have taken on debt or taken money out of their savings to pay bills in the past year (Table 5), uninsured adults in California are more likely than their insured counterparts to report changing their living situation or postponing marriage or children for financial reasons.

Table 5: Financial Difficulty Among Adults in California, by Income and Coverage
	Uninsured		Insured
			Employer	Nongroup	Medi-Cal
Has difficulty paying for necessities
All	59%		18%*	31%*	66%
By Income
≤138% FPL	69%		40%*	—	70%
139-400% FPL	54%		25%*	—	48%
>400% FPL	—		—	—	—
Has difficulty saving money
All	80%		51%*	63%*	83%
By Income
≤138% FPL	84%		56%*	—	84%
139-400% FPL	77%		61%*	67%	77%
>400% FPL	—		45%	—	—
Has difficulty paying off debt
All	57%		29%*	34%*	59%
By Income
≤138% FPL	58%		38%*	—	62%
139-400% FPL	57%		38%*	—	52%
>400% FPL	—		23%	—	—
Taken on debt or took money out of savings to pay bills
All	44%		40%	50%	39%
By Income
≤138% FPL	39%		35%	—	39%
139-400% FPL	54%		53%	59%	—
>400% FPL	—		33%	—	—
Changed living situation or postponed marriage/children for financial reasons
All	35%		15%*	21%*	31%
By Income
≤138% FPL	34%		29%	—	32%
139-400% FPL	39%		23%	—	—
>400% FPL	—		8%	—	—
NOTES: “–“: Estimates with relative standard errors greater than 30% or unweighted cell sizes below 30 are not provided. Excludes people covered by other sources, such as Medicare, VA/CHAMPUS, or other state programs. *Estimate statistically significantly different from uninsured estimate at the 95% confidence level. SOURCE: 2013 Kaiser Survey of Low-Income Americans and the ACA.

Though it is not surprising that many low-income families are in a precarious financial situation, it is notable that low-income adults who lack insurance coverage or who were covered by Medi-Cal before the ACA are more financially unstable than their privately-insured counterparts. Historically, Medi-Cal coverage for adults was targeted to those with the greatest need, and this role is reflected in the fact that they face similar financial challenges as their uninsured counterparts. While insurance coverage can provide financial protection in the event of illness or injury, it is not curative of all of the financial burdens faced by low-income families. Given their overall situation, health insurance alone may not lift low-income people out of poverty, and many low-income adults may continue to face financial challenges even after gaining coverage. However, gains in coverage under the ACA may address some of the consequences of financial instability among low-income families, and linking low-income adults with other support systems may help address the broader financial challenges that they face.