Individual Insurance Coverage Comes With Restrictions

Although insurance companies may be willing to grant health coverage to individuals with "common health conditions," that coverage is often costly and may come with a number of benefit restrictions, a new study by the Kaiser Family Foundation found. The report, titled "How Accessible is Individual Health Insurance for Consumers in Less-Than-Perfect Health?", reveals that the "extremely wide variations in benefits and premiums offered" to people with "even the most common health conditions" are largely based on the age, residence and health status of the applicant and the insurer in question. In the study, seven hypothetical applicants with conditions such as hay fever, a repaired knee injury, asthma and HIV applied for coverage in the individual insurance market. The applications were given to 19 health plans and HMOs in eight markets across the country: Arlington Heights, Ill.; Austin, Texas; Corning, Iowa; Fresno, Calif.; Miami, Fla.; Tucson, Ariz.; Richmond, Va.; and Winamac, Ind. Insurers were asked to determine whether each applicant would be offered coverage and under what terms, using a policy that included a $500 deductible and a $20 copay per physician visit. Insurers responded by accepting the applicant without placing additional restrictions or higher premiums on the policy, rejecting the applicant, offering coverage with additional restrictions or offering coverage at "higher-than-standard" premiums.

The study found that the applicants were granted the policy without additional premiums or restrictions 10% of the time, were rejected 37% of the time, received policies with restrictions 28% of the time, were granted policies with higher premiums 13% of the time and were granted policies with restrictions and premium hikes 12% of the time. The applicant with HIV was rejected 100% of the time. Larry Levitt, vice president of KFF, said that the study highlights the shortcomings of strategies that aim to use tax credits as a way of helping the uninsured purchase coverage through the individual market. "On average a perfectly healthy consumer in our study would have had to pay almost $3,000 a year for health insurance, three times the amount of the $1,000 tax credit for individuals that some have proposed. ... This study highlights the need for greater accessibility and affordability before the individual insurance market can be more broadly tapped as a vehicle for covering the uninsured" (KFF release, 6/19). To access a copy of the report, go to http://www.kff.org/content/2001/20010620a/.