Policy Documents

Destroying Insurance Markets

March 1, 2005

The lead editorial in the July 24, 2013 Wall Street Journal, titled “Obama’s New York Model,” says President Obama declared last week that “insurance rates in New York’s Obamacare exchange ‘will be at least 50% lower next year than they are today. Think about that: 50% lower.’ ” The editorial goes on to explain how community rating and guaranteed renewal  adopted in New York in the 1990s destroyed the state’s insurance markets, so that the terms under which the Obamacare insurance exchange will operate would constitute deregulation of New York’s insurance marketplace. Since very few other states followed New York’s lead, health insurance premiums In most other states will rise dramatically as a result of Obamacare.

The Heartland Institute was one of the first and most effective organizations in the country calling out the pitfalls of guaranteed issue and community rating. In 2005 we co-published with the Council for Affordable Health Insurance a small book titled Destroying Insurance Markets: How Guaranteed Issue and Community Rating Destroyed the Individual Health Insurance Market in Eight States. The chapter on New York provides some background and details that are missing from the Wall Street Journal piece.

Destroying Insurance Markets documents how guaranteed issue and community rating laws have destroyed the individual health insurance market in eight states.This small book written by Conrad F. Meier and published by The Heartland Institute and the Council for Affordable Health Insurance, presents a series of eight case studies originally published in Health Care News between February and October of 2004. The studies document how guaranteed issue and community rating laws have destroyed the individual health insurance market in eight states. These mandates are not merely poorly crafted laws; they undermine what should be a voluntary, thriving, consumer-driven insurance marketplace. They have succeeded only in making individual health insurance coverage more expensive and less available than it otherwise would have been. As a result, hundreds of thousands of people have been shut out of the health insurance market in these states.

With the exception of Kentucky and New Hampshire, where policymakers are attempting to restore the free market and individual choice, the states profiled have done little to address the serious damage their 1990s’ interventions have caused. We urge state policymakers in states with guaranteed issue to:

  • Repeal guaranteed issue and community rating laws;
  • Roll back mandated insurance benefits by allowing insurers to offer “mandate-lite” and even mandate-free policies;
  • Give individuals who buy insurance the same tax breaks as those whose employers provide insurance;
  • Encourage the use of Health Savings Accounts by giving public employees and those in high-risk pools the option to choose them and providing state income tax deductions for deposits made to the accounts;
  • Permit more health insurance options, including policies sold through membership in associations.