Monday, January 29, 2007

The Individual Health Insurance Market Isn't Ready for Primetime

Julie Appleby has an article on the front page of Monday's USAToday covering an issue I dealt with in an earlier post--insurers using post-claim underwriting to rescind people's health insurance policies.

President Bush's health plan proposal would encourage consumers to buy their own health insurance. The President, and many others, believe that giving individuals more control over their health benefits is a good way to get consumers to more efficiently buy and use their health insurance.

That philosophy has some logic.

However, the individual health insurance market is nowhere near the place it needs to be to carry a major portion of the market:
  • Individual health insurance tends to be more expensive than group insurance because the cost of selling one policy at a time is more expensive than group health insurance.
  • People who are sick often can't get insurance. Most group health insurance is "guarantee issue" while individual programs need to protect themselves from consumers who delay buying insurance after they become sick.
  • Group health insurance charges one rate for all of the group's participants irrespective of a person's age. Individual health insurance charges relatively low rates for younger consumers and very high rates for older people.
On top of all of these challenges, the USAToday article reports that a number of individual health insurers have apparently become overly aggressive in administering their anti-fraud provisions.

The Bush health plan would be a big help to the individual health insurance market.

But, if these individual insurance companies don't clean up their act when it comes to "post-claim underwriting," no one is going to be able to help them.
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