Literature on State Health Insurance Reforms



Goodman, John C., and Gerald L. Musgrave. Freedom of Choice in Health Insurance, NCPA Policy Report No. 134. Dallas, TX: National Center for Policy Analysis, November 1988. http://www.ncpa.org/
 This report summarizes trends and the extent of mandated benefits in the U.S. As of 1988. A partial adjustment model using Current Population Survey data for 1985 and 1986 shows that 14.0 of uninsured people lack health insurance because of mandated benefits. An annual (cross-sectional) model for 1986 shows that 25.2% of the uninsured lack coverage due to mandates. The authors provide state-level estimates of the uninsured population due to mandates using both models.

Jensen, Gail A., and M. Morrisey. 1989. State Insurance Regulation and the Decision to Self-fund. Working Paper. Chicago: University of Illinois at Chicago, 1989.
Using data from the 1981 and 1984 Bureau of Labor Statistics Survey of mid-sized and large firms, the authors estimate the impact of total number of mandates and five selected mandates on the likelihood of self-insurance. Mandates were found to increase the likelihood of self-funding.
General Accounting Office, Human Resources Division. Access to Health Insurance: State Efforts to Assist Small Business, GAO/HRD-92-90. Washington, D.C. U.S. Government Printing Office, May 1992. http://www.gao.gov/
This report provides case studies and qualitative evidence of the effects of selected demonstrations on the availability of coverage among small firms. Few additional employers opted to offer health insurance coverage in response to tax credits or other subsidies for small business health insurance.
Morrisey, Michael A., and Gail A. Jensen. "State Small-Group Insurance Reform." in Health Policy, Federalism, and the American States. Editors Robert F. Rich, and William D. White. Washington, DC: The Urban Institute Press, 1996, 71-95. http://www.urban.org/uipress/index.htm
In the past decade, states have responded to the health insurance needs of small businesses by launching a number of reforms. According to authors Michael Morrisey and Gail Jensen, more than 30 states have implemented "bare-bones" policies that seek to make minimum-benefit, affordable coverage available to small employers. Almost all states have enacted legislation modifying the underwriting practices that insurers may use with respect to such things as pre-existing conditions and occupational exclusions. Other states have provided tax or employer subsidies. But despite the efforts of the states, the authors found the state policies have had little success. Drawing from a survey found that the few employers who were aware of the programs found them to be unappealing. In discovering what doesn't work, the authors are able to suggest remedies for the states' small group insurance ills, such as offering long-term instead of short-term subsidies.

Thorpe, Kenneth E., Ann Hendricks, Deborah Garnick, Karen Donelan, and Joseph P. Newhouse. "Reducing the Number of Uninsured by Subsidizing Employment-Based Health Insurance: Results from a Pilot Study." Journal of the American Medical Association 267, no. 7 (February 19, 1992): 945-48.
http://www.ama-assn.org/public/journals/jama/jamahome.htm
OBJECTIVE--To evaluate whether employers who do not provide health insurance would offer such benefits after a 50% reduction in the price of health insurance.
DESIGN--Using a survey of 530 firms at two sites in New York State, we estimate the number of firms that added insurance during 1988 as a percentage of firms that were eligible for the subsidy. We use this proportion as an estimate for the number of firms that would have added insurance in the absence of the subsidy program. We then estimate the number of firms adding insurance during the initial year of the program, 1989.
SETTING--The subsidized health insurance pilot projects were available in Brooklyn and in the Albany- Plattsburgh-Poughkeepsie region of New York State.
INTERVENTION--New York State subsidized the price of health insurance, reducing it by 50%. Eligible employers were responsible for paying the remaining portion of the premium.
RESULTS--The subsidized health insurance products increased the number of small firms (under 20 employees) offering insurance by a small amount, approximately a 3.5 percentage point increase. When fully implemented and assuming all eligible employers were aware of the program, the subsidy would increase the proportion of firms offering insurance by 16.5 percentage points. We view this as an upper boundary.
CONCLUSIONS--Increased program visibility and allowing the employee to share in the premium payment may increase the number of employers offering insurance. Even under ideal conditions, however, the results highlight the limitations of voluntary programs to increase the number of employers offering health insurance.

Jensen, Gail A., and Jon R. Gabel. "State Mandated Benefits and the Small Firm's Decision to Offer Insurance." Journal of Regulatory Economics 4 (1992): 379-404. http://www.rci.rutgers.edu/%7Ecrri/jre.htm
Using a survey of 1320 firms responding to a 1985 NFIB mail survey and 492 small firms (fewer than 50 employees) responding to a 1988 HIAA telephone survey, the authors find that continuation-of-coverage requirements lower the probability of small firm offers of coverage. Between 19.7% (1985) and 43.4% (1988) of firms would have offered coverage in the absence of mandates.
Dyckman, Z., and J. Burnette. Programs to Improve Health Insurance Access for Small Business--what Works and What Doesn't, Report to the Small Business Administration. Columbia, MD: Center for Heatlh Policy Studies, March 1992. http://www.sba.gov/ADVO/research/summaries/adv3.txt
Small businesses face substantial cost and other barriers in obtaining health insurance coverage for their employees. An analysis of data from the Current Population Survey, performed by the Bureau of the Census, indicates that 28 percent of workers aged 18-64 who are employed by firms with fewer than 25 employees had no health insurance coverage in 1989, compared with 8 percent for firms with 1,000 or more employees. This study was commissioned to identify and examine strategies that are proving successful in increasing health care coverage for small business employees.

Families USA . No Sale: the Failure of Barebones Insurance. Washington, D.C. Families USA, July 1993. http://www.familiesusa.org/
This report provides descriptive information about 31 state programs (18 operational) offering "stripped down" health insurance products. It was found that most states had fewer than 400 subscribers for these barebones plans leading to the conclusion that these were not very popular to consumers.

Jensen, Gail A. "Regulating the Content of Health Plans." in American Health Policy: Critical Issues for Reform. editor Robert B. Helms. Washington, DC: The AEI Press, 1993,167-93. http://www.aei.org/3818-2.htm
 This study provides an extensive review of the literature on benefit mandates showing a consistent pattern of findings suggesting that mandates increase the demand for services and/or increase health costs.
This book can be purchased at the above website.

Gruber, Jonathan. "State-Mandated Benefits and Employer-Provided Health Insurance." Journal of Public Economics 55 (1994): 433-64.
One popular explanation for the low rate of employee health insurance coverage is the presence of numerous state regulations which mandate that group health insurance plans must include certain benefits. By raising the minimum cost of providing any health insurance coverage, these mandated benefits make it impossible for firms which would have desired to offer minimal health insurance at a low cost to do so. I use data on insurance coverage among employees in small firms to investigate whether this problem is an important cause of employee non-insurance. I find that mandates have little effect on the rate of insurance coverage; this finding is robust to a variety of specifications of the regulations. I also find that this lack of an effect may be because mandates are not binding, since most firms appear to offer these benefits even in the absence of regulation.

Nichols, Len M., Linda J. Blumberg, Gregory P. Acs, Cori E. Uccello, and Jill A. Marsteller. Small Employers: Their Diversity and Health Insurance. The Urban Institute, June 1997. http://www.urban.org/health/smemployers.htm
The problems with health insurance markets are well known: health insurance costs are high and increasing relative to the cost of other goods; those who need health insurance the most sometimes cannot buy it at any price; changing jobs may lead to interruptions or even to a loss in coverage, despite no change in health status; and millions of Americans are uninsured, many involuntarily. These problems are particularly acute for small employers. In response, the vast majority of states passed some version of small-group reform between 1990 and 1994, as did the federal government in 1996. Still, the number of uninsured continues to rise, and most of the uninsured are connected to the labor force through small employers. Recent federal legislation (the Health Insurance Portability and Accountability Act of 1996, for example), a modest but controversial step toward improving access to coverage, virtually guarantees that the issues surrounding small-group reform will be a focus of policymakers for some time to come. This report examines 10 major factors that policymakers must take into account when developing health insurance policy for small employers.
Litow, Mark E. The Impact of Guaranteed Issue and Community Rating in the State of New York. Brookfield, WI: Milliman and Robertson, Inc. 1994.
Using Current Population Survey data to count persons with coverage prior to reform and insurer data to measure coverage following reform, the author concludes that 405,000 (+ 100,000) lost coverage in the first year following small group and individual market reforms.
Zuckerman, Stephen, and Shruti Rajan. An Alternative Approach to Measuring the Effects of Insurance Market Reforms. Inquiry 36 (Spring 1999): 44-56. http://www.inquiryjournal.org/pressr9.html
Reforms in the small group and individual insurance markets could make it easier for the currently insured to keep their coverage, and could expand coverage by making insurance more accessible to the currently uninsured. We use data from the 1989 through 1995 Current Population Survey to measure the impact of these reforms on state-level rates of uninsurance and private health insurance coverage. Instead of examining the effect of each of the various types of insurance marker reforms, we estimate the impact of packages of reforms on insurance coverage, reflecting how policies were implemented. We find that small group reforms have done little to affect insurance coverage. Individual market reforms, on the other hand, appear to increase uninsurance rates and reduce private coverage. Our findings suggest that small group reforms may have prevented erosion of private coverage, but have not reduced the numbers of uninsured people.
Blumberg, Linda J., and Len M. Nichols. "First Do No Harm: Developing Health Insurance Market Reform Packages." Health Affairs 15, no. 3 (Fall 1996): 35-53. http://www.projhope.org/HA/order.htm
Health insurance reform is complex, and discussions about preferred reforms are often marked by confusion. This paper focuses on the fundamental issue: how best to address adverse selection. We develop four reform packages that could improve insurance market performance without aggravating risk selection problems. We then compare the principles applied in our packages with two specific proposals that formed the basis for the compromise federal legislation passed in August 1996. We also review the evidence to date on the effects of small-group reforms on health insurance markets in various states, and conclude with suggestions for further research.
A reprint of this article can be ordered by visiting this web page. The cost is $12.
Institute for Health Policy Solutions. State Experiences with Community Rating and Related Reforms. Waltham, MA: Brandeis University, September 1995. http://www.ihps.org/
This report examines the experience in several states that have recently implemented health insurance rating reforms and offers important insights for state and federal policymakers. Preliminary data fron New York and New Jersey reviewed in the study do not appear to support claims that community rating rules have resulted in a major reduction in the number of persons with health insurance coverage.
Oliver, Thomas R., and Emery B. Dowell. Small-employer Health Alliance in California. Health Affairs 13, no. 1 (Spring (I) 1994): 350-351. http://www.projhope.org/HA/order.htm
In August 1992 the California legislature approved significant new regulation of the small-group health insurance market. The provisions of A.B. 1672 adopted strict underwriting reforms and established a state-sponsored insurance purchasing pool for small employers. The purchasing pool, named the Health Insurance Plan of California (HIPC), began operation in July 1993. It has become a laboratory to help test the health alliance concept in the Clinton administration's proposal for national health care reform.
A reprint of this article can be ordered by visiting this web page. The cost is $12.
California Department of Corporations. Small Employer Group Reforms: Monitoring of Standard Employee Risk Rates, Report to Legislative Assembly. Sacramento: California Department of Corporations, July 1994. http://www.corp.ca.gov/
Using a survey of indemnity carriers after the implementation of small group reform and health purchasing alliances, small group enrollment was found to decline 5% in the first year. However, results may have been contaminated by a contemporaneous recession.
Lipson, Debra J., and Jeanne De Sa. 1995. The Health Insurance Plan of California: First Year Results of a Purchasing Cooperative. Washington, DC: Alpha Center, July 1995. http://www.ac.org/
Data from the first year of California's health purchasing alliance found that the HIPC achieved only a 1% penetration into firms eligible to join; of employees who enrolled, only 15% had been previously uninsured.
Minnesota Department of Commerce. Study of Small Employer Health Insurance Reform. Minneapolis: MDC, 1995. http://www.commerce.state.mn.us/
Data from the small group market found that following 1993 reforms, there was an 8 to 12 percent increase in the number of small group enrollees.
Marsteller, Jill A., Len M. Nichols, Adam Badawi, Bethany Kessler, Stephen Zuckerman, and Shruti Rajan. Variations in the Uninsured: State and County Level Analyses, Washington, DC: The Urban Institute, June, 1998. http://www.urban.org/health/variatfr.html
This is a study of why health insurance coverage varies across the country and within a state. While individual characteristics of the uninsured are well known, relatively little research has been devoted to explaining the systematic variation in state and county-level rates of uninsurance. Since these aggregate rates are the targets of many recent policies -- health insurance market reforms, Medicaid expansions, high risk pools -- the policy development process can only be helped by a better understanding of the covariates of rates of determinants coverage and uninsurance.
Uccello, Cori E. Firms' Health Insurance Decisions: The Relative Effects of Firm Characteristics and State Insurance Regulations. Washington DC: The Urban Institute, July 1996. http://www.urban.org/
Data from the 1991 HIAA Employer Survey were used to examine the impact of a) mandated benefits overall; b) selected high cost mandates, including substance abuse, mental health and psychological services; and c) various state health insurance regulations, including high risk pools, mandated benefit waivers and guaranteed issue. Among small firms (2-49), 22% are less likely to offer coverage in states with psychological mandates. Mandates were found to have no effect on coverage decisions for those with 50 or more employees.
Morrisey, Michael A., and Gail A. Jensen. "Switching to Managed Care in the Small Employer Market." Inquiry 34 (Fall 1997): 237-48. http://www.inquiryjournal.org/contents3.html
In 1993, only 22% of small employers offered a managed care product; by 1995, nearly 70% did. This study uses nationally representative data on small firms in 1993 and 1995 to examine the factors underlying this dramatic shift. Two explanations emerge from the regression work. Adoption of managed care by large employers appears to have served as a signal, certifying the acceptance of managed care among workers. Second, lower prices for managed care products, relative to conventional insurance, increased the adoption of managed care, particularly in 1995. There is little evidence that state insurance reforms prompted the switch, although they may have helped set the stage for it.
Buchmueller, Thomas C. "Managed Competition in California's Small-group Insurance Market." Health Affairs 16, no. 2 (March/April 1997): 218-28. http://www.projhope.org/HA/order.htm
This paper describes the early experience of the Health Insurance Plan of California (the HIPC), a small-employer purchasing cooperative established in 1993. The plan's experience is consistent with the predictions of advocates of market-oriented health care reform: The program's design has encouraged cost-conscious choice by enrollees, which in turn has generated price competition among plans. Differences across the HIPC's six rating regions conform with the notion that health care competition is less viable is sparsely populated areas. Evidence on risk selection suggests that while the HIPC as a whole has not experienced adverse selection, certain plans within the program have received a disproportionate share of high-cost enrollees.
A reprint of this article can be ordered by visiting this web page. The cost is $12.
Buchmueller, Thomas C., and Gail A. Jensen. "Small Group Reform in a Competitive Managed Care Market: the Case of California, 1993 to 1995." Inquiry 34, no. 3 (Fall 1997): 249-63. http://www.inquiryjournal.org/contents3.html
State-level insurance reforms designed to make health insurance more accessible for small businesses and their employees have become common in the 1990s. This study examines the effects of small group reform legislation enacted in California in 1993. Using survey data on health benefits in small firms, we look at changes in health insurance coverage that occurred between spring 1993 (just before reform) and spring 1995. Our results indicate that insurance became slightly more affordable and, among businesses with three to nine employees, employer provision increased more than 10 percentage points. Provision was unchanged among larger-sized businesses, however. Managed care penetration increased considerably. We argue that California's competitive health insurance market, which already was dominated by managed care, represented a favorable environment for small group reform. In this context, the modest growth in insurance provision highlights the limited potential of incremental reforms for expanding insurance coverage.
Jensen, Gail A., and Michael Morrisey. "Managed Care and the Small Group Market." Presented at American Enterprise Institute for Public Policy Research Conference, Managed Care and Changing Health Care Markets, Washington, DC, April 10, 1997. http://www.aei.org/
Abstract not available
Jensen, Gail A., and M. A. Morrisey. "The Effects of State Inititatives in the Small Group Insurance Market." Revised paper originally presented at the Robert Wood Johnson Foundation conference, The Rapidly Changing Insurance Market: Policy and Market Forces, Washington, DC, March 22, 1997. http://www.rwjf.org/main.html
This study of state reforms showed that barebones legislation increased the probability of small firms offers of coverage, but other individual reforms had no detectable effect. Collectively, small group reforms increased health insurance offers among small firms from a baseline of 46.4% to 50.6% following reforms.
Buchmueller, Thomas, and John DiNardo. Did Community Rating Induce an Adverse Selection Death Spiral? Evidence from New York, Pennsylvania, and Connecticut. Cambridge, MA National Bureau of Economic Research, January 1999. http://www.nber.org/papers/w6872.
Using data from the 1987 to 1996 March Current Population Surveys we find no evidence for the conventional wisdom' that the imposition of pure community rating leads to an adverse selection death spiral.' Specifically, the percentage of individuals in small groups covered by health insurance did not fall in New York (which enacted community rating legislation in 1993) relative to either Pennsylvania (which enacted no insurance reform) or Connecticut (which enacted moderate insurance reform without imposing community rating). Consistent with the predictions of the simple Rothschild and Stiglitz (1975) framework, however, we find that the New York reforms appear to have had a significant impact on the structure of the New York insurance market. Specifically, New York has experienced a dramatic shift away from indemnity insurance toward HMOs. While this shift took place during a period of nationwide increases in the percentage with managed care, the increase in HMO penetration in New York's small group and individual markets was significantly greater than in Pennsylvania or Connecticut.

Sloan, Frank A., and Christopher J. Conover. "Effects of State Reforms on Health Insurance Coverage of Adults." Inquiry 35 (Fall 1998): 280-293. http://www.inquiryjournal.org/pressr7.html
fsloan@hpolicy.duke.edu conoverc@hpolicy.duke.edu
States have tried a number of strategies to reduce the growing number of uninsured people. These include Medicaid expansions and various insurance reforms, such as low-cost plans, subsidized insurance products, risk pooling, open enrollment and continuity of coverage requirements, and community rating. Using data from 1989 to 1994, we examine the impact of such policies on health insurance coverage for adults. We find that few state policies have succeeded in increasing health insurance coverage. For those that work, impacts are very modest or are accompanied by adverse effects such as crowdout. Implementing effective state policies to reduce the number of uninsured remains a great challenge.
Visit the website for the abstract of this article or e-mail the authors for a copy of the paper.

Kapur, K. Labor Market Implications of State Small Group Health Insurance Reform, Working Paper. Santa Monica, CA: RAND Corporation, 1998. Kanika_Kapur@rand.org http://www.rand.org/
Using March 1991-1997 Current Population Survey data, this study examined small group portability and rating reforms on small firm hiring decisions and job mobility. Reforms were found to improve job prospects for employees with family disabilities, but worsened job prospects for older workers. Portability reforms without companion rating reforms were found to have a negative effects on individuals in poor health.
Simon, Kosali Ilayperuma. 1999. "Did Small-group Health Insurance Reforms Work? Evidence from the March Current Population Survey 1992-1997." Unpublished manuscript. College Park, MD: Department of Economics, University of Maryland, March 1999. ilayperu@econ.umd.edu
During the 1990s, almost every overhauled the regulation of small-group health insurance markets. States were driven to these measures by the high rate of uninsurance among workers in small firms as well as the high prices in the small-group market. I use the March Current Population Surveys from 1992-1997 to study how small-group reforms affect whether full-time small-firm employees hold employer provided health insurance. Elementary theory of adverse selection predicts that reforms preventing insurers from discriminating on the basis of expected medical costs should help high-risk individuals, disadvantage low-risk individuals, and probably reduce the overall employer provided coverage rate among small-firm workers. I compare the changes in insurance coverage for workers in small firms before and after reform to changes in rates for workers in non reform states, controlling for health insurance coverage of workers in large firms. This "differences in differences in differences" estimator isolates the effects of reform from those of time and state fixed effects as well as of contemporaneous developments in a state other than small-group reform. I find that comprehensive pricing and issue reforms decreased the rate of employer coverage for the average small-firm worker by almost two percentage points. Within small firms, low-risk individuals experienced a 5.7 percentage point decline in the rate of coverage through their employer, while the coverage rate of high-risk individuals does not appear to decrease.
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Hing, Esther, and Gail Jensen. "Health Insurance Portability and Accountability Act of 1996: Lessons from the States." Medical Care 37 (July 1999): 692-705.
OBJECTIVES: To assess the likely effects of the 1996 Health Insurance Portability and Accessibility Act (HIPAA), based on small firms' experiences under state small group insurance reforms that were similar in design to HIPAA.
METHODS: Data on 17,818 small businesses (range, 2- 50 employees) nationwide from the 1994 National Employer Health Insurance Survey were analyzed to examine the effects of state small group reforms on the following: (1) employers' provision of coverage; (2) the percentage of workers in insured firms who were covered by plans; and (3) insurer practices of "enrollee exclusion." Logistic regression models were estimated and used to quantify the marginal effects of state small-group reform. Reform effects were examined for all small firms, for small firms by size category, and for small firms in redlined industries.
RESULTS: Under full reform for at least 3 years (full reform includes guaranteed issue and renewal, portability, limits on pre-existing condition waits, and rating restrictions), employers were slightly more likely to sponsor health plans; however, employee participation in employer plans was no higher and the prevalence of enrollee-exclusion provisions was unchanged. Businesses in redlined industries clearly benefitted from all types of small group reform. For other subgroups of businesses, however, there were advantages and disadvantages associated with reforms, which varied with the scope of the measures and time since their implementation.
CONCLUSION: Widespread small group reform may eventually help raise the proportion of small firms that sponsor health benefits, but not by much.
Hall, Mark A. 1999. An Evaluation of Health Insurance Market Reforms. Winston Salem, NC: Wake Forest University School of Law, February 1999. http://www.phs.wfubmc.edu/insure/summary.html
This is a brief summary of the major findings, abstracted across the multiple states in which this study was conducted. These findings characterize the dominant impression across these states, but there are significant exceptions to some of these findings in some states. For more information and explanation, consult the full reports on this web site.
Buchanan, Joan L., and M. Susan Marquis. 1999. "Who Gains and Who Loses with Community Rating for Small Business?" Inquiry 36 (Spring 1999): 30-43. http://www.inquiryjournal.org/pressr9.html
This paper compares community rating with experience rating for small businesses using a microsimulation model to determine what firms offer and who within these firms purchases insurance. We generate four years of data and find that our results are remarkably stable through time. Both offer and purchase rates are about five percentage points higher under experience rating, but community rating leads to more stable offerings. Under community rating, high-risk firms and families purchase insurance, whereas under experience rating, it is the low-risk firms and families who are the purchasers. Young families and poor families have the lowest purchase rates, with these rates being disproportionately low under community rating.
Monheit, Alan C., and Barbara Steinberg Schone. 1999. "How Has Small Group Market Reform Affected Employee Health Insurance Coverage?" Unpublished manuscript. Rockville, MD: Agency for Health Care Policy and Research, May 1999. amonheit@ahcpr.gov bschone@ahcpr.gov
In the early 1990s, over forty states passed legislation designed to limit a number of exclusionary practices by insurers in the small group market in order to improve the availability and affordability of health insurance to employers in small firms. In this paper, we address the effects of reform on the likelihood that workers are offered insurance or are uninsured. Using a difference-in-difference-in-difference estimator, we devise a number of tests to assess the overall effects of reform, the marginal impact of specific reform provisions, and the effects of reform on population subgroups. We find som evidence that overall reform increases offers of insurance and reduces uninsurance. The marginal effects of specific reform components are generally smaller with no appreciable effect on uninsurance. In contrast, we find some evidence that reforms had quite different impacts on population subgroups.