Individual Health Insurance and States:  chronologies OF CHANGE

State Reform Initiatives in Effect Before and During the ACA

"States Implement Health Reform" bannerIncludes updates August 2015

Introduction: Individuals seeking private health insurance faced a number of challenges, especially those whose employers do not offer any health insurance coverage.  Unlike most group insurance policies, acceptance for individual insurance was not guaranteed in most cases.  Applicants often were required to submit several years' worth of medical history before they are either approved or denied insurance.  Furthermore, after the issuance of insurance, consumers might face further difficulties.  For example, insurance companies had the flexibility in many jurisdictions to cancel health insurance retroactively, if they discover that the individual either knowingly or unknowingly omitted information about his or her health history in the application for insurance.  Retroactive cancelation requires the consumer to pay back to the insurance company any funds the company may have already covered for the consumer's health expenses. 

At the start of 2010 it was estimated that there were 17-18 million people with individual coverage.  In light of increasing consumer and policymaker dissatisfaction with the individual market choices, states had begun to legislate in the area of individual health insurance to protect consumer rights.  Until the launching of ACA Exchanges in October 2013, about 80% of individuals enrolled in non-group plans nationally were served by a Blue Cross Blue Shield licensee. 

Federal Health Reform and the Individual Market

The 17 million people who are covered in the individual health insurance market, where switching of plans and substantial changes in coverage are common, have seen significant market changes because of the Affordable Care Act (ACA). Roughly 40 percent to two-thirds of people in individual market policies changed plans within a year. Individuals whose plan changes and are no longer grandfathered now gain access to free preventive services, less restrictions pertaining to annual limits, and patient protections such as improved access to emergency rooms. These Americans also now have access to the Health Insurance Exchanges that provide coverage as of 2014, to offer individuals and workers in small businesses a much greater choice of plans and with a goal of more affordable rates.

2015 Study: Comparing ACA’s Individual Insurance Market Reforms

Early predictions that health plans sold through the Affordable Care Act’s insurance marketplaces would attract a higher share of people with costly health problems have not been realized, an August 2015 Commonwealth Fund study finds.  To see whether the ACA’s reforms of the individual market are working to promote competition based on value instead of insurers’ ability to segment consumers based on their health risk, researchers compared plans sold on and off the exchanges. They found that plans featuring more generous benefits, which appeal to people with health problems, are more commonly sold off the exchanges rather than on. Projected administrative costs and profit margins are higher for insurers operating outside the marketplaces—“a testament to the exchanges’ ability to sell coverage efficiently,” the researchers say. [Read full brief 10pp - PDF]  The Commonwealth Fund, 8/18/2015.

Federal Health Reform and the Individual Market, Background 2008 to 2013

  • "Essential Health Benefits: Individual Market Coverage"

    The Affordable Care Act designated ten categories of services and items included in essential health benefits (EHBs). The ten categories include: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.

All ten categories of services and items must be covered by insurance offered in the individual and small group markets as of January 1, 2014.
According to data on pre-ACA marketed plans submitted by health insurance companies to HealthCare.gov, many individuals and families who purchased their own health insurance did not have coverage for several of the categories of benefits now included in EHBs. 2
 

  • 62 percent of enrollees did not have coverage for maternity services.
  • 34 percent of enrollees did not have coverage for substance abuse services.
  • 18 percent of enrollees did not have coverage for mental health services.
  • 9 percent of enrollees did not have coverage for prescription drugs.

Americans who bought coverage in the individual market starting in 2014 gained access to these required essential health benefits. Based on 2013 estimates of the size of the individual market3 and the percent of enrollees in currently marketed plans without coverage for certain services, coverage of benefits in the individual market may expand as follows:4

  • 8.7 million Americans will gain maternity coverage.
  • 4.8 million Americans will gain substance abuse coverage at parity with medical and surgical benefits.
  • 2.3 million Americans will gain mental health coverage at parity with medical and surgical benefits.
  • 1.3 million Americans will gain prescription drug coverage.

State Protections for Treatment of Pre-Existing Conditions for Individual Markets

State law changes and regulation of the small group health insurance market have been heavily influenced by the passage of The Health Insurance Portability and Accountability Act of 1996 (HIPAA). This federal law was designed to increase the access, portability and renewability of private health insurance by setting minimum standards that apply to the individual, small group (including fully insured and self-insured) and large group markets of all states.All 50 states now have some type of state statutory protection and/or definitions related to coverage (or exclusion) of pre-existing conditions.  A much shorter list of states have no waiting period or "look-back" period.  In the absence of a waiting period or "look-back" period stipulation, insurance companies can not deny individual health insurance on the basis of pre-existing conditions.   

Individual Market Reforms

Since the individual market was previously not highly regulated, the federal standards affected insurers selling individual policy in several states, particularly those with laws dated after 1996.  Individual reforms have three significant differences from the reforms targeting small groups:  1) pre-existing condition exclusion clauses are not allowed; in particular, issuers may not impose pre-existing condition exclusions upon individuals eligible for group-to-individual guaranteed access.  2) a state may opt out of the guaranteed issue provision with "acceptable" alternative mechanisms;  and 3) eligibility requirements exist (guaranteed renewal applies to all of those in the individual market, not only HIPAA eligibles).

Health Insurance Exchanges

Between 2007 and 2010, two states launched health Insurance Exchanges, or "Connectors" aimed at aiding those who rely on the individual market. Individuals will have increased ability to use Health Insurance Exchanges with the implementation of federal health reform. See details on Massachusetts, Utah and Florida in NCSL's report:  Health Insurance Exchanges: Overview and State Actions - PDF File (November 2009)

Consumer Assistance Programs (CAP)

For more than a decade at least 20 states offered various types of consumer assistance programs for those having questions or difficulty in maintaining or obtaining health insurance.  With the passage and implementation of the ACA, the role of these programs has become more prominent.  Federal ACA grants to states provided new impetus for such programs, but the current landscape varies by states.

Archive and Legislative History: Before ACA Implementation 2000-2010

Use only for comparison to new information, 2010-2016

Table Definitions:
The following definitions and abbreviations apply to the table below:

Guaranteed Issue:  Requires insurance carriers to offer coverage regardless of claims history or health status. 

Preexisting Conditions:  Limits the amount of time a carrier can exclude coverage for a condition that was present before the new coverage began.  Also usually limits the amount of time a carrier can "look back" to consider a condition as preexisting.  The tables list two numbers indicating first, the maximum exclusion time in months, and second, the look-back time in months (i.e., 12/6). Look-back provisions often use one of two specific standards and definitions:

  • "Prudent Person" definition, meaning that the average layperson would have sought treatment or advice for the given condition.  This means that actually consulting a health care provider is not always necessary for a condition to be considered preexisting.
  • "Objective Standard" definition, which includes those conditions for which someone actually received medical advice, diagnosis, care or treatment prior to enrollment to be counted as pre-existing. A portability provision commonly is included so that a waiting period served under a previous policy is credited toward the new policy. 

Guaranteed Renewal:  Requires carriers to renew policies with small groups or individuals regardless of claims experience. Insurers may discontinue coverage only if the individual or business is at fault (e.g., failure to pay premiums, fraud). Note that the federal HIPAA legislation requires guaranteed renewal.  Each state enforces HIPAA requirements with the Centers for Medicare and Medicaid services (CMS) playing an enforcement role under certain conditions.  If a state notifies CMS that it has not enacted legislation to enforce or that it is not enforcing HIPAA requirments, then CMS becomes responsible for that function.The table below includes laws on the specific topics current to December 2008. 

STATE GUARANTEED ISSUE GUARANTEED RENEWAL PRE-EXISTING CONDITIONS DEFINITION OF PRE-EXISTING CONDITIONS
AL No HIPAA Yes (24/60) No Definition
AK No HIPAA Yes (no limit/no limit) No Definition
AZ No Chap 251-431R (SB 1321, 1997) Yes (no limit/no limit) No Definition
AR No HIPAA Yes (no limit/60) Prudent Person Standard
CA Partial1 1997 Yes, 1993 (12/12) Objective Standard
CO No 1996, 1997 Yes (12/12) Objective Standard
CT No 1997 Yes, 1993, 1997, 20081 (12/12) Objective Standard
DE No SB 166 (1997) Yes (no limit/60) Prudent Person Standard
FL No 1996, 1997 Yes 1996 (24/24) Prudent Person Standard
GA No 1995, 1997 Yes (24/no limit) No Definition
HI No 1997 Yes (36/no limit) No Definition
ID Partial2, 1994, 1995 1994, 1997 Yes, 1994 (12/6) Prudent Person Standard
IL No 1997 Yes (24/24) Prudent Person Standard or Objective Standard
IN No 1998 Yes, 1995, 1996 (120/12) Prudent Person Standard
IA Partial3, 1995 1995, 1997 Yes, 1995, 20082, 2010 (24/60)  Prudent Person Standard
KS No 1997 Yes (24/no Limit) No Definition
KY Partial4,1994, 1998 1998 Yes, 1994 (6/6), 1996 (12/6) Objective Standard
LA No 1993, 1997 Yes, 1995, 2010 (no limit/12) Prudent Person Standard
ME Yes, 1993 1993, 1997 Yes, 1993 (12/12) Prudent Person Standard
MD No 1997 Yes, 2010 (12/12) Objective Standard
MA Yes, 1996 HIPAA Yes, 1996, 2006 (6/6)* Objective Standard
MI Partial5 HB 5571 (1996) Yes, 1996 (12/6)** Objective Standard
MN No 1992 Yes (18/6) Objective Standard
MS No 1997 Yes, 1997 (12/12) Prudent Person Standard
MO No HIPAA Yes (no limit/no limit) No Definition
MT No 1997 Yes, 1995 (12/36) Objective Standard
NE No 1997 Yes (no limit/no limit) Prudent Person Standard
NV No 1997 Yes (no limit/no limit), 2010 (no limit/6) Objective Standard
NH Partial6, 1994 1994, 1998 Yes, 1994 (9/3) Objective Standard
NJ Yes, 1992 1992, 1997 Yes, 1997 (12/6) Prudent Person Standard
NM No 1998 Yes, 1994 (6/6) Prudent Person Standard
NY Yes, 1992 1992, 1997 Yes, 1992 (12/6), 1997 Objective Standard
NC No 1997 Yes (12/12) Objective Standard
ND No 1995, 1997 Yes, 1995 (12/6) Objective Standard
OH Partial7,1993 (capped enrollment) 1993, 1997 Yes, 1993 (12/6) Prudent Person Standard
OK No HIPAA Yes (no limit/no limit) No Definition
OR Partial8 1995, 1997 Yes (24/6), 2010 (6/6) Objective Standard
PA No 1997 Yes (12/60) Objective Standard
RI Partial9 1995 Yes (12/36) Prudent Person Standard
SC No 1997 Yes (24/no limit) Prudent Person Standard
SD Partial10,1996 1997 Yes, 1996 (12/12), 1997 Prudent Person Standard
TN No 1997 Yes (24/no limit) No Definition
TX No 1997 Yes (24/60) Prudent Person Standard
UT Partial11, 1995 1995, 1997 Yes, 1995 (12/6) Objective Standard
VT Yes, 1992 1997 Yes,1992, 1997 (12/12), 2006 Prudent Person Standard
VA Partial, 1998 1996, 1997 Yes, 1995 (12/12) Prudent Person Standard
WA Partial12, 1993 1993, 1995 Yes (9/6) Prudent Person Standard
WV Partial13 1995, 1997 Yes (12/24) Prudent Person Standard
WI No 1997 Yes (24/no limit) Prudent Person Standard
WY No 1995 Yes, 1995 (12/6) Objective Standard
TOTAL STATES 19 50 50 Objective Standard = 19 states Prudent Person Standard = 24 states
 

Source: Kaiser Family Foundation, State Health Facts, "Individual Market Portability Rules (Not Applicable to HIPAA Eligible Individuals), 2010"

Footnotes for Guaranteed Issue: Note: Details and updated data provided by "Health Policy Institute, Georgetown University" as published by Kaiser State Health Facts- December 2007.

1. California: Insurers for the individual markets and HMOs must guarantee issue a standardized policy to those exhausting High Risk Pool coverage (36 months).
2. Idaho: Individual market insurers must guarantee issue standardized policies to the medically uninsurable. Insurers must offer basic, standard and catastrophic policies. These policies are called High Risk Pool Policies.
3. Iowa: Iowa provides a high risk pool for those who cannot afford coverage in the private markets. The Iowa Individual Health Benefit Reinsurance Association (IHBRA) has been merged into HIPIOWA effective January, 2005.
4. Kentucky: Beginning in 1998 with HB 315, the standardized plans and guaranteed issue requirements were replaced by a complex "pay or play" system that was named the Guaranteed Acceptance Program. In 2000, HB 517 created a high risk pool called the Kentucky Access. These measures were specifically taken to encourage more people to return to the individual markets.
5. Michigan: HMOs, after 24 months in existence, are required to guarantee issue to a limited number of applicants during one, 30 day open enrollment per year.
6. New Hampshire: There were many flaws with the 1994 law on guarantee issue. The greatest conflict being that the law did not require individual policies issued before the law to comply with the new laws. Therefore, the impact of the reforms were dampened. Due to declining enrollments, the guaranteed issue was repealed in 2002. Instead, a high risk pool was created.
7. Ohio: Individual market insurers must guarantee issue standardized policies on a periodic basis. Non-HMOs are required to guarantee issue standardized policies (up to a limited number determined of enrollees as determined by the state) for one 30 day period, annually. HMOs are required to guarantee issue standardized policies annually until reaching a state determined limited number. For HMOs, this period could extend beyond 30 days.
8. Oregon: Individual market insurers must guaranteed issue portability policies to individuals with 6 months of prior coverage.
9. Rhode Island: Individual market insurers must guarantee issue all products to those with 12 months of continuous creditable coverage, provided the applicant is not eligible for alternative group coverage, Medicare or any other state health insurance plan.
10. South Dakota: The South Dakota Risk Pool was created in 2003 to provide coverage to people who have lost coverage and have previous creditable coverage. However, unlike most high-risk pools, the program does not serve uninsured individuals who have a pre-existing condition or illness that causes them to be declined by private insurers unless the person recently lost creditable coverage.
11. Utah: Individual market insurers that have not met enrollment cap must guarantee issue at least one individual market policy to those that are otherwise not eligible for any other type of health insurance coverage (i.e group, HRP, etc.).
12. Washington: The insurers must guarantee issue all products to their applicants,  who receive a minimum score on the state mandated health status questionnaire. The applicants that are not eligible for guarantee issue are referred to the high risk pool.
13. West Virginia: HMOs with greater than 5 years in the market or with enrollment not less than 50,000 must guarantee issue during the annual 30 day open enrollment period.

Footnotes for Pre-Existing Conditions:* Cannot be applied to guaranteed issue products.**Commercial insurers: 6/12, BCBSMI and HMOs: 6/6

1. Connecticut:

  • HR 2833: The legislation would allow insurers to look back only a period of 30 days on medical records of applicants. Furthermore, the legislation extends the HIPAA protections to individuals who are insured through employer-based private plans and non-group, individual plans.
  • Charter Oak Plan: The plan would require managed care companies to provide health coverage to residents who have been uninsured for at least six months and are ineligible for publicly funded health plan and charge only the premium.     

2. Iowa: The HF2539 legislation would prevent private insurance companies from using preexisting health conditions against its applicants.
 

Brief Legislative History of Individual Insurance Reform

Before HIPAA was enacted, there was significantly less regulation of the individual market.  South Carolina took the first steps in 1991 by enacting portability and rating bands. Since then, 14 states enacted guaranteed issue laws (with the most recent law passed in 1998 in Virginia), 42 required guaranteed renewal (which HIPAA requires), 30 placed limits on preexisting condition exclusion clauses and 18 have rating restrictions.

2007-08 STATE ACTIONS: Prompted by numerous consumer complaints and lawsuits against insurers, state lawmakers took action. Among their efforts:

New Mexico: The Legislature passed bills requiring insurers to show that applicants deliberately gave incorrect information on an application. Current law allows cancellation if the error or omission was inadvertent. Without the law, "the consumer has no ability to defend" against a cancellation, says Melinda Silver, attorney with the state's Managed Health Care Bureau. (SB 226 Signed into law as Chapter 87, 3/4/08)

Connecticut: In October 2007, a new law took effect requiring approval from the state insurance commissioner before an insurer could cancel an existing policy.

California: California state regulators announced cancellation-related fines against some insurers, including Blue Cross, Kaiser Permanente and Blue Shield of California.  Legislation introduced in February 2008 required insurers who wanted to cancel a policy to first win approval from the state's Department of Managed Health Care. Legislators adopted a law requiring insurers to pay for any medical treatment they approve, even if they later cancel the policy.

Washington: In March 2008, the Washington state legislature enacted SB 5261, which was signed into law the following month by the governor.  This legislation restores state oversight of the individual health insurance market.  Specifically, the law authorizes the Insurance Commissioner to disapprove unreasonable rate increases and establishes a sliding-scale medical loss ratio for insurers (Medical loss ratios require insurers to spend a certain amount of premium revenue on direct medical care.  These laws help ensure more of the premiums are used on medical care and less on administrative costs, including profits and bonuses). 

Sources: Table updated August 2006 and June  2008 by the NCSL Health Program; selected text adopted from a longer issue brief on HIPAA, originally published 10/3/00 by Health Policy Tracking Service and updated in 2003.  Data also has been compared to online material by Kaiser Family Foundation, at http://www.statehealthfacts.org/comparetable.jsp?ind=353&cat=7 or http://www.statehealthfacts.org/.


State Action Pertaining to Guaranteed Issue: Pre-Existing Condition Coverage

Although all 50 states have some regulations on preexisting conditions, currently, five states have laws that ban insurance companies from rejecting insurance coverage for applicants on the basis of preexisting conditions. The legislation requires insurers to sell coverage to all applicants regardless of their past medical history.  This concept is also known as guaranteed issue.  Since many insurance companies consider caesarean section and even pregnancies as preexisting conditions, the insurance companies in these five states would cover the expenses, without future repercussions to the mother. The policies in the following states are Modified Community Rated, which guarantees insurance applicants will not be denied coverage or affect insurance rates due to pre-existing conditions, as long as the applicant has previously maintained continuous coverage.

STATE DETAILS
ME
Title 24-A M.R.S.A. §§ 2736-C and 2808-B
Requires an insurer to make available to all individuals any individual policy being marketed to Maine residents.  A carrier may deny coverage to individuals if the carrier has demonstrated to the Superintendent's satisfaction that the carrier does not have the capacity to deliver services adequately to additional enrollees within all or part of its service area because of its obligations to existing enrollees.
MA
Chapter 58 of the Acts of 2006
Pre-existing condition is defined as "a condition present before the date of enrollment for the coverage, whether or not any medical advice, diagnosis, care or treatment was recommended or received before that date. Genetic information shall not be treated as a condition in the absence of a diagnosis of the condition related to that information."  Carriers cannot exclude applicants for insurance on the basis on the definition of pre-existing condition as defined above.
NJ
S 1870
S 1870 is an addition to the innovation health insurance law that was enacted in 1992 that "provided guaranteed-issue, guaranteed-renewal coverage, with a prohibition against rating on the basis of health status and limiting preexisting condition exclusions in policies".
NY
A 02609
No pre-existing condition provision shall exclude coverage for a period  in  excess  of  twelve  months following the enrollment date for the covered person and may only relate to a condition (whether  physical  or mental),  regardless  of  the  cause  of the condition for which medical advice, diagnosis, care or treatment was recommended or received  within the  six  month  period  ending on the enrollment date.
VT
§ 8086
No long-term care insurance policy or certificate may exclude coverage for a loss or confinement which is the result of a preexisting condition, unless such loss or confinement begins within six months following the effective date of coverage of an insured person.

 


Gender Distinction in Individual Insurance Rates

Insurance carriers are able to charge men and women different premiums for individual insurance under a practice known as gender rating in 38 states.  Eleven states - Colorado, Washington, Oregon, Montana, North Dakota, Minnesota, Massachusetts, Connecticut, New Hampshire, Maine, and New Jersey have protections against the use of gender to set premiums in the individual health insurance market.  Two other states - New Mexico and Vermont limit the use of gender to set premiums in the individual health insurance market with a rate band.  Gender rating has been criticized for creating financial barriers for women seeking to obtain health insurance.  On the other hand, gender rating has been defended on the basis that it is actuarially justifiable - that women have higher cost health expenses than men and therefore premiums reflect that difference in costs to providing health care to men and women generally.  In any case, many states that allow gender rating require that any difference in premium rates for men and women be "justified by actuarial statistics".  Thus, these states require proof of actual differences in cost of providing health care to women and men generally for insurance carriers to use gender rating.  

Gender Rating State Laws: Slide presentation by Richard Cauchi, August 2009

 


Additional Resources

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NON-NCSL ONLINE RESOURCES

ADDITIONAL EXPERT RESOURCES AND OPINIONS

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