AHIP: States’ Guaranteed Issue and Community Rating Reforms Without a Mandate Failed

Updated Milliman report analyzes states’ experiments with health insurance market reforms;
Consumers experienced higher premiums, coverage disruptions and loss of choice

WASHINGTON, DC — States that enacted guaranteed issue and community rating reforms in the absence of an individual mandate saw their individual insurance markets deteriorate reports Milliman in its updated study, “The Impact of Guaranteed Issue and Community Rating Reforms on States’ Individual Insurance Markets.”

Commissioned by America’s Health Insurance Plans (AHIP), today’s report updates Milliman’s August 2007 report on the impact of guaranteed issue (GI) and community rating (CR) reforms adopted in eight states in the 1990’s.

“In forecasting the impact of potential Court rulings, there is no substitute for real-world experience.  Eight states enacted various forms of guaranteed issue and community rating in the 1990s without covering everyone, and these reforms resulted in a rise in insurance premiums, a reduction of individual insurance enrollment and no significant decrease in the number of uninsured,” said AHIP President and CEO Karen Ignagni.

The report found the following:

“Although results varied widely among the eight states, in general we found that, measured in terms of market size, level of premium, and availability of insurance options, individual health insurance markets deteriorated after the introduction of GI and CR reforms.  Often, insurance companies chose to stop selling individual insurance in the market after reforms were enacted which resulted in a decrease in competition.  Enrollment in individual insurance also tended to decrease, and premium rates tended to increase, sometimes dramatically.  We also did not observe any significant decrease in the level of uninsured persons following the enactment of these original market reforms.”

Other key findings include:

  • “Particularly severe consequences resulted in states such as Kentucky, where reforms were applied piecemeal, so that some portions of the individual insurance market operated under pre-reform rating and issue rules for years after reform was originally enacted.”
  • “Of the eight states we studied, two (Kentucky and New Hampshire) have since repealed guaranteed issue and community rating laws in their individual markets entirely, and one (Washington) has significantly weakened its original community rating and guaranteed issue provisions.  Maine and New Jersey have relaxed their community rating requirements as well.”


  • “According to a memorandum by the Kentucky Legislative Research Commission, more than 40 insurers had left the individual market by January of 1998.”
  • “By late 1996, only one health insurer and the Kentucky Kare (a self-insured plan for state employees that also sold policies to individuals through the purchasing alliance) were selling new policies to non-association individuals.”


  • “After the implementation of these reforms, there was a decline in the number of carriers participating in the indemnity market.”
  • “According to a white paper prepared by the Maine Bureau of Insurance, by 2001 it was ‘clear that the future viability of the individual health market in Maine [was] at serious risk.’  Moreover, the Bureau concluded that ‘the market for individual HMO coverage does now appear to be in a death spiral,’ citing poor experience and large rate increases.”


  • “In 2006, Massachusetts adopted comprehensive bi-partisan legislation aimed at expanding health insurance coverage to the state’s uninsured residents.  Among the key provisions impacting the individual market are an individual mandate requiring individuals to purchase insurance or face fines…”
  • “…Massachusetts health care reform has been successful in achieving its goal of near universal coverage, with over 98% of residents having insurance coverage in 2010.”

New Hampshire

  • “Despite the introduction of premium subsidies for the individual market in 1998…by 2000 only two indemnity insurers based outside of New Hampshire were actively participating in New Hampshire’s individual market.”
  • “Further declines in enrollment eventually led to the repeal of guaranteed issue and community rating reforms in the individual market effective in 2002.”

New Jersey

  • “From 1996 through 1998, carriers with small market shares were raising rates significantly (in one instance, by 415% over the two years), losing enrollment, and exiting the market.”
  • “By 2000, only one small market share carrier remained.  At present, there are only six companies selling individual insurance in New Jersey.”
  • “In a 2004 study, Monheit et al. described the IHCP [individual market] as “a market heading for collapse.”  They found enrollment in the program had declined much more rapidly than national trends and that premiums had increased more rapidly than in the group market.”

New York

  • “By 1996, the GI and CR requirements effectively eliminated the commercial individual indemnity market in New York with the largest individual health insurer exiting the market.”
  • “Despite repeated legislative intervention in subsequent years and shifts towards managed care, premiums increased following reform and enrollment decreased in New York’s individual market at a rate greater than the national average in the years immediately following reform.”


  • “In 1999…the two insurers with the largest individual market share after BCBS-VT both decided to leave the individual market.  After that, the individual market continued to decline.”
  • “The Insurance Department study further found that…the individual market ‘has in essence become a high risk pool.’”


  • “In the late 1990s, the three largest carriers closed their individual blocks to new business, citing mounting losses.  Smaller carriers had also been leaving the market, and individual health insurance became unavailable in many counties.”
  • “It is clear that individual insurance reforms in Washington directly caused many insurers to leave the individual market.  It also appears that the individual insurance market decreased in size faster than the national average after the enactment of reform.”

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