Individual Health Care Plans Crop Up for Small Employers

As the recession forces layoffs and benefit cutbacks at many employers, more individual health insurance plans are popping up—though the question remains as to whether people who need such coverage will be able to afford it.

Health insurers such as Aetna, Anthem Blue Cross and Blue Shield, and Cigna Corp. intend to release new individual plans in Ohio during the next year. Ohio is a top priority for Cigna because state laws make it easy for insurers to do business there, and Cigna already has 248,000 members in the state, says Andrew Sullivan, senior vice president of individual and small group business for Cigna.

Ohio also has had a large number of layoffs, and more small companies there are eliminating insurance coverage.

“Small companies are definitely being squeezed by the cost of health care, and more are dropping coverage altogether because they can’t afford it,” Sullivan says

Steve Millard, president and executive director of the Council of Smaller Enterprises small business advocacy group, says he expects that trend to continue in Northeast Ohio. Five years ago, about 58 percent of small employers across the country offered health insurance for their workers, but that number has fallen to 47 percent, he says.

To address their employees’ need for health care coverage, small companies are trying to find creative ways to help them get health insurance on their own—a move that could be an advantage to health insurers, Millard says.

For example, a handful of local companies have employees put their individual health insurance premiums on expense reports, and the company then reimburses them, Millard says. Others help employees pay for individual insurance premiums by putting money into a health reimbursement account, he says.

Such trends could be fueling an increase in the individual plan market for some insurers.

Medical Mutual of Ohio saw a 300 percent increase in the number of applications for individual plans at the end of 2008 compared with the same period a year earlier, says George Stadtlander, vice president of individual small group and chief underwriter at Medical Mutual.

“As we progressed through 2008 and as the economy continued to deteriorate and employment eroded, we have seen an increase in the volume of applications coming in,” he says.

Kaiser Permanente also has seen increased demand for individual plans, though that doesn’t mean more people are getting health care coverage, says Carolyn Abraham, director of Medicare and direct consumer sales for Ohio for Kaiser Permanente.

“The reality is, many people cannot afford the options or, the one they can afford, they can’t pass the medical screen,” she says.

Less-expensive individual plans often are designed for healthy people who don’t expect to need much health care. Therefore, those people must pass a medical screening to qualify for that plan.

Insurers are trying to make the premiums for such plans more affordable by increasing deductibles. On March 1, Anthem launched its Smart Sense plan, which will offer lower premiums but will have deductibles for individuals ranging from $500 to $10,000 and deductibles of $1,000 to $20,000 for families, says Josh Byrd, Ohio sales manager for individual sales for Anthem.

But no matter what companies do, individual health insurance plans won’t be the answer for the uninsured, says J.B. Silvers, a professor of health systems management at Case Western Reserve University’s Weatherhead School of Management.

“There is no way private insurance companies with individual policies will ever be able to close the gap” between the insured and uninsured, he says. “They don’t have a product cheap enough for people to afford it.”