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Kaiser Survey of People Who Purchase Their Own Insurance Finds Rates Increasing Posted: August 23rd, 2010

By Rebecca Theim

Recent Kaiser Family Foundation survey reports surging individual health insurance rates

People buying their own health insurance report that recent premium increases average 20 percent, according to a new survey by the Kaiser Family Foundation (KFF) that examined the experiences of people who buy health coverage on the open, or individual, market.

"These people report spending thousands of dollars on premiums and out-of-pocket health care expenses, and not surprisingly, more than half say it is difficult for them to afford these costs," according to the survey report. "The vast majority of people in the non-group market have faced premium increases...and while most have chosen to pay the increase, many switched to less expensive plans, which may have less comprehensive coverage. This group also reports problems with paying for health care, feeling vulnerable to medical costs and worrying about affording insurance and medical care in the future."

More than three in four people (77 percent) with non-group coverage reported a premium increase with a current or previous insurer. Most said they paid the increase, but 16 percent of all policyholders said they switched to cheaper insurance plans, either by buying a less expensive policy from their current insurer or switching companies altogether. After these so-called "buy downs" are factored in, those individuals paid 13 percent more than before.

Despite the double-digit cost increase, the survey found that 49 percent of respondents said their new plan offers inferior benefits compared to their previous plan, while only 11 percent said their new plan was better.

While most people in the United States obtain health insurance through their employer, about 14 million under the age of 65 have coverage through the non-group or individual market.

Individual market charges higher premiums and deductibles

More than half (57 percent) of those with non-group insurance said that they were the only ones covered by their medical insurance policies. This group reports average annual premiums of $3,606, less than the average $4,824 premium reported in 2009 for employer-sponsored coverage (which typically provides more comprehensive insurance). Among those whose policies cover not only themselves but other family members, the average annual premiums are $7,102.

Many reported being in plans with high deductibles, including more than 25 percent who said their annual deductible is $5,000 or more, and 6 percent paid a deductible of $10,000 or more.

Overall, the average deductible reported for single coverage is $2,498, almost four times the $634 deductible reported on average for employer-sponsored preferred provider organization (PPO) coverage.

Affordability worries reported

People purchasing their own coverage were more likely to worry about being unable to pay for health care than those with employer coverage.

For example, 40 percent of those who buy their own coverage said they are "not too confident" or "not at all confident" that they will be able to pay their usual medical bills, twice the share of those with employer coverage who participated in an earlier KFF survey. Only 17 percent indicated they are "very confident" they could pay the cost of health insurance, compared to 36 percent of those with employer coverage.

Paying for a major illness or injury requiring hospitalization is an even bigger concern. Slightly more than half of those who purchase their own coverage said they are "not confident" they could pay their bills in such a situation, compared with a little more than one-quarter of those with employer coverage.

More than one in five said that over the past year they or a family member covered by health insurance did not get needed medical care because of the cost, and 20 percent said they skipped filling a prescription for the same reason.

Pre-existing conditions particularly worrisome

Nearly half of those with health insurance from the individual market said they or someone covered by their policy has a pre-existing condition. This group is more likely than other policyholders to report difficulty in finding a plan that insures them (49 percent versus 27 percent). Additionally, those with pre-existing conditions are more likely to worry that they may lose their coverage if they become seriously ill (62 percent compared with 48 percent of those without pre-existing conditions). Because the survey only focused on currently insured individuals, these numbers do not include individuals with pre-existing conditions who could not obtain coverage.

Who buys individual coverage?

Almost half of respondents said they turned to the individual market because they are self-employed and small business owners. One in four did so because their employer or spouse's employer did not offer coverage, or they were not eligible or could not afford the employer-sponsored coverage.

KFF's Survey of People Who Purchase Their Own Insurance is based on a nationally representative random sample of more than 1,000 people ages 18-64 that purchase their own health coverage. It was conducted between March 19 and April 2, during the final congressional debate and enactment of health reform legislation.