Who Relies on the Individual Market for Comprehensive Health Insurance Coverage? Objectives, Scope, and Methodology

The Chairman of the Senate Committee on Labor and Human Resources asked us to report on the size of the individual health insurance market, recent trends, and the demographic characteristics of its participants; the market structure, including how individuals access the market, the prices, other characteristics of health plans offered, and the number of individual carriers offering plans; and the insurance reforms and other measures states have taken to increase individuals’ access to health insurance. Therefore, references to individual market products do not include more limited benefit products unless specifically noted. For About 10.5 Million Americans, Individual Health Insurance Was Their Only Source of Health Coverage in 1994

On the basis of our analysis of the March 1995 CPS, we estimate that about 10.5 million Americans under 65 years of age (4.5 percent of the nonelderly population) received health coverage through individual health insurance as their only source of health coverage during 1994. 2.2.) Consumers could choose from plans offered by no fewer than 7 to over 100 carriers. Medical Underwriting Affects Premiums and May Bar Access to the Individual Market

Absent state restrictions, carriers also evaluate the health status of each applicant to determine whether an applicant’s health status will result in an increase to the standard premium rate, the exclusion of a body part or an existing health condition, or the denial of the applicant altogether. Individuals with acquired immunodeficiency syndrome (AIDS) or other serious conditions, such as heart disease and leukemia, are virtually always denied coverage. Tables 4.4 and 4.5 provide examples of what individuals may face, given particular demographic characteristics and health conditions, when attempting to purchase individual insurance from carriers in the states we visited. In many of these states, high-risk insurance pools have been created to act as a safety net to ensure that these otherwise uninsurable individuals can obtain coverage, although at a cost that is generally 50 percent higher than the average or standard rate charged in the individual insurance market for a comparable plan. This provision, however, did not necessarily guarantee coverage to all individuals on demand. The individual insurance market is complex, and consumers, unlike those who have access to employer-sponsored plans, are largely on their own in obtaining and financing coverage. Thus in most states, those who are older or in poor health may be charged significantly higher premiums or may be denied coverage altogether.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the private individual health insurance market, focusing on the: (1) size of the market and characteristics of its participants; (2) structure of the market, including how individuals access the market, the prices, other characteristics of health plans offered, and the number of individual carriers offering plans; and (3) insurance reforms and other measures states have taken to increase individuals' access to health insurance.

What GAO Found

GAO found that: (1) about 10.5 million Americans under 65 years of age relied on private individual health insurance as their only source of health coverage during 1994; (2) when compared with those enrolled in employer-sponsored group coverage, individual health insurance enrollees are, on average, older and have lower income, but they are similar in their self-reported health status; (3) individual insurance is more prevalent among particular segments of the labor force, such as the self-employed and farm workers; (4) individuals must identify and evaluate multiple health insurance products and then obtain and finance the coverage on their own; (5) individuals in the states reviewed could select products from 7 to over 100 carriers, with deductibles ranging from $250 to $10,000; (6) in the majority of states, which permit medical underwriting, individuals may be excluded from the private insurance market, may only be able to obtain limited benefit coverage, or may pay premiums that are significantly higher than the standard rate for similar coverage; (7) carriers in these states determine premium price and eligibility on the basis of the risk indicated by each individual's demographic characteristics and health status; (8) carriers GAO visited declined coverage to up to 33 percent of applicants because of medical conditions, such as acquired immunodeficiency syndrome and heart disease; (9) if they do not decline coverage, carriers may permanently exclude from coverage certain conditions or body parts, or charge significantly higher premiums to those expected to incur large health care costs; (10) at least 43 states have sought to increase the health coverage options available to otherwise uninsurable individuals; and (11) a new federal law contains provisions intended to enhance access to the individual insurance market, particularly regarding portability and guaranteed renewal.