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Commentary

Apples and Oranges
Grace-Marie Turner, Galen Institute, 9-15-06

Turner takes issue with a recent study from the Commonwealth Fund purporting to show that individuals who purchase their own health insurance are less satisfied than those who have employer-based policies.

The Commonwealth Fund once again is making headlines with a new study that says people with individual health insurance policies pay more, get less, have higher deductibles, and are less happy with their coverage than those with job-based plans. This certainly would seem to undermine confidence in private health insurance.

But America's Health Insurance Plans immediately countered that the Commonwealth study—which was based upon telephone interviews with only 137 people with individual policies (of 1,878 total in the survey)—doesn't jibe with AHIP's own survey of 1.9 million individual policies covering 3.2 million people.

AHIP found that individual insurance policies were more affordable than Commonwealth reported and had richer benefits. Further, AHIP's data shows that 9 in 10 people who completed the application process were offered coverage. Commonwealth said that 9 in 10 people who "explored" buying coverage in the individual market didn't succeed.

Certainly the market for individual health insurance has problems, many of which are due to heavy-handed regulation and mandates by the states. But the Commonwealth study is most off the mark with its basic concept of comparing what those with individual policies say they pay in health costs vs. those with job-based coverage.

When people buy individual policies, they must pay the full cost. But workers with job-based policies see only a fraction of the cost and are under the illusion that their employers pay the rest.

Once again, it gets down to tax policy. Health insurance is part of the total compensation package for workers, but tax policy shields them from seeing its full price.

So it's no wonder that people with individual policies say they pay more. Their full costs are visible, but not for workers with job-based policies.



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