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Baseline Information for Evaluating the Implementation of the Health Insurance Portability and Accountability Act of 1996: Final Report

Publication Date

Stephen H. Long and M. Susan Marquis with Ellen R. Harrison, Peter D. Jacobson, and Jennifer S. Sloan

The Rand Corporations

Prepared for the Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)) under Contract 500-95-0056, Task Order 4. 


Part I. Introduction

In 1996, Congress passed the Health Insurance Portability and Accountability Act (HIPAA) which ensures access to insurance for some employer groups and individuals who previously were unable to purchase adequate coverage. The Department of Health and Human Services is mandated to report to Congress on the effects. An evaluation of the effects of HIPAA on the insurance coverage of the population, on the premiums charged for policies, and on the characteristics of insurance products available depends on a detailed understanding of the state regulatory and market context in which the federal standards and provisions are implemented. The Health Care Financing Administration contracted with RAND and the Institute for Health Policy Solutions (IHPS) to develop the contextual information needed for an evaluation and to develop a design for the evaluation.

The project included four central tasks:

  • Develop a database to describe the regulatory environment in each state prior to HIPAA and to measure regulatory actions states have taken to comply with HIPAA’s requirements.
  • Review the literature to address issues that have arisen during HIPPA’s implementation and summarize the expected effects of HIPAA’s provisions.
  • Review the strengths and weaknesses of extant data that might be used in the HIPAA evaluation.
  • Develop a plan to evaluate the effects of HIPAA on the accessibility and affordability of insurance in the group and individual insurance markets.

RAND and IHPS collaborated on the design of the database; IHPS conducted the necessary regulatory review, data abstracting, and data coding to complete the database. It describes in detail the small group and individual insurance market provisions in each state in 1996 and 1997 and thus provides a comprehensive picture of each state’s regulatory environment prior to the HIPAA legislation. The database also describes some key market characteristics that we believe may be important factors mediating the effects of regulatory changes stemming from the HIPAA legislation.

This report is the final report covering the other three project tasks. This work was carried out by RAND. Part II of this report summarizes the literature review, emphasizing the potential effects of HIPAA on access to insurance, the affordability of coverage, insurance benefit design, and employment effects.

Part III then reviews existing databases that might provide the information to conduct an evaluation of the magnitude of these effects. We examine four types of databases: population surveys, employer surveys, insurer databases, and policy databases. For each database we describe availability, scope of coverage, reference periods, data collection method, and key content related to a HIPAA evaluation. We also present a brief narrative comparing the utility of the different databases for the evaluation.

Finally, Part IV of this report presents a proposed evaluation design. For each of the key outcome areas—access, premiums, benefit design, employment—we present a small number of key implementation and outcomes questions accompanied by an approach or approaches to answer the question. Thus, our design is modular; subsets of questions and approaches can be selected to comprise a complete evaluation.

Part II. Potential Effects of Hipaa: A Review of the Literature

Stephen H. Long and M. Susan Marquis


The Health Insurance Portability and Accountability Act of 1996 (HIPAA) establishes a federal role for regulating the employer group and individual insurance markets (Atchinson and Fox, 1997). The goals of Title I of the legislation are to provide coverage security for those currently insured. Title I guarantees the availability of insurance to all small employers (with 2 or more employees) and assures that individuals who leave employment are able to maintain health insurance coverage. Thus, HIPAA ensures access to insurance for some employer groups and individuals who previously were unable to purchase health insurance or unable to purchase adequate coverage. What effect this will have on the number of uninsured or the price people pay for insurance is, however, a matter of some uncertainty. Moreover, variability among states in existing insurance legislation, and the flexibility that states are given to implement the individual market reforms suggests that the answer to these questions will vary from place to place.

This paper examines the extant literature on issues pertaining to HIPAA and the general insurance access problems it was designed to address. The goal of the review is to generate hypotheses about the likely effects of HIPAA, the magnitude of those effects, how the effects are likely to vary between population groups, and how background, policy, or implementation characteristics might influence the magnitude of the effects. These hypotheses and the identification of mediating factors will inform the development of a plan for evaluating HIPAA.

In the next section of this paper, we provide a brief overview of the provisions of HIPAA. This is followed by a discussion of the potential effects of these provisions in the group market and the individual market. To estimate these effects, we searched the literature in research journals, the employee-benefits trade press, and reports of private and public organizations for information about HIPAA and the provisions it contains, including: guaranteed issue, guaranteed renewal, portability, pre-existing condition exclusion limits, and non-discrimination provisions. We also reviewed literature on the performance of state high-risk pools, one of the alternative mechanisms that states are allowed to adopt to meet the HIPAA provisions for the individual market reforms. We conclude with some summary observations about the implications for an evaluation design.


The specific provisions of HIPAA related to the reform of the group market and the individual market are summarized below.

Group market reforms. The group market reform provisions that apply to all group plans, including self-insured plans, limit pre-existing condition exclusions and prohibit exclusion of individuals from a group health plan based on health status. In addition, health insurance issuers are required to guarantee renewability of coverage for all groups and guarantee issue all products for small groups.

Preexisting conditions exclusions for all group plans (including insured and self-insured plans) are limited to 12 months (18 months for late entrants) for conditions treated or diagnosed in the prior 6 months. Moreover, group health plans must credit prior public or private insurance coverage toward preexisting condition periods, provided the coverage has not lapsed for more than 63 days (group-to-group portability).

HIPAA prohibits all group health plans (insured or self-insured) from denying coverage or charging higher prices based on health status. It requires that health insurance companies guarantee renewal of all group plans, to both large and small groups. It also requires insurance companies that offer health coverage in the small group market (2-50 employees) to make all products available to all applicants (guaranteed issue). All small groups must be accepted and all eligible members of a group must be accepted.

Individual Market Reforms. Unless the state implements an "acceptable alternative mechanism," insurers in the individual market are required to guarantee issue and apply no preexisting condition exclusions to individuals who had 18 months of continuous coverage, the most recent under a group plan, within 63 days of obtaining new coverage (group-to-individual portability). The individual also must have exhausted all other sources of coverage (including COBRA coverage, other group coverage, Medicare or Medicaid). Individual health insurers must guarantee issue at least two different individual insurance products. These products may be either a) the two highest volume products, or b) a low and high policy option that represent individual policies offered by the insurer in the state that are subsidized, risk-adjusted, or covered by a risk-adjustment mechanism. The guaranteed renewal provisions of the law for plans issued to groups also apply to plans in the individual market.

State Implementation. HIPAA provides for substantial state flexibility in implementing the intent of the individual market reforms to ensure that those who leave a group health insurance plan are able to maintain coverage and are not denied individual insurance if that is the only coverage option available. States may adopt an "acceptable alternative mechanism" to the federal provisions outlined above. To meet the requirements of an "acceptable alternative mechanism", a state program must provide all eligible individuals with a choice of coverage, including one providing comprehensive benefits, and not impose pre-existing condition exclusions on them. For example, 22 states will use high risk pools to meet the requirements, in most cases expanding on an existing risk pool (IHPS, 1998). Other state alternative programs include mandatory group conversion policies, or guaranteed issue of designated individual policies.

Effects of Hipaa’s Group Market Provisions

HIPPA’s group market provisions were designed to eliminate insurer practices that discriminate against employer groups and their members on the basis of health status, industry, or other characteristics. Redlining (that is, excluding specific types of businesses from coverage), denying coverage to employees with poor health or to their entire group, and excluding coverage for pre-existing conditions are documented practices that can pose barriers to employers (especially small employers) that wish to offer health insurance as a benefit (McLaughlin and Zellers, 1994; Zellers, McLaughlin, and Frick, 1992). HIPPA eliminates the first two practices in the small group market, and limits the exclusion on pre-existing conditions for all group plans. Proponents of these reforms believe that they will expand coverage; critics argue that they will lead to increases in premiums that might in turn lower access to coverage (Atchinson and Fox, 1997).

The research evidence on the effect of guaranteed issue, guaranteed renewal, guaranteed coverage for individuals, and pre-existing condition limits in group plans is scarce. But it suggests that these provisions have only small effects on premiums and coverage. Moreover, many states had already taken steps to eliminate discriminatory carrier practices and have standards that meet or surpass HIPAA standards. Thus, HIPAA imposes few new requirements in the group market. We review this evidence below.

Effects on Access

Many states (38) had some form of guaranteed issue legislation for small groups at the time HIPAA was enacted (Litow and McClelland, 1997). Of these, 16 require guaranteed issue of all insurance products and 22 have statutory plans that are guaranteed issue. In about 12 of these states, however, the state law does not encompass all small groups covered by HIPAA.

In the 24 states that do not guarantee issue insurance products to small groups or have guaranteed issue legislation that does not encompass all groups from 2 to 50, HIPAA may result in changes in the number of firms that offer health insurance. The research evidence on the effect of this type of reform is very limited because most of the states’ small group reform legislation is relatively recent. One empirical study using state data from 1989-1993 suggests that guaranteed issue legislation may result in an increase in the number of firms offering insurance (Jensen et al., 1995). This study’s estimate implies about a 10 percentage point increase in the number of small firms offering insurance in states in which availability is guaranteed, holding constant other regulations and market characteristics. Another recent empirical study of the effect of insurance market reforms on states’ uninsured rates found that guaranteed issue, when part of a package of small group reforms including portability and limits on pre-existing conditions, reduces the uninsured rate (Marsteller et al., 1998). However, this conclusion is likely to vary from state to state depending on other state regulations concerning the health insurance market. HIPAA for example, guarantees access to insurance for all small groups, but it does not guarantee affordability. Whether guaranteed access leads to additional group insurance purchases is likely to depend on whether and what type of rating restrictions the state insurance legislation places on premiums that insurers can charge small groups. For example, Marsteller and her colleagues (1998) suggest that there are no changes in the uninsured rate when rating restrictions are combined with the reforms including guaranteed issue.

Most states (30) have legislation for small group plans that meets or surpasses the HIPAA limits on pre-existing conditions periods that can be imposed (Ladenheim, 1996). Many of these state regulations also credit prior coverage in determining these periods (GAO, 1995). However, the HIPAA limits on pre-existing conditions and group-to-group portability would also apply to large businesses, which are typically not subject to state regulations, and to self-funded plans, which are exempt from state regulation. The GAO (1995) estimates that about 12 million employees and almost 7 million dependents of employees may benefit—in terms of reduced or eliminated waiting period—from the HIPAA group-to-group portability provisions (GAO, 1995).

While potentially benefiting many current plan enrollees, the provisions are unlikely to lead to an increase in the number of firms offering insurance. Jensen and her colleagues (1995) found no evidence that restricting pre-existing condition waiting periods increased offer rates among small employers. Similarly, the results from the Urban Institute study (Marsteller et al., 1998) found a small, and only marginally significant, effect of limits on pre-existing conditions and portability if guaranteed issue is not part of the package. In larger firms, the HIPAA provisions would benefit only a fraction of employees and so have limited influence on the group decision, assuming the preferences of the median worker dominate (Goldstein and Pauly, 1976). Moreover, offer rates in large firms (those with 50 or more employees) currently exceed 90 percent (Cantor, Long, and Marquis, 1995).

While we believe it is unlikely that the pre-existing condition limits and portability will increase the number of firms offering insurance, the absence of waiting periods may induce some persons to enroll in group plans that they otherwise would turn down. Research indicates that individuals are more likely to purchase insurance when the expected benefit of the plan is greater (see for example, Marquis and Holmer, 1996). This increase, however, is also expected to be small, because about 90 percent of workers offered group insurance enroll in the plan (Long and Marquis, 1993; Cooper and Schone, 1997).

Portability may also benefit individuals who wish to change jobs but who currently stay in their job because of fear of losing insurance. We examine this benefit of the HIPAA reforms in more detail below.

The non-discrimination provisions also are unlikely to substantially affect firm offer rates or employee enrollments. Health insurance offer rates by small employers are not significantly different in states that have limits on the exclusions allowed under pre-existing condition clauses nor are they significantly different in those that have laws prohibiting occupational exclusions from coverage (Jensen, Morrisey, and Morlock, 1995). Medical underwriting, the practice of excluding workers from coverage if they have specific preexisting conditions, occurred in both large and small employer group plans, though it was more common in the latter. However, it was rarely practiced; fewer than 5 percent of firms report that specific individuals are excluded from coverage (Cantor, Long, and Marquis, 1995).

Finally, guaranteed renewal is not an effective guarantee of access to coverage without limits on premium increases (Blumberg and Nichols, 1996). HIPAA does not provide for affordable coverage; it only ensures the continued right to purchase a plan.

Several state-specific experiences after adopting a package of regulations similar to the HIPAA provisions also suggest that there will be at most modest access effects, and that other market factors and regulatory conditions may influence outcomes. California enacted a package of reforms, effective in 1993, for firms with 3-50 employees that included guaranteed issue, guaranteed renewal, limits on pre-existing conditions, and restrictions on premium variability. In the post-reform period, about 10 percent more firms with 3-24 employees offered insurance than in the pre-reform period (Buchmueller and Jensen, 1997). No change in offer rates were found among firms with 25-50 employees, however. Minnesota’s experience is similar to California’s. Minnesota also enacted a package of reforms for the small group market that included guaranteed issue and renewal, and limits on pre-existing condition exclusions. After reform, the number of enrollees in the small group market increased by more than 8-12 percent (Nichols et al., 1997).

However, Buchmueller and Jensen (1997) did not find increases in offer rates among small firms in a group of states that adopted reforms similar to California’s during the same period. They concluded that intense competition in the California health market that exerted downward pressure on prices may have provided an environment in which the access reforms were successful in providing a small expansion in coverage. Observers of Minnesota’s market draw similar conclusions (Nichols et al., 1997). Moreover, Minnesota’s reforms included a provision prohibiting individuals from purchasing individual policies on their own if they were eligible for group coverage. It is believed that some of the increase in the group market is a move from the individual market (IHPS, 1995).

Effects on Premiums

The HIPAA group provisions ensure access to coverage for groups and individuals in those groups, but also place some limits on insurers ability to segment risks. Insurers cannot charge higher prices to high risk individuals in a group; they cannot exclude entire groups from the risk pool. Risk segmentation results in lower premiums for the healthy than the sick; greater pooling of risks may result in adverse selection and increasing premiums that will cause the healthy to drop coverage. However, HIPAA does not place any restrictions on the manner in which insurers can set premiums, and so insurers retain substantial ability to segment the market (Blumberg and Nichols, 1996). Thus, the HIPAA provisions are unlikely to result in substantial premium increases for those individuals currently purchasing insurance. The Health Insurance Association of America estimates that guaranteed issue provisions have only a small impact on premiums—2 to 4 percent (Thompson, 1992). The empirical evidence supports this. Jensen, Morrisey, and Morlock (1995) found no evidence that guaranteed issue, pre-existing condition limits, or laws limiting exclusions on the basis of condition or occupation resulted in premium increases. Moreover, an analysis of claims experience from a large insurer specializing in the small group market found no difference in average claims for groups that were guaranteed issue and those that were medically screened (Glazner et al., 1995)

However, all states that have enacted guaranteed issue provisions have also adopted some form of rating restrictions for small groups, and observers believe that other states are likely to adopt rating reforms for small groups as they modify their laws to meet the guaranteed issue provision of HIPAA (Litow and McClelland, 1997). Rating reforms are intended to enlarge the risk pool on which premiums for small employers are based, thus making insurance more affordable for high risk groups and encouraging them to purchase insurance. On the other hand, small employers that have a good risk profile (for example, predominantly young workers) may pay higher rates after reforms are enacted because insurers will be limited in the extent to which they can take into account this favorable profile. The effect of rating reforms on premiums will therefore vary from company to company depending on the characteristics of the group.

On average, premiums may rise as well, as higher risk groups are attracted into the market and the lower risk groups discouraged from purchase. Thus, rating reforms in combination with other market reforms may increase the premiums for small businesses that purchase insurance, and lead some of them to drop coverage. There are other forces, however, which might lead premiums to fall with a change in market regulations and rate restrictions. Reforms may encourage greater price competition because insurers are limited in the extent to which they can compete on the basis of risk selection (Buchmueller and Jensen, 1997). Reforms may also improve information and lead to greater shopping.

The overall effect on premiums and access is likely to depend on how stringent the rating reforms are. Under full community rating, the insurer can vary premiums only by family type, geographic location, and benefits design. Only New York currently requires full community rating. Modified community rating reforms (or community rating by class), which allow insurers to vary premiums by a limited number of characteristics of the enrollees (such as age), are more common but do not permit health status or prior claims experience to be factored into the pricing. Some states limit the variation in premiums attributable to these factors. Other states have enacted rating reforms that permit use of health status in setting premiums, but limit the differentials in premiums allowed due to health status differences.

The American Academy of Actuaries (1993) conducted simulation analyses that suggest that average premiums for small businesses would rise by only about 2 percent with modified community rating and by about 5 percent under full community rating. There is little empirical evidence on the effects of rating reforms from states that have enacted them. What little evidence exists is consistent with the analysis of the Academy suggesting that rating reforms result in only modest increases in average premiums. For example, premiums in New York in the small group market rose about 5 percent during the first year that community rating was in effect (Chollet and Paul, 1994). Minnesota, which adopted restrictions on premium rate variations, also experienced premium rate increases of less than 5 percent in the year after it enacted these rating reforms in combination with a number of other small group reforms (Blumberg and Nichols, 1996). In California, premiums fell slightly after the small group reform legislation (Buchmueller and Jensen, 1997). Again analysts attribute the California experience to the highly competitive nature of the market.

Average premium changes of this magnitude are unlikely to lead to significant changes in the number of employers offering insurance. The published research literature suggests that a 5 percent increase in premiums would lead to a reduction of between 10 to 15 percent in the number of employers offering health insurance (Leibowitz and Chernew, 1992; Jensen and Gabel, 1994; Morrisey, Jensen and Morlock, 1994). However, this literature uses proxy measures of the price faced by those who do not currently offer insurance to estimate the response. Experimental evidence suggests that the response is much lower. A number of demonstration studies of the effect of subsidies to small groups on insurance purchase decisions indicate that premium changes up to 50 percent lead to changes of less than 10 percent in the number of firms offering insurance (Thorpe, et al., 1992; Helms et al., 1992). Based on these experimental results, we would expect only about a 1 percent decrease in the number of firms offering insurance in states that adopt a comprehensive new package of small group reforms to meet the HIPAA requirements.

Even if the average price does not change, states that adopt rating reforms along with other group regulatory changes may see substantial changes in the prices faced by individual firms. For example, the American Academy of Actuaries (1993) estimates suggest that about 20 percent of firms would realize premium increases of 20 percent or greater and 20 percent of firms would realize premium decreases of 20 percent or greater under modified community rating. This, in turn, might lead to changes in the firms that do and do not offer insurance, even if the overall numbers remain steady. Over time, however, rating reforms lead to greater stability in premiums faced by individual firms and so on offer decisions (Buchanan and Marquis, 1997).

HIPAA imposes new requirements that may increase the administrative costs of insurance. HIPAA requires employers to provide certification of creditable coverage to employees and their dependents as they leave a group plan; in subsequent contracts, employers are likely to place this responsibility on insurers (Finlay, 1996). Insurers view this as costly and unnecessary, favoring certification on demand. They note that state portability rules have been successfully implemented without global certification requirements (GAO, 1998). The necessity of certifying periods of coverage for spouses and dependents may pose special problems and require costly new record keeping systems. Employers and insurers currently do not have records to track this coverage (Humo, 1997). In addition, there may be other new costs to employers or insurers as their agents in oversight and adherence to the regulations concerning waivers of coverage and timely enrollment of HIPAA eligibles (Deru, 1997).

Some writers also suggest that carriers will adopt some new practices in response to the guaranteed acceptance provisions of HIPPA that may raise administrative costs. They observe that insurers are more closely assessing the risk of an entire group using medical questionnaires for all employees, even if not immediately eligible for coverage, to identify the potential risk of the group should these employees later seek coverage (Deru, 1997, Grosjean, 1997). This practice potentially increases the insurer’s risk assessment costs. Carriers are also more strictly enforcing contract guidelines concerning employee participation and employer contributions (Deru, 1997; Grosjean, 1997), which also raises administrative costs. With guaranteed issue, it is especially important to spread the risk as much as possible, which requires enrolling as many people in the group as possible. Although these new administrative costs are important to the groups affected by them, they are unlikely to lead to significant changes in the overall price of insurance.

Finally, HIPPA’s non-discrimination provisions prohibit carriers from raising rates for particular individuals in a group because of health. This may lead to increases in the price charged for all members of the group. However, guaranteed renewal provisions adopted in 43 states place some limits on these price increases (Landenheim, 1996).

Other Effects

Employment Effects

Some believe the main benefit of the HIPAA group market reforms is that it relieves individuals from worry about gaps in coverage as they change jobs (Clark, 1996). And many believe that such worry now impedes people from leaving current jobs—referred to as "job-lock"—and leads to an inefficient distribution of labor. The empirical evidence on the importance of job-lock is mixed, however. A number of studies have found evidence of lower job-turnover as the value of one’s own employer-provided insurance increases (Madrian, 1994; Cooper and Monheit, 1993; Buchmueller and Valetta, 1996). These studies suggest that insurance reduces turnover by about 25 percent. Gruber and Madrian examine turnover in states that do and do not have continuation of coverage mandates, and conclude that one year of continued benefits increases turnover by about 10 percent among those with employer health insurance. In contrast, several other investigators have found little evidence to support job-lock (Holtz-Eakin, 1994; Kapur, 1998).

The effects of HIPAA on job mobility and the distribution of labor are likely to be minor, however, even if job-lock exists. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires that firms with 20 or more employees permit employees and their dependents to continue to purchase the company’s health insurance for up to 18 months after their job is terminated. Although employees must pay the premium for COBRA coverage, this coverage should have substantially eliminated job-lock for most workers and their dependents in firms of 20 or more, especially if job-lock stems from short term medical considerations such as pregnancy rather than longer horizon issues about being medically underwritten. But in addition, 40 states already have adopted group-to-group portability regulations for small groups requiring that periods of coverage under a previous employer health insurance plan be credited toward waiting periods for coverage under a new employer’s plan (GAO, 1995).

Benefit Design

HIPAA forbids discrimination based on health status. There is some uncertainty about the implications of this rule for plan benefit design. Some observers believe that the rule does not prohibit exclusions or caps on coverage of particular treatments, nor different copayments or deductibles for specific conditions, nor mandatory case management for specific health problems (Barker and O’Brien, 1997; Schwappach and Sipes-Early, 1996). However, certain wellness programs may need to be redesigned, especially those that appear to impose a premium surcharge on those in poorer health (Barker and O’Brien, 1997). But, ambiguities in the law, litigation, and subsequent case law may lead to further constraints on benefit design (Barker and O’Brien, 1997).

There are also some early indications that some issuers may be using benefit design to circumvent HIPAA’s restrictions on pre-existing condition limits for those leaving a job or losing group coverage. There is anecdotal evidence that some insurers are establishing waiting periods for coverage for certain costly conditions from all enrollees’ coverage, which effectively precludes pre-existing conditions from coverage (GAO, 1998).

Effects of Group-to-Individual Portability Provision

The largest controversy surrounding HIPAA relates to the probable effects of the individual insurance market reforms. Critics of these provisions argue that they would lead to steep price increases in the individual market and an eventual erosion of the individual market. Proponents believe they will guarantee continued access to insurance at little cost. Below we discuss estimates of the effects of the group-to-individual portability provisions and lessons that can be learned from state experiences with individual market reforms. We organize the discussion around two implementation mechanisms: guaranteed issue of some or all products and high risk pools.

Effects of Guaranteed Issue

Access and Premiums

Widely discrepant estimates of the effects of the group-to-individual portability provisions of HIPAA on access and premiums in the individual market have been offered. The Health Insurance Association of America, for example, estimated that the HIPAA individual market provisions would lead about 1.6 million new individuals to purchase individual insurance each year (HIAA, 1995). In the long run, this would lead to an increase of 28 percent in the number of covered lives in the individual market. These new entrants are assumed to have higher spending that those currently insured, otherwise they would likely participate in the current market. Assuming spending levels that are twice that of the currently insured, HIAA estimates that prices in the individual market would rise by about 25 percent (HIAA, 1995). This price increase in turn might discourage some who currently purchase in the individual market from doing so. As healthier individuals leave the market, premiums would rise further potentially leading to a collapse in the market.

However, others have concluded the effects would be much smaller. For example, analysis at RAND (Klerman, 1996) indicates that the HIAA estimates substantially overestimate the number of individuals who exhaust their COBRA benefits and thus become eligible under the HIPAA provisions. The RAND analysis also suggests that the HIAA estimates overstate the number of individuals leaving insured jobs at smaller employers who are eligible for HIPAA because they assume that all have 18 months of creditable coverage. The RAND analysis suggests that the increase in covered lives in the individual market would be only about 6 percent, and premiums would rise by only about 6 percent.

The estimates are also sensitive to assumptions about the health risk of the newly eligible population. Evidence from states that have continuation of coverage requirements indicates that claims cost for those who enroll in such coverage is about 150 percent of the average claims cost of members of the group (Gruber, 1994). Combining this estimate of the cost of the new entrants in the individual market with the RAND estimates of the number of entrants, premiums are estimated to rise by only 2 percent (Klerman, 1996).

Moreover, the implications of these estimates of premium increases depend upon state’s actions regarding rate regulation in the individual market. Insurance companies worry that states will impose restrictive rate regulation on the individual market as they pass new legislation to conform to HIPAA (Findlay, 1997). With restrictive rate regulation, those currently insured in the individual market would see their premiums increased as the new, and less healthy, HIPAA eligible individuals enroll. In response, some of those currently insured might leave the market. Because the healthy would be more likely to insure, this would lead to further increases in premiums and flight from the market by the healthier. Some fear that this would then lead carriers to eliminate individual coverage from their portfolios (Deru, 1997: Litow and McClelland, 1997).

However, to date, few states have adopted new rate regulation since HIPAA was enacted. Absent rate regulation, carriers are likely to segment the conversion policies and set separate, and higher, rates for these policies. This may lead to prohibitively high premiums for these policies and discourage the new HIPAA eligibles from purchasing coverage . Early results from the states that adopted the Federal fallback suggest that this, in fact, may be happening in some states (GAO, 1998). However, under this scenario, premiums for the currently insured would not be expected to increase.

The experience in states that had adopted guaranteed issue and rating reforms prior to HIPAA provides some confirmation of fears that imposing very strict pooling in this market too quickly might harm the individual market. The Urban Institute analysis of the effect of insurance market reforms on uninsured rates using the Current Population Survey (CPS), found some evidence that guaranteed issue and rating restriction in the individual market results in an increase in the uninsured rate (Marteller et al., 1998). However, this result is based on observations in a limited number of states. The Galen Institute (Schriver and Arnett, 1998) also used CPS data to compare uninsured rates in 16 states they classified as having stringent individual and group market reforms with other states. Uninsured rates in the former increased by 2 percentage points more than in other states between 1990 and 1996, leading the authors to conclude that the reforms had unintended effects. However, there was considerable variability among the 16 states in the magnitude of the increase, and overall uninsured rates in the tightly regulated states remained below those in the other states. Turning to some state specific experiences, premiums for individual coverage in Kentucky rose more than 60 percent following the enactment of guaranteed issue and community rating for the individual market, driving healthier insured individuals out of the market (Page, 1997a). Carriers faced losses when left with the sicker individuals, and 40 companies left the market. Similar problems were encountered in New Hampshire, leading the largest individual insurer in the state to withdraw (Page, 1997b). Washington also saw a number of insurers leave the state following individual insurance market reforms, and remaining insurers are reported to be incurring large losses (Chollet and Kirk, 1998). New York also saw a reduction in the number of individual policies following strict rating reforms and anecdotal evidence suggests that it was younger, healthier individuals who left the market (Chollet and Paul, 1994; IHPS, 1995). However, few commercial insurers left the New York market, despite threats to do so (IHPS, 1995). Moreover, it is difficult to attribute the changes in the individual market in New York to community rating because Blue Cross and Blue Shield, the dominant carrier prior to the reforms, practiced community rating prior to the New York legislation (Chollet and Paul, 1994).

Other states have implemented guaranteed issue along with rating bands in the individual market; there appear to be less disruptive effects when insurers are not required to adopt complete pooling. While there is little hard data, insurers in Vermont report growth in their business and little adverse selection (Chollet and Paul, 1994). Few insurers left the state following the reforms. Minnesota, which also adopted rating bands rather than strict community rating, reports some fall in participation in the individual market (IHPS, 1995). But as noted earlier, some of this is believed to be a movement to the group market. Some carriers have left the market, but the impact was limited because they held a small market share (IHPS, 1995).

In sum, the effect on both access and premiums in the individual market will depend on how states implement the portability provisions of HIPAA and on how they regulate the market—especially, whether and how they restrict premiums for individual insurance coverage. Ten states already had guaranteed issue and portability in the individual market, and all of these had some rate regulation (GAO, 1996). HIPAA would not be expected to have additional effects in these markets. Twenty-two states and the District of Columbia have introduced risk pools or modified existing risk pools to meet the HIPAA requirements, and so HIPAA will not directly effect premiums or coverage in the individual market. Furthermore, in the remaining states, the effect of the legislation on premiums for current policies will depend on whether the state has or introduces rate regulation, since insurers would be expected to price policies to the new entrants separately if free to do so.

Other Effects

Employment. The availability of post-retirement health insurance is a significant factor in the decision to retire. Employer-provided retirement health insurance reduces the age at retirement by 6 months to 2 years (Madrian, 1994; Blau and Gilleskie, 1997). In addition, the probability of retirement is greater among older workers who have access to mandated continuation coverage—either COBRA or state mandated continuation benefits (Gruber and Madrian, 1995). Thus the group-to-individual portability provisions of HIPAA may affect the supply of labor. The magnitude of this effect is not known, but will likely vary depending on the type of insurance products that are available and state regulations to control their price.

Some have also suggested that portability will enhance entrepreneurial activity, and that the employment-based health insurance system discourages individuals from leaving firms to start their own business. While there is limited empirical work, the evidence does not support this hypothesis (Holtz-Eakin, Penrod, and Rosen 1996).

Benefit Design. The new legislation may also affect the characteristics of products available in the market if they affect carriers’ decisions to participate in the market or alter product lines. Plan design can be a technique to segment the market; for example, plans with high cost sharing are likely to be more attractive to healthier individuals than to sicker individuals. There is some evidence that insurers have turned to plan design as a competitive response in states that have adopted community rating (IHPS, 1995). Plan design changes may also be used to hold down premium increases (IHPS, 1995). These responses will vary depending on whether the state regulation imposes strict pooling through rating reforms.

Administrative Costs. Several states failed to pass conforming legislation and the federal government will be responsible for oversight of HIPAA implementation. The state, however, will continue to enforce existing law. This may lead to administrative duplication and added administrative costs (Aston, 1997a).

Effects of Risk Pools

Twenty-two states and the District of Columbia have adopted state risk pools as an alternative mechanism. Many of these risk pools were in operation prior to HIPAA, though some characteristics of the pools have to be modified to meet the group-to-individual portability provisions. For example, eligibility needs to be extended to all HIPAA eligibles and waiting periods for pre-existing conditions need to be eliminated for those with 18 months of creditable prior coverage. Some pools also have to expand the choices available to serve as an alternative mechanism (Aston, 1997b).

State high risk pools for individuals who are unable to obtain insurance have been in existence since Connecticut and Minnesota introduced the first pools in 1976 (Bovberg and Koller, 1986). The experience of these pools suggests that they are unlikely to attract large numbers of new HIPAA individuals. We summarize the evidence on the effects of these pools on access below, and discuss some other potential effects for states that introduce new pools.

Access and Premiums

Existing high risk pools are a form of guaranteed issue to individuals (Blumberg and Nichols, 1996). They provide a source of coverage for individuals who wish to purchase individual insurance and are willing to pay for it, but are denied coverage or offered coverage that is prohibitively expensive or restrictive. However, the evidence suggests that most of these pools cover only a small share of the target population. In 25 of the states with pools, fewer than 5 percent of persons with individual insurance are enrolled in the pool (Gao, 1996). Assuming the uninsurable population is about 1 percent of the under 65 population in a state—a standard metric (Laudicina, 1988)—1994 enrollment data for the 25 state pools that were operational indicate that most of the pools reach only about 5 to 25 percent of the target population (enrollment data from Stearns et al., 1997). In contrast, about 40 to 50 percent of workers who do not have access to group coverage purchase individual insurance (Marquis and Long, 1995; Marquis and Buchanan, 1992). So, assuming preferences among workers lacking insurance are similar to preferences of persons unable to purchase individual insurance, the low rate of participation in risk pools suggests that there remain barriers to enrollment in risk pools.

The premiums in risk pools appear to be at least one such barrier. Table 1 shows premiums and enrollments in 8 risk pools studied by Stearns and Mroz (1995). Overall, enrollments appear to be inversely related to premium levels.

Table 1. Premiums and Enrollments in Eight State High Risk Pools



Premium, 1991a

Enrollment/Target Populationb


























Source: Stearns et al., 1997; Stearns and Mroz, 1995.

a. Quarterly premium for 50 year old male.

b Target set at 1 percent of the uninsured population under age 65

c 1992 premium

d 1990 premium

e 1989 premium

By their very nature, risk pools start out with adverse selection; persons who are able to purchase individual insurance at a lower rate than in the pool would choose to do so. The premiums in risk pools are subsidized—they are typically capped at a fixed percentage (usually about 150) of rates charged by private insurers for standard risks. Nonetheless, Table 1 suggests that high premiums in many plans are a barrier to participation and more rigorous analysis of disenrollments from risk plans also shows that price is a factor in participation (Stearns and Mroz, 1995). Thus, unless states subsidize risk pools more heavily than in the past or attract a broader risk pool to lower premiums, it is unlikely that many new HIPAA eligibles will enroll in such plans. Most risk pools allowed limited pre-existing condition exclusions, which will have to be waived for HIPAA eligibles if the risk pool is to serve as an alternative mechanism. This may increase the pool’s attractiveness to some individuals. However, in states with an existing risk pool, most HIPAA eligibles were previously eligible to participate in the pool, or were able to buy private insurance at a lower price than offered by the pool but were unwilling to pay the price. The experience of existing risk pools suggests that new pools will attract only a small share of the target population unless prices are lower.

States with existing risk pools will have to modify eligibility criteria for the pool to serve as an alternative mechanism. An unanswered question is whether broader eligibility rules will serve to attract a broader risk pool, thereby keeping premiums down and so increasing enrollments among those who might otherwise go uninsured. Without premium restrictions, private insurers will offer low prices to better risks, and so risk pools are likely to continue to attract the less healthy. However, risk pools have lower administrative costs than typical private insurance plans (Stearns et al., 1997), which may serve as a partial offset to private insurers’ ability to attract lower risks through lower premiums. The state risk pool in Connecticut provides an illustration of the experience of an open risk pool. Historically, the Connecticut risk pool was open to any resident. Yet it appeared to attract a less healthy population. The premiums in the pool were as high as or higher than premiums in other states, though it did not have lower loss ratios (Stearns et al., 1997 and Stearns and Mroz, 1995). In addition, the Connecticut pool attracted a disproportionate number of persons with severe mental health problems (Stearns and Slifkin, 1995). Thus, even with broad eligibility requirements, state risk pools appear to experience adverse selection. Premiums are thus likely to remain high, and so enrollments are likely to remain low.

Other Effects

Risk pool premiums are not designed to fully cover premium and administrative costs and so the pools realize losses. The most common way to finance these is by an assessment on insurers (Stearns et al., 1997; Sneider, 1991; Bell, 1997). Most of this cost is then passed on to businesses and individuals in the form of higher prices for insurance (Bell, 1997; Sneider, 1991). New assessments on commercial carriers to finance risk pools may also lead some of them to withdraw from the market (Blumberg and Nichols, 1996).

Some view pools as a major loophole in HIPAA (Lieberman, 1997). Critics point to their insolvency. Some also argue that they constrain choice, which was one of the intentions of the act (Atchinson and Fox, 1997). Some also fear that many self-employed will find their premiums raised because they will be forced to join risk pools of less healthy individuals (Atchinson and Fox, 1997).


Most states had adopted small group market reforms prior to HIPAA that met or exceeded the provisions of the HIPAA legislation. Thus, we expect limited effects nationally on access, coverage, and premiums in the group market. There may be greater effects in the few states that had not adopted market reforms. But even in these states, the literature suggests that the effects of guaranteed coverage are likely to be small without price reforms. The implication for evaluation design is to focus on selected states and populations within them that are most likely to benefit from the reform, such as persons in high risk industries or occupations and employers with a larger share of older workers. The key outcomes to monitor include the availability of group coverage, enrollment in group coverage, the cost of group coverage, and job mobility.

Evaluation requires a comparison group as well to control for secular change. This is especially difficult because we would like to compare what would have happened over time without reforms to the changes that we observe in states in which the HIPPA provisions lead to new group reforms. We cannot observe the former, but must rely on change over time in states that had implemented reforms prior to the HIPAA legislation as control groups. However, reforms are likely to affect premium growth and the stability of the market, and thus the change we observe in reform states is only an imperfect proxy for the control measure that we would like to have.

While the individual market reform provisions of HIPAA were much more controversial than the group market reforms, the evidence also suggests that these reforms are likely to have limited effect on the number of uninsured and the premiums they would have to pay for care. Many states already have high risk pools that will, with minor changes, meet the group-to-individual portability provisions of the law. A number of other states already had individual market reforms that provide portability. Again, careful selection of states and subpopulations is indicated for the evaluation. For example, one would want to include states that modified existing risk pools, states that have adopted new risk pools, states with new guaranteed issue provisions, and states that had prior individual market reforms. Focusing on access, coverage, and premiums for high risk individuals leaving the group market (e.g., early retirees, those in poor or fair health) would increase the likelihood of finding possible effects.

It is not surprising that we expect limited quantifiable effects. HIPAA was targeted to address the most important insurance abuses and not to ensure affordable coverage (Lieberman, 1997). But, there are many implementation issues and problems facing employers, insurers, and regulators that also need to be addressed in the evaluation. One observer notes that HIPAA "may appear modest in scope to public policy makers, but it is anything but simple for the private sector" (Findlay, 1997). Monitoring employer and insurer efforts to document creditable coverage, insurer benefit design practices and the characteristics of products available to HIPAA eligibles, and state practices to insure compliance with HIPAA requirements, are all important issues that will need to be addressed as a part of a qualitative assessment of HIPAA.


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Part III. Data Sources for an Evaluation of Hipaa

Ellen R. Harrison, Stephen H. Long, M. Susan Marquis, and Jennifer S. Sloan


The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was designed to secure access to coverage for all employer groups and individuals that currently have health insurance. HIPAA requires that all group plans, including self-insured group plans, limit pre-existing condition exclusions and prohibit exclusion of individuals from a group health plan based on health status. In addition, health insurance issuers are required to guarantee renewability of coverage for all groups and guarantee issue all products for small groups. HIPAA also ensures that individuals who leave employment are able to maintain health insurance coverage. States must adopt an acceptable mechanism to provide a choice of health insurance plans to all individuals with 18 months of continuous coverage, the most recent under a group plan, and apply no exclusions on preexisting conditions, or require all insurers in the individual market to guarantee issue plans with no preexisting conditions exclusions to this population.

Thus, HIPAA ensures access to insurance for some employer groups and individuals who previously were unable to purchase health insurance or unable to purchase adequate coverage. What effect this will have on the number of uninsured or the prices people pay for insurance is, however, a matter of some uncertainty. Moreover, variability among states in insurance legislation just prior to HIPAA, and the flexibility that states are given to implement the individual market reforms suggests that the answer to these questions will vary from state to state.

DHHS has been mandated to report to the Congress on the effects of HIPAA. For Part II of this report, we conducted a literature review to identify important effects that DHHS will want to study to carry out that responsibility. The effects include changes in: health insurance coverage in the individual and group market, premiums in each market, carrier participation in the markets, health insurance product design, labor force participation (especially of older workers), and job mobility.

To monitor these changes will require information before and after HIPPA reforms. Moreover, because HIPPA was designed to ensure access to coverage for those who currently have difficulty obtaining coverage, DHHS will want to give specific focus to subpopulations—especially older workers, individuals in poor health, individuals in risky occupations, and employers considered to have high risk populations (older workers, certain industries). The evaluation will also require information on specific public policies in place prior to HIPAA. Many states had adopted reforms in the group and individual market prior to HIPAA; in these states the legislation would be expected to have less effect than in states which had previously imposed few restrictions on the group or individual market. This paper reviews databases that might provide the information required for the HIPAA evaluation.

We focus on databases that are national in scope or that cover a substantial number of states. There are some state specific sources of information that might be useful in evaluating state specific experiences. For example, Wisconsin, Oregon, Washington, and Arkansas are among states that have conducted population surveys to measure the number of uninsured. Some states—including Pennsylvania, Kentucky and California—have collected and tracked enrollment and premiums in the group and individual market. We have not included abstracts of these data sources because they often are not on-going efforts and hence will not provide a post-measure for evaluation. Furthermore, our empirical evaluation design focuses on examining changes in outcomes in groups of states that have similar pre- and post-reform environments. Measuring change in a single state may confound HIPAA and state-specific factors, whereas site-specific effects are averaged out over observations from multiple states. Thus, our database review emphasizes sources of information that are broader than a single state.


We examined four types of databases:

  1. Population surveys—as sources of information on insurance coverage of the population, premiums people pay for insurance, labor force participation, job mobility.
  2. Employer surveys—as sources of information on firms that offer insurance, group coverage of employees, premiums paid for group insurance, benefit design (especially pre-existing condition limits).
  3. Insurer databases—as sources of information on coverage in the group and individual market, premiums charged, carrier participation in the market, benefit design.
  4. Policy databases—as a sources of information on state market regulations prior to HIPAA and state HIPAA implementation strategies.

An abstract of each data source identified in each of these areas is provided in the Appendix. Each source is described in a separate table that provides information about the timing of the data collection, the scope of data collection, coverage, key content relevant to a HIPAA evaluation, cost and availability to outside researchers, and a point of contact for further information. The information was compiled by us from written materials about the sources and conversations with technical experts involved in the data collection. Below we briefly describe what we looked for in reviewing each type of data and discuss the strengths and weaknesses of the sources for an evaluation of HIPAA.

Population Surveys

We identified 8 population surveys that are national in scope or that covered populations in multiple states and that collected information about health insurance coverage. They are:

  • Current Population Survey (CPS)
  • Survey of Income and Program Participation (SIPP)
  • National Health Interview Survey (NHIS)
  • Medical Expenditure Panel Survey, Household Component (MEPS-HC)
  • Community Tracking Study (CTS)
  • Behavioral Risk Factor Surveillance System (BRFSS)
  • National Survey of America’s Families
  • RWJF 1993 Family Health Insurance Survey (RWJF)

Six of these surveys (all but the RWJF and National Survey of America’s Families) are continuing surveys and provide pre- and post- HIPAA measurement. The National Survey of America’s Families was conducted prior to HIPAA, and a follow-up is planned for 1999 or 2000. The RWJF 1993 Family Survey provides baseline information for 10 states, but no post-HIPAA observations.

As noted above, the effects of HIPAA are likely to vary from state to state, therefore, one criterion in our review of these databases was whether the data support state level estimates of population characteristics. All of the surveys permit some state level analyses. The CPS, SIPP, MEPS, and NHIS provide estimates for the largest states and selected other states. The CTS does not provide state-specific estimates, but it allows estimates for communities in 12 different states. The National Survey of America’s Families and the RWJF 1993 Family Survey were both surveys of families in selected states, and provide estimates for those states. The BFRSS is the only survey that provides estimates for all states.

Each of the population surveys was examined for coverage of 7 key outcomes to be studied in the evaluation:

  • Insurance coverage and source
  • Change in insurance status
  • Enrollment in a state high risk pool
  • Offered employer based health insurance
  • Premiums paid for health insurance
  • Labor force status
  • Job mobility

All of the surveys provide information about current insurance coverage (since this was a criterion for inclusion in our list) and whether coverage is under a group plan or through an individual policy. They differ, however, in the detail collected about group coverage. The MEPS, SIPP, and RWJF 1993 Family Survey differentiate coverage through a current employer, from COBRA or continuation coverage; the other surveys do not. The MEPS, CTS, and RWJF 1993 Family Survey also determine whether an employed individual works for a business that offers group insurance, even if he/she is not enrolled in the plan. All of the surveys also provide information about change in insurance status over the past year. However, none of the surveys identifies coverage that is obtained through a state high risk pool.

Few population based surveys endeavor to collect premium information. The NHIS, the CTS, and the 1993 RWJF Family Survey ask those who hold individual policies to report premiums; however, we do not have information about the completeness or accuracy with which those data are reported. The MEPS includes a follow-back to employers of sampled persons to collect information about the group coverage, and premium data for group coverage will be available for persons in the MEPS with a completed follow-back interview.

All eight surveys include information about current work status. Five of the surveys also collect information to measure job mobility in the previous year (all but CTS, National Survey of American Families, and the 1993 RWJF Family Survey).

We also examined each survey to determine whether it would permit us to identify important subpopulations to study: older Americans, those in poor health, and those in selected occupations and industries. All of the surveys provide some measures for selecting these subpopulations.

The CPS, NHIS and BRFSS are all on-going surveys with the large sample sizes needed for studying sub-geography and selected demographic subgroups. Because of delays in access to the NHIS and BRFSS, however, we believe the CPS is the most useful source for HCFA(now known as CMS)’s evaluation needs. Our empirical evaluation design therefore focuses on this source of data.

Employer Surveys

Our review includes 6 employer surveys that provide some information about health insurance coverage offered by employers.

  • KPMG Peat Marwick Survey
  • Employee Benefits Survey conducted by the Bureau of Labor Statistics
  • Foster-Higgins
  • The 1994 National Employer Health Insurance Survey (NEHIS) and the Medical Expenditure PanelSurvey -Insurance Component (MEPS-IC)
  • The 1993 RWJF Employer Health Insurance Survey (1993 EHIS)
  • The 1997 RWJF Employer Health Insurance Survey (1997 EHIS)

Five of these surveys (all but the 1993 RWJF Employer Health Insurance Survey) are administered periodically, or planned for periodic administration, and provide pre- and post- HIPAA measures. The 1993 RWJF Employer Health Insurance Survey was administered in 10 states, and provides baseline data for those states. However, followup surveys in those states are not planned.

The NEHIS/MEPS-IC provide state-level estimates for many states. The long-run design calls for state estimates of all states every 5 years. In the intervening four years, samples will be selected to make estimates for 40 of the states (on a rotating basis). The 1993 EHIS provides state estimates for 10 states. The 1997 EHIS also provides state estimates for 10 states (5 of which overlap with the 1993 EHIS survey), and it provides estimates for 12 communities. While follow-on employer surveys are planned by the Robert Wood Johnson Foundation, the periodicity and design details are not yet known. The other surveys only allow national estimates.

Each of the employer surveys was examined for the following content:

  • Whether employer offers health insurance
  • Recent change in offer decision
  • Premiums
  • Benefits—especially pre-existing condition limits
  • Number of enrolled employees, number of covered lives.

The NEHIS/MEPS-IC surveys and the EHIS 1993 and 1997 surveys are the only employer surveys that regularly include both firms that offer and those that do not offer insurance. These surveys provide information about the first two content items listed. The KPMG survey periodically expands its scope of coverage to include all firms and to measure firm offer rates.

All but the EBS measure premiums by plan. However, they differ as to whether they ask about all plans or about selected plans. All of the surveys include information about plan benefits. However, the EBS does not measure pre-existing condition limits. All but the EBS measure the number of employees enrolled in health insurance plans. The EHIS and NEHIS/MEPS-IC also ask about the number of enrollees who elect family coverage and those who elect single coverage.

All of the surveys provide information about the industry, to select high risk industries for study. The EHIS and NEHIS/MEPS-IC also obtain some limited information on the age mix of the workforce to select employers with an older than average workforce for study.

Insurer Databases

We include five databases that provide information about health insurers in all or selected states:

  • AM Best
  • ALPHA Center compilation for 25 states
  • Health Insurance Association of America (HIAA) survey of member companies
  • Communicating for Agriculture’s review of high risk pools
  • Interstudy’s summary of HMOs

We reviewed each of these as a possible source to monitor carrier participation in the group and individual market, enrollments in the individual market, and premiums in each market.

The first two sources provide information on the number of carriers participating in the individual and group health insurance markets by state and on market shares. The AM Best data will permit monitoring of changes in the number of carriers pre and post-HIPAA or in the concentration of market share. The ALPHA Center database may be updated in future years to permit monitoring. The HIAA data base also provides a count of carriers active in the group market by state and over time, but it is limited to HIAA member companies.

The AM Best and ALPHA Center sources give some information on aggregate premiums. However, they do not provide enrollment counts or denominators to monitor changes in typical premiums. The Interstudy data provides information to monitor changes in HMO premiums.

The Communicating for Agriculture’s annual compilation of information about high risk pools is a potentially useful source of data for the HCFA(now known as CMS) evaluation. It presents information to track changes in participation in risk pools in states that have adopted risk pools as the alternative mechanism. It presents information on claims payments and enrollments to track changes in the average risk of participants in these states as well.

Policy Databases

The policy databases that we have included in this review provide information about state regulations in the group or individual market, or details of the states’ HIPAA implementation strategies. They are:

  • Community Rating: Issues and Experience (Alpha Center report)
  • Health Insurance Regulation (GAO report)
  • State Experiences with Community Rating and Related Reforms (IHPS report)
  • Health Insurance Portability (GAO report)
  • Understanding Individual Health Insurance Markets (Kaiser Family Foundation report)
  • Summary of State Insurance Laws
  • Major Health Care Policies: Fifty State Profiles
  • New Federalism State Database
  • HIAA Summary of Current Developments for HIPAA

Five of these are one-time reports that provide some information about the regulatory conditions prior to HIPAA (the Alpha Center report on community rating, the two GAO reports, the IHPS report, and the Kaiser Family Foundation report on the individual market). Three of the databases track state regulations over time and so provide information pre- and post-HIPAA on group or individual market regulations (Summary of State Insurance Laws, Major Health Care Policies: Fifty State Profiles, and the New Federalism State Database). One of the databases focuses on HIPAA implementation and provides information on regulations in the post-HIPAA period (HIAA Summary of Current Development for HIPAA); the Kaiser Family Foundation report also includes some information on HIPAA implementation in the states.

Three of the databases focus on the small group market (the two GAO reports and the Alpha Center report on community rating); the others cover both the small group and individual market. However, the Kaiser Family Foundation report includes group market regulations only if they extend to self-employed individuals. Three databases describe selected states only (the Alpha Center report on community rating and the Kaiser Family Foundation report on the individual market) whereas the rest provide information about all states.

Each of the databases was reviewed for its coverage of the following regulations pertaining to the individual or group market in each state:

  • guaranteed issue
  • guaranteed renewal
  • pre-existing condition limits and portability
  • rating reforms
  • state sponsored risk pools

All of the databases provide some information about provisions related to the first three topics. Some information about rating reforms is included in all but the GAO report on portability and the HIAA monitoring reports. Limited information about risk pools used as the state alternative mechanism is included in the HIAA summary of Current Developments for HIPAA. None of the existing databases, however, provides the detailed on-going picture of group and individual market regulations in each state that is included in the IHPS database developed for DHHS as part of its efforts to evaluate HIPAA.

HIPAA Database Abstracts

A. Population-based Surveys

The population-based surveys we abstracted are:

  1. Current Population Survey (CPS)
  2. Survey of Income and Program Participation (SIPP)
  3. National Health Interview Survey (NHIS)
  4. Medical Expenditure Panel Survey Household Component (MEPS-HC)
  5. Community Tracking Study (CTS)
  6. Behavioral Risk Factor Surveillance System (BRFSS)
  7. National Survey of America’s Families (NSAF)
  8. Robert Wood Johnson Foundation Family Health Insurance Survey (RWJ-Fam)

 They were screened for the following content:

  • Insurance coverage source:

current employer/union


retiree group



  • Change in insurance status
  • Enrolled in high risk pool
  • Employer offers health insurance
  • Premiums
  • Current work status
  • Recent work history
  • Industry and occupation of worker
  • Health status

B. Employer Surveys

The employer surveys we abstracted are:

  1. KPMG’s Annual Survey of Employer-sponsored Health Benefits (KPMG)
  2. Employee Benefits Survey (EBS)
  3. Mercer/Foster-Higgins National Survey of Employer-sponsored Health Plans (Foster-Higgins)
  4. National Employer Health Insurance Survey (NE HIS)
  5. 1993 Employer Health Insurance Survey (EHIS-93)
  6. 1997 Employer Health Insurance Survey (EHIS-97)
  7. Medical Expenditure Panel Survey Insurance Component (MEPS-IC)

They were screened for the following content:

  • Employer offers health insurance
  • Insurance recently dropped or added
  • Premiums
  • Pre-existing condition limitations
  • Number of enrolled employees
  • Number of covered lives
  • Industry code
  • Age of workers

C. Insurer Databases

The insurer surveys we abstracted are:

  1. A.M. Best Experience By State (By Line) (AM Best)
  2. Alpha Center Database (Alpha)
  3. HIAA (Health Insurance Association of America) Member Survey
  4. Comprehensive Health Insurance for High-risk Individuals (Communicating for Agriculture)
  5. Interstudy

 They were screened for the following content:

  • Number of carriers
  • Premiums by type
  • Enrollment by type
  • Covered lives by type
  • Number of carriers in market
  • Benefit design

D. Policy Databases

The policy databases we abstracted are:

  1. Community Rating: Issues and Experience
  2. Health Insurance Regulation: Variation in Recent State Small Employer Health Insurance Reforms
  3. State Experiences with Community Rating and Related Reforms
  4. Health Insurance Portability: Reform Could Ensure Continued Coverage for up to 25 Million Americans
  5. Understanding Individual Health Insurance Markets
  6. Summary of State Insurance Laws
  7. Major Health Care Policies: Fifty State Profiles, 1997
  8. New Federalism State Database
  9. HIAA Summary of Current Developments for HIPAA

 They were screened for the following content:

  • Guaranteed Issue
  • Guaranteed Renewal
  • Preexisting Condition/Portability
  • Individual Market Risk Pool
  • Rating Reform

 1. CPS

Organization Census Bureau
Contact General: (301) 457-3806 Health: Robert Bennefield (301) 763-8578 
Type public-use
Availability/Cost $150/CD, 

available about 6 months after data collection

can extract data or generate tables from /

or extract data from / 

Time Period annual; conducted in March
Reference Period health insurance questions pertain to any time during previous calendar year.

Starting in 1995, also asks about current coverage.

Scope of coverage noninstitutionalized civilians and members of Armed Forces in civilian housing units
Analysis unit person, family, household
Sample size 48,000 households, 

136,000 persons

Response rate 92-93% provide basic labor force information

80-82% of households complete supplement

Geography 50 states and DC

Allows for state-level analyses, though might want to pool consecutive years to improve the estimates for smaller states. (The states with at least 1,400 people sampled are CA, NY, FL, TX, PA, IL, OH, MI, NJ, NC, MA) 

States can be identified.

Design sample selected using the 1990 Decennial Census

probability sample stratified by state to select households.

oversample hispanics

Data collection mode primarily telephone, some in-person
Content insurance coverage:
  • current or former employer/union
  • individual
  • public
current work status

recent work history

industry code of worker

occupation code of worker

health status

(April 1993 include offers of employer health insurance)

Note: Because of changes to the set of health insurance questions starting in March 1995, caution should be used when making comparisons to earlier years.


Organization Census Bureau
Contact Michael McMahon (301) 457-3819 or Robert Bennefield (301) 763-8578
Type public-use
Availability/Cost $200/CD(wave), $1050 for longitudinal file.

can extract data or generate tables from /

or extract data from / 

Time Period continuous series of panels from 2.5 to 4 years; most recent 2/93-2/96
Reference Period health insurance questions pertain to any time in the four months since the previous interview
Scope of coverage noninstitutionalized civilians and members of Armed Forces in civilian housing units
Analysis unit person (household and family composition is not constant throughout reference period)
Sample size 1993 panel: 20,000 households 
Response rate 91% of occupants in eligible living quarters were interviewed
Geography 50 states and DC

States can be identified, but state-level estimates are subject to high variance and are not recommended.

Allows for regional analyses.

Design multi-staged stratified sample 
Data collection mode decentralized telephone and in-person
Content insurance coverage:
  • current employer
  • cobra
  • individual
  • public
current work status

recent work history

industry code of worker

occupation code of worker

health status

Note: reinterviews at 4 month intervals allow for examination of changes in insurance status


Organization National Center for Health Statistics (conducted by Westat)
Contact Owen Thornberry, Jr, (301) 436-8500
Type public-use
Availability/Cost $21 for CD purchase through NTIS (through 1994)

$60 for CD purchase through GPO (through 1994)

$645 for tape purchase through NTIS (through 1995)

1995 data is expected to be available on CD in July, 1998

order from

Time Period annual; continuous sampling covers past 12 months; most recent available: 1995
Reference Period health insurance questions pertain to current status and changes in past 12 months
Scope of coverage noninstitutionalized civilians 
Analysis unit person
Sample size 36,000-49,000 households per year

92,000-125,000 persons

Response rate 90% of households completed interviews
Geography 50 states and DC

starting in 1995, design of sample modified to allow state-level estimates for the larger states, or can pool across years to obtain estimates for each state.

States can NOT be identified on main file, but region and large MSAs are identified.

Design multistage probability sample (with oversampling of black and Hispanic households)
Data collection mode in-person
Content insurance coverage:
  • current or former employer/union
  • private, not through employer/union
  • public
change in insurance status (# of months not covered in past 12 months)

denied or restricted coverage because of health condition

premiums (individual/employee contribution)

current work status

recent work history 

industry code of worker

occupation code of worker

health status

Note: In the past, separate state files have been created to allow for state-level estimates of the larger states (in 1994, 39 states were included on the file). However, the researcher is cautioned about sample size and coverage issues for the smaller states. The 1995 NHIS was redesigned to improve the ability to perform state-level estimates but still has the same limitations for the smaller states. The 1995 state file will not be available before the end of 1998.


Organization AHCPR (conducted by Westat)
Contact MEPS project manager at AHCPR (301) 594-1406
Type public-use
Availability/Cost $60/CD purchase from NTIS (800) 533-6847 or

Free from AHCPR Publications Clearinghouse (800) 358-9295

Time Period continuous rotating panels starting in 1996; most recent round completed in 12/97.
Reference Period health insurance questions pertain to coverage in effect at any time during the round 
Scope of coverage noninstitutionalized civilians 
Analysis unit person, family
Sample size 24,676 persons in round 1 eligible households (23,612 with positive weights) 
Response rate 78%
Geography 50 states and DC

allows for regional, but NOT state-level analyses.

census region identified on public-use file (state NOT identified) 

Design drawn from NHIS sampling frame 
Data collection mode five times in-person, sixth time by phone
Content insurance coverage:
  • current employer
  • previous employer (not COBRA)
  • individual
  • public
changes in insurance status (across rounds)

employer offers health insurance

premiums (individual/employee contribution can be obtained by linking to MEPS-IC)

current work status

recent work history (can be ascertained after multiple rounds)

health status

Note: Can be linked to detailed plan information from those employers identified as providing insurance to household respondents.

Also can be linked to data collected from the respondents’ medical providers and insurance providers.

Panel rounds allow for examination of changes in insurance status.

Citation: Cohen, J. W., Monheit, A. C., et al. "The Medical Expenditure Panel Survey: A National Health Information Resource," Inquiry 33: 373-389, 1996/1997.

5. CTS

Organization Center for Studying Health System Change (conducted by Mathematica)
Contact, Peter Cunningham (202) 554-7549
Type public-use
Availability/Cost free; will be available through ICPSR later in 1998
Time Period in field 7/96-7/97
Reference Period health insurance questions pertain to current status and any change in past 12 months
Scope of coverage non-institutionalized civilians 
Analysis unit person, family (insurance unit), healthcare "community"
Sample size 36,200 families:

1,225 per high-intensity metropolitan site

375 per low-intensity metropolitan site

4,500 total from non-metropolitan areas

3,500 total from unclustered national sample

Response rate 65%
Geography 12 high-intensity metropolitan areas, 36 low-intensity metropolitan areas, 12 non-metro areas.

Supplemental sample allows for national estimates. 

Also allows for analysis of 12 high-intensity sites.

Design 60 communities: separate probabilistic samples of high-intensity communities, low-intensity metropolitan areas, and non-metro areas stratified geographically.

supplement: unclustered national sample

Data collection mode telephone (in-person for those without phone in high-intensity communities)
Content insurance coverage:
  • current or former employer/union
  • individual
  • public
change in insurance status (has coverage changed in past 12 months?)

employer offers insurance


current work status

industry code of worker (open-ended)

health status 

Note: There is also a linked Insurer Followback Survey that is ongoing (expected to be completed in fall 1998). They are attempting to contact all identifiable insurers and should have 1,400-1,500 health plan entities. The survey’s main purpose is to obtain managed care characteristics, and though they are collecting premium data, the quality is suspect.

Citation: Kemper, B., Blumenthal, D., Corrigan, J., et al, "The Design of the Community Tracking Study: A Longitudinal Study of Health System Change and Its Effects on People," Inquiry 33: 195-206. Summer 1996.


Organization Division of Adult and Community Health, National Center for Chronic Disease Prevention and Health Promotion, CDC
Contact Craig Lutzinger at (770) 488-5304 or 
Type public-use
Availability/Cost free through GPO
Time Period annually; most recently available: 1996
Reference Period health insurance questions pertain to current status
Scope of coverage noninstitutionalized civilian adults (18 and above)
Analysis unit person
Sample size 1,100 to 4,000 interviews per state
Response rate 78% cooperation rate (median of rates by state)
Geography 50 states, DC, and 3 territories

allows for state-level analyses.

States can be identified.

Design random phone within state (design varies by state)
Data collection mode telephone
Content insurance coverage:
  • employer
  • individual
  • public
change in insurance status -- how long have you been without coverage?

current work status

recent work history (if not currently working, have you been out of work less than 1 year?)

health status

Note: identifies main reason you don’t currently have insurance coverage identifies main reason you didn’t have coverage at some time in past year


Organization Urban Institute (conducted by Westat)
Contact (202) 828-1815 or email
Type public-use
Availability/Cost (will be available in 1998)
Time Period data collection: February through November 1997 (follow-up survey in 1999 or 2000).
Reference Period health insurance questions pertain to current status.
Scope of coverage Families with children under age 18 and non-aged adults without children under age 18
Analysis unit person, family
Sample size sampled approximately 44,000 persons
Response rate still preliminary
Geography 13 states: AL, CA, CO, FL, MA, MI, MN, MS, NJ, NY, TX, WA, WI plus 5,000 respondents from rest of nation to allow for national estimates.

Allows for state-level estimates of the 13 states.

States can be identified.

Design random digit dial survey with oversampling of low-income households (<200% poverty)
Data collection mode telephone survey (3.5% of sample are non-telephone households that were supplied with cellular phones)
Content insurance coverage:
  • current or former employer/union
  • individual
  • public
change in insurance status over past 12 months (asked of most knowledgeable adult and up to 2 children)

current work status

industry code of worker (open-ended)

occupation code of worker (open-ended)

health status (asked of most knowledgeable adult and up to 2 children)

8. RWJ Family

Organization Robert Wood Johnson Foundation (conducted by Mathematica)
Contact ICPSR (313)-763-5010
Type public-use
Availability/Cost available through ICPSR at /;(study #=6894)
Time Period data collection: last half of 1993 and early 1994
Reference Period health insurance questions pertain to current status and ever in past 12 months
Scope of coverage noninstitutionalized civilians 
Analysis unit person, family (insurance unit) 
Sample size 62,549 persons
Response rate range from 77-91% by state
Geography 10 states - CO, FL, MN, NM, NY, ND, OK, OR, VT, WA.

allows for state-level analyses.

States can be identified.

Design random digit dialing by state to screen eligible families. 

oversampled families containing one or more Medicaid or uninsured persons.

Also selected families without telephones in a few geographic areas per state.

Data collection mode telephone supplemented with in-person interviews for those without phones
Content insurance coverage:
  • current employer
  • cobra
  • retiree group
  • individual
  • public
change in insurance status (over past 12 months)

employer offers insurance

premium (individual policies only)

current work status

recent work history (if not currently working, were you looking for work during past 4 weeks?)

industry code of worker (open-ended)

health status

Note: if employer offers insurance but employee not covered, identifies why not.

Citation: Cantor, J. C., Long, S. H., Marquis, M. S., "Challenges of State Health Reform: Variations in Ten States," Health Affairs(January/February 1998): 191-200.

Employer Surveys


Organization KPMG (conducted by National Research, Inc.)
Contact Jon Gabel (703) 469-3369
Type proprietary 
Availability/Cost $150 for the written report. 

Data have been sold to some organizations, but KPMG prefers to be used as a subcontractor. 

Time Period conducted annually in late winter and early spring; most recent: 1997
Reference Period health insurance questions pertain to current status
Scope of coverage private and public firms

1992, 1994, 1997: firms with >=200 employees and who offer health benefits

1993, 1995, 1996, (1998): includes smaller firms and those who do not offer health benefits.

Analysis unit firm, employee
Sample size 1,500
Response rate 60%
Geography 50 states and DC

allows for national and regional analyses, but NOT state-level. 

Design random draw from D&B, stratified by industry, employee size and region (uses location of headquarters) 
Data collection mode telephone
Content premium (asked of the largest conventional, HMO, PPO, and POS health plans)

pre-existing limits (not asked of those in HMO)

covered employees

2. EBS

Organization BLS
Contact (202) 606-6222 or
Type tabulation are public-use (actual database not available)
Availability/Cost selective access of tabulations available online at
Time Period annual; updates are generally available in the summer following the reference year.
Reference Period health insurance questions pertain to current status.
Scope of coverage even years: state and local government plus private non-farm establishments with fewer than 100 employees.

odd years: private establishments with at least 100 employees

limited to firms offering health benefits

Analysis unit employee
Sample size 1993: 2,325

1994: 2,135

Response rate 1993: 67%

1994: 69%

Geography 50 states and DC.

allows for regional, but NOT state-level, analyses.

Design two-stage probability sample -- establishments and then occupations within establishments. Occupation categories are grouped by professional, technical, and related; clerical and sales; and blue collar and service
Data collection mode in-person, telephone
Content average employee contribution 

Note: The data are presented as a percentage or average and can be classified by full- and part-time, public/private, small/medium/large private establishments, occupational group, and major industry sectors.

The EBS is being integrated with the Employment Cost Index (ECI) and Occupational Compensation Survey (OCS) into the National Compensation Survey (Comp2000). It will broaden the occupational coverage of the data, allow for state level analyses, and will eventually include information on costs for compensation and benefit plan provisions.

3. Foster-Higgins

Organization Mercer/Foster-Higgins
Contact Mitchell Stein (212) 345-7925 
Type proprietary
Availability/Cost entire database is not available for sale, but extracts can be purchased.

$500 for 1997 report

Time Period annual; most recent: 1997
Reference Period health insurance questions pertain to status as of July 1st of that year.
Scope of coverage private and public firms with at least 10 employees AND who offer health benefits
Analysis unit firm
Sample size 1997: 3,915 respondents (from random sample)
Response rate 50%
Geography all states and DC 

does NOT allow for state-level analyses, but can analyze census regions as well as five CMSA/MSAs (New York City, Chicago, Los Angeles, Dallas, Atlanta).

States can be identified.

Design private firms: random D&B draw stratified by employee size

gov: random draw from COG

convenience: sample of F-H clients

oversample of metro areas to allow for metro-level analyses

Data collection mode mail with telephone follow-up 
Content recent changes to benefit plans 

premium (asked of the largest conventional, HMO, PPO, and POS health plans)

pre-existing condition limitations

covered employees

average age of active employees

industry code


Organization NCHS/CDC (conducted by Westat) 
Contact (301) 436-8500
Type confidential
Availability/Cost not yet available to the public (due to confidentiality issues that are yet to be resolved)

check /

Time Period data collected from April to December 1994
Reference Period provision of health insurance and employee characteristics pertain to status as of December 31, 1993.

characteristics of health insurance plan pertain to 1993 plan year (the plan year ending prior to April 1, 1994).

Scope of coverage private/public/self-employed companies (including those with no additional employees)
Analysis unit establishment
Sample size 35,000 private

3,000 public

919 self-employed

Response rate private: 71%

public: 87%

self-employed: 80%

Geography 50 states and DC,

allows for state-level analyses.

States can be identified.

Design private: random draw from D&B

public: random draw from 1992 COG

self-employed: 1993 NHIS

Data collection mode telephone
Content offer health insurance coverage 

recently dropped (for those not offering, when did you last offer?)

premium (probability sample of up to 5 plans)

pre-existing condition limitations (probability sample of up to 5 plans)

covered employees (total and by plan for up to 5 plans)

covered dependents (total and by plan for up to 5 plans) - data of poor quality

industry code

Note: includes information about employers who do not offer insurance

includes information about employers who are self-insured

Citation: National Center for Health Statistics. "Employer-sponsored health insurance: State and National Estimates." Hyattsville, MD. 1997.

5. EHIS-93

Organization Robert Wood Johnson Foundation (conducted by Westat)
Contact ICPSR (313)-763-5010
Type public-use
Availability/Cost available through ICPSR at /;(study #=6908)
Time Period data collection: 1993 and early 1994
Reference Period health insurance questions pertain to status at time of survey
Scope of coverage private/public/self-employed establishments
Analysis unit establishment, insurance plan 
Sample size 22,890 establishments

22,465 plans

Response rate 71%
Geography 10 states (CO, FL, MN, NM, NY, ND, OK, OR, VT, WA)

allows for state-specific analyses of these 10 states.

States can be identified.

Design D&B probability sample of public and private employers stratified by employee size
Data collection mode telephone
Content employer offers

premiums (all plans)

pre-existing condition limitations

covered employees (total and by plan)

# of employees with family plans

industry code (open-ended)

age distribution of workers (by sex: % less than <25, 25-54, 55 or older)

Citation: Cantor, J.C., Long, S. H., Marquis, M. S., "Private Employment-based Health Insurance in Ten States," Health Affairs (Summer 1995): 199-211.

6. EHIS-97

Organization Robert Wood Johnson Foundation (conducted by Research Triangle Institute)
Contact Steve Long and Susan Marquis at RAND (202) 296-5000
Type public-use
Availability/Cost not yet available (plan to make available through ICPSR)
Time Period data collection: fall 1996 through 1997
Reference Period health insurance questions pertain to status at time of survey
Scope of coverage private/public/self-employed establishments
Analysis unit establishment, insurance plan 
Sample size 23,000 establishments
Response rate (preliminary estimate) 60%
Geography 48 states and DC (excludes Alaska and Hawaii)

allows for state-level analyses of CA, CT, FL, MA, MN, MD, NJ, NY, OR, WA 

also allow for analyses of 12 CTS intensive sites.

States can be identified.

Design stratify by geography (60 CTS sites, other selected states with significant rating reforms, and rest of nation) and by establishment size using D&B for private and COG for local government.

also used a list sample of firms participating in a health insurance purchasing alliance in CA, CT, FL. 

Data collection mode telephone, mail
Content employer offers

premiums (all plans)

pre-existing condition limitations

covered employees (total and by plan)

industry code

age of workers (% less than 30, 30-39, 40-49, 50 or older)


Organization AHCPR (conducted by Census Bureau)
Contact MEPS project manager at AHCPR (301) 594-1406
Type public-use
Availability/Cost to be available in fall 1998. 

$265/tape purchase from NTIS (800) 533-6847 or

Time Period Data collection from March 1997 through November 1997.
Reference Period Health insurance questions such as premiums and enrollment pertain to the pay period that included 7/1/96. Health insurance questions such as annual totals pertain to calendar year 1996. 
Scope of coverage insurance providers identified by respondents in MEPS household component as well as private and government establishments
Analysis unit establishment
Sample size 7,000 insurance providers linked to MEPS household component

27,000 other private

1,900 government

1,000 self-employed

Response rate 70%
Geography 50 states and DC

allows for state-level analyses of 40 states (only 100 cases were sampled in AK, CT, DE, ID, MT, ND, NH, RI, SD, VT and DC)

  1. employers who provide insurance for members of MEPS household component
  2. for remainder, by state: random draw from SSEL, COG, stratified by employee size.
Data collection mode phone call to determine whether they offer ins, then mail followed by telephone follow-up or in-person visit if necessary.
Content offers health insurance

recently dropped or added

premiums (up to 4 plans with highest enrollment)

pre-existing condition limitations (up to 4 plans)

number of enrolled employees (up to 4 plans)

industry code

number of workers 50 years or older

Note: provides person-specific information for sample linked to MEP-HC.

Citation: Cohen, J. W., Monheit, A. C., et al. "The Medical Expenditure Panel Survey: A National Health Information Resource," Inquiry 33: 373-389, 1996/1997.

Insurer Databases

1. AM Best

Organization A.M. Best
Contact (908) 439-2200
Type proprietary
Availability/Cost $375 for 1st year, see
Time Period annual
Scope of coverage health insurers included in NAIC annual financial report
Analysis unit accident and health insurers 
Sample size over 1,200 companies reviewed 

provides detail for up to 80 leading companies by line (the remainder are grouped together as "other")

Response rate not applicable
Geography presented by state.

States can be identified.

Design NAIC annual statement
Data collection mode information extracted from statements
Content aggregate premiums (accident AND health) attributable to each principal line of coverage

market share

number of carriers by line of insurance and state

Note: The Accident and Health lines are broken down by

  • Group
  • Credit
  • Collectively Renewable
  • Non-cancelable
  • Guaranteed Renewable
  • All Other


Organization Alpha Center
Contact Deborah Chollet (202) 296-1818 
Type public-use
Availability/Cost an overview of the findings are reported in the monograph "Mapping Insurance Markets: The Group and Individual Health Insurance Markets in 26 States" which can be dowloaded from
Time Period calendar year 1995
Scope of coverage group and nongroup major medical health insurance markets where insurers wrote at least $500,000 of comprehensive major medical business in 1995.

Does not include self-insured employers.

Analysis unit insurance plan 
Sample size 1,022 group health insurers

518 individual

Response rate not applicable
Geography 25 states (AL,CA,CT,FL,IA,ID,IL,KY,LA,MA,MD,MN,MS,MT

ND,NH,NY,OR,PA,RI,SC,TX,UT,VT,WA) for group and individual plus MI for individual only.

States can be identified.

Design include states in which at least 85% of total group health-related market and individual market are understood.
Data collection mode compiled from financial reports filed from HMOs, commercial insurers and BC/BS.

Also searched websites and telephoned company headquarters and states’ department of insurance.

Content premiums (aggregate)

market share

number of carriers by market (group and individual broken down by BC/BS, HMOs, and Commercial)

Note: They occasionally had to impute major medical coverage to multi-state insurers and impute the proportion of major medical coverage to multiple-line insurers.

Citation: Chollet, D. J., Kirk, A. M., Ermann, R. D. "Mapping Insurance Markets: The Group and Individual Health Insurance Markets in 26 States," State Initiatives in Health Care Reform monograph. Alpha Center, October, 1997.


Organization Health Insurance Association of America
Contact (202) 824-1600
Type proprietary database
Availability/Cost no set fee
Time Period annual
Scope of coverage HIAA member companies (commercial insurers)
Analysis unit commercial insurer 
Sample size 200+ insurers
Response rate not applicable
Geography state level
Design survey
Data collection mode survey
Content number of commercial carriers active in small group market

4. Comprehensive Health Insurance for High-risk Individuals

Organization Communicating for Agriculture 
Contact Bruce Abbe (612) 854-9005 or
Type publication
Availability/Cost $29.95 per copy
Time Period annual; 1998 will be available in October.
Reference Period operating statistics are for year end of previous year
Scope of coverage state comprehensive health insurance programs (risk-sharing pools)
Analysis unit state 
Sample size 28 programs (see note)
Response rate 100%
Geography state level for 28 states with risk pools (AL,AK,AR,CA,CO,CT,FL,IL,IN,IO,KS, LA,MN,MS,MO,MT,NE,NM,ND,OK,OR, SC,TN,TX,UT,WA,WI,WY)
Design survey
Data collection mode information supplied by state health plan administrators and obtained through research conducted by Communicating for Agriculture.
Content summary of plan composition

eligibility requirements

benefits design

waiting period and pre-existing conditions

number of participants (overall and by plan type)

premiums collected

premiums paid 

Note: Alabama and Texas are included in the survey though their comprehensive health insurance programs were not yet operational at the time of data collection.

5. Interstudy

Organization Interstudy
Contact (800) 844-3351 or
Type publications and proprietary databases
Availability/Cost varies ($200-$12,000)
Time Period annual and semi-annual; most recent - reporting date of July 1, 1997 (reporting date as of January 1, 1998 expected to be available in Fall 1998).
Reference Period Competitive Edge Database includes information for current year as well as for two previous years
Scope of coverage target all HMOs nationwide
Analysis unit HMOs 
Sample size varies
Geography nationally, by region, state and metro area
Design contact all HMOs
Data collection mode information extracted from surveys and regulatory data
Content premium

market share


financial indicators

competitive indicators

Note: "The Competitive Edge" database contains HMO industry data and enrollment and utilization information.

"The Regional Market Analysis" publication maps marketplaces for all MSAs and identifies HMO penetration, cost and premium information.


AHCPR Agency for Health Care Policy and Research

BC/BS Blue Cross and Blue Shield

BLS Bureau of Labor Statistics

CA Communicating for Agriculture

CDC Center for Disease Control

COG Census of Governments - a list of government firms maintained by the Census Bureau.

D&B Dun and Bradstreet. Their Marker Identifier file is a national census of employment establishments.

GPO Government Printing Office

HIAA Health Insurance Association of America

HMO Health Maintenance Organization

ICPSR Inter-university Consortium for Political and Social Research

NAIC National Association of Insurance Commissioners

NCHS National Center for Health Statistics

NTIS National Technical Information Service

POS Point-of-service health plan

PPO Preferred Provider Organization

SSEL Standard Statistical Establishment List - a list of private sector business establishments maintained by the Census Bureau.

Part IV. Hipaa Evaluation Design

Peter D. Jacobson, Stephen H. Long, and M. Susan Marquis

I. Introduction

Scope of Evaluation DESIGN

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) requires the Department of Health and Human Services to report on the effectiveness of the Title I provisions of HIPAA in providing access to health insurance and ensuring coverage security for the currently insured. This document describes components of a design for undertaking such an evaluation. The design builds on the literature review and database review described in earlier parts of this report, and on the policy database developed by the Institute for Health Policy Solutions (IHPS) as part of this project. The (IHPS) database describes the pre- and post-HIPAA status of group and individual insurance market provisions in each state and so identifies states in which the HIPAA legislation resulted in important insurance market changes.

Our approach to evaluation design is to identify a small number of key implementation and outcome questions that relate to access, premiums, benefits, or employment--the key outcomes addressed in our literature review. We suggest an approach or approaches to answer each question. Thus our proposed evaluation design is modular; a subset of the suggested modules may be combined to form an evaluation of selected topics. We, however, do not recommend the questions and topics that should be given priority by HCFA(now known as CMS) in putting together a final evaluation design.

We focus our evaluation design on changes brought about by the HIPAA legislation. In doing this, we propose designs to measure the effects of reform packages that have been adopted to conform to HIPAA, but we do not propose designs to evaluate the generic elements of group or individual market reform in HIPAA (such as guaranteed issue, guaranteed renewal). Many of these generic elements had been enacted as small group reforms in most states prior to HIPAA and there are a number of evaluations that have been produced or are underway to evaluate these. We limit our proposed evaluation to studying packages of market reforms that are subsequent to the HIPAA legislation.

We emphasize implementation questions and qualitative designs. We focus on implementation questions and qualitative studies because there exist limited data for quantitative investigation. Even with ongoing surveys, lags for most data mean that data for 1998 (the first full year of HIPAA implementation) would not be available for analysis until 2000 or even later, delaying information until late 2001 or later. Moreover, for a more complete quantitative evaluation of the impacts of HIPAA, an evaluator would prefer to give the legislation time to play out its effects. Thus, one would want to evaluate a year later than 1998, delaying results even further. However, Congress will want more timely feedback on the legislation and its effects. Our proposed evaluation plan does include some quantitative components, but they are limited to simple quantitative indicators that can be gathered quickly, and to analyses using the Current Population Survey in order to gain early results.

In addition, most observers believe that the magnitude of HIPAA’s effects will be small and concentrated among small segments of the population, such as those in at-risk industries, or persons in poor health—our literature review contained in Part II confirms this. HIPAA was designed to eliminate the most grievous inequities in the insurance market. Therefore, it will be difficult to show measurable effects with most existing data collection efforts because they are general population surveys, and so do not have a sufficient sample of target groups. Furthermore, it is difficult to design surveys or studies to identify representative samples of these vulnerable target groups.

We also focus on implementation issues in our design because an extensive literature shows that an effective implementation process is integral to successful policymaking, in part because program objectives are likely to be interpreted differently by various levels of government. Conceptually, we anticipate that certain barriers will emerge that will be difficult for individual HIPAA eligibles to surmount given their diffuse interests relative to the concentrated interests of the insurance industry. In particular, prices quoted to HIPAA eligibles may exceed prevailing rates in the individual market. In some cases, reforms brought about by HIPAA may also lead insurers to raise group rates. Further, insurers have little incentive to encourage brokers to enroll HIPAA eligibles, and may, as anecdotal evidence indicates, also delay the application process. Although employers have little incentive to work on behalf of individual HIPAA eligibles, they may have a corporate objective to convince remaining employees that the firm will facilitate HIPAA coverage. If implementation is to be facilitated, some concerted effort by the state and HCFA(now known as CMS) will be needed to overcome these barriers.

According to a recent GAO report, state insurance regulators have encountered implementation barriers resulting in part from the lack of federal guidance. Before policymakers and stakeholders can take action to address the perceived weaknesses in the HIPAA structure, we must accurately assess how HCFA(now known as CMS) and the states are enforcing HIPAA provisions, what seems to be working, what the potential barriers to implementation are, and what covered populations or services have been most affected by the implementation process. Therefore, our evaluation questions include assessing the extent to which these and other barriers limit HIPAA coverage and the extent to which the state and HCFA(now known as CMS) adopt policies to overcome these barriers. Finally, because HIPAA is viewed by many as a model for the new Federalism, understanding the implementation barriers may be as, or more important, than quantifying outcomes.

Limitations on proposed scope

There are a number of important topics related to HIPAA that are not addressed in our evaluation proposal. We do not propose efforts that we believe are duplicative of efforts that are underway. Thus, for example, we exclude evaluations of the generic small group insurance market reforms as discussed above.

A second example relates to efforts to inform consumers of their rights under HIPAA. This is an important implementation issue, however there is an extant project at Georgetown University to study consumer information and HIPAA. We believe HCFA(now known as CMS) needs to focus resources on questions that are not being addressed already.

Similarly, we do not propose developing and monitoring indicator measures when we are aware of other efforts that are underway. For example, Deborah Chollet and her colleagues have recently undertaken considerable effort to measure the structure of the group and individual insurance markets in selected states. While the effects of HIPAA on this structure are of interest, the development of reliable measures of structure entails considerable investment and we do not believe HCFA(now known as CMS) should devote resources to duplicate the ongoing work of Chollet and others.

Our evaluation proposal also is limited to the implementation and effects of Title I of HIPAA. We do not address other titles of the act which provide for specific tax incentives, programs to prevent health care fraud and abuse, a demonstration of Medical Savings Accounts, specific benefit mandates, and administrative simplification because these issues are beyond the scope of this contract.

Organization of Remainder of Report

The next section of this report provides a general overview of the proposed evaluation design. It discusses comparison groups and data for the quantitative components of the evaluation. It describes generic aspects of the qualitative evaluation including site selection, case study interviews, and data analysis.

The final section of the report then covers the specific evaluation topics that we propose. It is organized by the four key outcomes that we considered in the literature review chapter: access, price, benefits, and employment. For each of these topic areas, we pose one or more key questions and present an approach to address the issue. The discussion in section III highlights the unique elements of the quantitative or qualitative design that are not addressed in the general discussion found in section II.

II. Research Design

Quantitative Evaluation

Contrast Groups

Small Group Market Analyses. Our proposed quantitative design components focus on before-after comparisons of an outcome of interest in a state or group of states. Because states differed in their regulations prior to the implementation of HIPAA, we look to form clusters of states that had a similar pre-regulatory environment and examine changes post-HIPAA within this cluster of similar states. Ideally, we also want to identify a control group of states which had pre-HIPAA regulations that matched or exceeded the HIPAA reform requirements. Changes that we observe in these states are a measure of secular trend in states that adopted new regulation in response to HIPAA. That is, by comparing the change in an outcome among states which adopted legislation to conform to HIPAA requirements with the change in states that did not need to do so, we can infer how much of the observed change is due to the legislation and how much to secular change. The central feature of our recommended evaluation design is therefore the identification of these state groups.

Table 1 presents our suggested analytic groupings for analyzing the effect of the HIPAA group insurance market reforms. Based on an analysis of the IHPS small group database, we identified groups of states in which the small group insurance market legislation lacked one or more of the HIPAA requirements and so required new state regulation to conform to HIPAA. For example, Alabama (shown as group A), is the only state that did not limit pre-existing conditions or require guarantee renewal or guaranteed issue of some group product in the pre-HIPAA period. Similarly, we have identified

a group of states (group B) which included some of the HIPAA requirements but lacked guaranteed issue. Group C includes states with pre-HIPAA requirements that required guaranteed issue, but only of a limited number of insurance products; HIPAA requires this of all products sold in the small group market.




Limits on Pre-ex conditions

Group to Group Portability

Guarantee Renewal

Guarantee Issue

Health Allowed As Rating Factor?




























Group D is our group of control states. It includes states that had adopted regulations that met the HIPAA minimum requirements prior to the federal legislation. Group D does not include all states that had passed small group legislation that met the HIPAA requirements. We hypothesize that the degree of premium rating restriction may be an important factor in premium change and stability of offer rates. Therefore, we choose control states that have rating restrictions that are comparable to the rate restrictions in our 3 groups of study states. Specifically, we look for control states that do not exclude health status as a factor in setting premiums in the small group market.

The basic analysis strategy then is to compare change in an outcome of interest in one of the state groups A, B, or C with change in the control states in group D. This difference is a measure of the effect of new legislation to meet the HIPAA requirement. For example, a contrast between states in Group B and D is a measure of the effect of guaranteed issue in the small group market. Contrasting states in Group C and D provides an estimate of the effect of requiring guaranteed issue of all products.

Individual Market Analyses. Table 2 presents comparison groups for analyses of the effects of the group to individual portability provisions of HIPAA. The objective is to find groups of states that have adopted a similar implementation strategy and had similar pre-HIPAA regulatory provisions in the individual market. We focus on the two implementation strategies that have been adopted by most states: the federal fallback standards or use of a state risk pool. We do not include other strategies for several reasons.




Limits on Pre-ex conditions


Guarantee Issue

Rating Restriction

HIPAA Implementation








Federal Fallback






Federal Fallback






Risk Pool






Risk Pool


First, most of the states that have adopted more expanded guaranteed issue provisions than required by the federal standards had such legislation in place prior to HIPAA. Second, while there are several other alternative mechanisms in place, such as mandatory conversion, these are typically state specific. Thus, it is more difficult to generalize any findings. Any change we observe might reflect situational effects. When we have a larger group of states, situation specific effects can be assumed to average out over the group.

A problem in our comparison groups for the individual market analysis is that we do not have a good temporal control. Virtually all of the states that had adopted individual market reforms prior to HIPAA that met or exceed the HIPAA minimum requirements also had tight rating restrictions. Changes in these states will not reflect the effect of new access regulations, but will reflect the tight premium regulation in these markets. Therefore we do not believe that they serve as good controls for changes that would have occurred in the unregulated markets of states that have adopted the federal fallback or risk pool alternative to meet the HIPAA standards. Instead, the evaluation in the individual market will focus on contrasts between different models of HIPAA implementation in previously unregulated markets. This will not answer questions about overall effects of reform, but rather whether one model appears to have different access, premium, and employment effects than the other.

We present four comparison groups in Table 2. In addition to the HIPAA implementation strategy, we differentiate states based on their pre-HIPAA regulatory profile. In particular, we distinguish states that had some regulations limiting pre-existing condition exclusions in individual coverage and providing for portability in satisfying any such exclusions from those that did not.

Data Sources

Our suggested quantitative evaluation designs emphasize the use of the Current Population Survey. Timeliness is a critical factor in this recommendation. The March CPS, which includes information about insurance coverage, is typically available within 6 months of the interview period. Thus, the evaluator would be able to conduct quantitative analyses in late 1999 and early 2000 using the March 1999 CPS as the post-HIPAA measure. Most other data collection efforts would not begin to yield data to perform analyses until 2001 or later.

A disadvantage of the CPS for this purpose is small samples in some states. Thus, when a comparison group includes a small number of small states, the sample size will not be sufficient to produce reliable estimates. We discuss power to detect differences under the specific topics below. For comparisons that cannot be made using a single CPS, HCFA(now known as CMS) may wish to arrange for some longer term evaluation that would involve either pooling multiple years of post-HIPAA experience as measured by the CPS or using some of the other databases that we have described in Part III. Moreover, even when the contrast involves a number of states, our design will permit the evaluator to detect effects of HIPAA only if they are moderate or substantial. We do not present a design that would be able to reject the hypothesis that HIPPA has any, including very small, effects on the outcomes of interest. The magnitude of the effects that we can detect with our design are discussed in more detail below.

In addition to the CPS, some of our designs include other sources of data to address specific issues related to HIPAA and its implementation. These are described in section III where we lay out the proposed topics and specific designs.

Qualitative Evaluation

Case Study Methods

Qualitative methods are appropriate for studying how and why systems change and the political and social context in which these changes occur. The qualitative evaluation would involve elite interviews in selected sites to understand the implementation of HIPAA. To gain various perspectives, individuals from the following entities would be interviewed: 1) state officials involved in HIPAA implementation; 2) a sample of large and small employers; 3) insurers; and 4) a sample of HIPAA eligibles. In case study interviews, the desired strategy is to triangulate, that is, to obtain more than one voice for each group of interest, so that each conclusion is corroborated by more than one respondent. Thus one would want to interview more than one representative from each group. Interviews should be coded to ensure that all responses are included in synthesizing the results; software is commercially available to use for this purpose.

HCFA(now known as CMS) officials responsible for federally enforcing implementation in those states that have not passed conforming legislation should also be interviewed. As well as a discussion focusing on HCFA(now known as CMS)’s compliance strategy, the interview would cover efforts to communicate to or coordinate with all states.

We would expect that each state selected for case study would be visited once, for a period of 3-5 days. Follow-up telephone interviews would be conducted to clarify interview notes or to solicit additional information. Before visiting each state, the team should review the available data and determine an agenda for whom to interview and specific topics for discussion. A standard interview guide would be developed and used to collect the information not available from documented sources. This semi-structured format would serve as a guide to note-taking, ensure that all topics are covered, and ensure consistency across states. The interview guide should be pre-tested in a state that will not be part of the final site selection.

The interviews would focus on the specific issues discussed in Section III. Many of the questions would be the same across all sites, however some questions would vary between sites to cover implementation issues related to differing legal environments. For example, in states using high-risk pools as an alternative HIPAA mechanism, the interview would include questions about risk pool funding, the premium schedule, and the methodology for determining premiums. In states that have adopted guaranteed issue, the interview would focus on the number and characteristics of guaranteed issue plans, risk adjustment or risk-spreading mechanisms, marketing practices, and enforcement.

In advance of the interviews, the evaluator should collect available documentary evidence. A data checklist should be developed and distributed requesting that documents be provided or made available to the site visit team for review. Materials that are not available in advance should be obtained while on-site. The checklist might include specific enforcement data, trends in employee access to HIPAA services, and premium changes over time. In addition, the checklist would ask for studies conducted by any of the parties on the effects of HIPAA, and would inquire about on-going or planned studies.

Data Analysis

The data analysis would focus on synthesizing the results of the case study interviews and document reviews and on extracting a set of cross-cutting themes, or lessons, that can be applied by policymakers to achieve HIPAA’s goals. The primary form of analysis would be descriptive, comparing and contrasting information across sites along the dimensions of interest, namely access to insurance coverage, premium pricing, and market responses.

Initially, this would involve writing separate case studies for each state visited. Once the case studies are drafted, they should be sent to at least one respondent at each site for technical review. Comments received from the reviewer would be incorporated into the case studies. After the set of case studies has been developed and reviewed, the individual case study results would be compared and contrasted to identify common themes and key differences between the sites. For the final report, the results of the case studies would be synthesized to provide a comprehensive analysis of HIPAA compliance efforts.

Site Selection

The selection of sites would depend on the scope of questions described in section III that the evaluation will encompass. The candidate questions that we lay out below cover enforcement, the notification process, market responses, risk spreading mechanism, and risk pool implementation. Since not all states would be examined in case studies, the selection of sites would be based primarily on the ability to draw comparisons across states with different approaches to insurance reform. For example, to study enforcement, an evaluator would want to compare states that are implementing the federal fallback standards (such as CO, MD, TN), with states that have allowed enforcement of the standards to fall under HCFA(now known as CMS)’s, aegis (e.g. CA, MO), with states that have had individual market reforms in place for a longer period of time (e.g. NY, NJ, VT, or WA). An evaluator would also want to compare enforcement models and effectiveness in states that enacted new legislation to meet the HIPAA group market standards (e.g. AL, IL, CO, MO) with states that had such legislation in place (e.g. CA, TX, NY, NJ, WA)

To understand the implementation of the risk-spreading mechanisms and market responses, an evaluator would want to include states that have adopted the federal fallback standards (e.g. CO, CA, MO, TN), with states that have adopted a risk pool alternative (e.g. AL, IL, TX), with states that have enacted guaranteed issue provisions in the small group market that go beyond the fallback standards (e.g. WA, NY, VT, NJ). Investigation of problems in extending risk pools to HIPAA eligibles would include expansion of existing risk pools (e.g. IL, CT, MN) and states that have introduced new risk pools (e.g. AL, TX).

A core set of states that would provide some variation on the key dimensions to address all of the issues we propose below would include: AL, CA, CO, IL, MO, TX, WA.

III. Specific Evaluation Topics and Designs

This section lists details the specific evaluation questions and designs in each of the four topic areas.

Access to insurance

Access to insurance

Question A. How effective is the HIPAA model of federal standards/state implementation?

A number of observers view HIPAA as a model for the new Federalism. Under this model, the federal government establishes minimum standards, but states have flexibility with respect to implementation and are charged with enforcement. The federal government serves as enforcer only if the state fails to act.

Before adopting this as a general model of federal/state cooperation, there are several implementation questions that policymakers will wish to answer. First, do the federal standards establish a floor, or do they become a ceiling? In the case of HIPAA, the question is whether states that had gone beyond the federal standards begin to roll back reforms. For example, Nevada had regulations on pre-existing conditions exclusions in small group insurance policies that exceeded the HIPAA minimums, but has recently passed legislation to match the HIPAA requirements.

A second important question related to this model is what enforcement techniques are effective? Little is currently known about what mechanisms states use for enforcement—for example, do states rely on the grievance process to detect non-compliance? Do they impose reporting requirements to monitor the extent to which the market is responding to reforms? What other techniques are employed? What enforcement mechanisms are most effective? Even less is know about the effects of federal enforcement activities and how states will respond.

Answers to the first question can be obtained by monitoring changes in state law over time. IHPS developed a database structure and abstracting procedures for summarizing key elements of state law over time related to insurance regulation in the small group and individual insurance markets. A baseline describing regulations in the pre-HIPAA period (1996 and 1997) is complete. Continuing this abstracting process over time would provide data to measure how states’ regulations have changed in response to the HIPAA legislation.

To study enforcement mechanisms to ensure access, we recommend a four-phase study. The first three phases would be conducted as part of the qualitative case studies described generically above. The first task would be to categorize the enforcement mechanisms used by states and HCFA(now known as CMS) to implement HIPAA. The second part of the task would construct a typology of the various enforcement models. Once this typology is constructed, the third part of the task would be to develop measures of effectiveness and compare selected state models and HCFA(now known as CMS) activities in states included in the case studies. The case study analysis would lead to a typology of state mechanisms, hypotheses about effectiveness, and a protocol for measurement that would then be applied on a national basis.

Phase One: Problem Identification. Recent articles in the trade press have identified certain problems that have limited employee access to HIPAA benefits, including reduced brokerage commissions for enrolling HIPAA beneficiaries, application delays, and large price increases for coverage similar to that which the employee formerly maintained. The case study protocol would include a module to address what steps have been taken within the selected states to identify these and other problems that limit access to HIPAA coverage. For example, the protocol would include the following questions to be covered in the site visit interviews. Has the state put in place routine compliance review mechanisms to identify how HIPAA is being implemented or do states wait for complaints? Has the state implemented a voluntary compliance regime that encourages firms to self-correct without sanctions? Once a problem limiting access to HIPAA is identified, what steps are taken to eliminate the barrier? Does the state maintain a grievance process for employee complaints? If so, has the state analyzed the grievance process data to determine the types of problems employees repeatedly face in seeking HIPAA benefits?

Phase Two: Typology. A second product of this task would be an enforcement typology. To develop the typology the site visit interview protocol would address the following types of questions in states with conforming legislation. Which state agency has primary responsibility for HIPAA enforcement? Has the agency issued regulations or guidelines to employers and employees? How does the enforcement process work within each state? What data are collected to observe changes over time? Have states experimented with different enforcement models? If so, what lessons have they learned from these experiments? Have state agencies experienced any problems with the implementing legislation that might limit its ability to ensure access to HIPAA benefits? Have states solicited advice and cooperation from HCFA(now known as CMS) on enforcement concerns? What sanctions are available for non-compliance with HIPAA? Have any sanctions been imposed?

In states without conforming legislation, the typology would address these additional types of questions. Does HCFA(now known as CMS) attempt to develop partnerships with state agencies, in effect delegating enforcement to the state? How similar are the processes adopted by HCFA(now known as CMS) to those in states with conforming legislation? Has HCFA(now known as CMS) adopted a particular state model for use in non-conforming states? Has HCFA(now known as CMS) developed a mechanism for communicating its approach to states with conforming legislation and vice versa?

Phase Three: Effectiveness Measures. The third product from this task would be a set of hypotheses about the effectiveness of the various enforcement regimes, including a set of defined and measurable outcomes. Measures of effectiveness of the enforcement model might include the numbers of HIPAA eligibles enrolled after enforcement measures are taken relative to pre-enforcement enrollment, and reductions in the average processing times for HIPAA applications. Other measures depend on what types of barriers to enrollment are identified in the first part of this task. The case study interviews would be used to determine what types of outcome measurements are available from states and to gather the data for the sites selected for case study.

Two types of data would be collected to measure effectiveness. The first type would address HIPAA marketing activities. Is the marketing effort directed at employees? How do the states involve the business community in marketing the program? How does the state measure its effectiveness in complying with HIPAA? The second type would include any state information on the number of HIPAA eligibles and enrollees, changes over time in participation rates, and whether the state meets or exceeds federal minimum standards. Additional data would be sought to understand the grievance and complaint processes. How many HIPAA-related complaints have been filed, for what issues, and with what results?

The hypotheses about effectiveness would be tested in the comparative case studies. The purpose of the comparative case studies would be to assess the effectiveness of the states’ HIPAA activities using the typology described above. The findings would be used to refine the typology and measurement procedures for a national survey of state enforcement.

Phase Four: National Survey of State Regulators. The case study development work would yield a set of measures to describe the different enforcement models that have been identified, a set of measures of effectiveness, and a set of hypotheses about the relationships among these measures. The case study efforts will have identified what types of measures can be reported by most states. With this development work, we suggest that a fourth phase of this task would be to develop and administer a survey of state regulators on a national basis in order to have a comprehensive picture of state enforcement practices and their effectiveness.

Question B. How does the notification process work and what problems exist?

For HIPAA to achieve its goals, all involved parties must receive adequate notification of its provisions. The legislation requires that employers provide certification to employees and dependents as they leave a group plan. However, there is little known about how the notification process works in practice. This task, which would be a part of the case study, would interview state officials, employers, employee representatives, business groups (including business health purchasing coalitions), insurers, and HIPAA eligibles to better understand the notification process. It will be important to identify the specific roles played by the state, employers, and insurers and to identify problems in the notification process.

The case study protocol would include the following types of question to address issues related to the notification process. When are individuals notified? How and by whom are they are notified? What resources are made available to advise them and answer questions? Does the state specify the terms of the notification, including the content and timing of the notice? How does the state monitor the notification process? In particular, does the state monitor timeliness of the application process? What sanctions are imposed for not adhering to established notification processes and timeliness? For example, does the state mandate that the notice include a state official’s phone number to contact in case of delay? Does the state impose any reporting requirements on employers or insurers? Has the state analyzed those data? Are the costs of the notification process measured, and have there been attempts to reduce the costs? Do the participants maintain data on the volume of notifications?

Employers play an important role in the notification process. The case study protocol would include the following questions to understand this role: What steps have employers taken to meet HIPAA requirements? Have they gone beyond state and federal mandates in the notification process? Do employers develop their own systems for meeting their obligations? Are there differences between large and small employers? For example, do large employers delegate their responsibilities to third party administrators while small employers provide notification themselves? Do large employers designate a HIPAA sign-up specialist within their employee benefits office?

Anecdotal evidence suggests that employers and insurers believe that the notification process imposes burdensome administrative costs. To evaluate this claim, the case study interviews should address the following issues: Is there sufficient documentation to support the charge that notification is burdensome? Have employers and insurers implemented new systems to track HIPAA eligibles? To what extent have these groups experimented with less burdensome alternatives? Have these groups formally requested changes in the notification process?

In addition to informing HCFA(now known as CMS) about the notification process, we propose that the evaluator use this component of the case study as an opportunity to develop information to help in designing other data collection efforts to evaluate HIPAA. As we discuss in more detail under Question D below, we suggest that the evaluation include a survey of a sample of notifications to learn more about the number of HIPAA eligibles and who they are. The discussions surrounding the process of notification described here would be used in this later task to design the sampling process. That is, we use this task as the source of information about the parties responsible for notification—insurer, employer, TPA--and how this varies among different employer types. These responsible parties present sources of frames or lists from which to select a sample of notifications. Furthermore, the entity that tracks employer and dependent eligibility is a likely source of data about COBRA exhaustion rates—data which are also needed to help answer questions about the number of HIPAA eligibles. We suggest that the evaluator use this task to gather information about the tracking files and the kind of data that might be available to determine COBRA exhaustion rates. The use of these data is described under Question D below.

Question C. What Are the Effects of Hipaa Induced Legislation in the Small Group Market on Employment Based Coverage?

Among the key access questions about the HIPAA group reforms are :

  • What are the changes in enrollment in employer-sponsored plans by employees in small groups?
  • What are the changes in rates of offering coverage by small employers?
  • What are the effects on the structure of the market?

The design to address these questions is shown in Table 1 and discussed above. It involves a comparison of changes over time in groups of states that have implemented reform to comply with HIPAA (groups A, B, and C) with states that had previously met the HIPAA standards (group D). The data sources are discussed next.

What are the changes in enrollment in employer-sponsored plans by employees in small groups? A contrast between the state groups in the change the proportion of employees in small groups covered by group insurance can be made using data from the March CPS in the pre-and post-HIPAA period. (We define small to be fewer than 100 workers because the March CPS employer size questions do not allow one to identify groups of fewer than 50). A difference-in-differences design, such as we propose, is quite demanding in sample size because it involves a four group comparison. Based on sample sizes in the 1997 March survey, we estimate that the evaluator would have better than 95 percent power to detect a difference of 4 percentage points in change between group B and D or group C and D. This is equivalent to a 10 percent change in enrollment in the states with new legislation compared to a constant rate in the control group, and power of about 50-60 percent to detect a 5 percent change in enrollment.

Unfortunately, group A in Table 1, which includes states that implemented the greatest change in their small group insurance regulations to conform to HIPAA, consists of a single, small state. Consequently, an evaluator cannot expect to obtain reliable change estimates for this state group. Matters are somewhat better if successive March surveys in the pre- and post-HIPAA period are pooled to make estimates for this state. By pooling data for two years for both the before and after observations, one would have about 70 percent power to detect a 15 percent change in participation in group insurance among those in small groups in group A relative to a constant rate in group D (or about a 6 percentage point difference in the rate of change between the state groups).

HIPAA was intended to eliminate some of the most serious abuses in the market. Thus, as well as the effect on overall participation in group plans, policymakers will be interested in the effects on groups that previously had difficulty in acquiring group coverage. Certain industries, for example, are known to be singled out as poor risks by insurers and the CPS can be used to make a pre-post comparison of enrollment among those in small groups in at-risk industries. However, when subsetting the sample, pooling of years in both the pre- and post-period may be necessary for reliable results. Focusing on employees in small groups in industries that are often redlined, one would have less than 50 percent power to detect a 15 percent change in participation among these employees in state groups B or C relative to a constant rate in the control states using a single March CPS. By pooling over two years for the pre and post period, however, power can be improved to about 70 percent.

What are the changes in rates of offering coverage by small employers? The CPS does not collect information about whether employees are offered an employer sponsored-plan if they are not enrolled in one. Therefore, answering this question requires an alternative data source. Studying employer behavior is best accomplished through information about individual employers. The MEPS-IC provides information about a large sample of employers, and permits state level analyses in most states (see Part III for more details). Lags in data availability place this data source outside of the time frame of the scope of the evaluation that we have defined. Information about 1999 would not be expected to be available for analysis until the middle of 2001. However, we include it here because it is the best source for studying employer response to HIPAA. Based on the same design for the 1996 survey, the MEPS-IC would provide 80 percent power to detect a 4 percentage point difference in change over time between state group B and the control group D, and a difference of 3 percentage points between group C and group D.

What are the effects on the structure of the market? As we discussed above, Deborah Chollet and her colleagues have developed methods for synthesizing and integrating multiple data sources to produce measures of market structure. We do not believe the HCFA(now known as CMS) sponsored evaluation should duplicate those efforts. However, a simple measure of the count of the number of carriers in the market is a gross indicator of change that HCFA(now known as CMS) may wish to monitor. Regulator interviews conducted by IHPS as part of a Robert Wood Johnson Foundation study to measure insurance market regulations and characteristics that mediate their effect, indicated that most state insurance departments are able to provide this simple measure. This data might be collected during the case studies, or the national survey of regulators discussed under Question A above.

Question D. What are the access effects of HIPAA in the individual market?

We have identified three important sub-components of this question that we suggest HCFA(now known as CMS) incorporate in its evaluation design:

  • How many HIPAA eligible individuals are there and who are they?
  • How many HIPAA eligibles benefit from the reforms and what are the access effects?
  • What are the implementation issues in adopting risk pools as the alternative mechanism?

How many HIPAA eligible individuals are there. Who are they? Estimates of the number of persons who are HIPAA-eligible differ widely. For example, HIAA estimated potentially 3 million additional insured lives in the individual market annually, whereas Klerman put this estimate at only 0.6 million. The estimates differ because of different assumptions about the rate of job turnover, and different assumptions about the percent who are eligible among job leavers. The latter depends on length of prior coverage; eligibility, take-up, and exhaustion of COBRA coverage or continuation policies required by state law; eligibility for other employment based health insurance; and eligibility for public insurance. Accurately estimating these transitions is essential for knowing how many HIPAA eligibles there are. But estimates require panel data to find job changers and then observe their destinations and choices. The only extant data base to do this is the SIPP—a 24-36 month panel survey of a nationally representative sample of the U.S. population.

We considered recommending use of SIPP data to try to model the number of HIPAA eligibles, but rejected this idea for several reasons. First, there are a number of shortcomings of the SIPP data for this purpose. The survey doesn’t ask about COBRA coverage directly, it has to be inferred. The panels aren’t long enough to observe exhaustion of COBRA coverage for most individuals, so assumptions or modeling of this is required. One needs retrospective information on prior health insurance coverage to identify whether there were 18 months of continuous coverage prior to leaving the group plan, which is not available in SIPP. Second, Klerman used the SIPP data in his modeling of the number of HIPAA eligibles, and so there aren’t likely to be significant gains from additional effort using these data.

Instead, we suggest new and better data might be obtained by drawing a sample from notifications of creditable coverage, and interviewing persons selected 2 to 3 months later to measure initial transitions and eligibility for other insurance. This would not be a nationally representative sample. However, by selecting notifications from employers in different size groups and different industries, one could represent experiences of different types of employees. National weights could be estimated from another source (such as the SIPP or CPS) to apply to the sampled experiences.

As indicated above, we suggest that the case study of the notification process would be important to help identify the source of the sampling frame. This, we expect, will vary for different types of employers. For example, large employers (or their agents) may have developed systems to do their own tracking and notification whereas small employers may rely on the insurer to do so.

A survey of recent job leavers, drawn from the notifications, would provide important information about transitions, such as the number who go to another insured job, the number who are eligible for another family member’s group insurance, the number who participate in Medicaid, the number who take up COBRA coverage and the number who decline it. This survey however would not inform the evaluation about another key transition, namely the share of those who elect COBRA coverage who exhaust the benefit and thereby become HIPAA eligible. We expect, however, that the same systems that track employees and dependents creditable coverage would be able to provide information about COBRA exhaustion rates. That is, the sources used to sample notifications must have group coverage enrollment files and could provide exhaustion rates for their covered populations. (At least this possibility should be explored). While not representative, again the sources would provide information for a variety of groups of different size and from different industries.

How many HIPAA eligibles benefit from the reforms and what are the access effects? Answering this question is difficult because there aren’t good strategies for identifying and studying those who are HIPAA eligible and, even once the are identified, there is not a baseline against which to measure change. Therefore, we offer several indirect indicators.

First, the proposed survey of notifications just described would inform about the number of persons who are HIPAA-eligible at the time of the survey who have enrolled in individual insurance plans. Absent baseline enrollment rates among persons who satisfy HIPAA eligibility requirements, the new measure might be compared to coverage rates in individual plans among the population who do not have group or public insurance. A second indirect indicator is enrollment by HIPAA eligibles in risk pools in states that have adopted this as the alternative arrangement. Three out of four states queried that have adopted risk pools as the alternative mechanism indicated that their enrollment systems distinguish HIPAA eligibles from other enrollees and would permit this measurement. This suggests that there may be promise in this approach. The National Association of State Comprehensive Health Insurance Plans (NASCHIP) is currently surveying its members on these issues in preparation for a late September 1998 meeting. The survey instrument includes questions about the number of HIPAA applicants to the risk pool, the number of HIPAA eligible individuals who have enrolled in the risk pool, and the number of HIPAA applicants who have failed to qualify. Therefore, a centralized source of information should be available to HCFA(now known as CMS)’s evaluator. Neither of these measures directly answers the question posed because we do not have a baseline measure to indicate what would have happened to these individuals absent HIPAA; but each indicator provides some measure of the scope of HIPAA.

Another approach is to look at general access effects; that is, to measure changes in insurance coverage in a defined population—such as those without group or public coverage. This measure incorporates both the rate of HIPAA eligibility among the population and access effects for the HIPAA eligible population. Thus, it understates the access effects on the target, HIPAA eligible population. This component of the evaluation would use the design shown in Table 2 and data from the CPS. Based on an analysis of sample sizes in the March 1997 CPS sample, the evaluator would have greater than 80 percent power to detect an increase of about 3 percentage points pre- and post- HIPAA in coverage under individual insurance policies among persons without employer or public insurance in state groups A, B, and C shown in Table 2. This is an increase in coverage of about 15 percent, given that individual coverage in this population is about 18 percent. To detect a change of 2 percentage points (a 10 percent change), one would have about 60 percent power for group A and 75 percent power for groups B and C. Since group D consists of only 2 small states, one pre-and post-HIPAA survey do not produce reliable estimates. By pooling two years in the pre- and post-HIPAA period, we estimate that an evaluator would have about 60 percent power to detect an increase in insurance coverage of about 3 percentage points.

Contrasting the different implementation models (that is comparing change across two of the groups shown in Table 2), is somewhat more demanding on sample size. We estimate that a single pre-and post measurement using the CPS would allow an evaluator to detect a 3 percentage point difference in the rate of change between any pair of group A, B, or C.

Policymakers will also be interested in whether HIPAA has improved access for vulnerable population groups. Therefore, we investigated whether the CPS would provide sufficient sample to measure change in coverage among persons without employer group or public insurance who are in poor or fair health. Because having poor or fair health is a relatively infrequent event, changes in coverage over time would have to be quite substantial to detect them with a single pre- and post-observation from the CPS. For groups B and C, we estimate that the evaluator would have 80 percent power to detect an increase of about 7 percentage points over time using a single CPS for the pre- and post-period; for group A, a change of about 8 percentage points could be detected with 80 percent power. Again, pooling data for multiple years would improve the power.

What are the implementation issues in adopting risk pools as the alternative mechanism? This task would focus on issues in implementing changes to risk pools needed to provide access using a state high-risk pool as the alternative mechanism. It would be accomplished through two mechanisms. First, updating the individual market database developed by IHPS would provide monitoring information on regulatory changes made in state high risk pools to qualify as an alternative mechanism. Second, we suggest that risk pool implementation be part of the case study protocol. The following topics would be covered: What changes to existing risk pools have been made by states to attract HIPAA eligibles? Do states subsidize the costs for low-income HIPAA eligibles? How has HIPAA affected rate-setting in the risk-pool arrangements? What types of products are offered through the high risk pool and how has choice and type of product changed? How do states track and measure HIPAA eligibles’ participation rates in expanded risk pools? Have states developed new information products to inform HIPAA eligibles about the risk pool? What is the application process; how easy is it to apply; has a process been established to enroll individuals within the 63 day period? In selecting sites, the evaluator would want to include states that have modified existing risk pools as an alternative mechanism as well as one or both states that have developed new risk pools for the HIPAA eligible population. The comparative study of these different cases would provide information about differences between new and existing risk pools in the number of HIPAA eligibles who are attracted and retained, the different rate-setting experiences, and other differences in implementation. Information being collected by NASCHIP, discussed above, could be used as part of the site-selection process.


We will focus here on questions about changes in premiums in the individual market. The states that adopted new guaranteed issue or guaranteed renewal provisions in the small group market have not typically introduced new rating restrictions. Thus, we would not expect premiums of groups that purchased insurance prior to HIPAA to change—unless insurers do not risk rate, as discussed in Part II. The average level of paid premiums might rise if more expensive groups enter the market because of the small group reforms, but this is likely to be a small effect. To investigate this change, one would want to study employers who offer insurance and the premiums they pay. As we have noted, the MEPS-IC data are best suited for this purpose, but they are not available within the time frame of our proposed evaluation. Over the longer run, one could look at average premium changes in the contrast groups shown in Table 1. We estimate that samples in the MEPS-IC survey would be large enough to detect a 10 percent increase in premiums in group B or C relative to constant premiums in group D with 80 percent power.

Our recommendation for the HCFA(now known as CMS) evaluation focuses on two topics: (1) the risk spreading mechanism states have adopted and (2) the change in premiums in the individual market.

Question E. How is the risk-spreading requirement being implemented?

This question would be addressed using the case studies and monitoring state regulation through updates of the regulatory database. The IHPS individual database captures some measures of state law requiring risk spreading among carriers. Updates of the database would track changes in these regulations nationwide. The case study would be used to gather greater detail about how states are implementing this provision of the law. The case study interview would collect detailed information about the mechanisms that selected states have adopted to meet the risk spreading requirement of HIPAA—e.g. premium caps in risk pools, subsidies for HIPAA eligibles, requiring carriers to contribute to a state fund for risk spreading, other techniques. The interview protocol would include questions about the determination of the mechanism (e.g. the determination of the cap, the subsidy schedule, the carrier assessments), and enforcement procedures.

Question F. How has HIPAA affected premiums in the individual market?

Data are lacking to provide a thorough analysis of this question. Our database review did not uncover any extant source of data to provide information on average premiums. A few sources exist to measure aggregate premiums, but they do not provide information about enrollments or data to standardize premiums for population or benefits.

However, some trends in individual market premiums can be measured using information from risk pools. Most risk pools include a cap on premiums that is tied to individual market rates. Thus, the risk pool administrators acquire information about prevailing rates in the individual market. Monitoring the information that risk pools have, by monitoring changes in the risk pool premium caps , provides data on trends in individual market premiums. Several states that have adopted federal standards have existing risk pools, including CA, CO, MO, and TN. We checked informally with two of these states (CO and MO) on the availability of data about individual market premiums. Both indicated that they do periodically (either annually or semi-annually) collect information from the top five carriers on premiums and that this information would be available to monitor trends in the individual markets in these states.

Individual market premiums may also be affected in states that have adopted the state risk pool as the alternative mechanism, if the broadening of the risk pool alters the remaining risk in the individual market. Thus, the evaluation would collect information from risk pools in states that have used it as the alternative mechanism as well as states that have adopted guaranteed issue. The design in Table 2 presents comparison groups for studying the effects of different HIPAA implementation models on market premiums.

Another way to measure whether participating HIPAA eligibles are a high risk group is to monitor costs per participant in states that have a high risk pool. At minimum, changes in cost per participant in the pre- and post-HIPAA period can be compared using data from Communicating for Agriculture (see the database review in Part III). In addition, our informal discussions with six high risk pools suggested that more detailed information on claims costs and participant months by plan type are available for the pre- and post HIPAA period. This would permit the evaluator to adjust claims costs for any changes over time in the type of plans selected. In addition, it appears likely that control for population composition—at least age-sex mix—may also be data that the risk pools could provide. States were less certain that these cost data could be separated for HIPAA and non-HIPAA participants—though three of the four risk pools that we contacted in states that have adopted the risk pool as their alternative mechanism indicated that their data systems would permit separate estimates. The NASCHIP survey discussed earlier is also attempting to obtain some of these measures from risk pools. In particular, the survey asks about claims payments for HIPAA eligibles, the number of low-risk HIPAA enrollees (as measured by small claims), and the number of high-risk HIPAA enrolless (as measured by claims in excess of $25,000 to date).


Question G: What Have Been Insurer Responses to the Hipaa Legislation?

We suggest that evaluating the market’s response to HIPAA eligibility be a major focus of the case studies. HIPAA was designed to eliminate practices that discriminate against employer groups and their members or individuals purchasing insurance. The case studies would identify strategies adopted by insurers to facilitate or circumvent HIPAA requirements. As the dominant players in the small group and individual health insurance markets, how insurers adapt to HIPAA will determine whether HIPAA eligibles actually receive HIPAA benefits.

Specifically, the case study would focus on how insurers market HIPAA coverage, including any steps insurers might take to discourage HIPAA coverage. For example, the interview protocol should determine whether insurers use financial incentives to brokers to discourage them from selling to HIPAA eligibles in the individual market or to high risk groups. Other incentives to investigate would include pricing and benefits coverage strategies that make HIPAA coverage unattractive, such as the use of long waiting periods for costly medical conditions, benefits limits or exclusions, restrictive riders, or a benefit design structure that artificially segments the market. The case study would also attempt to assess whether insurers have exited from certain markets.

Some reports have suggested that insurers have implemented new rating methodologies because of HIPAA’s pre-existing condition requirements and have increased premiums. The case studies would complement the quantitative measures of premium change described earlier. They would question insurers about the bases for their rating methodologies, particularly to assess the allegation by GAO that HIPAA-eligibles are charged higher rates because insurers expect this group to be in poorer health, on average, than other policyholders. The case study would question insurers about evidence that the HIPAA-eligible population is in fact at higher risk than other employees. The case study interview should attempt to understand other objections or problems insurers are experiencing with HIPAA-eligibles.

The case study would also interview employers to assess their responses to changes in product offerings and prices. For instance, have employers responded by implementing changes in covered benefits? Have employers been able to offer similar benefits at the same price?

Employment effects

Question H. Are HIPAA induced changes in the small group market related to increases in employee turnover?

This analysis would follow the design shown in Table 1—that is, a comparison of changes in turnover in selected groups of states pre- and post- HIPAA with the change in the control states in group D. Each monthly CPS provides data to measure job change in the past week. This is a rare event, and so very large sample sizes are needed to detect a difference over time. Consequently, this proposed analysis would not be useful in detecting small effects of HIPAA on turnover. However, by pooling data for each monthly CPS in a year to obtain both the pre- and post HIPAA measures, we estimate that the CPS does provide moderate power to detect differences within the range suggested by the literature. Some estimates of the effect of insurance on turnover have placed the estimate at a 25 percent increase. The sample obtained by pooling all CPS surveys in a year prior to and post-HIPAA would have about 65 percent power to detect an effect of this magnitude for state groups B or C (that is, a 25 percent increase in turnover in state group B or C relative to a constant rate in group D).

Ideally one would look at turnover among those in insured jobs. Unfortunately, the CPS does not collect information on insurance every month. Therefore, the evaluation would have to focus on turnover among all employees. Consequently, a 25 percent increase in turnover is probably much larger than one might reasonably expect. As we have noted elsewhere, one can improve power to detect smaller effects by pooling observations over multiple years in the CPS. Using two years in the pre- and post period, one could detect a 20 percent increase in turnover (relative to the control states) with about 65 percent power.

Question I. Does group to individual portability affect early retirement decisions.

This analysis would be similar to that suggested for Question H. It would use the design shown in Table 2 and the CPS to address whether there was a decrease in the probability of being employed among individuals age 60-64 in the post-HIPAA period. Small samples in this age group included in any single CPS would necessitate pooling surveys. Using all respondents in this age group interviewed in a year prior to and post-HIPAA, the analysis would detect a decrease in employment in state groups A, B, or C of about 10 percent (or 4 percentage points) with 80 percent power. This design would provide 80 percent power to detect differences in the rate of change between two of these models of 5 percentage points.