A Report from Families USA, June 2008
As pressure mounts on policymakers to find a solution to America’s health care crisis, some lawmakers are promoting the individual health insurance market as the best avenue for reform. They propose providing tax credits for people who seek out and purchase health insurance on their own, suggesting that individuals will be able to find the best deal for themselves. However, without adequate consumer protections, the individual insurance market offers a raw deal. Individuals seeking health coverage on their own have virtually no bargaining power to obtain good health benefits at a reasonable rate.
The task of protecting consumers in the individual market has, for the most part, been left to the states. States have taken some steps to protect consumers, but they face limitations. The insurance lobby is strong, and many insurers would prefer an unregulated market in which they accept only consumers who are good risks for their business. This leaves consumers with a patchwork of protections that are inadequate as a whole and that vary greatly from state to state. In one state, consumers may be able to buy insurance that will cover their medical needs, but only at a very high price. Just across the state line, neighbors with similar medical conditions may find that although policies are cheaper, no insurer will sell to them or insurers will only sell them polices that exclude coverage of the very services that they most need. Consumers are put at the mercy of insurers and the vagaries of states’ insurance laws.
In order to understand what Americans face when they purchase health insurance in the individual market, Families USA surveyed all state insurance departments and compiled information on the laws that each state has in place to protect consumers (see the table on page 4). We found that protections vary greatly across the country, and in many states, because of a lack of consumer protections, insurance companies can deny people coverage, raise premiums significantly, refuse to cover treatment for certain conditions, and even revoke the coverage of policyholders who have been paying premiums for years.