October 8, 2007
Having more healthy young people in the insurance pool would benefit insurers, because they are less likely to make big claims. But efforts to attract them have thus far been feeble. Various companies offer low monthly premiums aimed at the young. But they typically have high deductibles -- the amount the subscriber has to pay out of his own pocket before insurance kicks in. So young people tend to shy away from them, says the Economist.
One company, however, is taking an interesting new approach. In September Precedent Insurance -- a division of the American Community Mutual Insurance Company -- brought out a line of Coverage on Demand plans. The plans are currently available only in Texas, which has a higher percentage of uninsured people than any other state. They offer low premiums, low deductibles, limited benefits, and a clever twist:
- If you exhaust your benefits but need more coverage, you can pay an additional "activation fee" and get more, even after you get ill or hurt.
- There are four levels of cover; to get to the fourth requires at least a cumulative $9,000 in activation fees, but it then provides the subscriber with up to $5million in coverage.
The activation fees for the higher levels are steep, but a lot better than bankruptcy. According to Mike Grandstaff, the company's chief executive officer, they only make sense if you are, in fact, in reasonably good health. If you are likely to need more than the first level of coverage, the plan is not really economical, says the Economist.
Source: "Happy-go-lucky young," The Economist, October 4, 2007.
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