Consumer Decision Making in the Individual Health Insurance Market
M. Susan Marquis, Melinda Beeuwkes Buntin, Jose J. Escarce, Kanika Kapur, Thomas A. Louis, and Jill M. Yegian
May 2006
Some policymakers and analysts have suggested using the individual insurance market to help expand coverage for the uninsured. The individual health insurance market, which covers about 9% of insured Californians, is made up of individuals and families who pay for their own coverage, usually because no group coverage is available.
While individual coverage offers certain advantages such as greater choice of products and portability, it also has inherent limitations for consumers. For example, the practice of underwriting (in most states) is designed to avoid enrolling those with very high expected costs or to charge them higher prices than healthier applicants would pay. As a result, individual coverage might not be accessible or affordable to people with high health risks.
Funded by the California HealthCare Foundation and published in the journal Health Affairs, this analysis by RAND examines the impact that cutting the cost of premiums would have on the individual market in California. The study finds price subsidies have only modest effects on overall participation in the individual market. For example, a 20% premium subsidy would increase the number of subscribers in the individual market by 5 to 11% and decrease the number of uninsured people by only 1 to 3%.
The authors argue that reducing the complexity of shopping for individual coverage could increase participation as much as, if not more than, price subsidies.
The complete article is available free of charge on the Health Affairs site through the link below.