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.