Prudential Insurance Co., confronted by the soaring costs of medical care, has stopped writing comprehensive health insurance coverage for individuals, company officials said yesterday.
Prudential, the nation's largest insurance company and fourth-largest commercial health insurer, said that its group health policies and its existing individual policies would remain in effect but that sales of new individual policies would be suspended while the company revises its benefit and premium formulas.
Though all medical insurers are facing the same skyrocketing costs of health care, Prudential appears to be alone among major companies in dropping individual policies. Neil Swan, Washington information director of the Health Insurance Association of America, said others among the 300 member companies were raising premiums, trimming benefits and increasing deductible amounts to keep their coverage in place.
A spokesman for Mutual of Omaha, the largest commercial health insurer, said his company "absolutely is not contemplating giving it up. It's a major part of our business and we intend to meet the need for this coverage."
Prudential officials stressed that their suspension of individual policy sales does not affect any group health policies, which make up about 90 percent of Prudential's health insurance sales, and that existing individual and family policies would remain in force. The company is eliminating only the sale of new policies to individuals not now covered by any Prudential policy.
John K. Kittredge, executive vice president of Prudential, said its comprehensive individual policy, which offered some of the broadest coverage in the industry, was a victim of what actuaries call "adverse selection"--that those most likely to use a benefit are the only ones who buy it. As the costs of premiums rose to keep pace with medical expenses, he said, the customers who bought the policies tended to be those most likely to need medical care, and the cost of their care was not offset by premiums from healthier customers.
Prudential has about 270,000 outstanding individual health insurance policies. Kittredge said the company has been raising premiums yearly to cover its costs and would continue to do so, but Prudential was still losing money on the policies.
"Some people in the industry refer to this as the Cadillac of individual health policies," Kittredge said. "It provides unlimited maximum benefits and very broad coverage." He said the company had concluded it should "go back to the drawing board" to devise a new policy that would lower costs.