Insurers are increasingly targeting the individual insurance market — traditionally viewed as static — as a potential growth opportunity, according to a study from the Center for Studying Health System Change (HSC). In the past, the individual market has attracted older, sicker people. This is adverse selection, and in response, insurers tend to avoid people with the greatest health needs or to set premiums higher to reflect those individuals’ expected medical use.
That’s changing, according to the report. The economic downturn has caused a decline in the proportion of people with employer-sponsored coverage. Also, a sizeable population of younger, healthier people is forgoing insurance. Insurance officials also think that subsidies to buy insurance under the proposed health care reform might also have an effect.
“If enacted, current health reform proposals, which envision a larger role for the individual market under a sharply different regulatory framework, would likely supersede insurers’ current strategies,” says HSC President Paul B. Ginsburg, PhD, coauthor of the study.
As insurers shift their focus, they are turning to states with favorable regulatory environments (the individual insurance market is regulated at the state level), offering lower-cost products and using marketing strategies that make it easier for consumers to shop for coverage.
The HSC study reviewed the market conditions in 12 communities in which the individual market tended to be dominated by mainstream insurers, typically a Blue Cross–Blue Shield plan. Places with less state regulation exhibited more competition: Ohio, South Carolina, Indiana, and Arkansas.
Reform proposals under debate include subsidies for low- and moderate-income people to buy insurance, creation of insurance exchanges, and much stricter regulation of the individual market.
Proposed regulatory changes include a mandate for individuals to be covered, guaranteed-issue requirements, a ban on medical underwriting, use of modified community rating, and products standardized by actuarial value.