States rapped for lax regulation of individual insurance market

Analysis by a consumer group finds that more Americans are moving to policies that offer them less government protection.

By Emily Berry, AMNews staff. July 14, 2008.

A report from the consumer group Families USA concluded that state regulation of individual health insurance is inadequate -- which is a problem, because more Americans are relying on individual coverage.

With the influx of new customers and loose regulations, "the individual health insurance market constitutes the 'wild wild west' for individual consumers," said Ron Pollack, executive director of Families USA.

According to U.S. Census Bureau data for 2006, the most recent year available, an estimated 9.2% of Americans bought their health insurance directly, rather than getting coverage from their employers. Other surveys have found declining percentages of employers offering health insurance.

In most states, the Families USA report said, health plans are able to refuse coverage, set prices and cancel individual policies without any significant oversight.

Specifically, the group found that:

• Only five states ban health plans from accepting just the healthiest people and excluding people who are ill or who have preexisting conditions.
• In 35 states and Washington, D.C., there are no limits on how high companies can raise a patient's premium if he or she becomes ill.
• In 21 states and Washington, D.C., a company can decline to cover preexisting conditions for more than a year.
• In the vast majority of states and in Washington, D.C., there is no required minimum medical-loss ratio, and some companies spend as little as 60% of premiums on medical care.