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Health insurance guide helps legislators navigate public policy

State legislators are under increasing pressure to address the affordability and accessibility of health insurance in their states. Before any progress can be made, elected officials must have a fundamental understanding of the current health insurance system.

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To that end, the American Legislative Exchange Council (ALEC) and the Council for Affordable Health Insurance (CAHI) releases an annual guide for state legislators, written from an industry perspective.

The "2008 State Legislators' Guide to Health Insurance Solutions" can be a valuable tool for consumers in understanding the obstacles that make health insurance such a minefield. It also illustrates the issues that will shape your future health insurance policies. Below are highlights from the most recent guide.

Ways to increase coverage for the uninsured

Leading public policy initiatives are programs for decreasing the number of uninsured individuals. ALEC and CAHI recommend these ways to spread coverage to the uninsured:

  • The market should offer affordable policies with a range of opions, not just high-deductible catastrophic policies.
  • There should be access to health insurance no matter what your health condition, including state high-risk pools for the sickest.
  • Create financial solvency standards for health insurers to guarantee they can pay claims.
  • Claims payments should be timely and fair, but legislators should not expect claims payments that don't meet the terms of a health insurance contract, no matter how sad the patient story.
  • Health insurance rates should be adequate to meet insurer obligations, and rate reviews by regulators should consider the solvency of the insurer.
  • Policyholders should expect fair and consistent treatment — and that meets the terms of the policy.
  • Insurance companies need time and legal rights to eliminate fraud.

The "problem of the uninsured"

The latest U.S. Census Bureau numbers show that 47 million Americans are uninsured. The guide notes that there are many reasons people are uninsured (such as job loss or low incomes) and these reasons vary by state. "It becomes apparent that the 'problem of the uninsured' cannot be resolved by a one-size-fits-all solution," says the guide.

States make it worse

The past several years have seen some experimentation by states to "fix" the problem of the uninsured with laws that have backfired. ALEC and CAHI point to "guaranteed issue" laws as a regulation that has produced negative consequences. Under guaranteed issue laws, health insurers operating in a state must take all applicants, no matter their health status. Some states have tried "community rating" laws, which require that health insurers charge everyone the same for the same services, no matter their health conditions; that means the healthy and the sick pay the same for an identical policy. To insurers, laws like these are quicksand.

These may look good on paper, but they take away a fundamental activity of insurance: underwriting — or, put simply, judging a risk and charging accordingly.

"Together, they dramatically drive up health insurance premiums within just a few years of implementation. If states with guaranteed issue and community rating did nothing more than repeal those laws — allowing health insurers to underwrite again — premiums would begin to fall and competition would return," says the guide.

Maine, Massachusetts, New Jersey and New York have enacted guaranteed issue and/or community rating laws.

Instead, ALEC and CAHI's suggestions include these methods for addressing the uninsured population:

  • All states should have high-risk health insurance pools in order to cover the medically uninsurable.
  • Provide tax credits for workers who don't have access to group coverage through their employers. Also, allow state income tax deductions for out-of-pocket medical expenses.
  • If an employer doesn't offer group coverage, let workers buy their own policies in the individual market and agree to have the premiums deducted from their wages. The employer receives a monthly bill for all the employees (called a "list bill") and remits premiums to the insurer.
  • State insurance departments must be willing to approve policies that offer greater "flexibility," such as a $50,000 annual maximum.
  • Allow medical waivers, where a policyholder agrees to "exclude" a chronic medical condition from coverage in order to receive overall coverage at a lower premium than if the condition were included.
  • Allow policies that exclude most or all mandated benefits, which drive up premiums. Examples of mandated benefits include coverage for alcoholism, chemotherapy, contraceptives, maternity and mental health parity. CAHI publishes a list of current state-mandated benefits.
  • If residents live in states with unaffordable health insurance, let them purchase policies approved in another state.
  • Provide targeted subsidies for small employers as an incentive to offer group coverage, or offer premium subsidies to uninsured individuals.

The "2008 State Legislators' Guide to Health Insurance Solutions" also offers a primer on health insurance topics such as HSAs, prompt-pay laws, medical malpractice reform and underwriting.

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