Predatory Insuring:  A View from Inside the Individual Health Insurance Crisis
By Sue Dormanen

"Subprime" is 2007's Word of the Year according to the American Dialect Society.   Everyone's talking about the mortgage crisis. To me, those dubious lenders look a lot like the predatory insurers squeezing the individual health insurance market.

When you first try to buy health insurance as an individual, you may well be dismayed at the lack of transparency.  Faced with a baffling array of plans, you can't get a good idea of the premium cost until you've actually submitted a lengthy application and faced up to a month-long underwriting process.  

The price you thought you were carefully comparison shopping based on your age is not likely the price you will be offered. Instead, the price may be several times higher, based on the "tier" you are assigned in an underwriting process – a process that may comb through your medical file and exaggerate every small question you've ever asked your doctor about, and conditions for which you may never have been diagnosed or treated. For me, having broken my ankle five years ago and worn a simple cast for six weeks (no surgery) evidently was enough to boost me to a tier 5, where the premium cost was more than triple the price advertised for my age and geographic area.

If, to avoid the anxiety and, perhaps soon, illegality, of being uninsured, you bite the bullet and buy, you face a series of ballooning payments: a big raise at six months, on your birthday, at your "anniversary" date. My premium was 60% higher at the end of one year than the price I'd bought in at, even though, thank goodness, I'd stayed healthy and hadn't needed any medical care during the year. And this from Blue Shield, the "nonprofit" insurer, probably one of the best of the bunch.

Soon I was paying 25% of my total (pre-tax) income for my health insurance premium, about the same as I pay for rent. The difference being that for my rent check, I get a roof over my head. The "insurance" I buy doesn't really cover any medical care during normal conditions, only some measure of protection against catastrophic costs. You see, it comes with a $4,500 per year deductible. 

Again, thank goodness I've stayed healthy. If I needed medical care, I couldn't afford it, after paying my health insurance premium.

We all need access to affordable health care; I believe it's a basic human right.  I also believe we should all contribute to the cost of that care.  But no one needs this kind of "subprime" insurance.

Why is the cost of my individual health insurance so high? I've had no major illnesses, expensive treatment, or any serious health problems in my life. I've read that the health reform plan making its way through our state Legislature would ask small employers with payrolls up to $50,000 to contribute 1% of that toward the cost of employee coverage.  Why, with my much smaller income, is 25% the best deal I can find, even after a time-consuming search and the help of a professional broker?

Could it be that as individual purchasers we are too small a slice of the insurance market to get a fair deal?  I've learned that about 60% of people with insurance are covered by some type of government program, and that these programs pay as little as 20 cents on the dollar of healthcare providers' costs.  That means there's a very small pool of the rest of us to draw on for profits.

So when health plans publicly declare they will fight a reform proposal that caps administrative costs and profits at 15%, I wonder how we can hope to furnish those profits and still provide care.

There's an even smaller pool of us, less than 10% of the entire insurance market, who don't have an employer that offers group health insurance, but attempt to keep ourselves insured by buying individual plans. Compared to the general population, we are more likely to be early retirees or older workers, self-employed, and live in rural areas, according to the Agency for Healthcare Research and Quality. We are a tiny group with no effective representation, vulnerable to squeezing.   

And of course this is no progressive system, no account is taken of ability to pay, no safeguards are in place those whose incomes fall just above the poverty line where they might qualify for some government program.

Robert K. Ross, M.D., head of The California Endowment, recently had this to say in his always wonderful "Bob's Blog": "For my money, I would entrust the overhaul of our ridiculously expensive and dysfunctional health system to directors of community health centers (CHCs)... While developing a mission-driven, values-based plan, CHC leaders are best equipped to craft an approach that is also hard-nosed with respect to costs. During the past decade, CHCs have been perfecting the art and science of delivering quality health care services at a reasonable cost to virtually anyone who shows up at their doorstep."

CHCs are community-based and consumer-run nonprofit organizations governed by boards of directors and professional staff that closely resemble the communities they serve.  

Is this what any of the presidential candidates are talking about?  If so, they've got my vote.

Does this sound like what we may get a chance to vote on in California?  If not, why not?  While Sacramento may be able to accomplish little as far as much-needed general healthcare overhaul, a few relatively simple changes could bring much need relief to this little corner of the market.
 
Sue Dormanen is a freelance writer and editor for nonprofit health and human services websites.

Article posted on 1/17/08