In this episode, we are joined by Andrew Hurst, data writer for ValuePenguin, to discuss their survey on Americans that have chosen to scale back or eliminate various types of insurance in 2020.
Highlights of this episode include:
- Background on ValuePenguin’s survey of over 1,000 Americans from different generations.
- What type of insurances were most likely to be scaled back or cut entirely by Americans in 2020?
- How income and employment status contributed to decisions on scaling back or eliminating insurance.
- What Americans did with the money they saved from cutting back or eliminating insurance.
- Why more than half of those who reduced insurance coverage in 2020 regretted doing so.
- And more…
Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast®. Over the past year, many Americans have chosen to scale back or eliminate various types of insurance, including health insurance. To tell us about this trend. I’m joined by Andrew Hurst, a data writer at ValuePenguin, who recently wrote about a survey they conducted that looked at this issue. Andrew, welcome to the show.
Andrew Hurst: Hi. Thank you for having me.
Mike: Great for you to be here. Andrew, let me start out. Can you tell us a little bit about what you were looking at with this survey and who you surveyed?
Andrew: Yeah, definitely. So we interviewed more than 1,000 Americans from different generations. We wanted to get a broad demographic sample, so we interviewed everyone from boomers to people from Gen Z. The respondents comprised nearly equal numbers of men and women. And while our demographic sample admittedly skews a little bit more millennial, each generation was statistically significantly represented. So from our perspective, we were thinking about a way to approach the sort of unique beginning of the year. Obviously, this year is different because of coronavirus. Right? But in the past, we’ve seen many Americans pay maybe extra attention to their finances at the start of the new year. That’s pretty common. The start of a new year means a chance for people to sort of internally reset and think about where they’re spending their money. Right? However, the new coronavirus pandemic has sort of complicated what’s been a recurrent process for most people in the past. Right? I’m sure you can imagine, if a household has lost a job or an income because of the pandemic, it’s going to be a lot harder to add coverage if they have to for their insurance, for example. So we theorized that at least some people are going to be doing the opposite, something that they might not usually do, which is cut back specifically because of the coronavirus pandemic.
Mike: It makes sense. And people have different types of insurance and we’ll talk about that here. What types of insurance were they most likely to cancel or pare down?
Andrew: Sure. They certainly do have different types of insurance. And just a little bit of maybe background before I go into the answer. So most people will have auto insurance because they’re required to have it to drive legally in most states. Mortgage lenders, for people who maybe aren’t homeowners who don’t know, mortgage lenders actually require you to get home insurance for their homes, because they view it as sort of an investment that has to stay solvent over the course of your loan. Right? But even people who have paid off their loans don’t forego their homeowner’s insurance in large numbers. I think at last check, something like more than 90% of homeowners have home insurance coverage, including those that have paid it off. But this is all to say that these people should have been unlikely to reduce these types of coverages, but that’s not actually what we found. While it was true that a few people dropped or reduced their homeowner’s insurance coverage, about 39% of all people who considered dropping coverage did, in fact, drop one form of insurance at least. But compared to that 39%, just 20% cut down on their home insurance. So not very much. Right? Not very many people eliminated their home insurance. This is much less than the amount of people who, for instance, cut back on their health. And we found that 40% of people actually eliminated their health insurance completely of the people– of that 39% who either reduced or eliminated at least one form of insurance. And that’s followed by 36% of those people who cut back on their auto. 26 for dental and then another 22 or so for life. But this makes sense from at least one perspective. The pandemic has forced people home, right? A lot of people have been working from home for an entire year at this point, or at least close to it. So it eliminates the need for the bulk of their commutes. But, yeah, it’s possible that they’ve cut back on insurance because they’ve been able to commute either using a friend’s car or getting carpools. But the point that I’m making, I guess, is that the situation has uniquely changed this year and it’s allowed people to reimagine where they can cut down on their expenses. But I really want to talk about that 40% health– the 40% of people who cut back on their health insurance in the past year.
Mike: Yeah, let’s do that. I mean, there’s certainly some reasons people would do that. Obviously, some may have lost it due to it being attached to their employer. But it’s also, I guess you could say, one of those optional insurances, right? In some ways where you may be mandated to have auto or home, health, you can still make that choice by and large or pay a small penalty. Well, there used to be pay a small penalty, I guess.
Andrew: Yeah, sure. And you can see sort of a decision-making process being made with regard to health insurance when we start to talk about income.
Mike: Yeah, so let’s talk about that, too. So did income or employment status affect their decisions around this? Did you find any anything notable there?
Andrew: Yeah, the data suggests– so, especially this is most evident in our analysis of health insurance numbers. So earlier I mentioned that our respondents eliminated health insurance in large numbers. Of those, 39% of all Americans who say that they cut down on at least one type of insurance, 40% actually completely eliminated their health care coverage, and another 43% just took off a bit of insurance without eliminating the whole thing. We asked people specifically who were affected by COVID-19 financially. And among those whose incomes were affected by COVID-19, 44% eliminated health care coverage and 46% cut down. So you’re seeing already an increase there from that initial 40%. And it’s likely that some of the people who eliminated this health care coverage actually lost their health insurance coverage through work, right? Where 44% of those who eliminated at least one form of coverage and who lost a job because of COVID did away with their health insurance, this number falls to just 28% of those who did not lose a job but suffered less hours or they had a salary reduction. So you’re seeing that the people who didn’t already have insurance through their job, they’re eliminating their coverage at a much higher clip than those who still have their job and maybe still are getting employee-sponsored benefits, but who are working fewer hours in a week. It’s telling us that people are pretty hesitant to eliminate their coverage unless they have to. When we asked about whether they’d eliminated or cut down on insurance before looking for other ways to lessen expenses, about 75% said that they were looking somewhere else first. So that’s to say, people are just looking to get rid of their insurance. They appreciate the value that it adds from a risk perspective so that number, that 75%, actually climbed to 81% of those who cut down on at least one form of coverage and lost their jobs. So people who lost their jobs were even more hesitant to cut down on insurance. We also took a look at income, not just people who were affected, or who were not necessarily affected by coronavirus. We found that wealthier people actually cut down on their insurance at higher rates than other people. So we looked at household income and found that those making a combined $100,000 per year eliminated their health care coverage at about 58%. Again, that’s of the 39% who said that they eliminated at least one form of coverage. So 58% completely eliminated health of those making over $100,000, and another 29% eliminated life. And both of those are higher than what was typical. Now, at the same time, this could be due to loss of employment. But, as I think I alluded to earlier, it could be that– it’s a risk analysis. If people are staying home or– committed to staying home more are able to sort of mitigate those risks from workplaces. They may be at a little bit more liberty to cut down on expenses there than other people would be.
Mike: And Andrew, did they give any indication as to what they were using the savings for?
Andrew: Yeah. We definitely wanted to see where this money was going. And it depends upon the household, but generally groceries for everyone– no matter if they lost a job or if they’re making a lot of money or making less money, generally, groceries are taking up the most amount of extra money. Obviously, people have to eat. They still have to supply– put food on the table. But once we got past groceries, usually they’re addressing the debts or somewhere having the ability to put that money towards savings. But those two variables or– I’m sorry, those two outcomes were sort of more impacted by the different financial situations. If I could dive a little bit more deeply into that, we found that those incomes who– those whose incomes weren’t affected by the pandemic put most of the money that they saved into groceries. And they did this at about 29% clip. Those people said that they primarily spent that money on groceries. And following closely behind that, those people whose incomes weren’t affected by the pandemic, about a quarter of them, said that they devoted that money to savings. These people also paid off debts at a higher rate than average. The people whose incomes weren’t affected, about 24%, devoted their money primarily to paying off debts. Nationwide, for all people, that was about 21%. So there’s a three-percent increase there. But with those who lost income, there’s another story. Those who lost their job because of the pandemic were mostly likely to put the money that they saved towards paying off debts or groceries. They didn’t have as much ability to put it into savings. About half of this demographic– again, those who lost some of their income or lost their jobs, that half of this demographic used their money to primarily pay off debts and groceries. It was about 25% distribution both ways. And among those who lost just a portion of their salaries or hours, 60% of those people put the bulk of the money that they saved from cutting towards groceries and savings. So finally, among households that were making the most amount of money per year, those people making about– oh, I’m sorry. Those making the least amount of money per year, they definitely tended to prioritize groceries and paying off debt at a much higher rate than typical. About 39% of those making less than $25,000 as a combined household, about 39% of those people put their insurance savings to groceries. Again, a large jump from where it was for most people. And about one-fourth of those people who were making a combined less than $25,000 devoted their savings to debt. Similarly, those making between 25 and $30,000 as a household, paid off their debt at about 34% and their groceries at about 30. So I guess to reiterate, while it depended upon the household– the distribution– they were certainly most likely to use their savings from insurance to pay off groceries and then other necessaries like debts, and finally put a little bit toward savings if they could if they already had some more disposable income.
Mike: So necessities. Makes sense.
Mike: Andrew, did people regret canceling their policies? Did they express any desire to restore them at some point?
Andrew: For the most part, yeah, they did. There was a lot of regret. As I sort of touched on earlier, for no group was cutting back on insurance really an easy decision. About three and four said that they looked elsewhere. But yeah, for the most part, 63% said that they regretted cutting back or eliminating coverage, and this number jumped up for those who were laid off. 77% of those who lost a job said that they regretted eliminating coverage. So that disparity there tells me that it wasn’t completely voluntary. They would have liked to have that employer-sponsored healthcare maybe, or they would like to continue having the protection that insurance generally offers. But they’re having to buy those necessaries like groceries. And then 64% of those who lost income felt the same, that they regretted it. So those are both up from that 63 for just all people who did cut insurance. By comparison, just 41% of those whose livelihoods were affected by it the pandemic had the same feeling. So that’s a pretty momentous drop, right? From 63 from everybody to 41% of those who had not lost a job or income because of a pandemic. You can tell that maybe they might have been thinking about it for longer or were able to sort of make a more free decision about their financial situation. So it makes sense that they’re a little less likely to regret it. So those who lost their jobs are actually the most likely to claim that they plan to restore the coverage in the future. Across all people who cut insurance 52 said that they would restore it in the future and this increased to 59% for those who lost their jobs. But again, it fell to about 48 to those– 48% of those people who just said that they had their hours reduced. And I guess to put that in context, while about 10% of people who cut their coverage back said that they would not be restoring it, more people who weren’t financially impacted by the virus don’t seem to plan to restore coverage in the future. Again, while 10% said that– while 10% of people who cut their coverage back said they would not be restoring it, 19% of these people who weren’t financially impacted don’t think that they will restore their coverage. So, again, you see there that the decision is a little bit more self-determined, I guess. But interestingly, the number is similarly high for those that had to cut back, but who are making less than $25,000 a year. I think one can surmise that they’re being presented with the savings opportunity that they didn’t have, and it would be financially difficult to restore that coverage in the future.
Mike: Well, we’re certainly in unusual times, Andrew, if someone wanted to read the survey results in detail, where can they go?
Andrew: Yeah, if they wanted to read more, they should go to valuepigeon.com/cutting-insurance-costs-to-save-money, all separated by hyphens. And they could also submit a media request if they have more specific questions, and I could answer those for them.
Mike: Well, that’s much appreciated, Andrew, and thank you very much for coming by the Hospital Finance Podcast today.
Andrew: Yeah, thank you so much for having me. It was a pleasure.