May 6, 2008
12:00 a.m. Eastern Time
Workers In Fair Or Poor Health With Individual Health Insurance Are Less Likely To Become Uninsured
Than Similar Workers With Small-Group Coverage
But Wharton Researchers Find That Those In Good Or Average Health Are Less Likely To Become Uninsured If They Have Group Coverage
Bethesda, MD -- People in fair or poor health who have health insurance are less likely to drop or lose coverage entirely if they have individual insurance than if they have small-group coverage, according to a new national study published today on the Health Affairs Web site. In particular, the study found that among workers in relatively worse health, those with small-group coverage who became unemployed were substantially more likely to also become uninsured than their counterparts with individual coverage. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.3.w242
Study authors Mark Pauly and Robert Lieberthal of Wharton say this result stems largely from a unique policy feature generally included in individual health insurance policies: guaranteed renewability at class-average rates. This means that while an insurer may condition the price and availability of newly issued individual insurance policies on health status, an existing policyholder “has an unqualified right to renew at the rate charged to others” in his or her risk class, regardless of any change in his or her health status.
“By contrast, insurers may often raise premiums for group coverage, or even withdraw coverage entirely, when the risk composition of the group changes. More importantly, if an employee leaves his or her job, there is no guarantee of long-term coverage at nondiscriminatory rates for the employee or his or her dependents, and workers in groups smaller than twenty don’t even have the limited short-term guarantee of continued coverage provided by ‘COBRA’,” said Pauly, the study’s lead author and the Bendheim Professor in the Health Care Systems Department of the Wharton School at the University of Pennsylvania.
Using data from the U.S. Census Bureau’s Survey of Income and Program Participation, Pauly and Lieberthal looked at people who were employed and covered by large-group, small-group, or individual health coverage for at least one year during the period 2000-2004. The researchers asked what the probability was that someone who had a job and coverage in one year would become uninsured in the next year. In addition to examining the effects of coverage type and health status, Pauly and Lieberthal also looked at the impact of other factors, such as sex, current income, and future income expectations.
Overall, people with either large-group and small-group coverage were less likely to become uninsured than those covered through the individual market: 6 percent of those with large-group coverage and 13 percent of those with small-group coverage became uninsured, versus 17 percent of those with individual coverage who became uninsured. In addition, when people were asked to rank their health status on a scale from “excellent” to “poor,” those at the median ranking of “very good” were also less likely to become uninsured if they had group coverage than if they had individual insurance.
However, the relative chances of becoming uninsured were distinctly different for workers in “fair” or “poor” health. Among this group, those who began with individual coverage were less likely to become uninsured in the following year than those with small-group coverage. Even among those with large-group coverage, those in fair or poor health were almost as likely to become uninsured as those with individual coverage.
Pauly and Lieberthal use three hypothetical uninsured workers to illustrate their findings. For example, a 28-year-old man in very good health making $50,000 a year and expecting a 4 percent increase in income would face a 23 percent chance of becoming uninsured if he had individual coverage, versus an 18 percent chance of becoming uninsured if he had small-group insurance and an 11 percent chance if he had large-group coverage. However, were that same man in poor health, he would face a 24 percent chance of becoming uninsured with individual coverage, versus a 44 percent chance of becoming uninsured with small-group coverage and a 22 percent chance with large-group coverage.
Workers In Relatively Worse Health Are Less Likely
To Become Uninsured When They Become Unemployed
If They Have Individual Coverage
Why were workers in fair or poor health relatively less likely to become uninsured if they had individual coverage? The answer lies largely in the fate of workers in relatively worse health who became unemployed, whether because of their health status or another cause. These workers were far more likely to also become uninsured if they had small-group coverage than if they had individual coverage: Among those with small-group coverage, 67 percent of workers in fair or poor health who became unemployed also became uninsured, while among those with individual coverage, only 9 percent of workers in fair or poor health who became unemployed also became uninsured. Among workers in fair or poor health who kept their jobs, the relationship was reversed: Those with small-group coverage were actually a little less likely than those with individual coverage to become uninsured.
“Ironically, when a worker in poor health loses his or her employer-based group coverage and is unable to get affordable replacement coverage, the blame is often laid on medical underwriting standards for new individual-market coverage, even though it is the lack of protection in the group market that plunged the person into such a vulnerable situation in the first place. Our findings don’t mean that individual coverage is universally preferable--those in good or average health are less likely to become uninsured if they have group coverage. But group coverage has a tear in its safety net: It leaves a person whose health deteriorates more vulnerable to becoming uninsured than does individual coverage,” said Pauly.
After the embargo lifts, the article by Pauly and Lieberthal will be available online athttp://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.3.w242
ABOUT HEALTH AFFAIRS:
Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org.
©2008 Project HOPEThe People-to-People Health Foundation, Inc.