Coverage Does Not Guarantee Care

Coverage Issues:
Many Ailments
Can Pose Problems
May 31, 2005; Page A9

Severe medical conditions like cancer, diabetes and HIV can pose formidable, and sometimes insurmountable, barriers to coverage in the individual insurance market. So can less severe health issues.

For a 2001 study, Georgetown University's Institute for Health Care Research and Policy created seven hypothetical people with a range of problems and applied to 19 companies in eight states for policies. Overall, the fake applicants submitted 420 applications and got 266 offers of coverage. Greg, a hypothetical 36-year-old with HIV, was rejected by all insurers in every state. Bob, a 36-year-old who had surgery 10 years ago for a knee injury, was turned down 12% of the time. Some insurers who offered coverage to Bob excluded his knee from the policy or tacked on extra premium charges. Alice, a 24-year-old with seasonal allergies, was rejected 8% of the time. The policies she was offered generally had restrictions, such as excluding coverage for her allergies or her respiratory system.

"We have set ourselves up with a system that is designed to punish people," says Karen Pollitz, project director at the institute and a former Clinton administration official. "If we're going to rely on insurance to be our passport to medical care, we have to agree on some rules to deal with this." She and other critics say that, by its very nature, individual coverage is less efficient and affordable than group coverage. For one thing, policies are sold one-by-one, so administrative costs are far higher.

Industry defenders estimate that only 1% to 2% of the people seeking individual coverage truly can't get it due to health problems. They note that all the hypothetical consumers in the Georgetown study, except for the HIV patient, eventually were offered policies, even if the prices were higher than for healthy people. And exclusions of medical conditions aren't necessarily bad, says Janet Trautwein, vice president of government affairs at the National Association of Health Underwriters, a trade group for insurance brokers and agents that helped with the research. For example, Alice, the applicant with hay fever, could pay less than $100 a month for coverage on everything but allergy treatment and then buy an over-the-counter allergy drug on her own.

"If a person keeps trying, as long as they're not in the midst of a serious illness, they can get individual insurance at a pretty decent price," says Mark Pauly, a health-care economist at the University of Pennsylvania. But Ms. Pollitz counters that shopping around isn't easy: Often, the only way to know for sure what an insurer will offer and at what price is to apply for coverage, but the first month's premium typically is due with the application. Ms. Trautwein says insurance agents can help steer people to insurers that would be more likely to take them.