Thursday, July 17, 2008

Individual health insurance still has big problems with pre-existing conditions


Individual health insurance, left to the somewhat distorted mechanisms of a “free market” is not doing very well with people who have pre-existing conditions. Maybe it never has, but in some parts of the country the problem may be getting worse.

Julie Appleby has a front page story in “USA Today” (“Individual health policies leave many behind”) on July 17 about the problem. (The link is here.) She cites the Swain family, with (fraternal?) twin sons Logan and Morgan, in Georgia. Because Logan is much shorter than “normal,” the family wasn’t able to get Logan included in its health insurance policy. The mother, Theresa, works as a substitute teacher (an occupation with issues that I have discussed in detail in this blog before) and the father William ran his own landscaping business. Eventually, however, he took a job that offered group health insurance and was able to get Logan covered.

That illustrates another problem. The difficulties in the individual market forces many parents to try to hand on to “establishment” jobs (especially union jobs) that offer better benefits, where they may be exposed to overseas offshoring and economic downturns (especially now). They might find better opportunities and self-sufficiency if they went on their own, but they cannot afford to do this if they have dependents. And, as it is becoming clearer, not everyone always “chooses” to have dependents by marrying and having children. Some people raise siblings’ children or have heavy eldercare responsibilities.

According to Appleby, just five states (Maine, Massachusetts, New Jersey, New York, and Vermont) require private insurance companies to sell to all applicants. Washington has a partial requirement like this.

Many people have policies canceled and claims denied (as in the movie and John Grisham novel “Rainmaker”) if they gave “misleading” information on their individual insurance application.

Most industry associations say they could insure everyone if states would take over responsibility for pre-existing conditions. But healthy people sometimes find it advantageous to move to more “conservative” states where their rates may be lower because insurers won’t take sicker people (the “cherry picker” problem).

Barack Obama emphasizes the idea of requiring insurers to take everyone. John McCain talks about using pre-tax dollars to purchase individual insurance but soft-pedals the pre-existing problem, although this could change during the campaign. The two presidential candidates might, in debates, be forced to come closer in their positions.

No one is likely to require domestic partner coverage, but many companies like to offer it to attract skilled workers. Domestic partner coverage (especially for gay couples, in any state where then cannot marry) might become harder to get in a world where employers play a smaller role in providing health insurance than they have in the past 70 years.

Kaiser Permanante has a useful chart online (the “Individual Market Guide”) about guaranteed issue, here. In some states, like Virginia, Blue Cross and Blue Shield plans are insurers of last resort that take everyone, although their individual premiums will be much higher than what an employer could get.

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