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by Julie Appleby, AARP Bulletin, February 20, 2009
At a time when more people are forced to buy their own health insurance because of job losses, costs for many individual policies are soaring.
Advocates say the 17 million Americans who buy their own coverage can't negotiate lower rates the way employers or other large group plans can.
"These folks have their back against the wall," says Jerry Flanagan, a health advocate with Consumer Watchdog, a California-based group.
More people are shopping for coverage: The Golden Rule Insurance Company, a part of UnitedHealth Group, says sales of individual policies are up 24% in the past two months. A website that links people with insurers, eHealthInsurance, says applications are up 18% in the fourth quarter, compared with a year ago.
Among this year's large rate increases on the individual market:
• Anthem Blue Cross in California has notified about 80% of its 800,000 individual policyholders of double-digit increases, many above 30%. Spokesman Ben Singer says rising medical costs are prompting the increases.
• Blue Cross of Michigan is seeking state approval for a 56% increase in individual premiums. Spokesman Andy Hetzel says the company needs to offset losses stemming from state rules making it the sole insurer required to take all applicants.
• Regence Blue Cross Blue Shield of Oregon will raise rates for approximately 10,000 Washington state customers by 27.1% on March 1.
Another Washington insurer, LifeWise, raised rates 17.6% on Jan. 1, according to the Office of the Insurance Commissioner in Washington state.
By comparison, group health insurance premiums paid by employers rose about 5% in 2008, says a survey by the Kaiser Family Foundation.
Some insurers say increases this year for individual policies aren't out of the ordinary. Aetna, for example, says individual policy increases nationwide range from 8% to 22%.
Still, such hikes can cause "sticker shock" for people used to smaller increases under employer plans, says Robert Laszewski, who heads Health Policy and Strategy Associates, a consulting firm.
Premium rates for individual policies vary widely, depending on state rules, the type of coverage and the applicant's age and health. Unlike group coverage, in which all applicants are accepted, insurers can reject applicants for individual coverage in most states if they have medical problems.
A sample of 227,000 individual policies sold by eHealthInsurance found average monthly premiums for single people ranged from $107 to $301 in 2007, the latest data available. The average deductible, the amount paid before coverage begins, was nearly $2,000.
Family coverage ranged from $219 to $494 a month with an average $2,600 deductible.
Insurers face shrinking enrollment in group plans because employers are shedding jobs. They also have deflated investment portfolios and higher costs as patients use more health services, says a report out last week from ratings agency A.M. Best.
Those problems could lead to "higher rate increases than in the past," says Sally Rosen, a managing senior financial analyst at Best.
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