During the early 1990s, state legislators and insurance regulators faced growing public concern over two health insurance problems. The first was rising insurance premiums, in part the result of increased utilization but also because a growing number of state-imposed mandates and restrictions on managed care practices threatened to price middle- and low-income consumers out of the private insurance market. The second was job lock,; the inability of people to take their health insurance with them when they changed jobs.
Each state adopted a different package of legislation and reforms. Some created high-risks pools that subsidized the premiums of people with health problems that made them uninsurable; some passed tort reform to reduce the cost of unnecessary litigation; some offered tax credits to the uninsured and unemployed.
Several states adopted regulations requiring health insurance companies to accept anyone who applied for coverage and charge everyone within each group the same rates regardless of their age, gender, lifestyle choices or health status. These regulations, called guaranteed issue and community rating respectively, were intended to force healthy people to subsidize less-healthy people, younger people to subsidize older people, and to make it easier for people without health insurance--especially those with a pre-existing medical condition--to get back into the system.
Eight States--Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont and Washington--imposed guaranteed issue and community rating laws on health insurance companies that sold to individuals as well as to small groups. That legislation, controversial at the time, has had a devastating impact on the health insurance marketplaces in those states.
