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Health Insurance Coverage Gap
Health insurance coverage is a fundamental component of access to healthcare and financial protection against high medical costs.
Over the past decade, significant progress has been made in reducing the number of uninsured individuals in the United States, largely due to the implementation of the Affordable Care Act (ACA) and its Medicaid expansion provisions. However, despite these advances, millions of people remain without health insurance or experience gaps in coverage that leave them vulnerable to unmet health needs and financial hardship.
One of the most critical challenges is the so-called "coverage gap," which primarily affects individuals in states that have not adopted Medicaid expansion under the ACA. As of early 2025, 41 states plus the District of Columbia have expanded Medicaid eligibility to adults with incomes up to 138% of the federal poverty level (FPL), providing coverage to millions who previously lacked access. However, ten states continue to limit Medicaid eligibility, leaving an estimated 1.4 million uninsured adults in this coverage gap. These individuals earn too much to qualify for their state’s Medicaid program but too little to be eligible for subsidies to purchase insurance through the ACA marketplaces.
The coverage gap disproportionately affects vulnerable populations, including adults without dependent children, people of color, and individuals with disabilities. Most adults in the coverage gap are part of working families, yet they remain uninsured because their incomes fall within this narrow eligibility void. The uninsured rate in non-expansion states is nearly twice that of expansion states (14.1% vs. 7.6%), and uninsured individuals face significant barriers to accessing care. Nearly one in four uninsured adults report not receiving needed medical treatment due to cost, and they are less likely to receive preventive services or treatment for chronic conditions.
Young adults, who often experience transitions such as leaving parental coverage or changing jobs, are particularly vulnerable to coverage gaps. In 2025, about 3.6 million young adults are projected to be uninsured, with a substantial portion eligible for Medicaid or marketplace subsidies but not enrolled. The complexity of eligibility rules and administrative hurdles contribute to persistent uninsurance in this group.
Mental health coverage represents a critical and often underrecognized dimension of the insurance coverage gap. Even among those with insurance, access to mental health services is frequently limited by provider shortages, insurance denials, and administrative barriers. Studies show that nearly two-thirds of Americans diagnosed with mental health conditions in 2021 were unable to access treatment despite having insurance. This gap exacerbates health disparities and underscores the need for targeted policy interventions.
The persistence of the coverage gap highlights the ongoing challenges in achieving universal health coverage in the U.S. and underscores the importance of policy efforts aimed at expanding Medicaid, improving marketplace affordability, and addressing barriers to care for both physical and mental health needs. This report examines the causes, impacts, and potential solutions to the insurance coverage gap, with a focus on how it affects diverse populations and health outcomes.
Causes of the Coverage Gap
While the introduction outlined the broad contours of the insurance coverage gap, this section delves deeper into the underlying causes that perpetuate this persistent problem.
A key driver of the coverage gap is the refusal of ten states to expand Medicaid eligibility under the Affordable Care Act. This decision creates a narrow but critical income band where adults earn too much to qualify for traditional Medicaid but too little to access subsidies for marketplace insurance. This gap is geographically concentrated, with states like Texas, Florida, and Georgia accounting for nearly 75% of the affected population.
Beyond geography, the demographics of those in the coverage gap reveal significant disparities. Approximately 80% are adults without dependent children, a group often excluded from Medicaid in non-expansion states. Moreover, about 60% of individuals in the gap are people of color, reflecting systemic racial inequities in healthcare access. Many are part of working families employed in low-wage, part-time, or unstable jobs that typically do not offer employer-sponsored insurance. This employment context contributes to persistent uninsurance despite active labor force participation.
Administrative and economic barriers further exacerbate the problem. In many non-expansion states, individuals with incomes below 100% of the federal poverty level (FPL) are ineligible for both Medicaid and marketplace subsidies, creating what is often called the "coverage cliff." Even for those above this threshold, high premiums, deductibles, and copayments can make insurance unaffordable. Complex eligibility rules, paperwork requirements, and lack of outreach also hinder enrollment.
Employment-based coverage remains the largest source of insurance in the U.S., yet many workers in sectors such as retail, hospitality, and construction lack access to employer-sponsored plans. Part-time and gig economy workers are particularly vulnerable, as they often do not meet eligibility criteria for employer coverage or public programs. This dynamic is clearly reflected in the distribution of adults ages 19–64 in the coverage gap by industry.
By highlighting the specific industries most affected, this data underscores the importance of targeted policy interventions to expand coverage options for workers outside traditional full-time employment.
Finally, structural factors rooted in historical and systemic inequities contribute to the coverage gap. Policies and social determinants of health have created a fragmented system where marginalized communities disproportionately experience gaps in coverage and access. Addressing these root causes requires targeted policy interventions and sustained commitment.
Economic Costs of Inaction in Healthcare Coverage
The economic impact of inadequate healthcare coverage is profound and multifaceted, affecting individuals, employers, insurers, and the entire healthcare system. When people lack timely access to affordable and comprehensive care, the consequences extend far beyond individual health outcomes, imposing substantial financial burdens on society.
Globally, untreated or poorly managed health conditions, including chronic diseases, acute illnesses, and mental health disorders, are projected to cost trillions of dollars in direct and indirect expenses in the coming decades. In the United States, the cost pressures are especially acute. For example, depression alone accounts for over 200 million lost workdays annually, translating into productivity losses exceeding $44 billion. When combined with other chronic conditions such as diabetes and cardiovascular disease, the cumulative effect on workforce productivity and healthcare spending is staggering.
Employers face rising healthcare costs that strain budgets and threaten the sustainability of employer-sponsored insurance. According to recent analyses, employers expect healthcare costs per employee to increase by approximately 6.7% to 9% in 2025, pushing the average annual cost of coverage above $16,000 per employee. These rising costs often lead to higher premiums and cost-sharing, which can discourage employees from seeking care or maintaining coverage.
For insurers, gaps in coverage lead to delayed care and more severe health complications, which increase claims costs. Individuals without adequate insurance often postpone treatment until conditions worsen, resulting in higher hospitalization rates, longer disability periods, and more complex care needs. This is especially true for those with coexisting physical and mental health conditions, which amplify healthcare utilization and costs.
The uninsured population itself is substantial and growing under certain policy scenarios. Approximately 1.4 million adults remain in the Medicaid coverage gap in ten states that have not expanded eligibility. Moreover, if recent legislative proposals to extend enhanced subsidies and Medicaid expansions do not pass, estimates suggest that the uninsured population could increase by 8 to 9 million people, further exacerbating economic and health system pressures.
The broader economic consequences of inadequate coverage include reduced workforce productivity due to absenteeism and presenteeism, increased uncompensated care costs for hospitals, and heightened financial strain on public budgets. Half of Americans report delaying care due to cost, which leads to worsening health conditions and higher long-term expenditures. This vicious cycle drives up insurance premiums and out-of-pocket costs, creating barriers to access that disproportionately affect low-income and marginalized populations.
Who Experiences Coverage Gaps? Demographic and Geographic Analysis
The insurance coverage gap in the United States disproportionately affects racial and ethnic minorities, reflecting persistent systemic inequities in access to healthcare. In 2023, people of color accounted for approximately 60.4% of the uninsured population, despite representing only about 38.7% of the total U.S. population. Hispanic individuals alone made up over 41% of the uninsured, followed by Black Americans at 12.5%, and Asian Americans at 3.7%. In contrast, White Americans constituted 37.1% of the uninsured, a share lower than their proportion of the population.
Uninsured rates vary significantly by race and ethnicity. Hispanic and American Indian/Alaska Native (AIAN) populations face the highest uninsured rates at 17.9% and 18.7%, respectively, more than two and a half times the rate for White individuals, who have an uninsured rate of 6.5%. Asian Americans have the lowest uninsured rate at 5.8%. These disparities have persisted over time, underscoring the need for targeted interventions to close coverage gaps among minority populations.
Age and family composition also influence coverage status. Adults aged 19 to 64 are more likely to be uninsured than children, with uninsured rates of approximately 11.1% for adults versus 5.3% for children. Notably, about 80% of uninsured adults do not have dependent children, a group often excluded from Medicaid eligibility in states that have not expanded the program. This exclusion exacerbates coverage disparities, especially in non-expansion states.
Geographically, the uninsured population is concentrated in the South and West regions, where nearly three-quarters (74.2%) of uninsured individuals reside. This distribution aligns closely with states that have not expanded Medicaid, such as Texas, Florida, and Georgia, which together account for nearly 75% of the Medicaid coverage gap population. State policy decisions thus play a critical role in shaping local uninsured rates.
Income and employment status further compound coverage challenges. More than 80% of uninsured individuals live in families with incomes below 400% of the federal poverty level (FPL), and nearly half have incomes below 200% FPL. Despite this, nearly three-quarters of uninsured people live in families with at least one full-time worker, highlighting that many uninsured adults are employed but in jobs that do not provide affordable insurance options.
Health Consequences of the Coverage Gap
The absence of health insurance coverage has profound and well-documented effects on individuals’ access to care, health outcomes, and overall well-being. The uninsured population faces significant barriers to obtaining timely and necessary medical services, which contributes to poorer health and higher rates of preventable complications.
Limited Access to Care
In 2023, nearly half (46.6%) of uninsured adults aged 18 to 64 reported not seeing a doctor or healthcare professional in the past 12 months, compared to only 15.6% of those with private insurance and 14.2% with public coverage. This disparity reflects both financial and structural barriers. Cost is a major factor: over 22% of uninsured adults reported foregoing needed care due to cost concerns, a rate more than four times higher than that of insured adults. Moreover, 42.8% of uninsured adults reported lacking a regular source of care, which further limits their ability to receive preventive services and manage chronic conditions effectively.
Children without insurance also experience significant gaps in care. In 2023, 27.4% of uninsured children had not seen a doctor in the past year, compared to less than 5% of children with public or private coverage. Nearly 10% of uninsured children went without needed care due to cost, a stark contrast to insured children, who reported rates below 1%.
Preventive Care and Chronic Disease Management
Uninsured individuals are less likely to receive preventive care such as vaccinations, cancer screenings, and routine check-ups. This lack of early intervention often leads to the progression of diseases that could have been managed or prevented. Studies show that people without insurance have higher rates of hospitalization for conditions that are typically manageable with outpatient care, indicating delayed or inadequate treatment.
Chronic diseases, including diabetes, hypertension, and asthma, require ongoing management to prevent complications. Uninsured adults with these conditions are less likely to receive recommended care, resulting in more frequent emergency visits and hospitalizations. The lack of insurance also correlates with higher mortality rates; uninsured patients hospitalized for serious conditions receive fewer diagnostic and therapeutic services and have worse outcomes than insured patients.
Mental Health and Behavioral Health Impacts
The coverage gap also exacerbates disparities in mental health care. Uninsured individuals with mental health conditions often delay or forgo treatment due to cost and lack of access to providers. This contributes to worsening symptoms, increased disability, and higher rates of emergency department visits and hospitalizations for mental health crises. Even among insured populations, access to mental health services is frequently limited, but the uninsured face the greatest barriers.
The health consequences of the coverage gap are closely tied to financial hardship. Uninsured individuals are more likely to experience medical debt, bankruptcy, and reduced ability to afford basic needs. Poor health resulting from untreated conditions can lead to lost income, job instability, and reduced quality of life, creating a cycle of disadvantage.
The Mental Health Coverage Gap
Limited Coverage and Persistent Barriers
Despite growing recognition of mental health as a pillar of overall well-being, most standard health insurance policies, both public and private, continue to provide limited coverage for mental health services. Common restrictions include the exclusion of outpatient therapy, strict caps on reimbursed sessions, and lack of coverage for chronic mental illnesses. These limitations create substantial financial barriers, often forcing individuals to pay out-of-pocket for essential care or forgo treatment altogether.
Key findings include:
In many countries, mental health services are not fully covered by public or private insurance, resulting in significant out-of-pocket costs for patients.
Private insurance typically plays only a supplementary role, often covering a narrow set of services and rarely offering comprehensive mental health benefits.
Even among those with private insurance, copayments and deductibles for mental health care are generally higher than for physical health services.
Public insurance tends to offer more generous mental health benefits, but access is still limited by provider shortages and capacity constraints.
Economic Impact of Untreated Mental Illness
The economic consequences of untreated or undertreated mental illness are vast and multifaceted. According to the World Economic Forum, the global cost of mental health conditions, including direct healthcare spending and indirect costs such as lost productivity, will reach $16 trillion by 2030, making it one of the most expensive health challenges worldwide.
For insurers, the consequences are tangible and increasingly unsustainable. Untreated mental health conditions are linked to higher disability claims and longer return-to-work durations. Mental illness often coexists with chronic physical conditions, significantly raising care costs due to increased hospitalizations, medication needs, and complex care coordination.
This creates a feedback loop: insufficient mental health care leads to deteriorating physical health, resulting in higher insurance payouts, rising premiums, and reduced system efficiency. Addressing the mental health coverage gap is thus both a public health and economic imperative.
Market Momentum: Investment and Innovation
The rising economic toll of untreated mental illness has spurred significant investment in mental health solutions. Venture capital and private equity funding in mental health healthtech surged after 2020, peaking in 2021 with over $4 billion in funding. While deal volume has moderated since, 2025 figures remain above pre-pandemic levels, reflecting sustained investor interest. Investments are not limited to direct-to-consumer apps but also include infrastructure that insurers use to expand access, such as virtual clinics, therapist networks, and AI-powered diagnostic tools.
Sources & References
2025 Healthcare Cost Outlook: Key Drivers and Trend Insights
How Many Uninsured Are in the Coverage Gap and How Many Could Be Eligible if All States Adopted the Medicaid Expansion?
Mental Health and ACA Plans: What You Need to Know
State of Health Insurance Coverage in the U.S. 2024 Biennial Survey
