WSJ: Seeking Insurance, Individuals Face Many Obstacles

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Seeking Insurance, Individuals Face Many Obstacles

Past Ailments Can Disqualify People or Raise Prices; Bush Wants More Buyers
Mr. Craig's Policy Odyssey

By SARAH LUECK
Staff Reporter of THE WALL STREET JOURNAL
May 31, 2005; Page A1

John Craig, a 46-year-old software consultant in Orem, Utah, plays racquetball twice a week, doesn't smoke or drink and isn't overweight. But when he tried to get an individual health-insurance policy three years ago, he was rejected. The insurance company cited sinus infections and depression, two conditions that Mr. Craig felt were well under control. The sinus infections stopped when he quit eating wheat in 1992, and medication has kept depression at bay for years. Frustrated, he ended up pursuing coverage through various state programs. For people with health problems in the private market, he says, "if you have a job with health coverage, then you get health coverage. If you don't, you're simply out of luck." Mr. Craig has gotten an unwelcome education in the vagaries of individual insurance -- the private option of last resort for many of the roughly 60 million Americans who don't get health insurance from their jobs or the government. About 17 million people, or 10% of Americans under age 65, buy individual policies in a market that even proponents agree has a big problem: Sick people often can't get insurance, or if they can, it's prohibitively expensive.

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About 20% of nonelderly Americans aren't eligible either for employer plans or public programs like Medicaid, the state-federal health program for the poor, according to researchers at RAND Corp. and the California HealthCare Foundation, writing last year in the journal Health Affairs. Denial rates on the individual market range from 8% to 18%, they wrote. Mr. Craig, the software consultant, began looking for an individual policy in the spring of 2002, after buying his former employer's coverage got too expensive. He applied for a policy that would cover him, his wife, Elaine, and their three children, but the family was rejected. Mr. Craig suspects it was because his wife had been diagnosed with lupus years before. When he applied to American Medical Security, he didn't include his wife on the application. But that company rejected the family, too, saying in a letter that his past bouts with depression and sinus infections, which for a time had sent him to the doctor for antibiotics every few weeks, were to blame.


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As the number of uninsured people grew throughout the 1990s, the states and the federal government tried to address the problem. Some states passed aggressive regulatory changes aimed at improving access. New York and New Jersey, for example, began requiring individual-market insurers to offer all applicants a policy, regardless of past health conditions -- a requirement called "guaranteed issue." Such rules typically came with pricing restrictions, such as barring insurers from varying premiums based on health status or limiting their ability to do so. Most states limited the time insurers could exclude existing medical conditions from coverage.

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Now Republicans are pushing additional steps to shore up the individual market by reducing regulation and increasing demand. Mr. Bush has proposed $74 billion in tax credits over 10 years to help low-income people buy insurance, plus credits for small businesses that contribute to workers' health-savings accounts. Mr. Bush wants to give states $4 billion in federal grants to help states set up the purchasing pools supporters say will make individual coverage easier and cheaper to buy. Some people, including Newt Gingrich most recently, are reviving an idea that was part of President Clinton's failed overhaul of the health system. The notion is to mandate that everyone must get health insurance, much like they must have car insurance. If everyone has to buy a policy, the reasoning goes, insurers won't need to be so careful about who they accept.

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Republicans and industry officials say there's a solution for people whose medical conditions make it difficult or impossible to get individual policies -- state-run high-risk pools. These pools, which exist in more than 30 states, are designed to provide access to individual coverage for people who can't otherwise get it. They're usually funded by general-revenue funds or a tax on insurers, as well as by higher-than-average premiums paid by individuals. For some people, the high-risk pools have indeed been a blessing. For example, Mr. Craig's wife, Elaine, who has lupus, is getting insurance through the Utah pool for about $360 a month. Mr. Craig also recently found out that he got into the pool for a premium of about $380 a month. His health problems are excluded from coverage for six months. But the risk pools have their own problems. Florida's has been closed to new enrollment since 1991. Throughout the country, just 181,000 people are enrolled in risk pools, and most of that population is located in a handful of states, such as Minnesota, Texas and Wisconsin, according to Communicating for Agriculture and the Self-Employed Inc., a Fergus Falls, Minn.-based group that monitors the pools. In 2003, the pools' losses were $540 million.

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Write to Sarah Lueck at [e-mail]

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http://online.wsj.com/article/0,,SB111749120504446489,00.html