What If Your State Has Expensive Insurance?

A trio of states -- Massachusetts, New Jersey and New York -- require insurers to offer you coverage regardless of your medical condition. In New York and New Jersey, insurers must also charge the same rates for everyone, regardless of their age.

Sounds great, right? Wrong. It may be a good deal if you're older and not in the best of health. But a 25-year-old marathon runner has to pay the same premiums as a 64-year-old who has had several heart surgeries. As a result, insurance is extraordinarily expensive for those who are young and healthy.

Predictably, young people in those states are far less likely to purchase individual policies. Predictably, many insurance companies don't sell individual policies in those states because they can't offer competitive rates. And predictably, individual coverage is least affordable in those states that, on paper, appear to have laws that are consumer-friendly. "Such laws miss the whole dynamics of the insurance market," says Jim O'Connor, of Milliman, an actuarial consulting firm. "The viable carriers that may have been able to offer competitive rates end up leaving."

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Like many young families, Cynthia Rolon Lee and her husband, Evan, who live in Chester, N.Y., were oblivious to the health-insurance market in New York when Cynthia was employed by a company that provided rich health benefits for next to nothing. But they got a rude awakening when Cynthia left her job to stay home with their young son, Jackson.

A self-employed accountant, Evan, 41, doesn't have employer coverage. The Lees could have stayed on Cynthia's employer's plan for up to 18 months under the federal COBRA provision. But the price was "ridiculously expensive," says Cynthia, whose premiums would have jumped to $1,200 per month.

Because her family was in good health Cynthia thought they could find a much better deal if they purchased a policy on their own. But in New York, being young and healthy doesn't help. Cynthia contacted several big insurers, including those that provided her company's group plan, but none of them sold individual coverage in her area. She finally found a policy with GHI that costs more than $900 per month, which is straining the family budget. Now, says Cynthia, 39, "I'm thinking about going back to work to get the health insurance."

New York does offer help to lower-income families. Individuals earning less than about $25,000 per year, or a family of three earning up to about $41,000, can qualify for Healthy NY plans, which are offered by private insurers and subsidized by the state. If you don't qualify for Healthy NY, an individual policy can cost $550 to $1,200 per month in Albany County, says broker Dan Colacino, or $1,500 or more per month for family coverage.

It could be less expensive to buy a husband-and-wife policy for $1,100 a month and enroll your children in Child Health Plus, a subsidized program for children under age 19. There's no family-income cutoff, but premiums are linked to income, with a monthly maximum of $115 per child in Colacino's area (get more information from the New York State Insurance Department's Consumer Guide to Health Insurers).

Because Massachusetts requires insurance companies to accept everyone, regardless of their health, and mandates a long list of benefits, policies there tend to cost about $500 per month for individuals and $1,400 for families, says John Ernst, a health-insurance broker in East Longmeadow, Mass. Under the state's new health-reform law, a family of three earning less than $51,000 per year can get help paying for coverage. Higher-income families should eventually be able to find policies through the Commonwealth Connector. Premiums should be lower than today's options, but they probably won't be as low as state officials had hoped.