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Study Claims Health Insurance Market Fails Consumers

Many shun coverage because of costs

July 21, 2009
One objective of health care legislation pushed by President Obama is universal coverage – providing health insurance options for all Americans. The question of course, is how to do it.

Backers of the so-called "government option," in which a Medicare-like policy competes with private insurers, can point to a new study by the Commonwealth Fund which claims the private insurance industry is not a viable option for most uninsured adults.

Seventy-three percent of people who tried to buy insurance on their own in the last three years did not purchase a policy, primarily because premiums were too high, the survey found. In addition, among adults with individual coverage or who tried to buy coverage in the past three years, 57 percent said it was very difficult or impossible to find coverage they could afford, 47 percent said it was very difficult or impossible to find a plan with the coverage they needed, and 36 percent were denied coverage or charged more because of a pre-existing condition, or had the condition excluded from their coverage.

The report, Failure to Protect: Why the Individual Insurance Market Is Not a Viable Option for Most U.S. Families, compared the experiences of working-age adults with individual and employer-based private health insurance and found that people who have purchased health insurance in the individual market spend far more out of pocket and on premiums than those with employer-based coverage.

In fact, half of those with individual insurance have out-of-pocket costs and premium expenses that equal 10 percent or more of their income. People with individual coverage do not have premium contributions from their employers, and many are charged higher premiums because of their health status or age. According to the report, 64 percent of adults with individual insurance spend $3,000 or more per year on premiums while only 20 percent of those with employer insurance spend that much. On average, adults with employer plans spend $2,250 out of pocket for health expenses including premiums, while those with individual market insurance spend an average of $6,750.

"In our current system millions of people without access to employer coverage have no affordable option for health insurance," said Commonwealth Fund President Karen Davis. "To achieve a health care system that works for all Americans we need health care reform that offers comprehensive, affordable health insurance to everyone regardless of their health status, premium subsidies to help families with low and moderate incomes afford health insurance, and requirements to ensure that no one is denied health insurance because of a health problem."

Experiences In The Individual Market

The Fund says those who are able to purchase individual health insurance are more likely to face a host of problems with their insurance, including going without prescription drug coverage, limits on the total dollar amount their insurance will pay for health care; doctors charging more than insurance will pay and being forced to pay the difference; and expensive bills that their insurance will not cover.

In addition, 41 percent of individually insured adults reported forgoing needed health care because of costs—up from 24 percent in 2001. Over one-third of those with individual coverage (36 percent) also reported medical bill or debt problems, a substantial increase over the 28 percent who also reported medical bill or debt problems in 2005.

"People buying their own health insurance are paying significantly more in premiums than those with employer-based coverage, but are getting less for their money in terms of protection against high costs and access to the health care they need," said study co-author and Commonwealth Fund Vice President Sara Collins. "It is critical that health reform proposals set minimum benefit standards and provide adequate premium subsidies to ensure that families who lose their job-based benefits can purchase affordable coverage that gives them access to timely care and protects them from catastrophic health care costs."

The large majority of Americans who have individual coverage are unemployed, self-employed, or employed by firms with fewer than 20 workers—one-third are unemployed, and another 50 percent are self-employed or employed by firms with fewer than 20 workers. People with individual insurance also tend to be older, with the majority between the ages of 50 and 64, according to the report. Families with low and moderate incomes have the hardest time affording insurance on the individual market: 85 percent of those at or below 200 percent of the federal poverty level who sought an individual health insurance plan did not end up purchasing one and of that group, 67 percent cited cost as the reason they didn't purchase a plan.

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