You want to know what other states have done to make health insurance more affordable and available to small businesses.

SUMMARY

During the mid-1990s, nearly every state passed laws designed to make health insurance more affordable and accessible for small businesses. In addition, in 1996, the federal government passed the Health Insurance Portability and Accountability Act (HIPAA), which set minimum accessibility standards in the small employer group insurance market.

STATE LAWS

States enacted laws affecting affordability to change the way health insurers in the small group market determined premiums. Forty-seven states have laws placing some type of restriction on the premiums insurers charge small employers. In some states, insurers are required to use "rating bands," which limit variations in premium rates based on factors such as age, gender, claims experience, and health status. This narrows the difference between the highest and lowest premium insurers charge small group members. Other states have community rating laws, which require insurers to charge everyone within a geographic region the same premium and prohibit premium variation according to the actuarial risk presented by the group.

Still other states have modified community rating laws, which prohibit the use of prior claims experience or health status in determining premiums but permit the use of certain demographic factors such as age, gender, and industry.

In general, state rating laws in the small group market are designed to require insurers to "pool" small employers together in order to provide cross-subsidies for employers with high-cost (risk) workers. Thus, all small employers buying insurance in a geographic region would experience less variation in premium due to the prior claims experience or the health status of their workers.

Twenty-eight states permit purchasing alliances in the small group market. These are entities that select, based on quality or price, health plan benefit packages and offer coverage to members' employees.

All 50 states have laws designed to improve access to health insurance for small employers. These laws include "guaranteed issue" and "guaranteed renewal" requirements. A guaranteed issue requirement means that insurers offering insurance in the small group market must offer coverage to any small employer group regardless of the health status or prior claims experience of the group's members. A guaranteed renewal requirement means that insurers offering health insurance in the small group market must renew an employer's health insurance coverage at the employer's option.

THE FEDERAL HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT

HIPAA was intended to increase the access, portability, and renewability of private health insurance plans by setting minimum standards for individual, small group (including fully insured and self-insured), and large group markets in all states.

Among other requirements, small group market reforms required by the law include guaranteed access, guaranteed renewal, and anti-discrimination requirements.

In the small group market, insurers must make all health plans available and issue coverage to any small employer that applies, regardless of the group's claims history or health status.

HIPAA also prohibits small group insurers from excluding any member within the group based on health status, medical condition, medical history, claims experience, receipt of health care, genetic information, evidence of insurability or disability.

JH:ts