Regulation of Insurance for Individual Coverage

Most Americans obtain their health insurance coverage through employer-sponsored insurance (ESI). This coverage is regulated by federal law, while the insurance companies that sell this coverage to small businesses or groups are regulated at the state level. However, many people do not have access to ESI, either because their employers do not offer health benefits or because they are unemployed. People without ESI and not on public insurance may therefore try to obtain coverage in the individual insurance market. The health plans offered in this market are not regulated as extensively as those in the small group insurance market, where discrimination based on health status is prohibited and premiums are generally based on risks associated with the pool of beneficiaries. In the individual market, eligibility and initial premiums are usually based on the individual's health status and risk characteristics, thereby making coverage difficult to obtain or very expensive if the person has any negative medical history. Also, plans in this market often have minimal benefits with limited coverage and high cost-sharing. The Report Card examines whether states have enacted protections for people seeking to buy plans in the individual market. For example, states can require policies to be sold on a guaranteed issue basis, which guarantees access to coverage for all applicants regardless of health status. States can also mandate a minimum or standardized benefits package and establish rules prohibiting rate discrimination based on health status (known as community rated premiums). States that allow insurers to discriminate based on health status can create high-risk pools as a source of coverage for people who are turned down or charged more by private insurers. Depending on how well states design and fund their high-risk pool programs, they can serve as an adequate safety net. Often, however, high-risk pools are not well funded and so cover very few people.

  • Regulation of Insurance for Individual Coverage

      Strength Of Policy 2007 Change From 2004
    ALABAMA Weak Policy Better
    ALASKA Weak Policy Same
    ARIZONA No/Harmful Policy Same
    ARKANSAS Weak Policy Same
    CALIFORNIA Limited Policy Same
    COLORADO Weak Policy Same
    CONNECTICUT Weak Policy Same
    DELAWARE No/Harmful Policy Same
    DISTRICT OF COLUMBIA No/Harmful Policy Same
    FLORIDA Weak Policy Better
    GEORGIA No/Harmful Policy Worse
    HAWAII No/Harmful Policy Worse
    IDAHO Limited Policy Same
    ILLINOIS Weak Policy Same
    INDIANA Weak Policy Same
    IOWA Weak Policy Worse
    KANSAS Weak Policy Same
    KENTUCKY Weak Policy Same
    LOUISIANA Weak Policy Same
    MAINE Meets Policy Same
    MARYLAND Weak Policy Same
    MASSACHUSETTS Meets Policy Same
    MICHIGAN Limited Policy Same
    MINNESOTA Weak Policy Worse
    MISSISSIPPI Weak Policy Same
    MISSOURI Weak Policy Same
    MONTANA Weak Policy Worse
    NEBRASKA Weak Policy Same
    NEVADA No/Harmful Policy Worse
    NEW HAMPSHIRE Weak Policy Same
    NEW JERSEY Meets Policy Same
    NEW MEXICO Weak Policy Same
    NEW YORK Meets Policy Same
    NORTH CAROLINA No/Harmful Policy Same
    NORTH DAKOTA Weak Policy Same
    OHIO Limited Policy Same
    OKLAHOMA Weak Policy Same
    OREGON Limited Policy Same
    PENNSYLVANIA Limited Policy Same
    RHODE ISLAND No/Harmful Policy Same
    SOUTH CAROLINA Weak Policy Same
    SOUTH DAKOTA Weak Policy Better
    TENNESSEE No/Harmful Policy Same
    TEXAS Weak Policy Same
    UTAH Limited Policy Better
    VERMONT Meets Policy Same
    VIRGINIA No/Harmful Policy Same
    WASHINGTON Limited Policy Better
    WEST VIRGINIA Weak Policy Better
    WISCONSIN Weak Policy Same
    WYOMING Weak Policy Same
     
    Meets PolicyMeets Policy 5  
    Limited PolicyLimited Policy 8  
    Weak PolicyWeak Policy 28  
    No/Harmful PolicyNo/Harmful Policy 10  
    Better Better 6  
    Worse Worse 6  
    Same Same 39  

    Does the state regulate individual health plans to guarantee their accessibility?

    States receive a "meets policy" if they have a guaranteed issue mandate, required minimum benefit packages, and community rated premiums. States that have a guaranteed issue mandate with some rules limiting premiums if the person is moving from the group market to the individual market receive a "limited policy." States receive a "weak policy" if they only create high-risk pools and a "no policy" if they have minimal or no regulation of the individual market.

    Data Source: Regulation of Insurance for Individual Coverage, 2006

    The Henry J. Kaiser Family Foundation, "Individual Market Rate Restrictions, 2006" available at http://www.statehealthfacts.org/comparetable.jsp?cat=7&ind=354, accessed April 26, 2007; The Henry J. Kaiser Family Foundation, "Individual Market Guaranteed Issue, 2006, available at http://www.statehealthfacts.org/comparetable.jsp?ind=353&cat=7, accessed April 26, 2007; The Henry J. Kaiser Family Foundation, "State High-Risk Health Insurance Pools, December 31, 2004," available at http://www.statehealthfacts.org/comparetable.jsp?ind=359&cat=7, accessed April 26, 2007; additional data on mandated minimum benefit packages provided by Karen Pollitz, Project Director, Institute for Health Care Research and Policy, Georgetown University, May 2007.