Guaranteed issue & community rating backfire

From a recent report by Americas Health Insurance Plans and Milliman, Inc.:

Guarantee[d] issue requires insurers to sell an individual health insurance policy without regard to a person’s health and community rating requires that all consumers pay the same or similar premiums without regard to age or gender.  According to the report, these initiatives have the potential to cause individuals to wait until they have health problems to buy insurance.  This could cause premiums to increase for all policyholders, increasing the likelihood that lower-risk individuals leave the market, which could lead to further rate increases.  If this continues, the pool or market could essentially collapse or shrink to include only the high risk population.

“While these reform goals were laudable, they frequently had unintended consequences that disrupted the individual marketplace,” said Leigh Wachenheim, FSA, MAAA, Principal and Consulting Actuary at Milliman, Inc.

Overall, the report found that states that implemented guarantee issue and community rating saw a rise in insurance premiums, a reduction of individual insurance enrollment, and an exodus of health insurers from the individual insurance market.  In addition, the report found no significant decrease in the uninsured population in states that implemented these initiatives, often a stated goal of legislators.

Consequently, several states that initially implemented guarantee issue and community rating have since repealed or modified their laws with the intent of stabilizing the insurance marketplace and providing consumers more choice and access to coverage.

These government controls are immoral regardless of their impact, as they violate each of our right to freely associate (or not associate) with others according to our own best judgment.  Instead, they substitute the judgment of a politician or bureaucrat, and threaten punishment for not according accordingly.

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  • Dale

    Milliman don’t understand the mathematics of community rating very well. Read this paper

    “Demand elasticity, risk classification and loss ooverage: when can community rating work?”

    http://tinyurl.com/da5z7y

  • http://www.patientpowernow.org/2010/01/15/insurance-price-controls-hurt-sick/ Insurance price controls hurt the sick | Independence Institute: Patient Power

    [...] The controls also result in higher premiums and more insured: Guaranteed issue & community rating backfire. [...]