The single consumer Featured

8:00pm EDT May 26, 2009

An increasing amount of attention is being given to the subject of individual health insurance. As employers are faced with the effects of the economic downturn, equally adverse conditions are being realized due to the continuing cost escalation of group health insurance products.

While larger employers are most often talked about in these discussions, small and mid-size employers have been equally affected. In some ways, the smaller employers and their employees have experienced more dramatic losses during the current recession.

Most notably, the loss of health insurance has increased significantly in smaller employers due to employees being unable to afford or secure coverage because of health status and the lack of product choice.

The health insurance industry has duly noted this phenomenon and is moving quickly to deliver to this growing uninsured population more product choice at a competitive cost, with relaxed underwriting when reviewing the applicant’s health condition.

“Losing health insurance causes the affected person to suddenly become a direct consumer of available products, with a more keen awareness being required of plan design, coverage differences, underwriting definitions and related cost ramifications,” says Rick Galardini, the CEO of JRG Advisors, the management company for ChamberChoice.

Smart Business spoke with Galardini about the changing role of uninsured individuals and their needs as single consumers.

What is actually happening with employer-sponsored health insurance plans?

The main issue today, in light of a fragile economy, is reduction of the work force. While employers with more than 20 employees are required by federal law to offer continued coverage to terminated workers, which has recently been made more attractive and feasible due to government subsidy through tax credits, the smaller employer is not required, in most states, to offer this option. Of course, whether a job is lost while working for a larger or smaller employer, or whether or not a subsidy toward premium costs is available, the real issue is the fact that an unemployed individual has a very difficult time funding the cost of health insurance.

The next issue is the reality that the employer is staring at the cost of paying 50 to 75 percent or more of the cost of a group health insurance plan, which is increasing in price at a rate of 11 to 15 percent per year. These conditions cause the employer to make difficult decisions. Employers may sponsor a plan with lesser coverage to save on costs, reduce the funding of the current plan, discontinue funding of the employee’s dependent coverage and place the burden on the family and/or discontinue the plan entirely. Each of these approaches shifts the cost of health insurance to the employees and their dependents. Further, employee morale is dramatically affected, which has a direct impact on productivity.

Another issue is the fact that more than 40 percent of smaller employers do not sponsor or fund a health insurance plan. While this is not a new trend, the employees working for these employers are having a more difficult time paying for insurance due to increasing costs. Also, these employees are often faced with flat or decreasing compensation or, worse yet, the possibility of their jobs being eliminated due to the state of the economy.

How can the availability of individual health insurance be a solution for the uninsured?

First of all, we must remember that all health insurance, whether group, employer-sponsored or individual, is expensive. The difference is that with individual health insurance, the purchaser has more choices. Each individual becomes a single consumer, shopping to obtain prices in an open insurance marketplace and purchasing what they need. Need is driven by a number of factors, including health status, tolerance for risk, age, sex, family status, lifestyle, disposable income and length of time required for coverage.

That is the good news. The bad news is that negative factors can preclude the individual from purchasing the insurance coverage desired. Poor health dictates a low tolerance for risk. An unhealthy lifestyle has a direct effect on premium costs. Unemployment generally suggests a dilution of disposable income. It is possible that any combination of negative factors impacts the length of time an individual can retain the insurance.

For 80 percent of our population, individual health insurance can be a very satisfying experience. As a single consumer, the individual can buy exactly what they need, at a price that is acceptable, and for the length of time that the coverage is required. Unfortunately, 20 percent of the population is not in this same set of circumstances.

What is the health insurance industry doing to address the needs of the individual?

Each consumer needs to accept the personal responsibility to adequately insure themselves against the risks they face as they consider their individual health needs. Our government has the obligation to encourage each individual, through mandate, to obtain the appropriate insurance to mitigate risk.

The insurance industry must do its due diligence to ascertain the health insurance needs of the American public, and provide for the availability of the products that meet these requirements, at a fair and competitive price. Employer-sponsored group health insurance plans can continue to play an important role in delivering these solutions. Current product offerings fall short of this objective. Employees do not have enough choice for themselves and their dependents. The ‘one-size-fits-all approach’ of today is part of the problem. Group insurers need to change.

An available option for the single consumer, in the absence of a more flexible employer-sponsored group insurance model, is the purchase of an individual health insurance plan that is a custom-fit solution.

Rick Galardini is the chief executive officer of JRG Advisors, the management company for ChamberChoice. Reach him at (412) 456-7013 or