How No-pre-existing-conditions Regulations Affect the Market

  • Kentucky: Forty insurers left Kentucky’s market by some estimates, and only two remained before the law was repealed.
  • Maine: Thirteen of Maine’s 18 major insurance carriers stopped issuing new individual policies. Many also doubled their premiums.
  • New Hampshire: New Hampshire’s insurance law left it with nearly no carriers in its individual insurance market. The state enacted an emergency tax to compensate insurers for the costs of the law, which was repealed in 2002.
  • New Jersey: Premiums rose as much as 350 percent in New Jersey after its pre-existing conditions law took effect. Even HMO plans, which tend to resist premium increases, nearly doubled in price.
  • New York: The percentage of nonelderly New Yorkers without insurance grew 21 percent, with premiums increasing as much as 40 percent per year.
  • Vermont: Vermont fared better than other states with similar laws, but its premiums spiked an average of 16 percent in two years.
  • Washington: Non-managed care options disappeared entirely from Washington’s individual market. Eventually, entire counties had no private individual insurance options at all.

From the Center for American Progress, which wants a mandate. But a weakly enforced mandate with minor penalties would produce the same results.

Comments (5)

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  1. Buster says:

    Actually, it’s amazing the Center for American Progress (CAP) would even realize — much less admit — that guaranteed issue and community rating laws caused individual insurance premiums to spike and insurers to flee the states that enacted such regulations.

    CAP is correct that repealing the individual mandate would devastate the market for individual insurance. However, the post accurately concluded… “a weakly enforced mandate with minor penalties would produce the same results.”

  2. Devon Herrick says:

    I have to agree with the Center for American Progress. However, I do not believe the individual mandate will be sufficient in preventing the adverse selection death spiral that will inevitably accompany these regulations.

  3. Linda Gorman says:

    Why wouldn’t the Center for American Progress be just fine with this?

    Isn’t the argument that if we have one big insurance pool individual policy prices always go down because the risk is spread over more people?

    If one accepts that that argument is correct [it isn't, but that's a topic for another day], then having insurers leave, especially if they are non-managed care insurers [under the equally mistaken assumption that managed care is always better], is a good thing.

  4. Chris says:

    Here is one thing I don’t much understand.

    BCBS of Michigan is nonprofit (and of course I understand how nonprofits can still be run for the profit of the employees and executives), uses community ratings, and accepts everyone, regardless of preexisting conditions, to their PPO plan. I’m in my 30s, rates are like $200-$250 a month, of course they did increase when some of Obama’s regulations took effect (like the slacker 26 year old mandate, etc).

    Their HMO plan is medically underwritten (and as is a result is cheaper), but they accept everyone to the slightly more expensive but still very affordable and less than what many pay for cable and phone PPO plan.

    Is it so different in other states? Could not the ability to buy across state lines fix issues then? Why was Obamacare needed (trick question, I know).

    I don’t necessarily get how this company can do this voluntarily, that which causes so many problems elsewhere.

    Of course, they have a probationary period for preexisting conditions. 6 months if you’re previously uninsured or underinsured (they waive it if you’re transferring from a roughly equivalent policy elsewhere). So, if you get cancer, no signing up for the policy at the hospital. Is that the magic tool, a probationary period, that is needed to fix the preexisting condition issue? (without a mandate anyways).

    I actually don’t mind a mandate, I do think it is unconstitutional for the feds to do it, but I have no problems with a state experimenting with one. Mandatory coverage minimums need reform though to help keep things affordable.

  5. Bob Hertz says:

    Thanks for a good post, Chris. In most states, the Blue Cross plans had to move to strict underwriting years ago due to competition in the employer market. It would be interesting to see how Michigan avoided this.

    As to your rates, there is still probably some age banding. I doubt if older insureds pay what you do. I am also curious if women of child bearing age pay what you do.
    If so, I am impressed!

    Now to my main point. The same ‘greedy evil insurance companies’ who flee the individual market if they cannot underwrite are just the opposite when it comes to Medicare Advantage. The companies run expensive ads on TV every day, offering to take anyone on Medicare with no underwriting whatsoever.

    Something does not compute at first. Companies that will not even write child-only policies are signing up geezers with no pre-existing conditions at all. And they are going on TV to find more geezers!

    The answer is that Medicare has a risk adjustment program for private carriers — as does every other nation like Germany which relies on multiple insurers. A company that gets a larger share of sick people in effect gets revenue from a general carrier fund. The insurer cannot go broke or lose big in such a program.

    Whereas under age 65, companies have to operate in a cutthroat free enterprise environment. Free enterprise always produces very uneven results in the field of insurance.

    As Devon Herrick suggests, the Obamacare exchanges will need large subsidies also or they will collapse.