San Francisco Chronicle - Thursday, June 21, 2001
Victoria Colliver, Chronicle Staff Writer

The study by the Henry J. Kaiser Family Foundation, conducted by Georgetown University researchers, sent seven hypothetical health care users with a variety of common health conditions out to find their own insurance and discovered they were unable to get coverage at standard rates 90 percent of the time.

Even when they did get an offer, they were very often offered a rate above the standard price.

"If you have an individual health plan, you have far fewer rights than people in group plans," said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights. "It's an accurate reflection of what goes on in that market. This study should fuel a renewed effort to make sure coverage is available to everybody at a reasonable price."

People who buy individual plans tend to be out of the job market, self- employed or ineligible for government programs such as Medicaid and Medicare. While some people are in the market for individual coverage permanently, many go in and out of it throughout their lives.

The percentage of Americans in these plans is fairly small -- only about 6 or 7 percent -- because most people get health insurance through their employer or their spouse's work.

"This is a market most people don't think about very often because most of us don't use it. But you could find yourself in it," said Karen Pollitz, senior project director and researcher at Georgetown University's Institute for Health Care Research and Policy.

"But you should really think twice if you could possibly arrange your life so you don't have to be in this market because it could really cost you," she said.

The study's researchers had the hypothetical seven health care consumers apply for coverage with 19 insurance companies and health-maintenance organizations in eight U.S. markets: Arlington Heights, Ill.; Austin, Texas; Corning, Iowa; Miami; Tucson, Ariz.; Richmond, Va.; Winamac, Ind.; and Fresno.

The insurance carriers, who were not identified as a condition of participating in the study, determined whether each applicant would be offered coverage and on what terms.

California had the highest rejection rate of all eight markets in the study. But once an offer was made in California, it tended more often to be a standard or "clean" offer.

The hypothetical subjects ranged from "Alice," a 24-year-old waitress with hay fever, to "Greg," a 36-year-old writer with HIV. Others included a family with two children, one of whom had asthma and recurring ear infections, and "Emily," a 56-year-old widow who was "situationally depressed" but otherwise healthy.

Greg, the one with the most "uninsurable" condition, was rejected 100 percent of the time. A 48-year-old breast cancer survivor was rejected 46 percent of the time but received 11 clean offers.

But some of the healthier applicants were still turned down.

The waitress with hay fever was rejected 8 percent of the time, and a 36- year-old man with a 10-year-old knee injury was excluded 12 percent of the time. The woman with depression had a 23 percent rejection rate. The family was offered coverage all 60 times, but nine of those offers excluded the 12- year-old boy with asthma.

The study found the denial rate higher in California, where state law prohibits carriers from permanently eliminating coverage for pre-existing conditions or excluding coverage for certain conditions or even body parts. While the other markets, such as those in Virginia, Iowa and Illinois, offered the subjects coverage about 70 percent of the time, the rate in California was 33 percent.

"There's an unintended consequence of that (California) regulation, which is fewer people get offers for that insurance," said Kathy Thomas, a Wisconsin risk management consultant who co-authored the study.

California plans offer the subjects in the study a higher rate than normal 33 percent of the time. Indiana offered a higher premium 56 percent of the time, but the rest of the states were lower.

California did have the lowest incidence of benefit limitations because of state laws.

Walter Zelman, chief executive of the California Association of Health Plans, said the individual market has peculiarities that make it costly. For one, individual purchasers include the partly employed and unemployed, a situation that creates a disproportionately higher cost pool.

"The individual market has always been very difficult. The reason is is it's not very large market and insurers are almost forced to charge people based on their risk," he said.

The Kaiser Family Foundation is a nonprofit health care philanthropy unrelated to Kaiser Permanente. The report -- "How Accessible is Individual Health Insurance for Consumers in Less-Than-Perfect Health?" -- is available online at www.kff.org/marketplace or by calling the foundation's publications request line at (800) 656-4533.

E-mail Victoria Colliver at vcolliver@sfchronicle.com.

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