Approximately 16 million Americans who need to buy individual or family health-insurance policies face a perilous market with many traps that might shut them out of coverage. This group includes the self-employed, employees of small firms that don't offer medical insurance, people between jobs, young adults moving off their parents' policies, widowed or divorced people who have lost their spouse's group coverage, and people who retire early and lose their group health coverage before they're old enough for Medicare. The September issue of Consumer Reports® (CR) presents "The perils of buying your own policy," part two of a two-part series examining the state of the health-insurance market in the U.S. It features CR's independent, unbiased Ratings of 63 individual and family policies in Grand Junction and Denver, CO; Miami and Tallahassee, FL; and Detroit and Grand Rapids, MI. The Ratings represent what many consumers are likely to find in their own locale. This evaluation presents a troubling picture of what consumers will find as they venture into the individual insurance market. Premiums are very high, exclusions and limitations are common, paying more doesn't always buy more, and premiums go up with age. CR offers shopping recommendations, and includes information about each state's safety-net option for consumers who have been turned down by insurance companies. Alabama, Arizona, Delaware and West Virginia have the most restrictive safety-net options. "The private market system is dysfunctional," said Trudy Lieberman, author of this report and Director of the Center for Consumer Health Choices at Consumers Union, the nonprofit publisher of Consumer Reports. "Consumers face high cost-sharing and many exclusions; paying more for a policy does not necessarily buy better coverage." Many insurance companies avoid writing policies in the individual market, or, when they do write them, they devise strategies that limit the company's risk and consumers' ability to obtain coverage for the care they need. These strategies create traps for consumers, who may have to struggle to stay insured: Trap 1: Carriers turn down people whose conditions pose too much risk. Most companies deny coverage to people with cancer, diabetes, coronary artery disease, or multiple sclerosis. Sometimes insurance companies will add a surcharge for insuring a person with potentially expensive conditions. When an insurer does accept a person with medical conditions, chances are it will exclude coverage for those illnesses. Trap 2: Some insurance companies sell health policies that appear to be group coverage when in fact they are not. Consumers get into trouble with some of these types of policies when they become ill. Premiums climb until the policyholders are forced to drop coverage, or until the insurer cancels the policy. Trap 3: Twenty-nine states have a high-risk pool, the only place where those in the worst health can find a policy, but these policies are very costly and coverage is often restrictive. Trap 4: Federal law mandates that all states provide a place of last resort for people to buy health insurance, but the safety net in many states does not ensure that everyone needing health insurance can get a policy regardless of their health status. Each state devises its own rules, which results in a hodgepodge of regulations providing varying levels of assistance. "There are no solutions in sight. Piecemeal reforms that have been offered so far will not easily solve the problems of the growing number of people who need policies. What's needed is coverage for everyone in a pool that spreads the risk-and the funding to make that feasible," said Ms. Lieberman. Some CR recommendations: Begin by investigating policies sold by at least four or five carriers in your area. First consider the policies sold by HMOs and by the local Blue Cross Blue Shield organizations in your area, as they tend to offer the most coverage for the premium. If you are a member of a legitimate association that offers insurance, it may be worth considering its policies. Call your state insurance department to ask whether it has jurisdiction over the policy you're considering. Look carefully at exclusions, limitations, co-payments, and co-insurance. Most of these policies have no drug coverage. They may offer a discount card, but many offer only a 15% discount, which may not make the cards worth the extra premium. If you're turned down for health insurance, investigate your state's requirements for obtaining a policy of last resort. "The perils of buying your own policy" is posted in the free Consumer advice section at www.ConsumerReports.org. News media can publish the attached chart, "How good is your state's safety net?" from this report. Support for this research was provided by The Commonwealth Fund. The views presented here are those of the authors and should not be attributed to The Commonwealth Fund or its directors, officers, or staff. The September 2002 issue of CR will be available August 13 wherever magazines are sold. To subscribe to Consumer Reports, call 1-800-234-1645. The material above is intended for use by legitimate news entities only. It may not be used for commercial or promotional purposes. Consumer Reports is published by Consumers Union, an independent, nonprofit testing and information-gathering organization, serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public and protect consumers.
