A Report from Families USA, May 2009

Hidden Health Tax:
Americans Pay a Premium

INTRODUCTION

As the number of Americans without health insurance continues to rise, so too do the costs borne by those who have coverage, who face what might be called a “hidden health tax.” Private health insurance premiums are higher, at least in part, because uninsured people who receive health care often cannot afford to pay the full amount themselves. The costs of this uncompensated care are shifted to those who have insurance, ultimately resulting in higher insurance premiums for businesses and families.

During 2007 and 2008, one out of every three non-elderly Americans—86.7 million people—went without health insurance for some period of time. When those who do not have health insurance get sick, their first response is often to avoid or delay seeking care due to the cost.

When the uninsured do obtain care, they struggle to pay as much as they can afford. Often, however, the uninsured cannot afford to pay the entire bill, and a portion of it goes uncompensated. To make up for these uncompensated care costs, doctors and hospitals charge insurers more for the services provided to patients who do have health coverage. In turn, the costs that are shifted to insurers are passed on  in the form of higher premiums to consumers and businesses that purchase health coverage.

This cost shift to health insurance premiums is a “hidden health tax.” To quantify this “tax,” Families USA contracted with Milliman, Inc., an independent actuarial consulting firm, to analyze federal Medical Expenditure Panel Survey (MEPS) data and data from other federal and private sources. Based on these data, Milliman estimated the total national cost of uncompensated care provided to the uninsured, and it quantified that amount spread across the privately covered, non-Medicare, non-Medicaid population.