Designs for One

Although the individual insurance market is fraught with adverse selection-a losing proposition for insurers and for consumers whose premiums are based on medical underwriting-it is also ripe with potential opportunity.

Moss considers the shrinking group market as an invitation to enter the individual insurance marketplace. Competing in a newly regulated healthcare landscape will be a concern.

"Insurers will need to find ways to be competitive to compensate for covering pre-existing conditions," he says.

Although Paul Ginsburg, president of HSC and co-author of the study, says he is not surprised by the survey results, he does question whether steps taken by insurers in the individual market reflect what healthcare reform may prescribe. "If those recently unemployed can get subsidized COBRA, they won't bother to buy individual insurance at its current high cost," he says.

According to the U.S. Census Bureau, the number of Americans with individual insurance has stayed constant at 6% or 7% over the past decade, even though the number of people insured by their employers has decreased.

GROWTH VARIES BY STATE

Helen Darling, president of the National Business Group on Health whose members provide health coverage to more than 50 million people, says that reform should create a level playing field for both the individual and group markets if there is an individual mandate. She points to the standard federal employee package as likely to be the minimally acceptable offering. Despite the weakened economy and high unemployment rates, Darling doesn't think that the individual market will necessarily grow in any substantial way, but that growth will vary from state to state, partly because costs to individuals vary so much.

"If there is an individual mandate and well-functioning exchanges, then the individual market is likely to grow as people move in and out of employment with medium or large size employers," she says.

John Bigalke, U.S. managing partner, health sciences and governmental health for consulting firm Deloitte, believes that insurers will be reluctant to offer new individual options until there is an individual mandate accompanied by penalties.

"Why offer something different if the incentives don't change?" he says.

Bigalke anticipates that an emphasis on chronic care management, primary care, patient-centered medical homes, an influx of data, quality and value will shake up the individual market.