Market of 1: As more employers drop coverage, market for affordable individual plans grows

March 1, 2007

Some health insurers are hoping that new benefit designs targeting individuals will attract some of the uninsured and the self-employed, who either don't realize that they can get insurance or don't know how much they can afford.

The Kaiser Family Foundation (KFF) says that a lack of health insurance coverage is a problem for many more Americans than it was 10 years ago. In fact, 81% of the uninsured are in working families–69% with at least one full-time worker and 13% with a part-time worker.

Consumerism and the high cost of healthcare are bumping heads, giving patients more control while at the same time, demanding they pay a larger chunk of it.

SEGMENTING A POPULATION

Aetna has rejuvenated its individual benefit, which was introduced in Pennsylvania in 1996. It became available in 16 states and Washington, D.C., in 2004 and now covers 200,000 lives. Laurie Brubaker, head of individual markets for the Hartford, Conn.-based insurer, says there is an unmet need for the individual market as more and more employers, especially small groups, are no longer covering their employees. She notes that 30% to 35% of those selecting one of Aetna's individual plans were formerly uninsured.

Brubaker says that Aetna's PPO-type and high-deductible plans have been designed to address the requirements of individuals based on lifestyle changes, such as early retirement, between jobs, starting one's own business, graduating from college or starting a family.

"The benefits are similar, but the price points differ," she says. "It's all about price." The $2,500 deductible has proved to be the most popular, while the $500 is the least. "We offer the lower deductible to mimic what employees received from their employers," she says.

Brubaker points out that the options offer comprehensive, robust benefits, not just catastrophic coverage. "Individual insurance has been viewed as gap or short-term coverage but now it is for the long term," she says.

In addition to the PPOs and high-deductible plans, Aetna also offers two hospital plans that provide members with lower priced coverage for basic healthcare services. These plans include limited coverage for preventive care as well as inpatient hospital coverage and limited benefits for outpatient surgery, skilled nursing or home health services.

Like Aetna, WellPoint based in Indianapolis, has segmented its prospective individual members, from "young invincibles" to the Hispanic marketplace, offering a Spanish language Web site and culturally sensitive providers. The plans consist of 30% to 35% formerly uninsured members.

"We used a shotgun approach but have now conducted research to target different markets and tailor benefits to them," says Jude Thompson, senior vice president of the under 65 market for WellPoint.

Tonik, designed for those aged 19 to 29, offers a $3,000 deductible, $30 copayments for the first four office visits per year, and covers 100% of x-rays, lab tests, overnight hospital stays and out-patient surgery once the deductible is met. Only generic drugs are covered. About 70% of Tonik's members were previously uninsured.