In this piece, Michael Lujan does a good job outlining the basic insurance principles. The problem however in the non-group market goes deeper than a failure to understand the relatively simple rules that govern all forms of insurance. Paying for medical costs shifted away the major medical risk insurance model to the prepaid model that came with the rise with HMOs and managed care organizations in the 1970s and 1980s.
Hence, consumers don’t see medical risk sharing in the same way they view other forms of personal insurance intended to protect against accidental or unexpected large losses such as life, homeowners and auto. The managed care model of bundling in relatively low cost primary care has furthered that perception. Consequently, consumers chafe at basic insurance functions such as underwriting and being asked to pay deductibles and otherwise assume a degree of risk. To them, it appears as a take away — “unusable” coverage that reduces value in their eyes, especially as premiums rise.
Unless consumers of individually sold medical plans see them as insurance and something only to be used when needed to cover large, unexpected medical costs, the segment will continue to struggle regardless of reform efforts such as the current House bill. It would restore another insurance basic with medically underwritten premium rating for states that opt to allow it for individuals who have not maintained continuous coverage provided the state has established a high-risk pool or participates in a federally-sponsored high-risk pool.
As long as consumers are reluctant to be insured in the conventional insurance sense for medical risk and insurers are reluctant to cover it, the long term viability of the non-group market remains in question.
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