Recent Empirical Studies of the Effects of State Health Insurance Reform
Buchmueller, T.C. and G.A. Jensen (Fall 1997). “Small Group Reform in a Competitive Managed Care Market: The Case of California, 1993-1995.” Inquiry 34: 249-263.
Small group reforms in combination:
Guaranteed issue (GI)
Guaranteed renewal (GR)
Preexisting condition exclusion (PreX) limits
Prohibited rate factors
Limits on rating
Data: Employer surveys conducted for UC-Irvine; sample included only independent firms with 3-99 employees. Estimation: Examination of changes in percent of small firms offering health insurance and change in premiums. (Supporting multinomial logit analysis not reported.) Dependent variable(s): employer offer of insurance, group premium.
Employer familiarity with reforms was moderate (56-57 percent of firms; 59-62 percent of firms offering insurance); 24 percent were aware of HIPC.
High growth in insurance offer among firms with 3-9 employees (significant at 0.01) was probably related to reforms. No change among larger firms; no impact on median premium.
Increase in managed care relative to indemnity insurance was potentially due to reforms.
Decline in highest premiums paid for coverage was likely due to reforms (note: data included no control for plan design).
Buchmueller, T.C. and J. DiNardo (September 1998). “Did Community Rating Induce an Adverse Selection Death Spiral? Evidence from New York, Pennsylvania and Connecticut.” Working paper, University of California at Irvine.
Small group reforms:
Pure community rating
Data: 1987-1996 Current Population Survey in three states (1986-1995 coverage). Estimation: Difference in difference (DD) and difference-in-difference-in difference (DDD) estimation. Control groups were workers in PA and CT, and workers in large firms in all states. Dependent variable(s): Rate of group health coverage; prevalence of HMO vs. indemnity coverage.
NY’s small-group market reforms were not associated w/ decreased coverage relative to PA or CT, states that did not have community rating laws.
Reforms altered structure of the small group market, increasing managed care penetration relative to PA and CT.
Schriver, M.L. and G.M. Arnett (August 1998). “Uninsured Rates Rise Dramatically in States with Strictest Health Insurance Regulations.” Backgrounder (Washington, DC: The Heritage Foundation).
States that had passed any type of small-group and any type of individual-market reform by 1995 (n=16)
Data: Calculations based on 1991-1997 CPS (1990- 1996 coverage). Estimation: Observation of differences between state groups (without control variables or tests of significance). Dependent variable(s): Percent of the state’s nonelderly population that is uninsured.
Uninsured rate grew faster or declined less in reform states between 1990 and 1996
Employer-based coverage declined in reform states, but grew slightly in nonreform states.
Individual coverage declined faster in reform states than in nonreform states.
Medicaid coverage grew faster in reform states than in nonreform states.
Sloan, F.A. and C.J. Conover (Fall 1998). “Effects of State Reforms on Health Insurance Coverage of Adults.” Inquiry 35: 280-293.
Number of mandates
Employer tax credit
High risk pool
Mandatory, voluntary reinsurance
GI, GR (all products, some products)
Rate limits (for health status, age, gender)
Data: 1990-95 Current Population Survey, persons aged 18-64, unduplicated persons (1989-1994 coverage) Estimation: OLS (private and group coverage specifications contingent on any and private coverage, respectively) Dependent variable(s): Among the nonelderly population: probability of being insured (private or public), probability of private coverage contingent on any coverage, probability of employer group coverage contingent on private coverage.
Greater number of mandates reduced private coverage, and group coverage in particular.
Small-group community rating raised the likelihood of group coverage among persons over age 55
Individual community rating reduced the likelihood of any private coverage
Limits on individual PreX increased likelihood of any coverage (public or private) among single persons.
Marsteller, J.A., L.M. Nichols, A. Badawi et al. (June 1998). “Variations in the Uninsured: State and County Level Analyses” (Washington, DC: Urban Institute).
Small group access reform combinations of GI, GR, PreX and portability
Small group rating restrictions
Individual GI and rating restrictions
Any individual market reform
Benefit mandates for drug and alcohol treatment
Data: 1990-1996 Current Population Survey (1989- 1995 coverage) Estimation: Logit with state fixed effects. Dependent variables are ESI, private coverage, overall coverage. Dependent variable(s): Percent of the state’s nonelderly population that is uninsured.
Small group access reforms (GI, GR, PreX limits or portability) were associated with higher rates of coverage overall. But only when all were present did they increase rates of private coverage.
Group premium restrictions were associated with lower rates of private coverage and lower rates of coverage overall.
When both access and rating reforms are present, magnitude of effects were fully offsetting.
Individual market GI and rating reforms were associated with lower rates of coverage overall. Results related to private coverage were consistent but weak.
Benefit mandate for drug and alcohol treatment decreased coverage overall (but statistical significance of this result was weak).
Presence of an open high risk pool increased coverage.
Hing, E. and G.A. Jensen (September 1998). “Health Insurance Portability and Accountability Act of 1996: Lessons from the States.” Medical Care 37(7): 692-705.
Small group reforms:
HIPAA+rate regulation, recent
HIPAA+rate regulation, 2+years
HIPAA only, recent
HIPAA only, 2+years
Number of mandated benefits
Data: 1994 National Employer Health Insurance Survey (NEHIS): 17,818 private establishments employing 1-50 or fewer workers (self-insured and Hawaii excluded); 1993 coverage and worker characteristics; all firms and separately, “red-lined” firms (establishment reported that insurer could refuse to cover within plan) Estimation: Logit and regression models. Dependent variable(s): Employer offer of insurance, proportion of employees enrolled
Likelihood of firms offering coverage greater if full or partial reform states (greater effect from earlier vs. recent reforms)
Among very small firms (1-9 employees) more recent reforms (typically rating reforms, no GI) reduced probability of offer.
Percent of employees covered within offering firms lower in full or partial reform states (regardless of duration of reforms)
Among red-lined firms, reforms (early/recent, full/partial) raised probability of coverage more than among all firms.
Full or partial reforms decreased employee enrollment among establishments offering insurance (but mean value lower in reform states).
Greater number of mandated benefits increased employee enrollment, for all small firms and for the smallest firms (1-9).
Reforms generally reduced reported redlining, especially among very small firms, however, rating reforms without GI (recent partial reforms) increased redlining.
Monheit, A. and B.S. Schone (1998). “How Has Small Group Market Reform Affected Employee Health Insurance Coverage?” (AHCPR revised working paper as reported in Simon (1999a).
Alternative configurations of reform “packages” including:
Community rating vs. rate bands
Any reform vs. no reform
Data: 1987 NMES and 1996 MEPS Estimation: DD Dependent variable(s): Employer offer of insurance.
Community rating increases insurance offer rates.
The presence of any reform increases offer rates among young single workers, but reduces offer rates among high-risk groups.
Jensen, Gail A. and M.A. Morrisey (Summer 1999). “Small Group Reform and Insurance Provision by Small Firms, 1989-1995.” Inquiry 36: 176-187
Mandated benefit waiver
Number of mandated benefits
All reforms in combination (including rate reform)
Data: HIAA and KPMG Peat Marwick surveys of employers. Pooled cross-sections totaled 2,472 unique businesses with fewer than 50 employees, from 1989 to 1995. Estimation: Logit model, estimated for separately for firms with fewer than 10 employees and 10 or more employees. Analysis omitted rate reform from the specific regulation analysis to resolve multicollinearity. Dependent variable(s): Employer offer of insurance.
Only PreX restrictions affected firms’ decision to offer insurance, raising the likelihood of offer (significant at 0.10).
# of mandated benefits significant and reduced firms’ offer of insurance (0.05). Effect was insignificant for firms of 1-9.
Zuckerman, S. and S. Rajan (Spring 1999). “An Alternative Approach to Measuring the Effects of Insurance Market Reforms.” Inquiry 36: 44-56.
Separate small group reforms:
Small group reform combinations:
All five reforms
All reforms but GI
GI and rating restrictions
Separate individual market reforms:
Individual reform combinations:
Data: 1990-1996 Current Population Survey (1989- 1995 coverage) Estimation: OLS regression Dependent variable(s): Percent of the state’s nonelderly population that is:
No combination of small-group reforms had an effect on coverage (coverage rate fell with comprehensive reforms and with GI and rating reforms, but these results were statistically insignificant).
Comprehensive individual market reforms (in any combination) were associated with lower coverage rates overall, and lower private coverage rates in particular. Coefficients were quantitatively large.
No small group reform, estimated individually, was significantly related to private coverage or coverage overall.
Individual market GI, estimated individually, decreased coverage overall, but had no significant effect on private coverage.
Data: 1992-1997 Current Population Survey (1991- 1996 coverage), full-time workers aged 16-65 employed in private establishments and who worked at least 13 weeks during the year. Sample excluded persons living in Hawaii. Estimation: DDD with alternative specifications (linear and probit), large-group employees as a control group Dependent variable(s): Probability of employer coverage
Full group reforms decreased coverage rates among small-firm workers, especially among low-risk (single men under age 36) workers, even when age and gender are allowed rating factors.
Full group reforms increased coverage rates among some high- risk workers (e.g., married women of childbearing age with children).
Constraints on rating by age and gender magnify the negative effects of other group reforms.
Partial group reforms had a negative but usually insignificant impact on group coverage.
Bare bones laws had no significant impact on coverage.
Simon, K.I. (October 1999b). “The Impact of Small-Group Health Insurance Reform on the Price and Availability of Health Benefits” (unpublished).
Full reform (both GI and rating reform)
Partial reform (rating reform but no GI)
Data: 1993 National Employer Health Insurance Survey (NEHIS) and 1996 Medical Expenditure Panel Survey Insurance Component (MEPS-IC). Data exclude self-insured small groups and reflect only the largest-enrollment plan among employers that offered multiple plans. Estimation: matrix-algebra calculation of OLS coefficients and DD method comparing health insurance outcomes in small states that reformed before and after reform. (Method reflects confidentiality constraints on use of NEHIS and MEPS-IC.) Dependent variable(s): Premiums, employee contributions, employer offer, employee eligibility, medical underwriting, conversion to HMO coverage, conversion to self-insurance
Full reform increased premiums (by about 4 percent), and most of the increase was passed on to workers as increased employee contributions for coverage.
Full reform decreased the rate of employer coverage (by more than 2 percentage points), but did not decrease the rate of employer offer.
Full reform decreased the probability that small-group plans could exclude selected individuals or impose a PreX waiting period (by about 5 percentage points).
Partial reform had no significant impact on offer or coverage, but was weakly associated with lower premiums and lower employee contributions in high risk firms (variously defined).
No compelling evidence that regulation increased the prevalence of managed care or self-insured plans.
Browne, M. J. and E.W. Frees (January 2000). “Prohibitions on Health Insurance Underwriting: A Means of Making Health Insurance Available or a Cause of Market Failure?” Working paper (University of Wisconsin, Madison).
Separate small group rating reforms for:
Any restriction on underwriting (including rate reforms or GI/GR)
Data: 1989-1995 Current Population Survey (1988- 1994 coverage). Single-person households aged 15-64; all persons and persons employed in firms of less than 10. Estimation: Multinomial logit, fixed effects (year and state). Dependent variable(s): Probability of group coverage vs. no coverage; probability of group coverage vs. individual coverage
Limitations on health rating reduced group coverage among nondisabled persons and raised group coverage among persons who reported disability (i.e., self-reported condition limiting the respondent’s type or amount of work).
Limitations on gender rating increased group coverage among women and reduced group coverage among men.
Limitations on age rating raised group coverage among older workers.
Persons with disability, older workers and women were more likely to have public insurance in states that prohibit underwriting on health, age, gender.
Effects insignificant w/ respect to individual coverage.
Chollet, D.J., A.M. Kirk and K.I. Simon (June 2000). “The Impact of Access Regulation on Health Insurance Market Structure.” Draft Report to the Office of the Asst. Secretary for Planning and Evaluation (DHHS)
Small group market reforms:
GI (some/all products)
GI (all products)
Rating restrictions on age, health, composite
Individual market reforms:
GI (some/all products)
GI (all products)
Rating restrictions on age, health
High risk pool
Data: 1995-1997 Health Insurer Database (HMO, BCBS and commercial carrier state filings; supplemental survey of commercial insurers). Estimation: OLS regression; group market and individual market models estimated separately. Dependent variable(s): Number of insurers, BCBS market share, HMO market share, commercial insurer market share, market concentration (Herfindahl, percent of market held by largest 5 insurers), commercial insurer loss ratios.
All-product GI was associated with more insurers in the market and less market concentration.
Shorter PreX waiting periods were associated with greater market concentration.
Tighter composite rate bands (compared to looser or no composite rate bands) were associated with more insurers in the market, but tighter health rate bands fully offset this effect. On net, a state with full community rating had about the same number of insurers as states with no constraints on rating, all else equal.
None of the forms of regulation investigated affected HMO, BCBS or commercial market share.
Some-product GI was associated with greater market concentration, but all-product GI drove less concentration and lower commercial insurer market share. On net, all-product GI states had much less concentrated markets (but not significantly more insurers) than some-product GI states, all else equal.
Tighter rate bands on health were associated with greater BCBS market share, lower commercial market share and greater market concentration.
Kaestner, R. and K.I. Simon (2000). “Labor Market Consequences of State Health Insurance Regulation.” Working paper.
Number of mandated benefits, collectively in “high-cost” categories
Full reform (GI, rating, GR, PreX and portability)
Partial reform (rating but no GI)
Data: 1989-1998 Current Population Survey (1988- 1997 coverage). Employees in firms with fewer than 100 workers or 25 workers, variously. Estimation: OLS regression. Dependent variable(s): Hours worked per week; weeks worked per year; hourly wages; employment in a small v. large firm; private coverage; coverage from own job.
Full reform associated with slight decline in employer coverage among workers in firms with fewer than 25 employees.
Partial reform reduces coverage among groups “vulnerable” to insurance loss: low-educated employees and young, unmarried employees without children.
Small group reforms are unrelated to other labor market outcomes.