States have historically regulated health insurance, although self-insured employer health plans are exempted under Federal law (under what is known as the “ERISA pre-emption.”)  States have typically sought to regulate the following:

• The financial solvency and viability of health insurance companies
• Premiums charged for health insurance
• Underwriting practices – e.g. the ability to deny coverage for pre-existing conditions (“guaranteed issue”)
• Benefits provided – e.g. parity for mental health coverage
• Employer obligations to provide health insurance

These regulations vary from state to state.  Some studies suggest that requiring “guaranteed issue” increases the cost of healthcare coverage overall, creating political resistance.  Mandating that employers provide coverage has also met with political resistance.  Some studies suggest that mental health parity reduces overall costs, but they are not conclusive.

In addition to addressing these issues of coverage, cost, and obligation, a number of other innovative regulatory initiatives have occurred at the state level.  Subsidies have been provided to small employers, to aid them in providing insurance to lower-income employees.  Rhode Island mandated that employers offer a basic “cafeteria plan,” which reduces the out-of-pocket cost of healthcare.  (See Component, “Cafeteria Plans.”) 

Massachusetts offered subsidies that laid-off workers could use to pay their COBRA premiums for continued health coverage, which are mandated by Federal law but are typically unaffordable for many workers.  Other states have attempted to close gaps in Medicaid coverage by creating “seamless” coverage for beneficiaries of these programs.  Still other states provide “high risk pools” for residents who have been denied coverage due to pre-existing conditions.

More than thirty states currently provide high-risk pools for residents who have difficulty obtaining coverage due to pre-existing conditions.  These states vary somewhat in their approach, but most offer comprehensive major medical coverage, with an option to elect HMO, PPO, or indemnity-style coverage.  Many of these plans offer disease management programs for people with chronic conditions.

The primary drawback to these risk pools for consumers are the relatively high cost of coverage (while state-subsidized, they can still cost twice as much as standard individual coverage).   They also share many of the same deficiencies as other forms of individual (vs. employer-based) coverage.  There are 6-12 month waiting periods for pre-existing conditions (which is paradoxical, since those same conditions are what qualify enrollees to join a pool), and out-of-pocket costs are typically higher than in employer-based plans.

Maine created Dirigo Health in order to provide better health insurance coverage for lower-income residents of the State.  DirigoChoice provides a subsidized health insurance program to employers with fewer than 50 workers.  Dirigo Health was also mandated to monitor quality, incent more insurers to enter the Maine health market, and provide other services.

Dirigo also provided subsidized coverage to lower-income members, although this program has been suspended due to a lack of ongoing funding.  DirigoChoice was administered by Anthem and is now being transitioned to Harvard Pilgrim Health Care.

Healthy NY is an initiative to provide more affordable insurance to small businesses and individuals by pooling risk, offering reinsurance to reduce programs, reducing tobacco tax revenues to support the plan, and targeting uninsured, underinsured and low income populations.  An online screening tool allows users to assess their own probable eligibility or non-eligibility for the Healthy NY program.

Virginia and California have each passed laws requiring insurers in the state to offer parity for mental health benefits, meaning that services to treat mental health conditions must be reimbursed at a comparable rate to those offered to treat other conditions.

While not currently a state regulatory initiative, the Robert Wood Johnson-funded “Cash and Counseling Program” is intended as a model for future state initiatives.  Funds have been provided to a number of states for the purpose of implementing and testing this program.

As the program’s website explains, “Cash & Counseling offers Medicaid consumers who have disabilities more choices about how to get help at home. Specifically, it gives frail elders and adults with disabilities the option to manage a flexible budget and decide for themselves what mix of goods and services will best meet their personal care needs.”

Speaks to Visible Gaps in Coverage, and possibly other leverage points, by showing how states can be an active partner in creating new solutions to the problem of uncovered health costs.