As the Market for Individual Health Insurance Grows, Cheaper Health Coverage Posted: December 15th, 2009

The Growing Market for Individual Health Insurance Policies May Result In Cheaper Health Insurance Plans
With the number of workers covered by traditional employer sponsored health insurance plans declining, insurance companies are seeing a growing market for individual health insurance policies.

Adverse Selection Raises Costs

The market for individual health insurance is subject to adverse selection. This means that those most likely to need care, who tend to be older and sicker than the general public, purchase policies. However, those who are less likely to need care forgo coverage.
The result is that individual health insurance policyholders usually have higher cost claims in greater frequency than those covered under group policies. In contrast, group policies usually have many younger, healthier individuals.

Premiums for individual policies must be set much higher than for group policies to account for this. As a result of such high premiums, all but those who are the most likely to need coverage are discouraged from applying.

Subsidizing Individual Policies

It is expected that any health reform measure may include subsidies for those unable to afford health insurance. Making insurance more affordable would broaden the market for those seeking individual policies.

Further, if purchasing insurance is mandated by the legislation, the market for individual policies may swell. With such large numbers of new younger and healthier entrants to the individual insurance market, insurance companies might expand their offerings to try to capture the greatest share of this new market.

Insurance Exchanges

Another provision of the overhaul under consideration is the establishment of health exchanges. These would enable individuals to join together to buy policies at cheaper, negotiated group rates.

Innovations for Cheap Health Insurance Policies

One way that insurance companies may try to acquire new customers is by offering policies that appeal to younger, healthier individuals. These include high deductible plans or plans that only offer limited benefits. Insurers already have some experience offering these types of plans, particularly in states and localities that have a more favorable regulatory environment.

Since their payouts are lower than those of most individual plans, their premiums are kept at more affordable levels.

If you don't have health insurance, you may want to consider going online to research and purchase a high deductible policy in order to provide cheap health insurance for you and your family.

Sanford Ellowitz