Saturday, September 08, 2007

States Gone Wild

Like alcohol induced antics on spring break, states have enacted anti-insurance legislation over the past few years with drunken abandon.

The results have not been pretty.

In a report commissioned by AHIP and numbers crunched by Milliman, the financial outcome of legislation designed to make health care more accessible is a disaster.

In 1994 the Kentucky legislature adopted rules requiring carriers to offer guaranteed issue individual medical insurance plans and institute community rating.

(Guaranteed issue means policies are issued to anyone who applies regardless of their current health.

Community rating is a formula whereby everyone within a specific geographic area pays the same rate regardless of health. Carriers may, in some situations, charge different rates based on age or gender but may not charge more to someone at deaths door than they would someone in perfect health.)

The result was an almost immediate exodus of 40 carriers from the individual market in Kentucky.

In 1998 community rating was repealed. In 2000 guaranteed issue was repealed.

In 1994 New Hampshire adopted guaranteed issue and a modified community rating model. Prior to the legislation about a dozen companies offered individual major medical. Only one carrier entered the market in NH after the legislation. In 1997 they exited the market due to heavy losses.

By 2000 only two carriers domiciled outside of NH were still in the market.

In 2002 both the guaranteed issue and modified community rating rules were repealed.

Since the repeal of these provisions the number of insured lives in the individual market has risen from 7,119 to 36,143. During this same time the average monthly premium for individual coverage has dropped from $144.34 to $141.85.

In 1993 New Jersey enacted legislation requiring guaranteed issue AND guaranteed renewal. They also required community rating and standardized plan designs.

In 1993 157,000 residents had individual health insurance. By 2006 the number had dropped to 83,000.

At this time NJ still maintains guaranteed issue and community rating requirements.

In 1992 Vermont adopted guaranteed issue and community rating.

In 1994 31,247 residents were covered by individual major medical plans at an average annual premium of $806. By 2005 this number had dropped to 9422 and an average annual premium of $2769.

This is what can happen when states go wild.
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