In this issue, we focus on the variety of state approaches to regulating individual health insurance. The individual insurance market remains a timely topic of interest because many proposals to help the uninsured would rely on this type of coverage. However, the ability to obtain individual health insurance in the U.S. depends very much on where one lives. In most states, only people in perfect health can be confident of their ability to buy individual coverage because insurers can (and do) turn down applicants with health problems, charge them more, or limit coverage for their health condition. In some states, laws limit the ability of some or all insurers from discriminating against some or all residents, some or all of the time. In a few states, discrimination based on health status is never allowed in the individual insurance market.In this issue of News You Can Use, two documents are offered for your information. The first document is a column about the New Jersey individual health insurance market written by Wardell Sanders, Executive Director of the New Jersey Individual Health Coverage Program Board. This column was originally submitted as a letter to the editor of Health Care News, a publication of the Heartland Institute, which featured a critical and misleading article about the New Jersey individual insurance market in February 2004; however, the publication declined to print this response, citing a lack of space. Accordingly, News You Can Use is pleased to make Mr. Sanders’ column available to our subscribers.
In his column, Mr. Sanders points out standard HMO coverage in New Jersey, available for $383.67 per month, “doesn’t have the usual list of exclusions found in many individual market plans and high-risk pool plans. It is a comprehensive plan that covers maternity, mental health, prescription drugs, and does not have a lifetime limit. It is available to anyone, regardless of health status, but does have a 12-month pre-existing condition exclusion. Query: How does that option stack up against other states, especially where the applicant has a health condition or is older?�
For those interested in pursuing this query, we offer our second document – 
a chart summarizing key state rules limiting discrimination based on health status by individual health insurance companies. Many visitors to our web site are interested in comparing the laws in their own state to those in others. This chart was created to enable such state-by-state comparisons, and was supported by grants from the Commonwealth Fund and the New York Community Trust.
We hope you find these two documents interesting and informative.
Setting the Record Straight on
New Jersey’s Individual Health Insurance Market
by
Wardell Sanders
Executive Director
NJ Individual Health Coverage Program Board
April, 2004
[Note to Readers: This column was written in response to an article that appeared in February, 2004 in Health Care News, a publication of the Heartland Institute (an organization based in Illinois.) The publication’s managing editor, Conrad Meier, wrote a highly critical and misleading case study of New Jersey’s individual market regulation, but then, citing lack of space for several upcoming issues, declined to print a response by Wardell Sanders of the New Jersey Department of Banking and Insurance. In the interest of setting the record straight, healthinsuranceinfo.net is pleased to post Mr. Sanders’ response in its entirety.]
The message of the article by Conrad Meier, entitled, “The New Jersey Car Wreck,� in the February 2004 Health Care News, faithfully supports the stated mission of the Heartland Institute, to promote “free market� solutions to healthcare. This article is presented as a “case study,� but in truth it is a polemic, and one in which some statements are incorrect and some important facts are omitted. Despite the dour portrait painted by the author, New Jersey’s individual market has had some success.
Like many critics of guaranteed issuance and community rating, the article’s author selected as his primary source of rate comparison the most expensive plan option available in New Jersey’s individual market: Plan D with a $500 deductible. This led the author to the conclusion that New Jersey’s rates are one of the highest in the nation. But are they? What if the point of comparison had been the standard HMO $30 copay plan which is available for $383.67 per month for single coverage. This plan doesn’t have the usual list of exclusions found in many individual market plans and high-risk pool plans. It is a comprehensive plan that covers maternity, mental health, prescription drugs, and does not have a lifetime limit. It is available to anyone, regardless of health status, but does have a 12-month pre-existing condition exclusion. Query: How does that option stack up against other states, especially where the applicant has a health condition or is older?
The article identifies a “controversy� concerning the number of people who buy coverage in New Jersey’s individual market, and cites differences in data published by the Census Bureau, Employee Benefits Research Institute, and the State. This is not a controversy; these sources are just measuring different things. Just to be clear, the State’s published enrollment for the IHC Program is not intended to show total enrollment of all residents with individual coverage, just coverage through the IHC Program.
Declining enrollment in the IHC Program has been affected by the disbanding of the Health Access Program, which provided state funds to purchase IHC coverage for 23,000 covered persons. It is also affected by the increasing number of coverage options for many individuals outside the IHC Program that have become available (e.g., NJ FamilyCare, NJ KidCare, the State Health Benefits Plan for certain part-time employees, self-funded MEWAs).
Also, New Jersey’s small group market has very relaxed rules for eligibility, and many individual purchasers with businesses have moved to the small group market. Eligibility for the individual market requires a lack of access to group coverage. Lower than average enrollment in New Jersey’s individual market may not resemble a car wreck; it may be emblematic of the fact that people are effectively steered to less expensive group coverage. According to Census data, New Jersey has a greater percentage of its residents covered under group plans (72.1%) than the national average (65%).
The national wave of individual and small employer market regulatory reforms in the 1990s was largely in response to the failure of the free market to provide viable options to the people arguably most in need of health insurance coverage: the sick, the disabled, and older persons not eligible for Medicare. In 1992, New Jersey’s largely unregulated individual market was in crisis. Carriers had increasingly developed methods for turning away business from people with any kind of health condition; the carrier of last resort was going bankrupt; and the trajectory of the market portended a collapse. The 1992 reforms helped avert the collapse of the marketplace and created some short-term stability to the market. Long-term success and viability have proven to be more difficult.
New Jersey stakeholders and policymakers have been continuing a dialogue on the proper balance of regulatory measures and market-based incentives to make the market work as well as possible. But this dialogue deserves to have an accurate and complete set of facts. The article “The New Jersey Car Wreck,� needs a crash course on full disclosure.
In addition, people whose health insurance was not changing also had problems — most often they were under-insured. When insurance did not cover test strips or prescription drugs, or when it imposed high-deductibles and other cost sharing, people had trouble getting care necessary to manage their diabetes. Medical and financial consequences of these problems could be severe. In a number of cases, people developed preventable complications requiring hospitalization and/or amassed medical debts they could not afford to pay. The report concluded that the perspective of people with diabetes — or other serious, chronic health conditions — provide an important lens through which to evaluate health insurance. Proposals to change the coverage system need to be considered in light of their impact on sick people.