Insurance Market Initiatives

Insurance market initiatives typically modify state insurance regulations in an effort to make it more affordable for small employers to offer coverage and for people without employer coverage to purchase insurance in the individual market.

Insurance market initiatives aim to accomplish the following goals:

1. Limit the cost and growth of premiums for both small employers and individuals

2. Guarantee that people with health risks can purchase insurance

3. Set minimum benefit standards

4. Make finding and purchasing insurance easier

Insurance market initiatives include tactics such as establishing rate bands and community rating rules; providing tax credits for insurance costs; making defined contribution plans available; creating caps/targets for premiums and other expenditures; permitting insurers to offer reduced benefit products; expanding young adult dependent coverage to higher age groups; subsidizing the cost of premiums in a state’s high-risk pool; enacting an individual mandate; pooling individual and small group markets; and forming insurance connectors/exchanges.

The following are examples of insurance market initiatives that are currently in place. Please visit our State Policy Summaries page for more information about current state initiatives.

Mini-COBRA
Under 2009 legislation, employees of small businesses who lose their jobs will be able to continue receiving health benefits coverage at group rates for themselves and their dependents temporarily while they are out of work. The federal COBRA law applies only to employers with 20 or more employees, but Pennsylvania’s “Mini-COBRA” law extends the COBRA option to workers in firms that employ two to 19 employees.

Young Adult Dependent Coverage
Twenty-two states have passed legislation to expand dependent coverage to young adult dependents by changing the definition of "dependent" and extending it beyond the age of 18 for commercial insurance for students and non-students. New Jersey passed one of the most liberal expansions of dependent coverage with its "Dependent Under 31" law. The law defines a dependent as a child with no dependents of his/her own, who is under the age of 31 and who either resides in New Jersey or is a full-time student. Approximately 8,000 young adults in New Jersey now have young adult dependent coverage.

Limited Benefit Mandate
Cover Florida is an unsubsidized state insurance mandate for private insurers in Florida to offer limited benefit plans, with and without catastrophic coverage, using guaranteed issue with some exclusions for pre-existing conditions as allowed by the state. Cover Florida is a low-cost option for Floridians who do not qualify for state programs and who have been uninsured for at least six months or who are recently unemployed.

Rate Bands
Rate bands set limits on the extent to which insurers can vary premium costs based on health status and claims experience by creating a price range (i.e., "band") within which premium costs are allowed to vary. Minnesota Statute 62A.65 states that premiums can vary based upon health status, claims experience, and occupation within a range of 25% above or below the index rate. However, plans sold in Minnesota must be guaranteed renewable at a premium rate that does not take into account the claims experience or any change in the health status that occurred after the initial purchase of the health policy.

Community Rating
Under "pure community rating," rules an insurer must charge all people covered by the same type of health insurance policy the same premium based on the health and demographic profile of the geographic region or the total population covered under the particular policy. A "modified community rating" is more common and allows for rate variation based on certain demographic characteristics (e. g., age, gender, family composition) but not on health status or claims experience (as seen with rate bands). In 2003, New Jersey passed a modified community rating law (N. J. Stat. Ann. § 17B: 27A-25) to protect small businesses. The legislation states that premium rates may vary by no more than 200% (or a 2:1 ratio) between the highest-rated (i.e., most expensive) small group and lowest-rated (i.e., least expensive) small group. Insurers can adjust their rates based only on age, gender, and geography.

Tax Credits for Insurance Costs
In 2009, under Georgia House Bill 977, the state of Georgia began offering non-refundable tax credits to small businesses (1 to 50 employees) who offer their employees a high deductible health plan. Eligible businesses can receive a $250 tax credit for each employee enrolled in the plan for 12 consecutive months.

High-Risk Pools
The Maryland General Assembly established the Maryland Health Insurance Plan (MHIP) under the Health Insurance Safety Net Act of 2002. MHIP is a state-managed health insurance program for Maryland residents who have been unable to obtain health insurance from other sources because of pre-existing health problems. In 2005, MHIP introduced a premium subsidy program, called MHIP+, for low-income enrollees (<200% FPL). Maryland’s risk pool is funded by assessments on Maryland hospitals’ net patient revenues.

Individual Mandate
Massachusetts was the first state to enact an individual mandate that all adults obtain insurance coverage. Starting July 1, 2007, all adults in the state who could afford insurance were required to purchase it or face a penalty under Massachusetts Health Care Reform. Each year, Massachusetts establishes standards that determine whether individuals and families can afford health insurance based on their incomes and the cost of health insurance premiums. Those who are deemed unable to afford health insurance according to these standards are not penalized for lack of coverage.

Insurance Connectors/Exchanges
The Utah Health Exchange, opened in August 2009, is an internet portal where residents can find, compare, and purchase private individual and family health insurance coverage. The website also provides a standardized electronic application and enrollment process for all applicants and plans. Utah’s exchange is open to individuals and small businesses until 2011, at which time the exchange will open to larger employer groups. Currently, employees of small businesses can use employer-provided pre-tax dollars (through either a health reimbursement arrangement or a Section 125 cafeteria plan) to purchase insurance through the Exchange. Families and individuals who don't get insurance through their employer can purchase insurance through the Exchange on their own.