New Hampshire Should Be Applauded for Seeking Market Reform

Published August 31, 2004

On January 1, 2004, key provisions of a law deregulating New Hampshire’s small group health insurance market went into effect. That law which also affirmed reforms implemented two years earlier to the Granite State’s individual medical market has made New Hampshire an island of common sense in a sea of government-run health insurance nonsense.

Policy makers in many states across the country and especially, it seems, in the Northeast seem to think government regulation of health care is part of the solution. In fact, as New Hampshire’s experience readily shows, government interference causes more problems than it solves. Real reform requires deregulation.

New Hampshire’s most recent bout with government-induced disorders of the health insurance market began in 1993, when Blue Cross/Blue Shield (BCBS) of New Hampshire complained it was suffering financially from the community rating (CR) and guaranteed issue (GI) practices it was required by law to adopt as the “insurer of last resort” in New Hampshire. In return, BCBS was exempted from paying an insurance premiums tax.

BCBS complained the CR and GI mandates made it unable to compete with firms permitted to use standard health insurance underwriting practices. Rather than seek freedom from the mandates, BCBS lobbied the New Hampshire legislature for rules that would force all state-regulated insurance companies to comply with the CR and GI mandates. The legislation BCBS sought, SB 711, went into effect on January 1, 1995.

That “cure,” not surprisingly, turned out to be much worse than the disease. By 1997, the number of commercial health insurers serving New Hampshire dwindled to five from a previous high of 12. Those remaining in the market reduced their insurance offerings to cover only high-deductible, catastrophic-type health insurance plans. Even BCBS threatened to drop out of the market, complaining once again that its losses were unsustainable.

On November 26, 1997, the department of insurance issued a “Findings and Final Order” with respect to the condition of the state’s individual health insurance market. Insurance Commissioner Charles Blossom found, among other things, that “the quality of products available in this market is worsening,” “the cost of available products in this market is increasing,” and “the loss ratios of the writing carriers has increased.”

Movement toward a legislative solution began in 1998. In legislation that went into effect July 1, 2002, the guaranteed issue requirement for individual health insurance was repealed and a high-risk pool for the medically uninsurable launched. The measure also provided for more flexibility in premium rating, allowing insurers to use medical underwriting and take into consideration an applicant’s age, health status, and smoking habit.

Additional legislation adopted in 2003, which took effect in January of this year, builds on the 2002 reforms by applying them to the small group insurance market. As a result, some companies have returned to New Hampshire and are competing with BCBS in the individual health insurance market. While it is too early to tell, it appears New Hampshire is on the path to restoring competition and choice for its health care consumers.

New Hampshire’s experience illustrates how proponents of big-government health care are on the wrong side of two trends that are sweeping the nation: deregulation and consumer choice. As the popularity of health savings accounts and “mandate-lite” insurance policies makes clear, less government involvement in health care, not more, is the wave of the future. New Hampshire policy makers are riding that wave successfully, and they should be applauded for doing so.

Conrad F. Meier ([email protected]) is managing editor of Health Care News.