The Impact of Access Regulation on Health Insurance Market Structure. A. Guaranteed Issue And Renewal

10/20/2000

At the time HIPAA was enacted in 1996, 35 states had enacted and implemented guaranteed issue in the small group market (see Table 1). In general, these states defined small groups as groups of 2 to 50 employees (as does HIPAA). Most (22 states) required guaranteed issue of only some products – typically a standard product devised by the state in part to encourage price competition in the small group market, at least for that product. Only thirteen states required guaranteed issue of all products, as did HIPAA when it became effective in July 1997.

Prior to HIPAA, guaranteed renewal in the small group market was far more common than guaranteed issue – reflecting insurers’ acceptance of guaranteed renewal as less restrictive regulation, allowing them still to deny coverage at first issue. In 1996, 43 states required guaranteed renewal of small-group products. By 1999, all states except California had complied with HIPAA’s small- group guaranteed issue and renewal provisions. In California, the federal government (specifically, the Health Care Financing Administration, HCFA(now known as CMS)) is charged with enforcement of HIPAA’s small- group provisions.

HIPAA’s provisions in the individual market are much less extensive than its small-group market provisions. Specifically, HIPAA requires only that insurers guarantee issue to individuals who have had significant (and continuous) coverage in the small group market immediately prior to applying for individual coverage. At the time HIPAA was enacted, only 10 states had any provision requiring guaranteed issue in the individual market. Seven of those states required guaranteed issue of all products, and three required guaranteed issue of only a basic and standard product as defined by the state. By 1999, 16 states required guaranteed issue of at least some product in the individual market.

HIPAA also requires guaranteed renewal in the individual market (as it does in the group market). In 1996, 10 states had implemented guaranteed issue of individual products. By 1999, all but three states (Missouri, Michigan and California) had implemented guaranteed renewal of individual products; in those three states, HCFA(now known as CMS) is charged with enforcement of HIPAA’s individual-market provisions.