The Surprising Affordability of Individual Health Insurance Plans

The Surprising Affordability of Individual Health Insurance Plans
A new study shows that most employees in a large majority of the states would do better with an individual health insurance plan rather than participating in group coverage.  Zane Benefits, which provides a Software-as-a-Service platform for employers, found that individual plans cost 50% less than group coverage for an average of 80% of those applicants who medically qualify.  According to the study:

“The dramatic relative price change between individual versus group policies has occurred because 45 U.S. states allow insurance carriers to distribute individual health insurance with medical underwriting. Allowing medical underwriting means that insurance carriers may reject, accept, or uprate (i.e. charge more for) applicants based on their health status or age. KY, WA, and NH changed in 2003 to allow medical underwriting.”

Of course, medical underwriting is what those who believe in a free market would call the way insurance is supposed to work.  An insurance company is taking a financial risk based on a number of quantifiable factors – your health status and your age are just a couple of the most common – and charges you a premium that takes into account payouts, overhead and, of course, profit.  States that attempt to manipulate this underwriting process by forcing insurers to accept all applicants and not allowing them to adjust premiums are called “guarantee issue” states – and it should be no surprise that these states also have the highest rates for individual health insurance.

The study also notes that current regulations may make individual health insurance even more affordable that the study suggests.  These include:

  • Individual health insurance is guaranteed renewable.  That doesn’t mean your premiums won’t increase.  But it does mean you can’t lose your coverage based on your claims history.
  •  Health Reimbursement Arrangements now allow employers to pay employees, on a tax free basis, for individual health insurance costs.
  •  Employees can get guarantee issue insurance through HIPAA mandated state risk pools.
  •  Federal health care Reform will require a nationwide risk pool that will offer guaranteed issues insurance to those who have been previously uninsured.

The study reaffirms our belief that while health care is far from perfect and in need of reform, it is often innovation and new ways of thinking about coverage that offer brighter and more affordable solutions that government mandates and intervention.

For more information about Zane benefits visit

Written by Damon Ford.

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