By VANESSA FUHRMANS Staff Reporter of THE WALL STREET JOURNAL May 31, 2005
The 45 million Americans who lack health insurance are one of the country's biggest social challenges. Lately, though, they've also become the insurance industry's hottest new growth market.

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At a time when the traditional market of selling health insurance to employers is showing sluggish growth, insurers including UnitedHealth Group Inc., Aetna Inc. and the Blue Cross plans have begun to target uninsured people -- college students, part-time workers and even those with more comfortable incomes -- with lower-cost plans.

"We said there are [45] million people standing in the corner, and they represent potentially insureable people," says John W. Rowe, Aetna's chief executive.

The industry hasn't just discovered the uninsured, but it has realized in recent years that many of them are the same relatively healthy Americans they used to cover or administer to in employer health plans. As health-care costs continue to rise and more people lose company health benefits, few of them are turning to the conventional one-size-fits-all individual health plans.

It's one reason some of the industry's biggest leaders have taken stronger advocacy roles for the uninsured. UnitedHealth Group Inc.'s chief executive, William McGuire, has championed creating a set of basic health benefits for those without, while Dr. Rowe recently announced support for an individual health coverage requirement and providing some sort of assistance to those who can't afford it.

Taking their cue from retailers and consumer-products makers, insurers are segmenting the uninsured into specialized markets, then using many of the same market-research tools that go into developing new shampoos and snack foods. "The people who develop potato chips know just how crunchy the chip has to be and how much air to put in the bag, but we've been at a much cruder level in health care," says Andy Slavitt, managing director for UnitedHealth's newly created Center for Affordable Consumer Health. "We're thinking more like a retailer thinks."

What they have learned is that most people who weren't buying existing health-insurance products were dissuaded by their cost. For many people, the issue was more specifically that existing policies seemed to offer little value for the expense -- often because they required meeting such a high deductible before benefits kicked in. And many, particularly younger people or small-business owners, were put off by the complexity of trying to find the right plan.

Some of the new insurance plans are specifically targeted at those concerns. Last year, Blue Cross of California launched Tonik, a line of health insurance whose "Thrill-Seeker," "Calculated Risk-Taker," and "Part-time Daredevil" plans target uninsured twenty-somethings. Aetna has acquired companies that sell plans to college students and temporary and part-time workers. UnitedHealth -- and to a smaller extent, Humana Inc., and Cigna Corp. -- recently struck an agreement with 60 large employers to sell bargain-basement plans to as many as three million early retirees and part-time workers without company benefits.

These plans don't offer all the benefits of most employer-sponsored plans. While many of them cover catastrophic illnesses and include upfront coverage for a set number of doctor visits or some preventive services, they often have higher deductibles and more restrictions or exclusions of certain benefits, such as covering pregnancies. That worries some health-care experts.

"Maybe it's better to have some coverage rather than nothing," says Sara Collins, a senior program officer at the Commonwealth Fund, a health-care policy foundation in New York. "But are we setting up a system in which we have fewer uninsured but substantially more underinsured?"


Some experts consider youth-oriented products like Blue Cross's Tonik a step in a dangerous direction because, they say, their slick marketing glosses over the limitations in benefits. "They are specifically catering to an ignorant population that has little understanding about what insurance is and what it should do," says Ruth Haskins, an obstetrician-gynecologist who is legislative committee chairman for the California branch of the American College of Obstetricians and Gynecologists. She argues these plans skim off young, healthier people, making it even more expensive for sicker uninsured populations to get coverage. "So you have low-risk people with really crappy insurance and high-risk people who can't afford anything," Dr. Haskins says. "Is that any better?"

Others counter that even limited health insurance is a tremendous improvement over having no coverage at all. "One of the things we know about uninsurance is that it's bad for your health," says Dr. Rowe of Aetna. Those without insurance put off seeing doctors until a medical crisis, then usually have to go to the emergency room. Even with limited health insurance, "You get prevention and you get access," he says. To not provide a more affordable product because it falls short of complete coverage, "that would be the perfect driving out the good."

Here are some of the market niches where health insurers are targeting unconventional products: Young adults


Those between ages 19 and 29 make up one-third of the uninsured. Because young people are relatively healthy and rarely see a doctor, many are put off by high premiums.

But being young and healthy is what makes them attractive to insurers. When Blue Cross of California set out to create Tonik, it asked dozens of uninsured people in their 20s to keep diaries of their health-care decisions over several months. "By watching them we could figure out the roadblocks," says David Helwig, president of WellPoint Inc.'s Western region, which includes Blue Cross of California.

One young woman showed them a six-inch stack of insurance information that she had avoided going through to make a decision. So Blue Cross designed a 15- to 20-minute online application process for Tonik, and is promoting it with images of snowboarders and hipster language.

Justin Doss, a 26-year-old computer consultant in Oxnard, Calif., recently went freelance and learned that insurance policies would cost him $200 to $300 a month. "For my age range, it was so high it just wasn't worth it," he says. Instead, he stopped riding his motorcycle and snowboarding, afraid of risking an accident. A friend mentioned Tonik and within an hour, he says, he was approved and able to print out his insurance card -- in time to make a snowboarding trip with friends he had planned to skip.

Tonik's monthly premiums range from $64 to $123 and members pay $30 copayments for doctor visits and certain medical tests included in the visit, but they have a high deductible of $1,500 to $5,000 for things such as hospital stays. And Tonik excludes maternity coverage.

Blue Cross of California says Tonik excludes services such as maternity because its focus groups of uninsured twenty-somethings were emphatic about not wanting to pay more for benefits they didn't need, and that the majority of its plans do offer maternity care for those who want it. About 70% of Tonic members came from the ranks of the uninsured, it adds.

Aetna, meanwhile, bought Boston-based Chickering Group in 2003 to sell student health plans to universities and colleges. Since 1998, Chickering's membership has more than doubled to 321,000, and with more than four million U.S. students still uninsured, Aetna says it sees big growth potential. While about 50% of college students remain covered by their parents' health-insurance plans through their college years, many insurance plans stop coverage for children once they reach 18 or 19.

In many cases, schools require students buy the insurance, usually for about $1,000 a year. Aetna keeps premiums low by capping coverage on some treatments, such as physical therapy or counseling, and requiring students to use the campus health-care clinic as their main provider.

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Source: Wall Street Journal