Individual health insurance: part of the total insurance picture
Health insurance has long been a major part of employee benefits. This group coverage is traditionally one-size-fits-all, with plan participants largely paying the same premiums to receive the same benefits. This has been the norm for so long that it is easy to forget that health insurance, whether individual or group coverage, is a recent phenomenon.
Medical expenses were generally low before 1920, largely because medical science was unable to treat many conditions. Consumers purchased “sickness” insurance to cover expenses if they were unable to work. Medical insurance was almost nonexistent. As medicine improved, the costs of medical care began to rise. This lead to a need for insurance to help cover the expense. In just ten years, enrollment in health insurance
programs grew from less than 21 million (1940) to approximately 142 million (1950).
Group plans are popular with employers, but individual insurance coverage also provides benefit to subscribers. Healthy people who simply want catastrophic coverage find individual health insurance a way to save on premiums. Group insurance spreads the cost of coverage evenly among all members of the group. This reduces costs for those who need medical care, but puts a larger burden on those in good health. A person who only sees a doctor for routine check-ups may find individual coverage more economical.
Continuing employer-provided medical benefits can cost up to $13,000 per year for a family, according to the Wall Street Journal. In contrast, the Commonwealth Fund reports that 64% of adults who have individual coverage pay $3,000 per year in premiums. COBRA allows workers who have lost employment-based insurance to continue their coverage by paying the full cost of the premiums plus a 2% administrative fee. In many cases, individual insurance can provide adequate coverage at a much lower cost.
While individual health insurance can be a good option, there are a few other factors to consider. In most states, insurers who offer individual plans are allowed to practice medical underwriting. This means that acceptance and premiums are based on the customer’s medical condition. Where medical underwriting is used, insurance coverage can be denied for any pre-existing medical condition. This makes finding insurance difficult for those with chronic conditions or who may have a family history of cancer. Even old football injuries can be a cause for denial of coverage.
A recent study by The Commonwealth Fund found 60% of uninsured individuals with health problems who sought insurance were denied coverage or charged a higher price. Persons who have previously had coverage through their employer have an advantage when they seek individual insurance. Those apply for insurance within 63 days of losing coverage under a previous plan are protected by the HIPAA law, which prohibits medical underwriting in favor of “guaranteed coverage”.
Studies have shown that unexpected medical expenses are a major cause of personal bankruptcy. Lack of insurance also reduces life expectancy. The Urban Institute estimates that in 2006, 22,000 people died in the United States because they were uninsured. The National Coalition on Health Care states that “Controlling for age, race, sex, and income, uninsured cancer patients are 1.6 times more likely than insured patients to die within five years of diagnosis.”
With the rising cost of health care, insurance is not a luxury, but a necessity. Individual health insurance provides options for those who have not subscribed to a group plan.