Why Haven’t I Heard of Individual/Family Health Insurance?

There are many reasons that most people haven’t heard of individual/ family health insurance policies:

• Simple inertia precludes action. The majority of people living in the United States today have always received free or low-cost employersponsored group health insurance as a job benefit. Most people are unaware that better options exist because they have never had to go looking for them.
• Families used to be covered by employers. Until recently, most employers providing employee health insurance included free or heavily subsidized coverage for the employee’s spouse and children. Today most private employers charge employees 50 to 100 percent
  of the cost for insuring their spouse and children. Many employees aren’t aware they are paying from half to all of the cost and not just a co-payment.
• Employers won’t tell you. If you are currently paying your employer for the cost of insuring your healthy spouse or children, your employer doesn’t want you to know about much less expensive individual or family health insurance. The $4,000 or more you pay in annual premiums for your family goes to support other, less healthy group members. Your employer’s group health insurance premium would increase dramatically if healthy people were to leave the group.
• People think individual or family policies cost more. The average cost of an individual/family health insurance policy used to be higher than the cost of an employer-sponsored policy, but today it is less than half the pro rata cost of a group policy in most states.
• U.S. income tax laws did not encourage it. Until recently, people wanting to purchase their own individual or family health insurance had to earn almost $2 of pretax income to have $1 left over to pay their health insurance premium. As explained in Chapters 11 and 13, this is no longer the case now that employers are allowed to reimburse employees tax-free for health insurance premiums on individual and family policies. In addition, health insurance premiums only recently became 100 percent tax-deductible for self-employed people.
• Insurance carriers don’t advertise. Advertising the availability of individual policies attracts mostly applications from unhealthy and/or unemployed people who typically do not qualify for, or cannot afford, individual health insurance. These applications are expensive to process and can cause regulatory problems for the carriers when most of them are rejected. Instead, carriers rely on a select group of agents who are trained to send in applications only from healthy applicants who can afford the premium.