Individual Insurance: How Much Financial Protection Does It Provide?

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Abstract
This paper examines the comparative financial protection provided by individual and group health insurance. Data sources include two national surveys of employer-based health plans and e-health insurance listings for individual coverage on the World Wide Web. Data on the use and cost of services are from the National Medical Expenditure Survey (NMES), a national household survey of Americans. We estimate that individual insurance pays on average 63 percent of the health care bill, whereas group health insurance pays 75 percent. Deductibles are much higher in individual insurance, and covered benefits are more meager. At 200 percent of poverty, the top 25 percent of health care users with individual coverage would spend 11 percent of their income for out-of-pocket health care expenses, as opposed to 6 percent for persons with group coverage.