People in fair or poor health who have health insurance are less likely to drop or lose coverage entirely if they have individual insurance than if they have small-group coverage, according to a new national study report published May 6 on the Health Affairs web site. In particular, the study found that among workers in relatively worse health, those with small-group coverage who became unemployed were substantially more likely to also become uninsured than their counterparts with individual coverage.
Study authors Mark Pauly and Robert Lieberthal of the Wharton School at the University of Pennsylvania say this result stems largely from a unique policy feature generally included in individual health insurance policies: guaranteed renewability at class-average rates. This means that while an insurer may condition the price and availability of newly issued individual insurance policies on health status, an existing policyholder “has an unqualified right to renew at the rate charged to others” in his or her risk class, regardless of any change in his or her health status. “By contrast, insurers may often raise premiums for group coverage, or even withdraw coverage entirely, when the risk composition of the group changes,” write the authors.
“Our findings don’t mean that individual coverage is universally preferable,” said Pauly. “But group coverage has a tear in its safety net: It leaves a person whose health deteriorates more vulnerable to becoming uninsured than does individual coverage.” Read the abstract.
