Destroying Insurance Markets: A Series

Published March 1, 2004

During the early 1990s, many states adopted regulations requiring health insurance companies to accept anyone who applied for coverage and charge everyone within each group the same rates regardless of their age, gender, lifestyle choices, or health status. These regulations, called guaranteed issue and community rating (see sidebar), were intended to force healthy people to subsidize less-healthy people, and to make it easier for people without health insurance to get back into the system.

Eight states–Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont, and Washington–imposed community rating and guaranteed issue on health insurance companies that sell to individuals as well as to groups. Their decisions, controversial at the time, have had a major impact on the health insurance marketplaces in those states.

The following case study is the second in a Health Care News series (the first, published in February 2004, addressed New Jersey) documenting how community rating and guaranteed issue have destabilized and sometimes destroyed the private individual insurance markets in states that adopted such legislation.