State regulation. What have we learned so far?

Abstract

�� Of all the different health insurance venues in the United States, small group and individual markets consistently engender the most complaints. Compared to large group purchasers, small groups and individuals suffer more from administrative diseconomies of scale, difficulties in spreading risk among themselves, and the absence of bargaining power with insurers and providers alike. These conditions lead to higher and more volatile premiums for the same or less generous benefits than large group purchasers usually obtain. Volatility and the apparently inexorable upward trend of health premium costs have led to considerable interest in reform of these markets, of which the recent national debate over comprehensive reform, in retrospect, was but a brief interlude in a history of federalism that spans half of the twentieth century (Nichols and Blumberg 1998). Because of its relative size and organized interests, most of the attention of health insurance market reformers and critics has been focused on the small group market, rather than on individual markets. Over fortyfive states have passed small group reform laws since 1989, though only twenty-five states had implemented individual market reforms prior to the Health Insurance Portability and Accountability Act of 1996. This federal law compelled all states to either pass certain conforming acts or to suffer direct federal regulation of their insurance markets for the first time. Recently, empirical and case studies of the effects of small group reforms have begun to appear (Jensen and Morrisey 1996; Sloan and Conover 1998; Marsteller et al. 1998; Hall 1998). This article, along with the other essays in this issue, attempts to redress this relative imbalance by focusing exclusively on the individual market.