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Should Workers Consider Individual Insurance?
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Most Americans
have employer-sponsored health insurance, but entrepreneur Paul
Zane Pilzer says individual plans are often a better bargain—if
you’re healthy, that is.
Oct. 4,
2005 - The number of Americans without health insurance
rose by 800,000 last year, reaching a record high of
45.8 million, according to the U.S. Census Bureau. Of
those without coverage, more than 21 million were
full-time employees. One reason? With rising healthcare
costs, an increasing number of companies are asking
their employees to bear more of the burden for insurance
premiums.
Some have opted to buy
their own individual or family insurance plans, purchased directly from
an insurance company licensed in their state. Though they still
represent a small number (less than 5 percent of Americans), economist
and best-selling author Paul Zane Pilzer is convinced that group will
grow much larger. He even co-founded a company,
Extended Benefits Group,
that provides individual health benefits to employees of Fortune 500
companies. In his latest book, “The New Health Insurance Solution,”
published in September by John Wiley & Sons, Pilzer argues (not
surprisingly) that most Americans—at least, those without pre-existing
conditions—can save money by choosing individual policies over those
offered by their employers. (With the exception, he notes, of residents
in New York, New Jersey, Massachusetts, Maine and Vermont. Those states
mandate that insurance carriers accept all applicants, so insurers
either don't offer individual plans there or charge much higher premiums
there than in other states.) Pilzer elaborated in an interview with
NEWSWEEK’s Jennifer Barrett.
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NEWSWEEK: You write
that you learned about individual insurance in 1999 when
your wife was pregnant and you lost your
employer-sponsored insurance. What happened?
Paul Zane Pilzer: Technically, I
was on a healthcare plan that I shouldn’t have been on.
I was a board member of a company and I got it through
them. I read it carefully to make sure I was absolutely
truthful … These are normal things for entrepreneurs to
deal with. But when [the company realized it] I was
dropped. It’s funny to think that here I was, a
successful guy, and I was sneaking around to get health
insurance.
So what did you do?
I panicked. And I started calculating how much it could
cost if we had a pre-term baby. We didn’t have one, but
that’s the way I think. I could afford it but it would
have been a lot of money. I didn’t realize then that
Utah [where we live] is a really good state for health
insurance … But I did some research and not only did I
get health insurance, I got real health insurance.
Corporate health insurance is not insurance, really, but
a pass-through mechanism. If you quit your job or get
fired, you lose that insurance. They should really be
called health benefits because there is no insurance if
you lose your job. In contrast, there’s the individual
market, which is new because states have now liberalized
the laws. The rate [on your premium] can never be
increased for health reasons now, only by inflation, nor
can a policy be cancelled. It is guaranteed renewable.
I’m assuming that’s what you have now.
Yes, I purchased a $20 co-pay policy—no matter what
happens. I pay $5 for generic drugs and 75 percent off
of brand name medications. I’m nearly 52 with four kids
aged 5, 3, 2 and 1. I have a typically expensive
healthcare family. And I pay $433 a month for a family
of six.
That seems very low.
I actually shouldn’t even have this one. I should have a
high deductible policy [which would have an even lower
monthly premium]. But my wife said she didn’t want to
think about how much to pay [for each doctor’s visit].
The $433-a-month policy is actually about average. Utah
is good for insurance … but California is the best.
Why?
Because it’s effectively free market health insurance.
There are 22 carriers competing for your business. So if
you have a smoking problem or anything, you can always
find someone to take you.
But at what cost?
Premiums have already come out now for 2006, so we know
that in 2006 the average corporate health insurance plan
for a family of four is $14,000 a year, and it’s $4,500
a year for an individual. That is the cost the company
pays, of which an employee may share part of. So let’s
assume you work in California and your employer pays
$14,000 for you. If you went to the same insurance
carrier yourself and asked if you could get a policy
that had identical benefits [to the employer-sponsored
plan], they would charge you $7,000 [which your employer
could reimburse you for].
Why?
Because you are in the 90 percent of the population that
is healthy. The average [healthcare] expenditures for an
American are $6,600 a year. Ninety percent of the people
spend less than $1,000, but 10 percent use more than $40,000 a year.
In the old days, we didn’t know who was healthy or not. The thinking was
that anyone could get cancer or other diseases, so let’s bond together
and insure each other. But crank the clock forward 20 years and I can
predict with 99-percent accuracy what you will spend
next year. And a carrier can check with
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