People's Medical Society Newsletter: Individually purchased health coverage difficult to obtain

Anyone who does not have health insurance through an employer and who is not eligible for public programs like Medicare and Medicaid must rely on individually purchased health insurance if they wish to be covered. What if the applicant is in lessthan-perfect health? A study funded by the Kaiser Family Foundation found the market for privately funded insurance to be unpredictable, inconsistent and expensive.

Conducted by Georgetown University's Institute for Health Care Research and Policy, the study set up seven hypothetical consumers-some with common health problems such as asthma, depression or hypertension and others with more severe conditions such as HIV-positive status-and had each apply to 19 insurance companies and HMOs in eight markets around the country. The report shows extremely wide variations in benefits and premiums offered that are highly dependent on the age, residence and health status of the applicant, as well as on the particular insurer.

Consider yourself not so out of the ordinary? Retired, overweight smoker with high blood pressure? Rejected 55 percent of the time. When he was offered coverage, a few plans excluded coverage of his circulatory system and most imposed a premium surcharge. The 30-something ex-athlete with a surgically repaired knee was turned down 12 percent of the time. In 34 instances, however, carriers sought to limit his coverage, typically excluding coverage for his knee.

What about family coverage? The family of four, including a child with asthma and recurrent ear infections, was accepted by all plans. But often the offer excluded that child, and most offers to cover the entire family came with limitations and some with higher out-of-pocket costs.

What does this study say to policymakers? Some federal policymakers seek to address the issue of affordability by offering tax credits, or vouchers, to help people buy coverage in the individual market. Commonly proposed is a tax credit of $1,000 for individuals ($2,000 for families). Do the arithmetic, though: This would cover only 25 percent of the average annual premium quoted to the hypothetical single consumers in this study, and even at that, the benefit package includes a $500 annual deductible.

But wait-this gets even more complex. As the folks at Kaiser Family Foundation say: "The wide variation of premiums in this market suggests that while a flat tax credit of $1,000 would cover a substantial portion of the premium in some cases-e.g., for..a 24-year-old with a relatively mild health condition-it may not be sufficient for many consumers whose age, place of residence or health status makes health insurance especially expensive."

Drew E. Altman, Ph.D., president and CEO of the Kaiser Family Foundation, laments that "trying to buy insurance in the individual market is a little like playing roulette with your health coverage."

The implications for consumers are all too clear: Consumers in less than perfect health face barriers that price insurance coverage out of their reach or that create significant gaps in coverage that result in underinsurance. To the People's Medical Society, it's obvious: The bottom line for health insurers is their bottom line, not protecting your health.