New Families USA Report Shows Lack of State Consumer Protections in Individual Health Insurance Market

The Right, including Presidential candidate John McCain, wants every American to purchase their health insurance in the individual market, where a mere 5% of non-elderly Americans currently get their coverage.  As a new Families USA report makes clear, this would expose Americans to even more volatility than they currently experience in accessing health care and health insurance.

Today, Families USA released an extensive 50-state survey and scorecard of the laws governing the individual insurance markets in each state - "Failing Grades: State Consumer Protections in the Individual Health Insurance Market."  They found great variation across states and, overall, little that states are doing to protect consumers from the anti-consumer behavior of insurance companies.

Key findings, as stated by Families USA, are:

  • Only 5 states prohibit all insurance companies from cherry-picking the healthiest consumers and excluding everyone else.
  • In 35 states and the District of Columbia, there are no limits on how much insurance can vary premiums based on health status.  
  • In 21 states and the District of Columbia, insurers can exclude coverage for pre-existing conditions for more than one year.
  • In 45 states and the District of Columbia, insurers can spend less than 75 cents of every premium dollar on medical services.
  • In 44 states and the District of Columbia, insurers can revoke an individual's health insurance policy without advance review by the state.


How does your state shape up?  Check out Families USA's scorecard for a quick comparison of regulations across states.  Most states do too little to protect consumers from the wills of insurance companies.  In a previous Stateside Dispatch, we detail a number of options states have to bring fairness and accountability to health insurance markets, including guaranteed issue, stronger community rating standards, and higher medical loss ratios.

2008 legislative highlights regulating the individual insurance industry include:  

  • Washington State enacted SB 5261 which will restore the insurance commissioner's oversight of the individual health insurance market and requires individual health plans to maintain a 77% medical loss ratio, meaning they must spend 77 cents of every premium dollar on medical care, rather than profits and administrative expenses.  The new law requires insurers to receive approval from the commissioner for proposed rate increases and allows the commissioner to reject unfair and unjustifiable increases.  
  • As the Colorado Consumer Health Initiative reports, the Legislature beat back fierce industry resistance and passed the Fair Accountable Insurance Rates Act (FAIR Act).  The FAIR Act, sponsored by State Rep. Morgan Carroll, requires insurance companies to submit and justify proposed rate increase to state regulators, who will now be empowered to reject unfair increases.  The new rules will apply to both the individual and small group insurance markets and will bring new transparency to rates.

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