The Affordability Of Individual Health Insurance
A recent study by eHealth Inc. seems to indicate that the individual health insurance market is quite affordable, especially when compared with the group health insurance market. The study on individual health insurance is large, with a sample of over 227,000 individual health insurance policies that were active as of the summer of 2007. Some of the findings include:
- average premiums for individuals: $158/month (up from $148 in 2006)
- average premiums for families: $366/month
- average individual deductible: $1972
- average family deductible: $2610
If we look at the detailed findings of the study, Colorado has average premiums below the national rate, at $141/month for an individual. The high end of the scale mentioned in the article is for states like NY that don’t allow medical underwriting on individual health insurance policies. The result is that everyone gets covered, but everyone pays more. Colorado has laws regarding individual health insurance that are very similar to most other states – medical underwriting is permitted, and premiums can be based on health history. My own family has a health insurance policy with an annual premium of $5976, and a deductible of $3000 (unfortunately both a bit higher than the average found in the study). But it’s still a lot better than paying $12,000/year for a group policy.
While this study does make the individual health insurance market seem pretty rosy, there are a few issues that deserve a mention. Although a huge number of policies were sampled, the nature of the research meant that the policies had to be issued and in force in order to be included in the study. So only people who were healthy enough to be issued policies in the individual health insurance market were included (plus those in a few states like NY where individual policies are guaranteed issue). The results obviously don’t include those who were declined or had to obtain coverage through a state high risk pool (typically a much more expensive option). So while the individual health insurance market is great for healthy people looking for an affordable option for health insurance, the options are limited or non-existent for a lot of people with serious pre-existing health conditions.
The other issue is coverage. A deductible of $1972 for an individual and $2610 for a family might seem pretty high to people who are used to comprehensive group health insurance coverage. Deductibles have been steadily creeping up on group policies as employers seek to curb costs, but these numbers are still higher than most people are accustomed to. Maternity care is another factor that might catch a lot of people by surprise in the transition to individual health insurance. Maternity is one part of a group health insurance policy that a lot of women plan to use, as opposed to most parts of our coverage that we hope we never need. But in the individual health insurance market, maternity coverage is hard to find. Here in Colorado, there are only three carriers – Rocky Mountain Health Plans, Assurant, and Golden Rule/United Healthcare – that offer maternity coverage at all.
So while the numbers in this study do indicate that individual health insurance is a relatively affordable option, there’s still a whole group of people who are uninsurable in the individual market because of their health history. And the trade off with an individual health insurance policy is that your out of pocket expenses might be higher than you’re used to. But the upside is that if you’re healthy there are plenty of affordable options available, and in the event of a serious health problem, an individual health insurance policy will protect your assets. Which is why we have health insurance in the first place.
Louise:
Did the study have any statistics on renewal premiums?
Here in Texas, it is not unusual for renewal premiums to be higher than the initial premiums for a family of similar demographics, particularly if the policy has been in force for several years.
While it is beneficial to have individual health insurance in the event of a serious health problem, it would also be appropriate to have premiums which encourage those with serious health problems, after the policy was issued, to remain with the insurer. Why should long-term customers be penalized by paying premiums higher than those with similar demographics just entering the pool?
Don Levit
Insurance in general is a little spendy. It’s a good idea to look around and compare companies and their plans before making a decision.
@Insurance: good point.
In Texas, this needs to be done every 3-5 years in order to obtain the “new customer’s” discount.
Where is the security of equitable premiums after the serious illness develops?
Don Levit
@Don Levit:
That is a good point you make and it is addressed in our FAQ page with this question. Basically, what it says is that Anthem Blue Cross, Humana, and Kaiser are the only companies that don’t penalize those that have been on a plan for years by having different rates. But there is more to that, and it is addressed HERE. Basically, what that says is that Anthem Blue Cross is the only company we’ve seen that hasn’t yet practiced “sunsetting” of plans leaving a pool of people with a certain plan without any new people coming onto it.
@Insurance:
All links in the comments are automatically tagged with “rel=nofollow” – so continually leaving worthless comments does you no good.
@Jay:
You are a mensch (that is a compliment)!
Very few agents will go to the lengths you do, that look at the fine print, in order to better serve his clients.
Anthem Blue Cross continues to accept new applicants.
I am curious if the stream of new applicants dwindles, in favor of the newer, possibly more popular plans?
Or, might the benefits change, or the network not be as extensive?
Is it usually, then, not beneficial for those who want long-term protection to switch from Anthem?
Don Levit
@Don Levit:
I consulted Google and confirmed that was a compliment, thanks!
And yes, good point. Anthem Blue Cross introduces new plans like Smart Sense, Tonik, etc, so that will dilute the number of people signing up for legacy plans still being sold, like the Blue Preferred PPO. And, I can’t be sure they won’t be sunsetting plans in the future (I wonder if they could guarantee that – I’ll ask). It’s just that I haven’t seen them do it yet. A couple years ago they switched from their own HSA product to the better “Lumenos HSA,” they let everybody with the old HSA switch to Lumenos with no underwriting.
But atleast somebody who signed up for a Blue Preferred plan in 2001 and got stuck on it because of a cancer diagnosis in 2002 isn’t sitting there in a pool with NO new applicants and only people who are healthy leaving the pool.
Well, it turns out Anthem Blue Cross is sunsetting half of the Blue Preferred plans, all of the Right Plan 40 plans, all of the HIA plans, and half of the HSA plans. Some Anthem Blue Cross clients are seeing rate increases of more than 50%.
I think you jinxed those people with cancer on the blue preferred plans.
Jay:
How were you able to discern this information?
Did Blue Cross provide the material, or did you have to do some investigative work?
Are these premium increases for renewals on the closed blocks?
If so, how does this compare to renewal premiums on the blocks that are still open?
Don Levit
@Don Levit:
It appears the larger rate increases are only on the closed blocks.
Jay:
That would make sense.
It seems like Blue Cross is properly anticipating what will happen in a closed block of business.
With no new, healthy blood entering the closed block, there are no additional premiums to help subsidize those experiencing claims.
If my synagogue disallowed new members, it would be wise to start raising dues, if simlar services were provided.
Don Levit
@Don Levit:
That is their plan. Insurance companies don’t profit as well if they keep marketing a pool forever. It’s a better game to discontinue blocks then start new blocks in order to continually trap the people that have been diagnosed with health conditions since signing up. They can’t go anywhere, but the healthy people can. In time, their premiums will be the only $$ paying for their claims and you can offer the new policy blocks at a lower price.
Keeping insureds for the long term is not the business model used.