Individuals Find Wide Price Spreads and Differing Benefits When Shopping for Insurance

Health insurance costs vary widely for the 1.5 million Californians covered by individual policies and a dizzying array of choices can baffle consumers. This analysis helps compare options and suggests how policymakers might make the process easier.

November 2002

In 2002, some 1.5 million people -- 5% of nonelderly Californians -- were covered by individual health policies rather than group insurance, which is typically available only through businesses and other organizations. Researchers studied the individual health insurance products offered by the five major insurers serving this market (Blue Cross of California, Blue Shield of California, Health Net, Kaiser Permanente, and PacifiCare) and found a dizzying array of choices and prices that were often difficult to understand and compare.

Depending on the geographic area of the state, up to 31 different benefit packages were available, with premium prices varying by hundreds of dollars per month. Price differences reflected in part the very broad range of available benefit packages; yet, prices varied considerably even when benefits were similar. There was no simple formula for choosing the best option, but close examination of the market offered insights that could help consumers make decisions.

When comparing health plans, the report advises consumers to:

  • Look for coverage that includes benefits they are likely to use (such as maternity care for a woman who is considering having a baby) or specialty services they are likely to need;
  • Consider the number and kinds of doctors available under the plan, particularly the difference between Kaiser Permanente's network of its own physicians and hospitals versus the physicians and hospitals offered by other plans; and
  • Balance the cost of the monthly premium against out-of-pocket costs that vary according to how often you use the insurance (for example, consumers who use health services frequently might want higher premiums and lower per-visit costs, while infrequent users might want lower monthly costs but a higher per-visit payment).

For policymakers, the report suggests that the difficult task of choosing an individual policy could be made easier if insurers were required to offer one or more standard benefit packages.