The Regulation of the Individual Health Insurance Market. Variation in Regulations within States

12/01/2008

The previous sections of this report describe some of the types of regulations that states can implement in their governance of the individual insurance market.  However, within each of the major areas of regulation there is wide variation in the requirements that have been implemented.  For example, within a rating structure that may be imposed on health insurance premiums, there are state actions that range from no rating requirements to pure community rating with various levels of rate bands in between.  Similarly, states have a range of requirements for regulating pre-existing condition limitations from no restrictions to very tight time frames of a six-month look back and six-month exclusionary period.

To illustrate this variation, Appendix B displays a chart of states and their market reforms compiled by the National Association of Health Underwriters (NAHU, 2007).  Though individual market reforms are the focus of this report, the chart displays both individual and small group policy regulations.

A majority of states (27) have no requirement for guaranteed issue (GI) of individual insurance policies and no rating structure for variation in premiums.  Where states have implemented some form of GI (11 states), this is often accompanied by some rating requirement, usually pure or modified community rating.  Several states (12) use the HIPAA requirements to grant access to the individual insurance policies, but this applies to persons with prior group insurance coverage and there are usually no rate restrictions on the amount of premiums insurers can charge for these policies, depending on the health status of the applicant.  Most states (37) allow policy elimination riders (policy provisions that eliminate coverage for particular conditions).

Almost all states have some limitation on the pre-existing condition look-back/exclusionary periods. While some states indicate they have none, this usually applies to persons exercising their group to individual portability rights under HIPAA (persons whose pre-existing limitations are eliminated because of previous coverage).  The most common look-back period was either a twelve month (14 states) or six month (13 states) period.  The most common exclusionary period was 12 months (22 states) followed by 24 months (10 states).

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