January 2008
The $4,284 monthly premium
If you go to the eHealthInsurance.com Web site, which links to hundreds of insurance plans across the country, you will find
many individual health insurance policies offered at seemingly affordable prices. A recent search found policies available
for a 25-year-old man in Evergreen, Colo., for as little as $45 a month. But unless you are also 25 years old and in perfect
health don't bet on getting such a policy.
"It's true that the advertised prices for many individual policies in many states are eye-poppingly low," says Karen Pollitz, a research professor who heads projects on individual health insurance at the Georgetown University Health Policy Institute. "The policies often cover very little: $5,000 deductibles, four doctor visits a year, no drugs."
Our survey found that the median out-of-pocket medical expenses for the past 12 months were $2,264 for those with individual health insurance policies vs. $973 for people with employer-based plans.
And anyone with a pre-existing condition who has an individual health insurance policy must pay whatever rate the company charges. Although it is illegal in all states to kick people out of insurance plans if they become ill, in most states insurance companies are allowed to increase rates for individual health insurance policies as much as they need to cover the plan's medical costs, plus a reasonable profit.
Companies also control their risk by using a maneuver known as closing a block or book of business. They stop accepting new customers in a plan, which kicks off a process known as a "death spiral."
Even if everyone in an insurance plan starts out relatively healthy, as time goes on, people get sick, and the cost to insure them rises. Once the pool is closed, costs for the remaining members rise inexorably. Healthier members find cheaper plans, but sicker ones are effectively forced out because they can't afford coverage.
Once that process gets going, premiums on individual health insurance policies can rise at a breathtaking rate. Jesse Paul, 59, an Indianapolis lawyer, paid $25.50 a month for his individual, $100- deductible Prudential major medical policy when he took it out in 1980. Premiums rose steadily for years but at a pace that Paul deemed "rational in terms of medical costs." In 2003 the premium shot up from about $1,200 to about $1,900 a month at renewal.
When Paul complained to the state insurance department, he learned that the policy had been closed to new entrants for years, that he was one of only 400 to 600 customers left in the state, and that the premium increase was permissible under Indiana law. Paul reached his breaking point when he got his latest renewal notice in August; the monthly premium was now $4,284. He quickly found out he was uninsurable on the private market because he took medications for high blood pressure, high cholesterol, and allergies. He is now insured by the Indiana high- risk pool for a premium of $650 a month.
"It's true that the advertised prices for many individual policies in many states are eye-poppingly low," says Karen Pollitz, a research professor who heads projects on individual health insurance at the Georgetown University Health Policy Institute. "The policies often cover very little: $5,000 deductibles, four doctor visits a year, no drugs."
Our survey found that the median out-of-pocket medical expenses for the past 12 months were $2,264 for those with individual health insurance policies vs. $973 for people with employer-based plans.
And anyone with a pre-existing condition who has an individual health insurance policy must pay whatever rate the company charges. Although it is illegal in all states to kick people out of insurance plans if they become ill, in most states insurance companies are allowed to increase rates for individual health insurance policies as much as they need to cover the plan's medical costs, plus a reasonable profit.
Companies also control their risk by using a maneuver known as closing a block or book of business. They stop accepting new customers in a plan, which kicks off a process known as a "death spiral."
Even if everyone in an insurance plan starts out relatively healthy, as time goes on, people get sick, and the cost to insure them rises. Once the pool is closed, costs for the remaining members rise inexorably. Healthier members find cheaper plans, but sicker ones are effectively forced out because they can't afford coverage.
Once that process gets going, premiums on individual health insurance policies can rise at a breathtaking rate. Jesse Paul, 59, an Indianapolis lawyer, paid $25.50 a month for his individual, $100- deductible Prudential major medical policy when he took it out in 1980. Premiums rose steadily for years but at a pace that Paul deemed "rational in terms of medical costs." In 2003 the premium shot up from about $1,200 to about $1,900 a month at renewal.
When Paul complained to the state insurance department, he learned that the policy had been closed to new entrants for years, that he was one of only 400 to 600 customers left in the state, and that the premium increase was permissible under Indiana law. Paul reached his breaking point when he got his latest renewal notice in August; the monthly premium was now $4,284. He quickly found out he was uninsurable on the private market because he took medications for high blood pressure, high cholesterol, and allergies. He is now insured by the Indiana high- risk pool for a premium of $650 a month.
