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Structuring Health Insurance Markets
And State Health Insurance Market Reforms
Karen Pollitz, Project Director, Georgetown University, Institute for Health Care
Research and Policy, Washington, D.C.
With the advent of the Health Insurance Portability and Accountability Act (HIPAA) in 1996, the
Federal Government took a precedent-setting step into areas of insurance regulation previously
considered the sole domain of States. It set a national floor for certain kinds of health insurance
reforms, and incorporated new, parallel rules in ERISA retaining a primary role for States in
Ms. Pollitz explained that HIPAA was passed under a strong, bipartisan desire
to pursue incremental health reform with consensus that insurance reform, at a minimum, should
protect access for those who already have coverage. The key protections the Act offers are:
- Making health insurance more accessible to employers and to people in groups.
- Improving the ability of people to move between group health plans.
- Helping certain individuals maintain coverage once they get it.
Ms. Pollitz also outlined what HIPAA does not do, (e.g., rating reform, guarantee issue for groups
over 50, limits on preexisting condition exclusions in individual market other than for HIPAA
eligibles, portability within individual market). She also examined HIPAA requirements for States
and the option that States may adopt acceptable alternative mechanisms for individual access.
date 39 States have adopted alternative mechanisms such as:
- Risk pool alone for HIPAA compliance (18 States).
- Risk pool with other issuance requirements for HIPAA compliance (4 States).
- Guarantee issue all products for HIPAA compliance (7 States).
- Guarantee issue specified products for HIPAA compliance (5 States).
- Mandatory group conversion for HIPAA compliance (3 States).
- Guarantee issue Blue Cross Blue Shield for HIPAA compliance (2 States).
Citing a Jensen and Morrisey (1997) evaluation, Ms. Pollitz reported that taken collectively, State
initiatives to reform the small group market during 1989 to 1995 appear to have contributed
significantly to small employer willingness to offer coverage. The model suggests that expansion of
reforms in all States could increase small employer willingness to offer coverage.
Though it is too
soon in HIPAA's implementation to measure its impact, Ms. Pollitz concluded that early indications
suggest HIPAA small group market reforms raised the overall level of State reforms somewhat, and
that HIPAA individual access provisions left many significant gaps.
Birnbaum ML. April 1998. State Implementation of the Health Insurance Portability and Accountability Act of 1996. State Initiatives
in Health Care Reform Technical Assistance Memorandum #13. Washington, D.C.: Alpha Center.
Health Insurance Standards: New Federal Law Creates Challenges for Consumers, Insurers, Regulators. (GAO/HEHS-98-67, February 1998):1-4.
Moran DW. Federal Regulation of Managed Care: AN Impulse in Search of a Theory? Health Affairs 16(6):7-21.
Enthoven AC, Singer SJ. Perspective: Markets and Collective Action in Regulating Managed Care. Health Affairs 16(6):26-32.
Hellinger FJ. The Expanding Scope of State Legislation. Journal of the American Medical Association 276(13):1065-70.
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