Bet on the “Over” not the “Under” – Commonwealth Offers an Incomplete Picture of Under-and-Over Insurance

new survey by the Commonwealth Fund found that the number of Americans without health coverage has fallen to historic lows[i]. The same survey concluded that “a large number of people remain uninsured or inadequately covered.” Of the 6,301 survey respondents who were under age 65:

  • 9% are not enrolled in health coverage[ii]
  • 11% had a gap in coverage (changing employers, eligibility, etc.)
  • 23% were “underinsured”

What the survey fails to confirm is that most American’s who are enrolled in employer- sponsored coverage are over-insured. That is, the survey ignores employee-paid premiums or contributions.

Over Insurance in Coverage

Consistent with Liberty Mutual’s tag line, a worker should select health coverage so that they “only pay for what you need.”

More than 50% of Americans spend less than $400 a year on medical services.[iii] Excluding older Americans (age 65+) and those in poor health/disabled, it is estimate that nearly three-fourths of all Americans spend less than $500 a year on medical services.

Unfortunately, many workers let their biases control consumer decision-making. We tend to be risk-averse when not prepared. Biased decision-making leads many to purchase more insurance than needed.

In dismissing Liberty Mutual’s guidance mentioned above, a Los Angeles-based trial attorney who concentrates on insurance company bad faith litigation suggests that “(Liberty Mutual) is implying that other insurance companies will automatically sell coverages that are not needed, which is complete nonsense.”

What biases are in play that prompt individuals to over-insure?

  • Recency and availability, where recent adverse events (having to satisfy a deductible) are prominent
  • Possibility, where a negative outcome is possible (having to satisfy a deductible) but not probable
  • Attentional, clue-seeking, focusing coverage on point of purchase cost sharing (deductibles, copayments, coinsurance, out of pocket expense maximums) instead of total costs (e.g., the Health Reform mandated disclosure, Summary of Benefits and Coverage)
  • Uncertainty, just-in-case thinking
  • Loss aversion, losses are perceived to be more impactful than an equal amount of gain
  • Commitment, confirmation a status quo, confidence in prior decision-making

Further, many employers “nudge” workers to over-insure by limiting the coverage choices:

  • Framing, naming coverage options based on the deductible
  • Commitment, confirmation and status quo, retaining the existing options and defaulting individuals to their current coverage election when introducing new choices

Most employers fail to offer coverage that would enable workers to prepare for the future. Medical spending increases as we age. Yet only 17% of surveyed employers offer the only option that allows workers to save on a tax-favored basis for future medical expenses – Health Savings Account-capable coverage.[iv] For the past 20 years, most workers have been denied access to HSAs, America’s most valuable benefits tax preference.

Uninsured or Gaps in Coverage

In 2014, Health Reform introduced taxpayer subsidized exchange coverage and a Medicaid expansion. Today, failure to enroll or a gap of coverage is a voluntary decision, prioritizing other household needs, wants. First introduced in 2014, enrollment in taxpayer subsidized public exchange coverage is approaching 15 million Americans. Since passage of Health Reform in 2010, the number of Americans covered under Medicaid has grown from 56.5MM to 89.4MM, or an increase of 56%.[v] As the Baby Boomers retire and age into Medicare, during the same period, the number covered under Medicare has increased from 44 Million to 59+MM, or over 33%.

The number with gaps in coverage is a modest percentage relative to the extraordinarily high levels of post-pandemic turnover and the very low labor force participation rate.[vi]

Underinsured – Using An Arbitrary Definition

The Commonwealth study defined underinsured as one or more of the following:

  • For those with household income greater than 200% of the federal poverty level, out of pocket costs, excluding premiums/contributions, of 10+% of household income
  • For those with household income of 200% of the federal poverty level or less, out of pocket costs, excluding premiums/contributions of 5+% of household income
  • A deductible equal to 5% or more of household income

For example, a worker who had many choices but selected the coverage option with the lowest premium/contribution and the highest deductible could be “underinsured.” They defined this as electing coverage that “doesn’t enable affordable access to health care.”

By ignoring affirmative elections in selecting coverage, and by excluding employee contributions and premiums, as well as employer contributions to Health Reimbursement Accounts (HRAs) or Health Savings Accounts (HSAs), this survey provides an incomplete picture. According to Kaiser, employer contributions to HSAs vary from $0 to $1,200+, and to the HRA, an average of $1,400+.

Median annual earnings in 2020 was $56,287 in 2020 for those who worked full-time, year-round. Using the third prong of the above definition, that would mean Commonwealth defines underinsured as up to half of all Americans (at the median or lower wage) if they have a deductible of $2,000.

Over the past 50 years, healthcare spending has nearly tripled as a percentage of the economy (Gross Domestic Product). So, while a $2,000 deductible seems high, for comparison, a $100 annual deductible in 1970, adjusted for the increase in health care spending over the past 50 years (from $353 per person to almost $14,000 per person), would exceed $4,100 in 2022.

The best timing for adding HSA-capable coverage is coming up quickly – December 1, 2022

No, not January 1, 2023. If you already offer HSA-capable coverage, consider changing your default for the upcoming annual enrollment.

As your partner, aequum helps lower costs, achieve savings and support your plan member experience and success in 2023 and beyond. Please contact us for additional insight into Health Savings Account capable coverage. For more information, visit

[i][i] The survey was conducted between March 28 and July 4, 2022 covering a nationally representative sample of 8,022 adults aged 19 and older. Data shown here are based on the 6,301 respondents under age 65.

[ii] For comparison, 12.6% of drivers (1 or every 8 people driving on America’s roads) lack auto insurance.

[iii] J. Ortaliza, M. McGough, E. W. Twitter, G. Claxton, K. A. Twitter, How do health expenditures vary across the population? Kaiser Family Foundation, 11/12/21. “… the 50% of the population with total health spending below or equal to the 50th percentile accounted for only 3% of all health spending; the average spending for this group was $374 in 2019. Roughly 14% of the population had $0 in health expenditures in 2019. Health spending is concentrated even within populations with relatively high average health costs. Among people reporting fair or poor health, the top 10% of people with the highest health spending accounted for 50% of total health spending.

Considerable spending variation exists between those who are 65 and over and those under the age of 65, with younger persons experiencing more concentrated health spending. In 2019, just over half of all health expenditures among adults ages 18 through 64 was concentrated in people in the top 5% of total health spending while almost half of all health expenditures among adults 65 or older was concentrated in people in the top 10% of total health spending. Accessed 10/12/22 at:

[iv] Kaiser Family Foundation, Survey of Employer-Sponsored Coverage, 2021, Accessed 10/12/22 at;


-[vi] U.S. employee annual voluntary turnover is likely to jump nearly 20% this year, from a pre-pandemic annual average of 31.9 million employees quitting their jobs to 37.4 million quitting in 2022, according to Gartner, Inc. 37.4MM is 24% (one in four) of the 159MM employed Americans as of August 2022. See:,%2C%20according%20to%20Gartner%2C%20Inc.