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Healthy individuals often turned down for coverage
By Julie Appleby, USA TODAY
Thirty-six-year-old Leah Edwards was shocked when her application for health
insurance was rejected: The insurer said she was high-risk.
The San Francisco resident exercises, doesn't smoke and isn't sick. But
she does have year-round allergies, for which she was prescribed Claritin
under a health plan she had while working at a dot-com company.
That was enough to get her rejected for the individual coverage she needed
after her dot-com went under.
"I had no idea that because I was using my health insurance for health
care, I was more or less limiting my ability to get major coverage as an
individual," Edwards says.
Edwards was testing her luck in the individual health insurance market,
where about 16 million Americans get insurance, buying it themselves rather
than getting it through an employer.
A difficult market
The individual market has always been tough for those who are ill: Insurers
underwrite policies to avoid patients with medical conditions that make
them bad financial risks. But even patients without serious health problems
may not be able to get coverage, or afford it if they are offered plans.
Patients with hay fever, temporary depression, asthma and other conditions
can be turned down, along with those with such risk factors such as cancer,
high blood pressure or AIDS.
"It's an incredibly fickle market, where even someone with a health
condition as mild as hay fever can find themselves rejected or with coverage
priced out of their reach," says Larry Levitt of the Kaiser Family
Foundation, a research and education group.
Individual insurance is in the spotlight, as the Bush administration and
some members of Congress push tax credits as a way to help Americans buy
insurance. But the idea is controversial. Most of the tax-credit proposals
would offer about $1,000 for an individual and $2,500 for a family toward
health coverage. Critics say comprehensive insurance can't be bought for
those amounts and that tax credits could lead some employers to drop coverage,
worsening the problem of the uninsured rather than helping solve it.
Others say a $1,000 tax credit could buy basic coverage - or at least lower
the cost for many patients. Many employees work for firms that don't offer
coverage, yet they cannot deduct the amount they pay for insurance, nor
can they get a tax refund to help them buy a policy. Stuart Butler of the
Heritage Foundation says tax credits may even spur some large employers
to open their group policies to non-employees, allowing them to buy in at
group rates.
But cost is just one factor in the individual market. The first hurdle,
as Edwards found, is getting a policy.
She had to drop plans to work for herself after being rejected for health
insurance. Instead, Edwards landed a job in an art gallery, a position that
came with health insurance. As it turns out, the same insurer that rejected
her individual application is now her insurer under her group plan at work.
"It made me make a decision about my career that maybe I would have
made anyway, but this forced the decision so I stopped thinking about the
alternatives," Edwards says.
Her experience was not unusual.
A Kaiser study released in June tracked seven hypothetical insurance applicants
and detailed the difficulties they faced in getting coverage.
The study by Georgetown University for the Kaiser Family Foundation asked
19 insurance companies in eight cities to consider applications from the
seven "patients" for policies with $500 annual deductibles and
$20 co-pays for doctor office visits. The insurers knew the applicants were
fictional, but were asked to underwrite them as if they were real.
Study finds problems
One applicant had hay fever; another had injured his knee in college. A
family of four was healthy, except for one son, who had asthma. One woman
had survived breast cancer; another was "situationally depressed"
after the death of her husband. One man smoked, was overweight and had high
blood pressure. Another was HIV-positive.
Every single applicant - no matter how healthy - was turned down at least
some of the time. The HIV-positive patient was turned down every time.
The 24-year-old waitress with hay fever was turned down 8% of the time and
offered "substandard" plans 87% of the time. A plan was described
as substandard if it limited coverage for certain conditions or required
a premium surcharge because of a health condition. The waitress' plans often-limited
coverage for allergies. Only 5% of her applications had no restrictions.
The widow with depression was rejected 23% of the time. In 80% of the policies
offered to the family of four, limits were placed on the son's asthma treatment.
The son was excluded entirely in 15% percent of the policies.
The overweight smoker was rejected 55% of the time, but did get offers of
coverage. His premium quotes ranged from $2,928 a year to $30,048.
The five single applicants were quoted premiums that averaged $3,996 per
year. Had they been in perfect health, the average premium would have been
$2,988 annually, the study said.
Just shopping around isn't always the answer. Applications can take weeks
to process, and many insurers require up-front payments along with the applications,
the study found. "There are no simple solutions here," Levitt
says.
Some states have established high-risk insurance pools for those who cannot
get insurance. But few enroll, because the policies are generally expensive.
Other states, such as New York, have tried to regulate insurers, limiting
their ability to exclude patients for medical conditions. But the average
premiums in states with such rules are higher: The applicants in the Kaiser
study were quoted an average premium of $4,104 in New York.
Levitt says the difficulties in the market show that purchasing pools or
expanding programs for the uninsured may be the best options for many uninsured.
"A tax credit like that proposed by the president would work for some,
but for those who have a health condition, the individual market doesn't
seem to have the answers, even with a tax credit."
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