Americans buying their own health insurance face an average 20 percent increase in premiums, driving some toward cheaper plans with fewer benefits, according to the Henry J. Kaiser Family Foundation.
An estimated 14 million U.S. individuals under age 65 purchase coverage themselves, rather than through an employer, according to a Kaiser report released today. About 77 percent of them got a premium increase, said the Menlo Park, California-based nonprofit, which surveyed 1,038 buyers of their own individual and family health insurance between March 19 and April 2.
What’s driving up costs and how much is a fair rate increase are issues of debate among regulators and insurers, said Drew Altman, Kaiser’s chief executive officer and president. “If you’re being hit with a 20 percent increase and inflation is negligible and your wages aren’t going up, that on its face is an unreasonable increase,” Altman said. “You will never convince a consumer that’s a reasonable increase when wages and inflation are flat.”
About 60 percent of policyholders paid the higher bills, while 16 percent switched to a less expensive plan, according to Kaiser. Of those who changed coverage, nearly half said their new policy offered fewer benefits.
“Health insurance premiums are rising because medical costs continue to soar and because younger and healthier people are choosing to drop their insurance during a weak economy,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, an industry group based in Washington. “That’s driving up costs for everyone else.”
The health-reform bill signed by President Barack Obama in March, which requires most Americans to have insurance, may increase the market for those purchasing their own policies by 30 million people, said Gary Lauer, chief executive officer and president of EHealth Inc. The Mountain View, California-based company operates EHealthInsurance.com, an online seller of insurance.
The most common reason people buy health insurance through the individual market is because they’re self-employed or small-business owners, according to Kaiser. The average annual premium for individuals purchasing a plan covering one person is $3,606 compared with $4,824 for group plans, where employers often contribute to the cost, Kaiser said.
Policyholders who purchased their own coverage spent an average $1,690 on health expenses in the past year in addition to their annual premium and typically had higher deductibles, according to the report. The average annual deductible for individuals who buy their own policies is $2,498 compared with $634 for the most common type of employer-sponsored health insurance.
The health law establishes exchanges where people can shop for insurance, provides subsidies for lower-income consumers to purchase policies, and prevents insurers from denying coverage to those with pre-existing conditions. Most provisions don’t take effect until 2014, according to Kaiser.
“I think these exchanges are going to bring visibility to this market,” said Lauer in a telephone interview. “What’s surprising to most people is it’s actually a vibrant market with a lot of choices in most states.”
The difference in prices on similar health-insurance offerings can be as much as 30 percent, he said.