More Individual Health Policies Carry Hefty Deductibles

August 3, 2004 ( - Like their brethren who enjoy workplace health coverage, those buying individual major medical policies are paying high deductibles, including many who are post-55 years old, according to a new study.

A report from the Kaiser Family Foundation and eHealthInsurance found that 68% of people who bought individual policies from broker eHealthInsurance paid at least $1,000, while 40% of policies sold had deductibles of at least $2,000, according to CBS MarketWatch. Some 14% of buyers had deductibles greater than $3,000, the report said.

Gary Lauer, president of eHealthInsurance, said in the news release that the trend towards buying higher-deductible plans is consistent with the thresholds for the new Health Savings Accounts, which allow workers to contribute pretax money to cover health expenses with money taken out of their salary. “You’re seeing more contributions in the employer segment made by employees, and it’s similar to many of the deductibles we see in the individual market,” Lauer said.

With HSAs, first authorized in January, workers with a health plan that has an individual deductible of at least $1,000 a year or a family deductible of $2,000 could set aside that amount. The limit rises to $2,600 or $5,150 a year for higher deductibles.

Still, the study showed the individual market isn’t just for the young and healthy, said Gary Claxton, vice president of the Kaiser Family Foundation. Nearly 12% of buyers were between 55 and 64 years old, the survey said. “There are a couple of different markets here: People who buy because they have a short-term break in coverage or those who are self-employed or retirees, where this is their only option,” Claxton explained in the news release. “For younger purchasers, a lot of them are gone after two years.”

To be sure, the vast majority of Americans still receive their medical benefits from their employers in the group health-insurance market. In 2002, 16.5 million non-elderly Americans – or 6.6% of those 18 to 64 – had individual health insurance compared with nearly 164 million, or 65%, who had employer-based coverage. Another 41 million, or 16%, were insured by Medicaid or other taxpayer-funded coverage. More than 43 million Americans are without health insurance at all.

Across the country, an average 70% of people who apply for an individual health policy for the first time are approved to get coverage, Lauer said. About 10% to 13% are denied due to health reasons.

Unlike employer-sponsored group insurance, individual health plans are regulated by state laws and are generally less expensive overall because they cover fewer benefits, though buyers may have to pay more out of pocket to cover higher administrative and marketing costs, Claxton said. When it came to monthly premiums, single policyholders paid $149 on average while those with family policies, which covered 2.9 people on average, paid $278 a month, the report said.

The survey tracked data from 57,000 individual policies in force through the first half of 2003.