The Impact of Guaranteed Issue and Community Rating in the State of New York

This report examines the impact that guaranteed issue and community rating, as implemented by New York Legislative Act 12350 on April 1, 1993, has had on the number of insureds, premiums, and claim costs for the individual and small group health insurance markets in the State of New York.

Specifically, our analysis shows that:

• The number of insureds covered under the Act is estimated to have decreased by approximately 500,000 people from before reform. This results in an estimated 2.3 million covered insureds as of January 1, 1994.

• The average annual premium per contract for individual and small group markets combined is about $3,300 after reform. The average annual premium is estimated to have decreased by a few percent in the small group market and by at least 20 percent in the individual market. This result is probably due to the purchase of leaner coverage and/or the increase in the percentage of single (non-family) policies.

• The cost of annual claims for the same contact after reform is estimated, based on modeling, to have increased by 6 percent for the small group market and 46 percent for the individual market, as compared to the cost before reform. These estimates by market are influenced to some extent by the apparent shift of some younger and healthier people from the individual to small group market; this shift escalates the individual market percentage increase while decreasing the small group market percentage increase. If claims have increased as estimated, future rate increases would be needed to at least partially offset this result.

Our est6imates focus only on the individual and small group (less than 50 lives) markets before and after reform. While the law may have had an impact on Medicaid and the larger group market, these changes are beyond the scope of our review.