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New AHIP Report Takes a Ten Year Look at the Unintended Consequences of State Efforts to Change the Insurance Market

WASHINGTON, Sept. 7 /PRNewswire-USNewswire/ -- As states consider proposals to expand access to health care coverage, a new study assesses the impact of prior efforts in states across the country. Over the past decade, numerous states have launched "insurance reforms" with significant unintended consequences. A number of these initiatives were repealed or significantly changed within a few years of implementation. The study by Milliman, Inc. on behalf of America's Health Insurance Plans (AHIP) examined what happened.

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Specifically, the report examined eight states that enacted various forms of "guarantee issue" and "community rating" in the 1990's, including Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont, and Washington. The report found that these initiatives can have unexpectedly negative consequences for consumers, and can limit access to coverage.

"This report offers important lessons. It demonstrates that insurance reforms without universal access drives up health care costs for consumers and encourages individuals who have health insurance to drop insurance and take the financial risk of being uninsured," said Karen Ignagni, President and CEO of AHIP.

Guarantee issue requires insurers to sell an individual health insurance policy without regard to a person's health and community rating requires that all consumers pay the same or similar premiums without regard to age or gender. According to the report, these initiatives have the potential to cause individuals to wait until they have health problems to buy insurance. This could cause premiums to increase for all policyholders, increasing the likelihood that lower-risk individuals leave the market, which could lead to further rate increases. If this continues, the pool or market could essentially collapse or shrink to include only the high risk population.

"While these reform goals were laudable, they frequently had unintended consequences that disrupted the individual marketplace," said Leigh Wachenheim, FSA, MAAA, Principal and Consulting Actuary at Milliman, Inc.

Overall, the report found that states that implemented guarantee issue and community rating saw a rise in insurance premiums, a reduction of individual insurance enrollment, and an exodus of health insurers from the individual insurance market. In addition, the report found no significant decrease in the uninsured population in states that implemented these initiatives, often a stated goal of legislators.

Consequently, several states that initially implemented guarantee issue and community rating have since repealed or modified their laws with the intent of stabilizing the insurance marketplace and providing consumers more choice and access to coverage.

Click here to view the complete study:

AHIP is the national trade association representing nearly 1,300 member companies providing health insurance coverage to more than 200 million Americans.

SOURCE America's Health Insurance Plans
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