November 14 2008 0comment

Health Insurers Push for Cheaper Individual Policies

Crain’s New York
Barbara Benson

One plan would chop premiums by a third; small businesses could see costs increase.

Momentum is building for reforming New York’s troubled individual insurance market as a way to help people who have lost their jobs in the economic upheaval. That market, for people who don’t get coverage through employers or other groups, has virtually collapsed in recent years as premium costs have risen to unaffordable levels.

Two of the state’s largest insurers, Empire BlueCross BlueShield and UnitedHealthcare, are pushing for regulatory change. One proposal could bring costs down by as much as a third in the individual market, but probably would drive costs up slightly for hundreds of thousands of small businesses.

The insurers and experts who agree with them may find a receptive ear in Albany, where lawmakers are beginning to grapple with the fact that the ranks of the uninsured are swelling just as the money to expand government programs runs out. Right now, many people who are laid off would be forced to turn to the individual market, where premiums are as high as $4,300 for a family in Manhattan.

“I think the odds of reform are pretty good,” says David Sandman, senior vice president at the New York State Health Foundation, which is sponsoring a conference on Monday on the topic.

Along with people who have been laid-off, others who could benefit from lower prices are sole proprietors, freelancers and early retirees – and insurers themselves, who would be able to sell the less expensive policies to more people.

The path to reform is rocky. State lawmakers would have to amend statutes that mandate separate markets for individuals and another for small groups of two to 50 employers. People in the individual market, about 45,000 as of 2007, have about twice as many medical claims a month on average than the small group market, which currently includes about 1.7 million New Yorkers. Combining the markets would mean spreading that risk over a broader pool – and that means rising costs for small businesses.

A United Hospital Fund study found combining the markets could cut individual premiums by 37%, while small group premiums would rise by 3.1%.

“It’s hard to imagine small businesses wanting to subsidize this, but whether they protest depends on how big the hit is,” says Mark Scherzer, legislative counsel, New Yorkers for Accessible Health Coverage.

UnitedHealthcare has put forward an alternative proposal to use the administrative structure and vendors of the state’s New York State Health Insurance Plan, which provides health coverage to about one million state and municipal employees, dependents and retirees. United Healthcare estimates its move would cut premiums by 17% without affecting taxpayers or the small group market.