United Press International - Wednesday, 20 June 2001
Joyce Frieden, UPI Science News

"To level the playing field, there needs to be substantial changes made in how the individual insurance market operates," said Diane Rowland, executive vice president of the Kaiser Family Foundation, which is not affiliated with health insurer Kaiser Permanente. Rowland was a panelist discussing the study findings at a Washington press conference.

In the research, investigators developed seven different hypothetical applicants for health insurance. Each had a health problem ranging from hay fever to HIV infection, and all but one had problems getting coverage.

The researchers -- Richard Sorian and Karen Pollitz of Georgetown University, Washington, along with insurance industry consultant Kathryn Thomas -- asked 19 different insurers to assess each applicant as though he or she were actually applying for insurance. They looked at the individual market in eight different geographic areas, ranging from large urban centers such as Miami to small towns like Corning, Iowa. They submitted a total of 60 applications for each applicant.

Six of the seven applicants were rejected for coverage at least once, although the rates of denial varied widely. For example:

-- "Alice," a 24-year-old waitress with hay fever and otherwise excellent health, was denied coverage 8 percent of the time;

-- "Greg," a 36-year-old freelance writer with HIV, was denied coverage 100 percent of the time; and

-- "Frank," a 62-year-old salesman who smoked, was obese, and had hypertension, was rejected by insurers 55 percent of the time.

The study was structured so that none of the applicants were in a category that would have guaranteed them coverage under current federal law.

Of the six applicants who received at least one offer, all received some that were less desirable than a standard policy. For example, 42 percent of insurers offered "Frank" a policy with a substantial rate increase over the standard premium. And when "Carl" applied for coverage for himself, his wife, and his son and daughter, 15 percent of insurers offered him a policy covering everyone except his son, who had asthma.

Prices quoted for coverage also varied greatly. "Alice," the hay fever sufferer, was quoted an average premium of $1,656 annually, while "Frank," the salesman with obesity and hypertension, was quoted an average annual premium of $9,936 per year, with one quote at more than $30,000.

Affordability is a significant problem with many individual insurance policies, according to several panelists. Rowland noted that two-thirds of the 42 million Americans without health insurance are in families making less than twice the federal poverty level, that is, about $30,000.

Susan Sherry, director of planning and development at Community Catalyst, a Boston-based consumer organization, said that although several states have instituted insurance reforms that make it easier for applicants to obtain coverage, most of the reforms do not address the affordability issue.

"These types of reforms don't put money in people's pockets to enable them to pay the premium," she said. "If a person makes $1,400 per month and the policy costs $300 per month, that's nearly a fourth of their income."

Nevertheless, said Ross Schriftman, an associate at Kistler Tiffany Benefits in Wayne, Penn., it's noteworthy that most of the applicants did get some kind of coverage offer.

"It's a myth that limited coverage is no better than no coverage at all," he said. "Is it the best solution? No, but we have to be careful about how we go forward."

The high cost of many of the policies is not surprising because it's more expensive to insure for one particular individual's risk than it is to insure a whole group of people, said Jack Meyer, head of the Economic and Social Research Institute, a Washington think tank. "We need to find ways to take these people and put them in large groups," he said. "That would lower administrative costs and reduce risk for the insurers."
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