Self-employed lose healthcare option
Industry groups dropping plans
LOS ANGELES --A major source of health insurance for people who work for themselves has all but disappeared, casting thousands of contractors, freelancers, and solo practitioners into the ranks of the uninsured, with little hope of obtaining new coverage.
Health plans offered by professional associations were once safe havens for millions of people who couldn't obtain coverage anywhere else. But as medical costs soar, groups representing professions as varied as law and golf have stopped offering the benefit or been dropped by insurers.
While no one tracks association coverage, the experience of Marsh Affinity Services is telling. A decade ago, Marsh, which brokers and administers such plans, had 142 such clients. Today, all but three have closed.
Over the same period, the uninsured US population, now estimated at 45 million, rose dramatically, experts say. Among uninsured workers, nearly 63 percent are self-employed or work in small companies, Todd Stottlemyer, president of the National Federation of Independent Business, told Congress recently.
Fewer than a quarter of 1,020 professional and small-business associations surveyed in February offer medical coverage. The American Society of Association Executives, which commissioned the survey, views the issue as a crisis.
In its heyday, association health coverage was so popular brokers touted it as a membership recruiting tool for professional organizations. "Now it's like the buggy and whip business -- almost entirely gone," said Robert Laszewski, a Washington consultant.
Insurers began pulling out of association markets 10 years ago, amid mandates that the groups -- like employers -- offer coverage to all who wanted to buy it, regardless of preexisting conditions. Unlike employers, however, who typically pick up the lion's share of the premiums, most associations do not share in the costs. Instead, they arrange for their members to buy coverage at group, rather than individual, rates.
In today's marketplace, that's almost always a better deal for older members and often the only option for people with preexisting conditions. But insurers are eager to sell individual policies to the young and healthy for as little as $100 a month, scooping the cream off the risk pool. That leaves higher-risk older and sicker people to the group market.
As healthy members leave an association health plan, the concentration of members with higher-than-average medical costs increases. That forces the underwriter -- usually the insurer but sometimes the association -- to raise premiums. A "death spiral" sets in, when medical costs exceed the plan's ability to raise premiums to cover them.
"If you can get cheaper coverage through the individual market, that's what you do," said Mila Kofman, of Georgetown University's Health Policy Institute.
But not everybody can buy an individual plan. In many states, insurers are allowed to reject applicants for individual policies for any medical reason, including common conditions such as asthma and varicose veins. As a result, many who lose association coverage are effectively uninsurable.
Insurance options of last resort -- COBRA-conversion coverage, named after the federal law that created it, and publicly subsidized high-risk pools -- are not an option for everybody because the coverage is insufficient or unaffordable, or both.
"If they don't have an opportunity to go to another group and have to go into the individual market, it's a real problem," said Kansas Insurance Commissioner Sandy Praeger. 