We Already Have Obama’s Goal of No Pre-Existing Conditions Limitations in Eight States

The result: higher prices and fewer people insured.

In 1994, there were just under 752,000 individuals enrolled in individual insurance plans, or about 4.7% of the nonelderly population. This put New York roughly in line with the rest of the U.S. Today, that percentage has dropped to just 0.2% of the state’s nonelderly. In contrast, between 1994 and 2007, the total number of people insured in the individual market across the U.S. rose to 5.5% from 4.5%.

Parente and Bragdon estimate that repeal of community rating and guaranteed issue could reduce the price of individual coverage by 42%.

Comments (3)

Trackback URL | Comments RSS Feed

  1. Ken says:

    Good post. This is going to happen everywhere with Obama Care.

  2. Joe S. says:

    There is a report out today by the insurance industry on how much premiums are going to go up as a result of the Baucus bill.

  3. Bart Ingles says:

    A couple of unrelated thoughts…

    (1) With interstate purchasing, this data wouldn’t exist. Living in California as I do, I’m more than happy to let someone else be the subject of social experimentation once in a while. I’m not looking forward to the upcoming nationwide experiment.

    (2) To put things in perspective, we’re talking about five or six percent of the population here. The employer-sponsored insurance market is at least ten times as large. Given that the individual market in these states is so bad, I would expect some of the missing individual customers to have taken extraordinary measures to secure employer coverage. Because of the differences in market share, the impact on the employer market would be relatively tiny.

    (3) Expanding on this idea, again because if the differences in market share, changes that affect the employer market, causing people to enter or exit, might have a disproportionate impact on the much smaller individual market.

    (4) The market conditions in these eight states are partially the result of having neither an enforceable individual mandate nor an adequate tax incentive for participation. In contrast, the employer market has similar attributes– e.g. “soft” forms of guaranteed issue and community rating, backed by tax incentive rather than individual mandate– but is at least comparatively health. In fact it’s fascinating to me that employer coverage in these states is likely much cheaper than individual coverage.

    (5) The market failure in these states may be aggravated by the fact that the already less expensive employer coverage is made even more affordable by favorable tax treatment. If employer-based coverage is already, say, 30% cheaper than individual coverage pre-tax, and tax breaks provide an additional 45% discount, then the actual cost of employer-based coverage would be .55 x .70 = .385 compared to individual coverage! I wonder if this is actually the case.