The Cost Of Individual Health Insurance In Colorado
I just finished reading a Newsweek interview with Katherine Swartz, a Harvard professor of health policy and economics who is well versed in insurance. Swartz answered questions about the McCain and Obama health care reform proposals, shedding light on the differences between the two plans. She points out that both plans have funding shortfalls, and given the financial situation in the US right now, it’s unlikely that either one would get off to a strong start next year. Her estimation is that McCain’s proposal would result in about 21 million people losing employer-sponsored coverage in the first year, but that about the same number of people would buy individual health insurance with the tax credits McCain is proposing. But as time goes on, Swartz sees the number of uninsured Americans increasing under McCain’s reform proposal.
Obama’s plan isn’t perfect – it would still leave some Americans without health insurance. Swartz predicts about 6% of the under-65 population would be uninsured, compared with the current 17%. So while there would still be people falling through the cracks, things would likely be much better than they are today.
One part of the interview that caught my attention was when Swartz detailed the costs of health insurance, compared with the tax credit that McCain is proposing. McCain’s plan would give a tax credit of $2500 to individuals, and $5000 to families, to use to purchase individual/family health insurance. Swartz contends that those amounts are not high enough, saying “For a family, insurance premiums in the nongroup markets are typically above $700 a month, and that’s with a deductible of at least $5,000.” I thought that sounded a little high, at least for the Colorado market. I used the Colorado Health Insurance Insider’s instant quote tool to get quotes for a hypothetical Denver family, with 40 year old parents and two children. I picked a total of eight policies from Aetna, Anthem Blue Cross Blue Shield, Humana, and United Health Care. From each company I chose one HSA qualified policy with a deductible of about $5000 for the family, and one traditional policy with copays for doctor visits and a deductible of between $2000 and $5000 per person. The average price for the eight policy options for this family was $428/month. Far lower than the “above $700″ referenced in the article. Of course Colorado – like most states – uses medical underwriting on individual health insurance policies. And if underwriting were no longer allowed on Colorado policies, we could very well see the average family premium exceed $700/month. But for now, $5000 goes a long way towards paying for a health insurance policy in Colorado.
Of course for people who are not able to qualify for a medically underwritten policy, it doesn’t matter whether the coverage is affordable or not, since it’s not available for them. We do have Cover Colorado, but the premiums are significantly higher than they would be on a similar underwritten policy. Instead of charging higher premiums to everyone on individual policies (and thereby increasing the number of people who are unable to afford coverage and are forced to become uninsured), how about instituting a federal subsidy to help lower the premiums on state high risk pool health insurance in order to bring the premiums more in line with private health insurance? A federal high risk pool would be a good idea too, instead of the state-by-state pools that we have now (especially since some states don’t even have high risk pools available for residents unable to qualify for individual health insurance). There are lots of ways to attack the problems in our health care system. But a significant premium increase on currently-underwritten health insurance is only going to drive more people out of the market, and runs counter to the stated goal of expanding health insurance coverage and health care access for everyone.
Louise:
The premiums you quoted on individual health insurance are the rates charged after proving health, for only the first year.
My experience in Texas has been that annual increases on health premiums are generally higher than annual premiums on yearly renewable term insurance.
Thus,depending on age, and the length of time the policy has been in force, premiums tend to double about every 7 years.
My premium on an individual policy was 40% higher in year 11 than a similar policy from the Texas High Risk Pool.
Don Levit
The online quotes for individual health insurance are an absolute waste of screen pixels. The quotes don’t include medical underwriting and they almost always end up significantly higher.
There is no reason to believe the Obama plan will cover any more people than the McCain’s. It’s more of robbing Peter to pay Paul, IMO. I am hoping there is NO money left after the bailout for health insurers. Let’s let the health insurance self implode so we can start over.
Don,
The problem with yearly renewable term insurance is that you have to continue to prove insurability year after year, and each year you essentially have a new policy, which does not cover pre-existing conditions (at least that’s how they work here in Colorado). So while the price may be lower, you’re essentially never covered for more than a year for any given condition, since the policy keeps expiring.
With individual health insurance, once you have a policy in force, it will stay in force as long as you continue to pay the premiums. I agree that the rate increases have been outrageous (Jay and I were paying double the premiums we were paying five years ago, even before we added our son to the policy). But the upside is that we don’t have to keep going through underwriting year after year. When we compare individual health insurance premium increases with those in the small group market over the last several years, they have been very similar.
For Health,
About half of our clients end up with exactly the quoted premiums and no exclusions once the underwriting is completed. So for them, the quoted prices are meaningful. Because we work closely with our clients to understand their specific health conditions and figure out which carriers – if any – are likely to offer the best coverage at the best price, we can help the other half of our clients end up with the best options available. And if no carriers will accept a client, we help them navigate the Cover Colorado system and get a guaranteed issue policy.
Louise:
Did you go through underwriting after your premiums doubled?
If so, was it with your present insurer or a new insurer, or was there a significant difference by doing so?
Don Levit
Don,
We switched to an HSA in 2007, with the same carrier we had been with since 2003. They did underwrite the HSA, but there had been no changes in our health status in the four years we had been with them, so the underwriting was no different. Over the years, we’ve checked rates with other carriers every year, but rates have been increasing for all plans, so there was never a better option. We will continue to shop around each time we get a rate increase.
Louise:
I can understand how your insurer would provide a discount for proving your health.
However, that process is no different than what other insurers are offering in Colorado, correct?
Or, did you say previously that proving health to get a lower premium does not work that way with Blue Cross (Anthem) in Colorado?
For example, the rate they charged your family 5 years ago would be a similar rate for a similar policy that you started today?
Don Levit
Don,
Our current insurer, Humana, works the same as Blue Cross for policies that are actively marketed. So the price we pay today on our policy five years in, is the same as we would pay if we were signing up for the policy today. But our current policy was discontinued this year and replaced with a new HSA, so it remains to be seen what our rate increase will be going forward.
Louise:
When you wrote that your current policy was discontinued, are you saying that they were not accepting any new applicants?
Does that mean the number of participants would dwindle over time?
If so, for those who could not switch plans or carriers, wouldn’t their premiums increase a lot more than if new applicants were entering?
Don Levit
I am an unemployed, 63 year old, female, Currently have insurance through Kaiser which I retained following COBRA. Premiums are $670. per month.
The annual out of packet max is $3,000., premiums are $8,040. per year. I will soon be unable to afford the premiums.
It appears that the $2,500. credit to individuals under the McCain plan is not sufficient in my case.
@forHealth:
Exactly. It is not like going to McDonalds, Home Depot, or any of the examples the libertarians will associate health care with in their examples of a free market system.