The individual health market "is an important and growing market for health plans," says analyst Debra Donahue in Mark Farrah Associates' June 24 Healthcare Business Strategy. "It is emerging as a diversified product line for insurers targeting people without access to group-sponsored or government-sponsored coverage." Factors that should spur an increase in the sale of individual health policies include "employer groups reducing benefits, continuing high unemployment, and opportunities in the group and government markets shrinking," as well as the implementation of the health insurance exchanges and a growing desire among consumers for portable healthcare as frequent job changes become more common, she said.
That said, the individual market likely will see a significant shake-up due to health reform-mandated minimum medical-loss ratios--with up to one-fourth of policyholders potentially needing to change coverage--but that drag on the market should be relatively short-lived, according to a new research brief from the Robert Wood Johnson Foundation (RWJF). "After an initial period when many insurers will experience significant uncertainty, most of the large, established carriers offering coverage in the individual market will be able to meet the MLR thresholds, but other insurers may leave the market," said the RWJF.
"In the short term, the greatest opportunities for improving the MLR may be reducing distribution costs, but the contractual ability available to do so may be limited. If insurers choose to terminate product lines or withdraw entirely from the market before 2014, some consumers may be unable to find affordable alternative coverage." However, states can limit any market destabilization by taking such steps as extending continuous coverage protection to consumers affected by market exits and designating "insurers of last resort," noted the RWJF.