During the heated debate on health care reform
several years ago, some states jumped ahead of the rest by
aggressively regulating their health insurance markets to speed
reform. The data are now in, and they show that these attempts have
backfired by harming the very citizens they were designed to
Between 1990 and 1994, 16 states passed the
most aggressive laws designed to increase access to health
insurance for their uninsured citizens. They imposed mandates and
regulations on health insurance for small employers and individual
citizens, implementing at the state level many of the provisions
contained in the failed Clinton health care bill.
results: In 1996, all 16 states experienced an average annual
growth in their uninsured population eight times that of the other
34. In 1996, the one-year average growth rate in the uninsured
population in the 16 regulatory states was 8.14 percent; in the
other 34 states, however, it had fallen to only 1.02 percent. In
1990, before the blizzard of health care reform legislation, the
two groups of states had been nearly equal at 4.6 percent and 3.9
Although the primary intention of insurance
reforms is to make insurance coverage more affordable and
available, thereby increasing the number of people covered by
private health insurance, the 16 states that implemented these more
comprehensive reforms have had the exact opposite experience. The
the mandates passed by these 16 states were requirements that
insurers sell policies to anyone who applies and agrees to pay the
premium--even those who wait until they are already sick before
buying insurance (guaranteed issue); prohibitions on such
underwriting practices as excluding coverage for some medical
conditions (pre-existing condition exclusions); and requirements
that insurers charge the same price to everyone in a community,
regardless of the differences in risk individual policyholders
represent (community rating).
16-state study included Idaho, Iowa, Kentucky, Louisiana, Maine,
Minnesota, New Hampshire, New Jersey, New Mexico, New York, North
Dakota, Ohio, Oregon, Utah, Vermont, and Washington State. These
states were identified by the U.S. General Accounting Office as
having passed aggressive regulations affecting both their
small-employer and individual health insurance markets between 1990
health sector is the most heavily regulated in the American
economy. In every other industry, Americans recognize that
regulation drives up prices, restricts innovation, dries up
competition, and forces businesses to cater to regulators instead
of consumers. This is exactly what is happening in the health
data show that Americans are paying a high price for the mistakes
of well-intended but flawed legislation. The misguided efforts of
lawmakers to over-regulate insurance markets have backfired,
squeezing more and more people out of the system.
How to Help the Uninsured
Lawmakers should focus on policies that
allow individuals to purchase health insurance that they own and
control themselves in a free, competitive, and well-informed
marketplace. Such policies would enable consumers themselves to
transform the health sector into a market driven by competition,
innovation, value, and choice. There are several actions that
states can take to help reach this goal. Among them:
Encourage changes in
federal tax laws.
Initiate the delivery
of state tax relief.
Review all currently
enacted health care regulations and eliminate those found to be
boards established with previous reforms.
Abolish pure community
Stop expanding benefit
experimentation of coverage for the uninsurable.
results examined in this study show that regulation at the state
and federal levels is counterproductive in responding to the
challenge of increasing access to health insurance in the
individual and private health insurance market. A far better
approach would be to empower individuals and families to make
health care choices that suit their own needs, restore the
independence and integrity of the medical profession, and force
insurance companies to compete for consumers' dollars. The health
care delivery system at all levels should be accountable directly
to the individuals and families being served.
--Melinda L. Schriver is a Senior
Research Associate with, and Grace-Marie Arnett is President of,
the Galen Institute, Inc., an Alexandria, Virginia, not-for-profit
institute specializing in health and tax policy research. The
authors are grateful to Robert E.
Moffit, Ph.D., Director of Domestic Policy Studies at The
Heritage Foundation, and Carrie J. Gavora, Health Care Policy
Analyst at The Heritage Foundation, for their significant
contributions to this study.
information, please contact: The Galen Institute, P.O. Box 19080,
Alexandria, VA 22320, Phone: (703) 299-8900.