Individual Health Policies Cost Insurers Less Than Group

Health insurers spend less on patients with individual policies than those with employer-sponsored plans, according to a new study released Friday.

Patients with individual policies also have higher out-of-pocket expenses than their counterparts who purchase plans through their employers, the study by Henry J. Kaiser Family Foundation found.

Individual health policies may carry low premiums but people need to understand that sometimes the plans are inexpensive because don’t offer very rich benefits, said Gary Claxton, a vice president at the foundation and author of the study.

The study found that an insurer spends an average of $765 annually on an individual between the ages of 18 and 34 who has bought his own policy but spends $1,174 on a person in the same age range in an employer-sponsored plan. Similarly, insurers spend an average of $942 annually on a person between the ages of 35 and 49 with an individual plan compared to $1,622 on someone in the same age range with an employer-sponsored plan. Spending on each group was less if the policy didn’t include vision or dental coverage.

People with individual policies paid 59 percent of their health expenses out-of-pocket, compared to 34 percent for those with an employer-sponsored policy, the study found.

The study examined data from The Medical Expenditure Panel Survey from 2000 to 2003. The Survey is conducted by the federal government, and receives data on health services, expenditures and insurance from families, individuals, medical providers and employers.

Claxton said the 2004 data only recently became available and that there is no reason to think the trends have shifted.

The Kaiser study also found that 42.8 percent of those with individual polices said they were in excellent health, compared to 35.1 percent of people in employer-sponsored plans.

Claxton said the reported better health of people in individual plans may contribute to the lower premiums in such plans.