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Wednesday, December 3, 2008

Free Market responds to gaps in the Individual Insurance market

In a previous post, I pronounced that when it came to solutions for the individual insurance market, the free market had fled from the opportunity to insure those who had more health conditions rather than embracing the challenge. However, United Health Group came up with a solution showing me how persistent the free market can be. Just when you think that this collective free market has retired to a remote tropical island with its carefully tax sheltered windfall, it comes back to try and maximize profits one more time. Kind of like Wiley Coyote's pursuit of the road runner only with conference rooms and Microsoft office applications.

United Health Group announced in this article it is selling an option for insurance in the future.

The main summary of the New York Times article is:

The product, called UnitedHealth Continuity, is intended for people who currently have insurance but are concerned they might lose coverage -- because they lost their job or retire early -- and might not be able to obtain other coverage.

Enrollees in Continuity will pay 20% of the current premium on an individual policy monthly to reserve insurance under that policy for the future, according to the Times.
An average individual plan premium is $200 per person so for $40 per month or $480 per year, you have the option to be able to purchase individual insurance whenever you want regardless of your health or lack of health at the time. You of course have to be healthy enough to pass the health screen that you fill out but for people who like the idea of insurance, you can have the knowledge that you can always buy health insurance for the price of a gym membership.

The article later pointed out that purchasers of this type of option probably don't think that health care reform will come anytime within the next few years. If health care reform does come than United will never have to pay out on this option. It doesn't help people who can't get individual insurance now but it does fill a niche by letting people buy an insurance policy that lets them buy an insurance policy.

From a product portfolio perspective, I have to grudgingly give United a lot of credit for coming up with a product that fills a gaping need and will probably be a winner financially. From a value creation perspective, they basically copied the idea of selling licenses to be able to buy season tickets from the sports world. That may be why the New York Times is lukewarm to the whole idea and feels that people may be overinsuring themselves and it's not worth the money. But given the desire for some to always be able to purchase health insurance, it fills a clear market need.


Steve said...

One drawback: the Continuity plan doesn’t seem to be helpful for people who have been unable to get insurance on their own because of pre-existing conditions.

The fine print in the NYT articles reads: "People who are already sick will generally not be eligible for the new product."

It's a move in the right direction. But most people between 55-65 (one of the primary target groups) already are under doctor's care for a medical condition.

I guess the key to this Continuity plan is to sign up BEFORE you have that first heart attack!

Deadhedge said...

You're absolutely right, Steve, the inability to get insurance due to pre existing condition isn't addressed at all so you have to get this product before you get sick. This is the type of thing that appeals to people who really like have all kinds of insurance.

I talked to an insurance broker for some market research and he started telling me some of the types of insurance plans out there. I found out that you can get an insurance policy that gives you a bunch of money if you get certain specified diseases. Theory is that if you get cancer maybe you want to pay for treatments that health insurance won't cover or go on a big trip. It's like a personal health hedge.

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