What is Individual Health Insurance?
Individual health insurance is coverage that you pay for yourself. Most Californians get their health insurance coverage through their employer group health plan, but about 7 percent of the population purchases individual health insurance. Individual health insurance is regulated by the California Department of Insurance and the Department of Managed Care.
2010 Has Been Challenging for the California Individual Health Insurance Market
Growth in the average monthly premium of individual health insurance plans in Californian rose an average of 17% in 2010. Some self-insured Californians managed to hold their monthly premium cost down by changing to less costly higher deductible plans or by switching carriers. Most were stuck with the higher premiums, either because they already had very high deductible health plans or could not change carriers because they had become "uninsurable" due to having developed preexisting conditions since they last enrolled. The average deductible of individual PPO health insurance plan was well over $2,000.
As HMO Costs Rose, Individuals Moved to Other Health Insurance Options
Offerings of HMOs fell significantly for all Californians in 2010. Cost was undoubtedly the main factor: HMO enrollment in California peaked in 2001 and has been eroding ever since, sliding from 25% to 21% of all of the individual and family plan (IFP) market in 2010. The movement out of HMOs and into PPOs has been going on for nearly a decade, largely because PPOs offer lower premiums and wider provider networks.
Big Increase in Catastrophic Health Insurance for Individuals in California
California's individual health insurance shoppers bought low-cost catastrophic health insurance plans. Buyers of catastrophic health insurance self-insure the lower cost medical expenses that fall below the deductible of their plan. Yet they are protected from catastrophic loss by the maximum-out-of-pocket feature of their high deductible plan.
Health Savings Accounts Continue Upward Trend in California
Health savings accounts (HSA) enable individuals to use a tax-advantaged savings account to put money away in case it's needed to pay the deductible. They are companions of high-deductible PPO plans. Enrollment in HSAs in California's jumped sharply in 2010. HSA enrollment rose faster this year than last.
Affordable Care Act Could Squelch Future HSA Growth in California
Although the full policy ramifications of health care remain unclear, the legislation is expected to have a significant impact on popular Health Savings Accounts. Under the Affordable Care Act, the future of HSAs and the high-deductible health plans (HDHPs) they accompany will be decided by regulations of the Department of Health and Human Services (HHS). It is possible, HSA plans may no longer be viable after 2014. The proposed guidelines may not allow large enough deductibles to meet the public demand for lower premiums and more control over first-dollar spending. Even though HSAs may be under new restrictions, we expect a substantial increase in HSA enrollment in 2011. Even hamstrung by regulations, HSAs will remain an important and significant part of the health insurance marketplace.
Cost of Reform on California Individual Health Insurance in 2011
Some of the changes required by the Affordable Care Act took began to be implemented late in 2010, namely:
1. Elimination of preexisting conditions exclusions for children to age 19.
2. Dependent coverage through age 26
3. Elimination of annual and lifetime maximum benefits
4. Preventive care benefits with no co-payment
5. Elimination of gender specific ratesItems 2 through 5, when taken together, will account for a small increase in rates in 2011 - probably less than 2%. Only Item number 1, the guaranteed issue of health insurance to children under the age of 19, could have a significant effect on individual health insurance rates. Insurance companies fear that a requirement for guaranteed issue of child-only health insurance policies without a corresponding mandate to purchase health insurance for children could result in" gaming the system", whereby parents hold off purchasing health insurance for their children until they are on the way to the hospital, so to speak. The adverse selection created by such behavior could drive health insurance rates the roof. So insurers have hesitated to issue child-only policies while negotiating favorable terms with the regulators.
More Retirees Seek Individual health Insurance in California
The prevalence of retiree medical plans slid to its lowest point ever in 2010, with just 25% of large California employers offering a plan to retirees under age 65 (down from 28% in 2009) and just 19% offering a plan to Medicare-eligible employees (down from 21%). Even among the largest organizations, where retiree medical plans were once nearly universal, just 46% and 38% of California employers, respectively, provide coverage to retirees under age 65 and those 65 and older.
This trend is responsible for an increasing number of older healthcare shoppers who are not yet qualified for Medicare. These older health insurance applicants are difficult to insure because of the increased likelihood of preexisting conditions - a situation that will continue to get worse before it goes away in 2014 when all applicants are accepted regardless of preexisting conditions in the California Health Benefit Exchange.
As some California employers take the step of terminating group health insurance plans coverage for retirees, they are softening the blow with a subsidy to help pay for individual health insurance coverage. Nearly one in ten of the largest employers (those with 20,000 or more employees) now provide such a subsidy in lieu of a group plan.
