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Report: High Premiums Significant Obstacle to Buying Individual Insurance

By Melissa Attias, CQ Staff

July 21, 2009 -- Nearly three-quarters of Americans who tried to purchase health care insurance on their own in the last three years did not end up buying a plan, most often because premiums were too high, according to a report released Tuesday by The Commonwealth Fund.

The report, entitled Failure to Protect: Why the Individual Insurance Market is not a Viable Option for Most U.S. Families, was based on a random sample of 1,517 adults, ages 19 to 64, who were surveyed by telephone between June 6 and Oct. 24, 2007. All participants were insured with private insurance for the entire year, but 1,387 had employer-sponsored insurance while 130 had individual insurance.

According to the data, 57 percent of adults who either had individual coverage or had shopped for it in the past three years said it was very difficult or impossible to find coverage they could afford. Forty-seven percent also found it very difficult or impossible to find coverage they needed, the report said, while 36 percent were turned down, charged a higher price or excluded due to a pre-existing condition.

"In our current system millions of people without access to employer coverage have no affordable option for health insurance," Karen Davis, president of The Commonwealth Fund, said in a news release. "To achieve a health care system that works for all Americans we need health care reform that offers comprehensive, affordable health insurance to everyone regardless of their health status, premium subsidies to help families with low and moderate incomes afford health insurance and requirements to ensure that no one is denied health insurance because of a health problem."

Yet a December 2007 analysis of the individual health insurance market by America's Health Insurance Plans (AHIP) found that approximately nine out of 10 Americans that went through the application process for individual insurance were offered coverage.

"Individual health insurance is more affordable and available than many people realize," said Robert Zirkelbach, AHIP's director of strategic communications. "But we also strongly believe that the individual health insurance market needs to be reformed—it is not working for everybody."

On Monday, the group launched a new advertisement that advocates for affordable health care for all Americans, regardless of preexisting conditions.

The Commonwealth Fund report also found that adults with individual health insurance coverage spend more out of pocket and on premiums than those with employer insurance. Approximately 64 percent of adults with individual coverage spend $3,000 or more per year on premiums while only 20 percent of those with employer plans spend that much, the report said. The report also found that adults with employer-based coverage spend $2,250 out of pocket on health expenses on average, including premiums, while those with individual insurance spend an average of $6,750. In all, more than half of adults with individual coverage spend 10 percent or more of their incomes on health care, the report said.

Nevertheless, the report also found that higher costs do not necessarily mean better coverage for those with individual health insurance plans. Approximately 20 percent of adults who purchased individual health insurance plans reported going without prescription drug coverage while 49 percent experienced limits on the total dollar amount their insurance will pay for health care, the report said. In addition, 41 percent of adults with individual insurance reported forgoing needed health care because of costs compared to 24 percent in 2001.

"People buying their own health insurance are paying significantly more in premiums than those with employer-based coverage, but are getting less for their money in terms of protection against high costs and access to the health care they need," study co-author and Commonwealth Fund Vice President Sara Collins said in a news release. "It is critical that health reform proposals set minimum benefit standards and provide adequate premium subsidies to ensure that families who lose their job-based benefits can purchase affordable coverage that gives them access to timely care and protects them from catastrophic health care costs."

Although adults with individual health insurance tend to pay more for coverage, the report found that those with employer-based plans also are confronted with increasing health care costs. In 2007, 31 percent of all privately-insured adults spend 10 percent or more of their income on out-of-pocket health care costs and premiums compared to 20 percent in 2001, the report said. Much of the increase stems from rising out-of-pocket costs in employer-based plans. Twenty-nine percent of adults with employer-based coverage spent 10 percent or more of their income on out-of-pocket costs and premiums in 2007, the report said, up from 18 percent in 2001.

To reverse these trends, the report says that the United States must make comprehensive health care overhaul a top priority.

"The time has never been more urgent for policy makers to forge consensus around strategies for reform that provide affordable and comprehensive coverage for all and apply the brakes to spiraling health care costs," the report concludes.

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