Study Says Individual Insurance Too Costly

Times Staff Writer

Individual health insurance -- often touted as an alternative to employer-based group coverage -- may be an option for the healthiest and wealthiest. But a study due out today suggests that the poor and sick need not apply.

The overwhelming majority -- 89% -- of working-age adults who shopped for health coverage in the individual market over the last three years were rejected for health reasons or found it too expensive, according to the study by the Commonwealth Fund, a private foundation that sponsors independent research on health and social issues.

Coverage was not affordable for 58% of the applicants, and 21% who had a medical condition were turned down, charged a higher premium or sold a policy that excluded the existing problem from coverage, the report said.

Individual insurance also is less affordable than employer-sponsored coverage, the study found. Two out of five people with individual coverage spent 5% or more of their income on premiums, compared with one out of seven people with employer coverage.

The study is the latest assessment of individual insurance, which is seen as an increasingly important form of coverage as employers drop health benefits for workers and their families because of the cost.


Most of the increase in the number of uninsured Americans -- who now total, by some estimates, 46.6 million -- was because of a decline in workplace coverage, said study author Sara Collins, an executive at the New York-based foundation.

“Although the individual market is a last resort for those shut out of employer-sponsored coverage, it is by no means a safe or secure haven for everyone,” Collins said.

America’s Health Insurance Plans, an industry group, took issue with the study and its methodology -- a telephone survey of more than 4,000 consumers -- saying their impressions were not as reliable as the trade organization’s survey of insurance companies last year. The group also pointed out that its survey showed that 16 million people had individual health insurance and that the policies they purchased were more affordable than the Commonwealth report suggested and with richer benefits than employer-sponsored coverage.

“Many people shop all the time, but don’t always buy,” said Mohit Ghose, a spokesman for the industry group.

He said individual insurance “may not be for everyone, but, for a certain person, it’s an important choice.”

In California, the companies that dominate the individual health insurance market are under fire for revoking coverage after some policyholders become seriously ill.

Several lawsuits accuse Blue Cross of California and its rival Blue Shield of looking for any excuse to dump people with costly medical problems in an effort to escape their obligation to pay the bills.

State regulators are investigating the allegations. The companies have denied wrongdoing, saying the cancellations are usually because policyholders did not make full disclosure of prior health problems that would have made them ineligible for coverage.

Unlike group plans, which must accept everyone, individual plans can deny coverage based on preexisting conditions.

The Commonwealth study did not look at the revocation problem. But it did find that people with individual insurance coverage tended to have higher deductibles, along with high levels of dissatisfaction with their healthcare.

The report is based on findings from the Commonwealth Fund’s latest biennial health insurance survey.

The study found that more than a third of adults with individual insurance had to spend $1,000 out of pocket each year before coverage kicked in. More than half of those with individual insurance pay at least $3,000 a year in premiums and about a third pay $6,000 or more.

People on such plans were more likely to report that they did not get needed healthcare or prescription drugs because of prohibitive out-of-pocket expenses.

One in five people with a high-deductible plan reported taking on credit card debt to pay medical bills, compared with 8% of those with lower deductibles.