UnitedHealth’s Insurance To Get Insurance Is Ridiculous

The New York Times“UnitedHealth to Insure the Right to Insurance” reports that UnitedHealth Group (UNH) is selling the option to buy an individual health insurance policy in the future without medical underwriting. However, the applicant would have to undergo medical underwriting to acquire this hedge. The product called UnitedHealth Continuity, is not actually insurance, it is for people who are currently insured but see the need for an individual policy in the future. An example would be early retirement.

This not the equivalent of whole life health insurance, based on the life insurance model that I previously proposed. Instead this is an option, without a strike price, costing 20% of the current monthly premium of the target policy. Being that I could not find any reference to the Continuity product on UnitedHealth’s website, I have some have some basic questions:

1. The monthly fee varies by age, sex and the current cost of a specific plan. Does the option fee increase each year as the option holder ages and policy cost increases with medical inflation?
2. Does the option holder have to undergoing additional medical underwriting if he changes to the target policy, deductible or co-pay?
3. What happens if the target policy is discontinued and the option holder is not satisfied with the replacement offered?
4. How is the product administrated for family plans? Can a spouse or child be added to the option?
5. What happens if the option holder discontinues payment for a period of time? Can the option be reinstated without medical underwriting?
6. There does not seem to be any price protection when the option is eventually exercised. All the option holder appears to get is guaranteed issue. Age and sex would be obvious factors in the premium, but are preexisting conditions also factored in the premium when the option is exercised?

It is unfortunate that UnitedHealth has not provided these details. An option without a strike price is of little value. My read is that UnitedHealth is trying to provide a “free market” approach to guaranteed issue health insurance, and head off the call for mandatory guaranteed issue by the Obama Administration.

Disclosure: Author is long UNH.

Comments

[herbert hoover:]

Hopefully, Obama will put these shysters out of business.

2008 Dec 03 07:04 PM

[otbricki:]

I had the misfortune of being insured by these hucksters once. Thank good no more.

2008 Dec 03 07:34 PM

[LeoTheDog:]

Spot on, Herbert. UNH will offer you the illusion of coverage today, but when the time comes for them to make good you can guarantee that they will leave you hanging. Any "free market" solution to healthcare will be little more than an illusion, with massive inefficiencies baked in.

All the criticism of "socialized" medicine ignores the reality that in most of the industrialized world healthcare benefits are delivered at a fraction of the cost that Americans pay, with results that we can only dream of.

Obscured by all the blather about waiting periods or inability to choose doctors is the fact that nearly all "socialized" medical systems provide outcomes that are far superior to ours; if you care about infant mortality, life expectancy and cost, that is....

2008 Dec 03 07:40 PM

[Dan Jacome:]

UNH is the biggest fish with the most lives - it will actually benefit from Obama, although margins could see some pressure. There are maybe some more opportunities in the smaller cap Mediciad-driven names, which may get picked off if the MCO arena really gets socialized and consolidation happens. And we all know the industry has to

2008 Dec 04 01:29 PM

[User 313419:]

Mr. Steinberg must lack basic internet skills despite being a blogger. The Continuity product isn't that hard to find on the UNH website. It appears to be a reasonable product -- essentially a hedge against future illness preventing an individual from qualifying under strict individual insurance underwriting rules. To call it ridiculous while admittedly knowing nothing about the product, and not even bothering to read more or contact the company is the height of irresponsible journalism.

2008 Dec 05 08:26 AM