Cost and performance: a comparison of the individual and group health insurance markets.

Abstract

�� The great bulk of private health insurance in the United States is obtained in employment-based groups, but this institutional structure has recently been subject to criticism for its apparent failure to achieve the social objectives of widespread and satisfactory coverage. One common criticism notes a continued erosion of the proportion of the relevant population covered by this form of insurance —a n erosion that slows but does not stop in periods of tight labor markets and that is correlated with a rise in the overall proportion of the population that is uninsured. In addition, there is bipartisan criticism of the types of coverage employers have been offering, as they move more and more to managed care of some form. In the face of these problems, there has been renewed interest in the nongroup or individual health insurance market. Most obviously, that market allows individuals to choose the form, type, and generosity of insurance themselves, without limitation, selection, prescreening, or channeling by employers and their benefits managers. The number of different health plans available to a buyer in the individual market (assuming acceptable premiums and underwriting) is in the hundreds, many more options than exist in even the broadest group arrangements, such as those available to federal employees. Managed care plans are less dominant in the individual markets, and more of the plans offer the freechoice features common in indemnity or even “managed indemnity” offerings. Another advantage of individual insurance is that, in contrast to those with workplace insurance, people with individual insurance need not be