Comparing Health Insurance Costs online

By S.P. DINNEN

REGISTER BUSINESS WRITER



November 23, 2005



Barbara Tillinghast couldn't afford another increase in the health insurance premium she was paying at the small print shop where she works. So she started shopping and ended up in a place known more for selling music and airplane tickets: the Internet.



Tillinghast tip-toed into the process. "I was a little apprehensive that I was going to get bombarded with other offers."



Indeed, there are pitfalls to buying insurance as an individual that group policyholders don't face. But three months later, the Urbandale mom, her husband and children have insurance in place and no complaints.



"I'm saving $70 a month, and my coverage is better," Tillinghast said.



Online insurance providers offer an alternative for workers faced with rising premiums. In Iowa, a family enrolled in a Preferred Provider Organization, or PPO, the most widespread type of workplace insurance in the state, has seen a premium increase of 65 percent since 2000, according to the study by Clive workplace benefits firm David P. Lind & Associates. Co-payments and deductibles also are up.



There are no firm figures on how many people electronically shop for health insurance. One of the major companies that hooks up insurers with consumers, California-based eHealthInsurance.com, reports that it provides around 800,000 quotes a month across the nation.



Robert S. Hurley, vice president of eHealthInsurance Inc., said an advantage of online insurance is that shopping is done anonymously, avoiding a chat with an insurance agent until the consumer is ready to proceed. Also, on most Web sites hosted by brokers, the consumer can compare dozens of coverage limits and see what the cost will be before committing to a policy.



In an industry that's not noted for pricing transparency, that cost-comparison exercise offers consumers an advantage, said Gary Claxton, vice president of Kaiser Family Foundation. But Claxton, whose organization studies health care issues, said individual policy buyers should keep in mind traps, regardless of whether they're buying online or directly from a company or its agent.



Unlike group policies available at workplaces, individuals must be in good enough shape physically to be accepted by the insurer. Barbara Tillinghast said her insurer called about a medical procedure that had been performed on her son's arm. The insurer was satisfied with her answers and issued a policy.



But insurers can apply other tests when it comes to underwriting, which the consumer often won't know beforehand.



"We have a carrier that's sticky about allergies," Hurley said. Another insurer takes a closer look at applicants it considers overweight. Hurley said his company has licensed agents on hand who can discuss these idiosyncracies with applicants who call.



Once accepted, Claxton said policyholders are placed in pools, which typically comprise people who have bought the same sort of insurance. He said insurers will sometimes allow only so many people into a pool, or block, and then close it to new entrants. As policyholders drift away, the costs to the insurer of covering that block is spread over a smaller group.



"If you're sick, you're stuck" in that dwindling block, Claxton said, because you probably won't be able to qualify for insurance with another company. He said that some insurers use this method, some don't, and "if you end up with one that does, it's a problem."



Claxton said consumers can avoid that problem by staying with a particular policy for a short term. However, they'll then have to find replacement insurance.



Cheryl Randolph, a spokeswoman for American Medical Security Life Insurance Co., said applications for electronic health insurance have risen as consumers have become more accustomed to conducting business online.



"The popularity of the Internet drives our popularity," said Randolph, whose Wisconsin-based company is licensed to sell health coverage in Iowa. She said that as demand and sales rise, the cost of delivering the policy via the Internet should drop, though she did not have figures showing how any savings might be shared among consumers and insurers.



Hurley said online policies can help address concerns over the number of uninsured Americans. He is encouraged that upwards of 40 percent of consumers who visit his Web site have previously not owned a health insurance policy, he said.