I recently got phone calls about individual insurance from two men who work for a small, family-owned construction company that is canceling its small group health insurance. With everybody in the company being over 50, a couple in their 60′s, and at least one person with serious health problems, the health insurance premiums for every employee were very high. The problem with small business health insurance plans is that everybody’s premium goes up if just one person gets sick and uses the insurance policy a lot, or if just a couple of employees are in their 60′s and healthy.
So this small family company with eight employees has left each individual to fend for himself for health insurance. One of the employees, “John” (not his real name), is pretty healthy, so he should have no problem being approved for insurance – though I did hear today that the insurance company to which he applied has asked for his medical records to assess a condition he mentioned on his application. John is in his mid-fifties and will have a lower premium than the one he had with the employer group plan.
I talked on the phone with John’s co-worker, “Alonzo”. Alonzo told me he is “pretty healthy” – though he neglected to tell me he is overweight. Alonzo applied on-line for health insurance, and the insurance company did not ask for his medical records before they declined him. His weight and two other conditions indicated on his application made the “decline” decision easy for the insurance company. And he thought he was healthy!
Alonzo is 64 years old and has one year to go until he gets Medicare. If he were healthy, he could get an individual policy with a very high deductible for around $200 per month. But because he has pre-existing conditions he will pay about three times that in order to get coverage through the Health Insurance Portability and Accountability Act (HIPAA). This 1999 federal law allows a person losing group insurance (even small group) to get insurance with no underwriting (no questions asked).
The HIPAA law which will allow Alonzo to get health insurance is a good thing. The bad thing is that insurance companies only have to offer one or two plans under the HIPAA law and they can take the normal premium and triple it. (UPDATE: It turns out they take the “standard” rate, not the “preferred rate” and triple it.) So Alonzo will pay around $800 per month for a health insurance policy with a $10,000 deductible. We looked at other policies with much lower deductibles, but the premium for Alonzo would be over $1,000 per month for these plans. So Alonzo will sign up for this policy, cross his fingers, and hope he stays healthy for the next year. He can’t wait to turn 65 and get good, affordable health insurance with Medicare.
UPDATED INFO: Alonzo ended up with a HIPAA plan with a $3,500 deductible and $1,400 per month premium. He chose this plan because he needed treatment for prostate cancer which was diagnosed just as he was losing his group plan.
I hate individual insurance because I have met too many people like Alonzo. He thinks he’s healthy. He has worked all his life. He and his wife have a lovely, well-kept, small home in Tucson. He is a responsible citizen who knows he needs health insurance to protect everything he has worked for all his life – and he’s willing to pay for it. He can get health insurance because of the HIPAA law, but he is basically getting ripped off with such an expensive policy that won’t kick in until he has spent $10,000 on medical costs.
In 2014, someone like Alonzo will go onto an insurance exchange, compare plans being offered (with different deductibles and premiums), and sign up for a plan. How simple! Of course, this kind of simple choice, with nobody being rejected for insurance coverage, can only happen if everybody is in the system – including young, healthy people. If everybody is in the system, people like Alonzo won’t be left out in the cold. And small businesses getting tax breaks for contributing to their employees’ premium costs will be more likely to have a group plan.
There are too many people in Tucson and across the country like Alonzo. For me, it seems un-american to say, “Sorry, you are un-insurable. Take a hike. Fend for yourself. It’s not our problem. I don’t want health insurance so who cares if you don’t have health insurance.” In 2014 this will change. For now, I repeat, I hate individual health insurance.