Does the thought of getting individual health insurance give you the chills? Have you always assumed it’s prohibitively expensive, and that if you needed it, you’d be better off forming a one-employee company so you could get into the small-group market?
A recent study by Health Insurance Commissioner Christopher F. Koller’s office shows those assumptions are, to a great extent, wrong.
The study, which looked at the potential impact of merging the individual and small-group markets, found that on average, premiums for individuals would rise by 11 percent. But because of the way the individual market is structured, not all would be affected equally.
Most people under 50 who can’t pass medical underwriting, for example, and now fall into “Pool I” in the individual market, paying $ 496.32 per month for a HealthMate plan with a $2,000 deductible, would pay substantially less by small-group standards, the study shows – as much as half the current premium for people under 30.
People under 45 who pass medical underwriting and qualify for “Pool II,” and now pay $140.54 to $447.90 for that same plan, depending on their age and gender, would all pay more, with those over age 55 paying as much as 25 percent more.
Of course in groups with multiple members, say 10 employees and some dependents, rates are set for the group as a whole, so a 20-year-old man (who’d get bargain rates in the individual market) will pay as much as a 60-year-old woman – a deal that works well for older people but often discourages younger employees from joining their employer’s health plan at all.
People who have access to group coverage are disqualified from the individual market, so it’s not a choice for them, but those who do qualify can also often get income-based subsidies under a program created by Blue Cross & Blue Shield of Rhode Island, the only carrier that covers individuals in this state.
The bottom line, the study concluded: The system works, and it’s probably best not to mess with it, even though a similar study in Massachusetts concluded that merging the small-group and individual markets would improve conditions there.
Right now, all agree, we’re in limbo, waiting for Congress to figure out what it’s going to do abut health reform, and whether it’s going to mandate that employers offer coverage, that individuals buy it, or both – as well as whether there will be a new, public option.
That, in turn, leads to what insurers call “adverse selection,” with healthy folks taking a gamble and going uninsured, while those who expect to need health care, especially costly services, continue to buy coverage. At the same time, unemployment is escalating, to 12.4 percent in June, up from 7.7 percent a year earlier.
So far, Blue Cross officials say, individual (or “direct pay”) enrollment has held relatively steady, helped by the company’s subsidy program. But with such strong forces at play, we shouldn’t take it for granted that things will keep working fine, said Thomas A. Boyd, executive vice president, in an interview.
“In terms of [national] reform, who knows what’s going to happen,” he said. “But we cannot let this market just stand by.
One key issue that Koller’s study addressed is whether having more insurers offer individual plans would improve the market. When Tufts Health Plan returned to Rhode Island last year, it said it might offer individual plans in the future, though not for awhile. Separately, Golden Rule Insurance Co., part of UnitedHealth Group, applied to enter the individual market but then withdrew its request after dealing with Koller’s office for several months.
Yet competition might not help, the study suggests. The current setup, it says, has “substantial” efficiencies and a delicate risk-spreading mechanism that would be “difficult to duplicate” in a multicarrier model, and creating a high-risk pool, as other states have, could hurt consumers.
But Koller is in no hurry to bring new carriers into the individual market. A health insurance exchange like Massachusetts’ Commonwealth Connector could help consumers better understand their options, he said, and being allowed to buy into Medicaid could help as well.
Still, he said, “Nothing is going to lower your price drastically because the costs are the costs,” he said. •
