November 4, 2009

Individual Insurance: Health Insurers Try to Tap Potential Market Growth

Elizabeth A. November, Genna R. Cohen, Paul B. Ginsburg and Brian C. Quinn write that individual insurance is the only source of health coverage for people without access to employer-sponsored insurance or public insurance. Individual insurance traditionally has been sought by older, sicker individuals who perceive the need for insurance more than younger, healthier people. The attraction of a sicker population to the individual market creates adverse selection, leading insurers to employ medical underwriting to either avoid those with the greatest health needs or set premiums more reflective of their expected medical use. Recently, however, several factors have prompted insurers to recognize the growth potential of the individual market that lead insurers to pursue several strategies to expand their presence in the individual insurance market. However, insurers' strategies in the individual insurance market are unlikely to meet the needs of less-than-healthy people seeking affordable, comprehensive coverage. Congressional health reform proposals, which envision a larger role for the individual market, would likely supersede insurers' current individual market strategies.