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Study Shows Insurance Reforms Enable Older, Sicker People To Get Coverage

Laws passed in recent years to help small employers and individuals purchase health insurance have had mixed success, according to a three-year study at Wake Forest University School of Medicine.

These state and federal laws have helped older or sicker people obtain coverage if they can afford it. But health insurance affordability and enrollment in the small employer and individual markets have not improved as a result of these laws, said Mark A. Hall, J.D., professor of law and public health.

The study also revealed that:

  • The reforms have made competition between insurers in the small-group market fairer by prohibiting them from denying coverage to groups with health problems or from raising rates for these groups exorbitantly.
  • Competition has increased among small-group insurers.
  • In states with stringent reforms affecting health insurance purchase by individuals, competition has diminished as insurers have left the market fearing that they would receive too much unprofitable business.
  • Insurers employ various strategies to circumvent the reform laws, but none is serious enough to undermine the reforms.
  • Innovative reforms, such as purchasing cooperatives and voluntary programs to spread risk among insurers, have been little used.
  • Independent insurance agents play an important role in making these reforms work well.

The study involved in-depth interviews in seven states with insurance industry sources and regulators. It also included a market test in which a potential purchaser contacted insurance agents for information on available coverage for a very small employer group with an unhealthy member.

The states studied were Colorado, Florida, Iowa, New York, North Carolina, Ohio and Vermont. These states were chosen to represent a variety of reforms. Researchers were interested in finding out in each state whether particular reform packages worked as intended, had no effect, or harmed the functioning of the insurance market.

The reforms studied included guaranteed issue and renewability of health insurance products, portability of coverage, restrictions on insurers'' use of preexisting condition exclusions, restrictions on how insurers can set prices, methods to spread risk equitably among insurers, and public purchasing cooperatives. The study also looked at the preliminary effects of the federal Health Insurance Portability and Accountability Act, which took effect July 1, 1997.

Detailed reports on each state are available on the Internet at www.phs.wfubmc.edu/insure/. Attached is a brief report summarizing findings across all the study states. Also found on the web site is a background paper on the rationale for the reforms.

The study was funded by the Robert Wood Johnson Foundation, through its Changes in Health Care Financing and Organization program. Based in Princeton, N.J., the foundation is the nation''s largest philanthropy devoted exclusively to health and health care.

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