Market Failure? Individual Insurance Markets for Older Americans

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President Bush's recent proposal to provide tax credits to expand access to health insurance coverage would not be of much help to older Americans, a new study finds. The President's proposal would provide tax credits of $1,000 for individuals, but the median premium costs incurred by a 60-year-old looking for private insurance coverage with a $250 deductible policy is $5,700 on average in 15 major cities. This effectively puts private insurance out of reach for most older Americans, especially those with low and moderate incomes.

These and other findings are reported in Market Failure? Individual Insurance Markets for Older Americans, an article in the July/August issue of Health Affairs by Elisabeth Simantov, Cathy Schoen, and Stephanie Bruegman. The study was based on analysis of a Commonwealth Fund survey of more than 1,500 people ages 50 to 64 conducted from August to November 1999, and on premium quotes on the Internet.

The survey shows that older, uninsured Americans are sicker and poorer than their counterparts who are covered by employer or private health plans. As a result, they are unlikely to qualify for private coverage because of poor health and would in any case be unable to afford the premiums.

Moreover, out-of-pocket expenses and premiums are much higher for older Americans with private insurance than those with employer coverage. According to the study, half (49%) of those with private, individual insurance spent $3,500 or more in premiums and out-of-pocket expenses compared with $1,770 paid by those enrolled in employer plans.

The authors note that to reflect market realities, tax credits would need to be greatly increased as well as adjusted by such factors as age, health status, and geographic region. "Given the complexity of doing this through the tax code and the uncertainty and inadequacy of individual insurance, other alternatives-such as the ability to purchase Medicare coverage before age 65-should be considered," Schoen urged.

Facts and Figures

  • Annual premium costs climb steeply with age in the nongroup market. Median premiums for coverage for a $250 deductible policy in 15 major cities are $1,664 for a 25-year-old, $3,480 for a 50-year-old, and $5,688 for a 60-year-old.
  • Americans ages 50 to 64 covered by individual health insurance are healthier and wealthier than the uninsured. The uninsured are three times as likely as those with individual insurance to be in fair or poor health (37% vs. 13%) and three times as likely to have incomes below 250 percent of the poverty level (62% vs. 21%).
  • Older Americans with individual insurance are more likely to experience health care access problems because of cost than those with employer coverage. One-fifth (21%) of older adults with individual coverage report an access problem because of cost, compared with 14 percent of those with employer coverage.
  • Benefits are often restricted, especially for prescription drugs. One of four of the individually insured spent more than $100 a month on prescription drugs versus 8 percent of those with employer insurance.

Publication Details

Publication Date: August 1, 2001
Authors: Cathy Schoen, Elisabeth Simantov, Ph.D., and Stephanie Bruegman
Citation:

"Market Failure? Individual Insurance Markets for Older Americans," Elisabeth Simantov, Ph.D., Cathy Schoen, M.S., and Stephanie Bruegman, Health Affairs 20, 4 (July/August 2001): 139–49

Related Topics
Health Care Coverage

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