Aetna's recent decision to start selling individual healthinsurance in Florida signals that the market once left for dead isin the throes of being reborn. About one million Floridians arecovered by individual policies — a tiny fraction compared to grouphealth insurance business. That means there is plenty of room togrow, and many agents and insurance officials say demand is pickingup.

Several factors are fueling the resurgence, including newhigh-deductible policies in Health Savings Accounts (HSAs) thatallow insurers to offer more affordable premiums. Also, the surgingprice of group health insurance — costs have been going up bydouble-digit rates for the past four years — is leading manyemployers to drop coverage or drop dependent coverage. As a result,many are turning to individual policies to fill the gap. Andfinally, the sheer number of uninsured in Florida — now at 3.2million or 19 percent of the population — is causing the demand forindividual policies to grow.

The growth in individual policies in Florida matches anationwide trend. The number of people buying health insurance ontheir own jumped by nearly one million, to 17 million from 2000 to2004, according to Mathematica Policy Research.

Noticing this growth, Aetna has launched individualhealth-insurance products in seven states this year, includingFlorida. “The market potential is significant,” said LaurieBrubaker, Aetna's general manager of the individuals market.“Florida is a key market for us with a lot of uninsured and a largemarket population.”

In addition to Florida, Aetna recently started sellingindividual health-insurance policies in Arizona, California,Georgia, Illinois, Maryland, and Texas.

OIR Welcomes Aetna with Open Arms

Aetna enters a market dominated by Blue Cross and Blue Shield ofFlorida, Humana, and a host of out-of-state insurers. No one washappier to welcome Aetna into Florida than the state's Office ofInsurance Regulation. Not only does Aetna add more competition intothe market, but it also comes into the market as an in-statecarrier, which places it under Florida consumer protectionlaws.

“Out-of-state association groups are primarily governed by rulesof another state and frequently allow rating practices that wouldbe prohibited in Florida,” said Insurance Commissioner KevinMcCarty. Like many states, Florida has its troubles policingout-of-state insurers, who often raise rates by exorbitant amountson short notice or are tied to scams.

Aetna indicated that it came into the state as a regulated planbecause of the added credibility that it will gain in themarketplace, in particular to compete against Blue Cross. Aetna foryears has been one of the largest group health insurers inFlorida.

Medical, Dental Programs Available

Aetna is offering individuals and their families severalstandard HMO and PPO-type plans. Plans will provide coverage forroutine checkups, preventive care, specialty care, hospitalizationand surgery, diagnostic testing, and emergency care. Some planswill also cover prescription drugs.

Members also will be able to choose among severalhigh-deductible plans connected to an HSA. In HSAs, policyholdersaccumulate tax-free funds to pay for most medical expenses. Thecontributions are tax deductible, and unused balances can becarried forward year to year. HSAs also are portable, a distinctadvantage in today's mobile society.

Aetna also is offering members the option to join a dental plan.Additional benefits include discounts on vision services, fitnessclubs, and nutritional supplements. About the only thing notcovered by Aetna's new plans will be maternity coverage. “We areworried about self selection,” Brubaker said. “Our strategy is tohave products and quality services at affordable prices. I thinkAetna brings a strong brand name, large provider networks, andconsumer web tools.”

While premiums will vary based on a consumer's age, sex, andhealth status, premiums will be as low as $50 a month for a male inhis 20s. Policies will be medically underwritten and pre-existingconditions won't be covered for the first year. Aetna, whichofficially started selling its plans Dec. 15th, is marketing itsnew products through brokers and directly to consumers throughdirect mail, telemarketing, and the Internet.

Agents Laud Healthy Market, Variety of Plans

Insurance agents across the state said they welcomed the newcarrier to the individual market that for years struggled with highprices, limited choice, and slumping demand. “We are very excitedthat Aetna will now be offering health insurance plans forindividuals and their families in Florida,” said Wes Fischer,president of The Health Insurance Store, a Kissimmee-basedindependent agency specializing in health insurance and employeebenefits programs. “A majority of our clients are familiar withAetna, and we believe there will be strong consumer interest inthese new individual plan options.”

Marc Fine, an independent agent in Davie, said the individualhealth-insurance market is healthy and Aetna's entry onlystrengthens it. “We have a lot of plans in the market and the plansare offering a lot of different products,” he said.

Small groups are finding they can save hundreds of dollars amonth by switching from group policies and buying individualpolicies for their family, he said. The caveat is that they can'thave any pre-existing conditions, which can mean higher rates. Finesaid he sees many uninsured customers just looking for acatastrophic-type coverage to protect them against major hospitalbills. Many people can get such plans for less than $100 a month,Fine said. “This is a great market, because prices are not asexpensive as most people think. We have a lot of plans to choosefrom with all types of budgets,” Fine reported.

Karen Hovis, an insurance agent in Stuart, said if people canbuy individual policies while they are healthy and stay with it,the premium is going to be affordable. Hovis said there areadvantages to both in-state and out-of-state carriers. Theout-of-state businesses may be able to offer lower premiums, butthe in-state ones may provide protection against rates escalatingquickly.

Whether Aetna will succeed will depend on how their prices matchup with existing carriers, she said. “There is a demand for qualitycarriers, no doubt about it,” Hovis said.

Aetna's entry into the market comes almost two years afterUnited HealthCare left. United had 8,000 policies in the state whenit quit. It tried to convert most of the policies to itsout-of-state company, Golden Rule Insurance Co. It is unclear howmany made the switch, but today Golden Rule has about 27,000policies in Florida, according to OIR data. That makes Golden Rulethe second largest out-of-state carrier behind Time Insurance Co.(formerly known as Fortis). United paid $500 million for GoldenRule in 2003, even though the company was facing 15 investigationsby insurance officials across the country for aggressive salestactics and questionable marketing. In all, 13 out-of-statecarriers write policies in Florida, along with six HMOs and twoPPOs.

What, Me Worry?

Officials at Jacksonville-based Blue Cross and Blue Shield ofFlorida say its longevity in the regulated market will help itcompete with any new entrants. Michael Guyette, the company's groupvice president of sales, said he was not surprised to see Aetnaenter the business. “The individual market is definitely growing,”he said. He cited the state's fast-growing population and companiesdropping dependents off group-health policies for accelerating thetrend to individual coverage.

“We are starting to see more individuals looking at HSAs andhigher deductible plans, where the premiums are lower,” Guyettesaid. But he quickly added that most customers are still in thetraditional PPO policies with $250 or $500 deductibles. Accordingto Guyette, Blue Cross sells most of its policies through agents,but an increasing number are sold directly on the company's own website. Following the pattern in the group market, rate increaseswith individual policies have moderated in the past few years butare still in the low double-digit range, he said.

Rates can also vary based on where in Florida the policy issold. For example, Miami has one of the highest rates forindividual health insurance in the country, according to a recentsurvey for eHealth Insurance Services. Miami's rates reflect thecity's high medical costs, partly due to its huge supply of doctorsand hospitals and a higher-than-average amount of medical billingfraud. n