June 13, 2008 -- People who buy individual health coverage in most states are vulnerable to insurance company tactics that can deny them care, a health care advocacy group warns.
A survey of insurance commissioners across the country shows that all but five states allow insurance companies to deny coverage to sick or older patients. All but 15 states have no limits on how much companies can raise premiums if individual policy holders get sick, according to the consumer group Families USA.
About 14.5 million Americans bought their own insurance on the individual market in 2006, according to the Henry J. Kaiser Family Foundation. Those numbers would likely grow under the health reform plan being touted by Sen. John McCain, R-Ariz., the presumptive Republican presidential nominee.
McCain's plan would replace existing tax breaks for employer-sponsored coverage with tax credits individuals could use to buy coverage on the individual market. The change would likely shift millions of workers onto individual coverage, where they would be vulnerable to insurance companies' cost-saving tactics, says Ron Pollack, Families USA's executive director.
"To deregulate the market would make a bad situation even worse," Pollack tells WebMD.
The group's report found wide variation in the number of consumer insurance protections in states.
Some states -- such as Maryland, Illinois, and Idaho -- let patients appeal when their individual coverage is revoked; other states -- such as Ohio, Kansas, and Arizona -- don't allow appeals. Most states guarantee that customers can review when companies deny individual claims. But in only a handful of states are those reviews free and conducted by an independent third party, the report says.
Overall, New York, Connecticut, New Hampshire, and California had among the most protections. States including Alaska, Arkansas, and Wisconsin had relatively few, according to the report.
Insurance Industry Perspective
Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the industry's main trade group, says the organization has proposed several reforms at the state level to make individual coverage more predictable.
"We recognize that some individuals are falling trough the cracks," he says.
One reform would try to improve state-run high-risk pools so they can insure more patients who cannot get insurance on the open market. But critics call those pools a way for private insurance companies to dump the most expensive patients onto taxpayer-funded programs.
Another industry-favored reform would guarantee that people can buy coverage for no more than 1.5 times the standard premium in their state.
"We want to get everyone covered. Here's one approach states can take," Zirkelbach says.
In the late 1990s, McCain was the main Republican sponsor of the "Patient's Bill of Rights," which would have set national consumer protection standards for private insurance. The plan never passed in Congress, and McCain has not said whether he would still support such standards.