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Warning On Individual Health Insurance

Individual health insurance is a lot cheaper than group health insurance because companies can cherry pick applicants--- typically young and health people with no medical history.

Once you get insurance, if you're lucky enough to get it, it's guaranteed renewable. As long as you pay your premium.

As good as that sounds, there's a big "gotcha" that a lot of people don't know about.

Companies generally sell a specific plan for several years. They sell it to lots of low-risk customers. When too many claims start coming in (due to increased age, etc.), they close the plan. Nobody new can enter the pool. Premiums start to increase dramatically.

At this point, people who are still healthy and without any claim history will be offered a new policy by the same company, moving them into another "cheap" plan. They do so in order to keep those customers who don't file claims because if they didn't offer a new plan, such healthy people would move to a competitor plan.

That leaves "unhealthy" people in the old plan. Those people cannot get a new individual health insurance policy from anyone. While their insurance is still guaranteed renewable, their rates will skyrocket, as they're lumped in only with "sick" people. People who cannot afford drop out; others who have perhaps only marginal problems also drop out because it's too expensive versus their risks. Typically only the most severely ill are left in the plan, after a year or two.

This policy is called "death spiraling" and it's the way the systems work in most states.

While it's easy to blame the insurance companies-- and they do after all push for these policies in the state legislatures-- it's also true that they must do whatever makes economic sense in a given jurisdiction's laws. If one company didn't do the "death spiral" practice (when others did), they'd quickly go out of business. The individual health insurance companies aggressive compete with each other in most states.

The lesson is-- in the long run, individual health insurance doesn't work, unless you never get a condition or illness until age 65.
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replied October 27th, 2007
Extremely eHealthy
I have had individual health insurance for 7 years.

I got on it healthy, and developed genetic high blood pressure, became athsmatic, and have crohns disease...

You cannot go to a cheap company and expect good benefits.

Blue cross and Blue shield of NC is what I use, and THEY COVER EVERYTHING.

Sick people pay more for coverage, which is the way it should be.
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replied December 17th, 2007
I am about to get an individual health insurance policy myself. I am sure that consultancies can clarify this matter for me. Thanks for pointing these factors out, nonetheless. However, I agree with Carifairy in that you cannot expect proper service from a cheap company. However, I remember one of my acquaintances getting a comparatively affordable individual health insurance policy suggested by Datahealth Consultancy. It seems to be working well for her...

I suppose professional advice can often make the difference.
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