Individual Insurance Market Falls Short for Families

During the past three years, nearly three fourths of individuals who tried to buy coverage in the individual insurance market never purchased a plan—because they could not find a plan that meets their needs, could not afford coverage, or were turned down because of a pre-existing condition, according to a new study from The Commonwealth Fund.

This parallels developments between 2001 and 2007 when increasing shares of adults with private insurance—either obtained through employer based coverage or an individual market plan—spent a larger portion of their incomes on premiums and out of pocket medical costs, were underinsured, and/or avoided needed healthcare because of costs. Those with coverage obtained from the individual market were the most affected, the report said.

Using data from the Commonwealth Fund's 2007 Biennial Health Insurance Survey, the researchers compared the experiences of adults ages 19 to 64 who purchased coverage in the individual insurance market with adults covered by employer based plans. It found that nearly half (47%) of adults who tried to purchase insurance in the individual market in the last three years found it very difficult or impossible to find a plan that fit their needs; 57% found it very difficult or impossible to find a plan they could afford; and 36% said they were turned down or charged a higher price because of a pre-existing condition.

Nearly three quarters (73%) of respondents said they never bought a plan, with 61% of those who did not buy a plan in the individual market citing expensive premiums as the main reason. Adults who did purchase coverage in the individual market "paid more out of pocket for their premiums, faced much higher deductibles, and spent larger shares of their income on health insurance and healthcare expenses than their counterparts with employer based group coverage," the researchers said.

Privately insured adults with low incomes were found to be most at risk of spending larger shares of their incomes on healthcare: In 2007, about 75% of privately insured adults with household incomes below 200% of the federal poverty level (about $44,000 for a family of four) spent 5% of their household income on premiums and out-of-pocket costs. Also, 60% of privately insurance individuals in lower-income households spent 10% of more of their income, compared with 25% of those in higher-income brackets.

These findings indicate that the "individual insurance market in its current form does not provide a viable alternative to employer based group coverage," the researchers said. They suggested that "new, affordable health insurance options" were needed for those who were uninsured, underinsured, or about to lose their employer-based insurance.