Private Health Insurance

Most Americans obtain health insurance coverage through their jobs or through government programs like Medicare and Medicaid. About 10.5 million Americans, however, purchased private health insurance for themselves or their families in 1994. The family farmer, the recent college graduate, the early retiree, and the employee of a company that does not offer health insurance coverage are all examples of persons who are often not covered in a voluntary, employment-based insurance market. Integrating the individual market into health insurance reform proposals has been a thorny issue at both the federal and state level, in part because of the paucity of information on the nature of this market and the characteristics of its participants. This report discusses the (1) size of the individual market, recent trends in it, and the demographic characteristics of its participants; (2) market structure, including how persons access the market, the prices and 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 improve individuals' access to health insurance.

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.