Health Insurers Target The Individual Market

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Aetna, WellPoint, Others Roll Out Policies That Cater to People Who Lack Employer Coverage; Stripping Out Maternity Care

Health insurers are targeting the two groups of people least likely to be covered by insurance at work — young people in their 20s and 30s, and early retirees who don’t yet qualify for Medicare.

Companies including Aetna Inc. and WellPoint Inc. have recently begun offering individual health-insurance packages tailored for young adults, the fastest-growing population of uninsured Americans. Besides basic medical coverage, the packages also often include such benefits as teeth whitening and gym-membership discounts, because insurers say many young people are especially concerned about looking good. But to keep the policies affordable — Humana Inc. packages start at $26 a month, for example — the plans usually have high deductibles of as much as thousands of dollars a year and strip out some coverage that could be important, such as maternity care and brand-name prescription drugs.

Meanwhile, Humana also recently began marketing policies for the second-fastest-growing group of the uninsured, early retirees — ages 50 to 64 — who because of buyouts and company cutbacks in retirement benefits are increasingly caught in the gap between stopping work and Medicare eligibility. Aetna, WellPoint and other companies say they also plan to roll out packages for older adults in coming months.

Eric Wolfson, a 32-year-old independent filmmaker in Los Angeles, says his mother bought him a policy from Blue Cross of California, a WellPoint subsidiary, because she was worried about his not having health insurance. Because of the high deductible, however, he recently had to pay $1,700 out of his own pocket to cover hospital emergency-room costs after separating his shoulder during a martial-arts workout. Still, Mr. Wolfson says he likes having the policy in case anything catastrophic happens. "It’s protection for the big stuff," he says.

Insurers are expanding their insurance offerings for individuals in part because of the dwindling share of employers — especially smaller companies — offering health benefits in recent years. Though the new plans could meet some of the needs of a number of young and older people, they won’t necessarily reach those among the roughly 45 million uninsured Americans most in need of health coverage. That’s because the new plans currently are available mainly in states where  
looser regulations allow insurers greater leeway to cull prospective policyholders, and thus choose the healthiest people as customers.

WellPoint rolled out its Tonik policies in California two years ago and has since expanded them to six states, with five more planned soon. There are three plan designs, which the company advertises on social-networking sites such as MySpace and through event sponsorships like the US SurfOpen. The plans are known as Thrill Seeker, with a $5,000 deductible, Part-time Daredevil, with a deductible of $3,000, and Calculated Risk Taker, which has a $1,500 deductible. Rates can vary by state, ZIP Code, age and gender. In Los Angeles, a 25-year-old male or female can buy a Tonik plan with a $5,000 deductible for as little as $77 a month. A 50-year-old male or female can buy the same plan for $244 a month.

In two of the states where Tonik was rolled out this year, 20% of WellPoint’s new sales are coming from the plans.

Other youth-oriented policies include Simply Blue, offered by Blue Cross and Blue Shield of Minnesota, and several plans from Rocky Mountain Health Plans called "SOLO" policies. Premiums for Simply Blue plans, for example, run from about $70 a month to $150 a month for young men and women (exclusive of maternity benefits). The youth-oriented packages typically limit the number of doctor visits per year, sometimes to as few as three. They also may have a lifetime maximum payout of $1 million or $2 million.

But these types of plans also aim to encourage preventive care by including regular check-ups and dental or vision care, generic-drug coverage and routine tests like Pap smears, often without a deductible. Some plans also allow policyholders to open a tax-advantaged Health Savings Account to help offset the out-of-pocket costs.

Insurers say the new plans are selling well. Blue Cross and Blue Shield of Minnesota says it has sold between 5,000 and 10,000 Simply Blue policies since introducing the product in December.

Jon Marcus, in his 40s, a self-employed recruiter for the tech industry in San Francisco, says he has had individual health insurance for several years but switched recently to an Aetna policy because of the relatively low premiums, currently $186 a month. But with a $5,000 deductible, Mr. Marcus says, he can’t afford the surgery he needs to correct sleep apnea, which interrupts breathing during sleep. "If I spent the same amount of money at a regular job, I’d have a much better insurance policy," he says.

Some regulators are critical of some of the new policies. "The Tonik program is specifically designed to create a significant profit for the insurance company," says John Garamendi, California’s lieutenant governor and former insurance commissioner. "It is designed to cover everything that a 19- to 34-year-old is not going to need. That happens to be the principal childbearing age, and it doesn’t cover pregnancy," he says.

A normal pregnancy and delivery costs $8,000 to $12,000, according to insurance-industry officials. Adding maternity benefits to an individual health plan can add several hundred dollars a month to the premium.

Christi Lanier-Robinson, a WellPoint spokeswoman, says: "There is a sizable portion of the population who are not interested in maternity coverage and don’t want to pay for this benefit." She says that other WellPoint plans are available with maternity coverage and that more than 70% of every Tonik premium dollar goes toward medical care.

Some people don’t mind limited maternity benefits. "It’s not a factor for me, just like they don’t pay for drug rehabilitation," says Erinn Liebhard, a 22-year-old waitress and aspiring dancer who lives in Minneapolis. She recently enrolled in a Simply Blue plan for $76.50 a month.

Young people might also want to consider alternative coverage, such as remaining on their parents’ health plans. A growing number of states now require insurers to allow children to do this up to the age of 24 or 25, or even 30 in New Jersey.

More adults in the 50-to-64 age group also need individual medical-insurance policies these days because of early retirements and layoffs from jobs that included group benefits.

But designing an affordable individual policy for older people is more difficult because there are more health problems in this age group.  Premiums are generally much higher for older applicants even if they are in excellent health. A Simply Blue plan for someone in his 60s might cost $400 a month, the company says.

It is also harder for older adults to qualify for coverage in the first place. On average, 11% of applicants who complete the medical underwriting process for individual plans in the 18- to 24-year-old age group are rejected; but 30% of 60- to 64-year-olds are rejected, according to America’s Health Insurance Plans, a trade group.

Still, older people often can better afford very high deductibles of $5,000 or even $10,000, insurers say. And many of these policyholders want plans with HSAs to help fund health care in retirement.

Humana’s Portrait plan, currently available in 11 states, with 15 more to come, has a deductible of $1,000 and unlimited office visits for $35 co-payments. It was designed to appeal to early retirees and others transitioning from employer-paid insurance, said Steven DeRaleau, chief operating officer. The program has relatively rich benefits like a group health plan, including coverage for common prescription drugs with a $15 co-payment.

The plan, however, has had broad appeal across all age groups. Many early retirees are instead choosing higher-deductible plans with fewer benefits from the company’s "monogram" line, Mr. DeRaleau said. Those plans have a deductible of $7,500 but premiums of as little as $84 a month, for a 50-year-old male nonsmoker living in Colorado. The company also offers three HSA-qualified plans under the "autograph" label.

WellPoint intends to introduce health-plans specifically marketed to early retirees later this year. Aetna wouldn’t disclose specifics about its planned effort with AARP.

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