A Commonwealth Fund survey on the individual insurance market revealed that high premiums, lack of needed coverage and pre-existing conditions have kept many Americans from purchasing individual policies.
The analysis has drawn both support and opposition, mirroring the contentiousness in the national debate over industry reform.
Elise Gould, healthcare economist at the Economic Policy Institute, said that the current market is inefficient and noncompetitive because of higher loading fees and administrative costs. The individual insurance market lacks transparency and has huge variations among plans, she said, making it difficult to measure and define minimum benefit standards.
The analysis is “right on target,” said Paul Keckley, executive director of Deloitte Center for Health Solutions, although he noted that the self-insured are not a homogenous group as the survey suggested. Keckley believes the individual market will grow as more employers offer such plans as an option.
States such as Michigan are trying to define what constitutes basic benefits, but the problem isn’t being adequately addressed in the two major reform bills in Congress, Keckley said. He believes the Commonwealth Fund’s “heavy” credibility and “solid” analysis will contribute to a national discussion on standard benefits for the individual market.
Devon Herrick, senior fellow at the National Center for Policy Analysis, called the Commonwealth Fund’s analysis “misleading.”
“There is a trade-off between premiums and the size of the deductible chosen on individual policies – if you want a lower deductible, you can pay a much larger premium,” he said.
Comparing the cost of individual plans and employer-based plans is also misleading because employees get health coverage through their employer plans via direct contributions and in lieu of bigger paychecks, Herrick said.
“If you compare the actual cost of employer coverage (and cost-sharing) with premiums and cost-sharing for individual plans, the employer plans are not generally more expensive – except for the oldest, sickest workers,” he said.
Herrick supports a uniform tax credit, which the Coburn Bill advocates, and the same tax preference for purchasers of individual plans that exist for employer-based plans. “All families would get a subsidy sufficient to pay for ‘core insurance’ coverage, but pay for extra bells and whistles with after-tax dollars,” he said.
Herrick blamed “poorly conceived” government regulations for the current state of the individual market.
To keep premiums from rising, the industry needs to focus on the underlying cost drivers, including practice patterns, medical liability and how we pay for care, said Robert Zirkelbach, senior manager for America’s Health Insurance Plans (AHIP).
AHIP recommends new consumer protection and the overhaul of the health insurance market rules, “so everbody’s in,” he said. AHIP supports expanding the safety net, providing tax credits to help those who can’t afford coverage and removing the pre-existing condition barrier so long as guarantee-issue is mandated.
“If we have these building blocks, the system will work and can be sustained,” as well as address the problems highlighted in the analysis, he said.