Friday, March 18, 2011

Nerd Friday: On Individual Health Insurance

Individual health insurance markets are the ones where you can buy an individual policy just for you or for your family. Most health insurance in the US is provided through employers as group policies. Individual policies tend to be more expensive than group policies, because the costs of writing one (extra health check-ups, investigations etc) are higher than the costs of a group policy (which can be written just once for a large group of people) and because customers in the individual market include more people with higher health risks. For instance, one reason why someone might not be working is ill health, and unless that person belongs to one of the socially subsidized groups (the elderly, or limited groups among the poor) the only place for him or her to get insurance is the individual health insurance market.

But research also suggests that insurers can play more games in that market, perhaps because they have more market power on state level. Thus, some health insurers charge higher premia for coverage when the applicant is a woman in a fertile age group or create the policies in such a way that anything related to pregnancy is not covered or covered insufficiently. And we have all heard about the denial of coverage and the later searches to find a reason for stopping coverage for those who suddenly consume a lot of resources.

A new survey by the Commonwealth Fund suggests that those markets function very poorly indeed (though I should warn you that I have not read the actual survey to judge its conclusions):
Nearly three quarters of those seeking health insurance in the U.S. individual market in recent years faced roadblocks or were turned down due to prior medical conditions, a report released on Wednesday said.
The report by the Commonwealth Fund, a healthcare advocacy group, said 71 percent of an estimated 26 million people who tried to buy insurance on the individual market in the previous three years had problems purchasing affordable insurance.
About 35 percent said they were turned down or charged higher prices because of their medical history.
It's hard to know what the survey means by "affordable" insurance, however. But the 35 percent figure about denials of coverage or higher prices is worrying.

Those who wish to cancel Obama's health care reform policies should note that the above is what we get in their absence. Of course the basic reason for all these problems is, as I have written before, the fact that insurance is a terrible model for the way to cover health care costs.