Scandlen on Individual Insurance
By David Henderson
Greg Scandlen has an interesting post today on the market for individual insurance. Many of the comments are informative also. Some highlights:
According to a recent report by Milliman, based on new reporting by carriers required by the National Association of Insurance Commissioners (NAIC), there are only 10,300,000 people covered by individual health insurance – three percent of the population of the United States. And denials would happen only at the time of application for coverage, not after someone is already covered. The trade group America’s Health Insurance Plans (AHIP) reports that 87% of all applicants for individual coverage are accepted.
Brian Liechty states a problem with the 87% number:
The only reason that AHIP reports “87% of all applicants are accepted” is that most people don’t even complete an application. A substantial number of these individuals seek counsel through a qualified health insurance agent. The individual’s situation and options are discussed, and in about 80% of the cases the application is never submitted because it’s known to be a waste of time: The individual would not meet underwriting criteria and/or won’t pay for it.
The correct statement from AHIP should be, “87% of the submitted applications are accepted”. The number of applications approved compared to the number of people truly interested in purchasing one is closer to 10-15%, not 87%.
Notice, though, that “would not meet underwriting criteria” is very different from “won’t pay for it.”
Insurance agent Beverly Gossage responds to Liechty and then expands on the policy issue:
As a health insurance agent for group and individual policies who has been appointed in 23 states, I can tell you that you are right about agents advising some individuals not to apply if we know that they won’t be accepted; however, my experience has been closer to 80% of those who seek a private policy qualify, certainly not 10%-15%.
Here is what I came to realize: Most of those folks seeking private policies, who would most likely be declined, developed high risk conditions while on an employer plan. When the employer plan stopped for whatever reason, they sought a private policy. Had they been on a private plan before they became ill, they would not have been forced to the high risk pool.
Most of these folks would have been far better off if the employer had added to the employee’s salary and let them purchase their own private policy like they do auto and home owner’s insurance.
Devon Herrick points out that it’s typically only when people buy individual health insurance that they realize how expensive it is, and they often adjust to that by abjuring first-dollar coverage. Ralph @ MediBid has a further insight, based on who makes decisions in firms that buy health insurance for their employees:
It has more to do with choice, and spending our own money. In a group situation, the HR [Human Resources] person often chooses for all, and the squeaky wheels get what they want. In the individual market people are deciding for themselves, and spending their own money, and people make better decisions on their own behalf.
And how about this story from Ralph@MediBid:
I was visiting a urologist in FL, who is a client of mine, and the office manager said they had a client who come to them and said she was covered by Blue Cross. She went for surgery, and had a stent installed. They billed Blue Cross, and they told them that her coverage had lapsed, so they would not pay. They billed the patient, and the patient said that they would have to take it up with Blue Cross because [O]bama said that they were not allowed to cancel people’s coverage when they got sick. The doctor explained that they still had to pay premium, and the patient said that Obama never said that, so she keeps coming to the doctor for uncompensated care.
Free lunch, anyone?