Monday, September 05, 2005

The "Crapshoot" of Individual Insurance Rates: Nothing to Sneeze At

The San Francisco Examiner reported on how the local Blue Cross health plan prices individual coverage. A generally health 41 year old man decided to try to maintain his Blue Cross coverage after finishing graduate school, where he had a Blue Cross student policy. After applying, Blue Cross sent him a letter stating that his rate would be subject to a 25% surcharge. The reason was he had "hay fever treated with Flonase [a commonly used steroid nasal spray]."
The newspaper contacted Kellie Bernell, a Blue Cross spokeswoman, who said "we follow established medical guidelines when making a decision about an individual's health." Further, "our decision is based on the risk of current and future medical expenses."
The newspaper also noted a study (available here. Citatation is: Pollitz K, Sorian R. Ensuring health security: is the individual market ready for prime time? Health Aff (Millwood). 2002 Jul-Dec; Suppl Web Exclusives: W372-6. ) by Karen Pollitz that demonstrated that five of 60 insurance applications for health patients with hay fever were rejected by insurers, and all but one were charged more than the base rate. Pollitz commented on how insurers set rate for individual policy holders,
It's absolutely not scientific. It's totally a crapshoot.
It is hard to believe that hay fever per se is truly a predictor of major disease or high health care costs. More likely, this is what insurers can get away with when they have little competition and little effective regulation.

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