HIPAA's Small-Group Access Laws: Win, Loss, or Draw?
By Mark A. Hall
Perhaps the least controversial aspect of the Health Insurance Portability and Accountability Act (HIPAA) is the set of provisions regulating access to health insurance by small employers (those with 2-50 workers). HIPAA builds on an extensive set of regulations that states began enacting in the early 1990s to make health insurance easier to purchase and to keep. Its requirements include not only the guaranteed renewability and portability provisions, but also an all-products guaranteed issue mandate, which prevents insurers from refusing coverage under any of their small-group products.
Although the vast majority of states (over 40) already had versions of these laws in place prior to HIPAA, a few did not, and there was some variation among those that did. Most important, roughly half the states with guaranteed issue laws applied them only to certain designated products with standardized benefits that were designed for higher risk subscribers. HIPAA requires that higher risk purchasers be able to choose any of an insurer's offerings in the small-group market. HIPAA took what existed in most states and made it universal and uniform.
Assessments of HIPAA's guaranteed issue and related access and portability provisions generally conclude that they have achieved their limited aims and have done no immediate economic harm (Sloan et al. 1999; Hall 1999). Although coverage has not measurably increased as a result, small employers can purchase comprehensive coverage regardless of their workers' (or their workers' families') health problems, as long as they are willing to pay the cost. Because few previously uninsurable employers have elected to add coverage, in most markets there has not been any substantial, measurable increase in small-group premiums that is directly attributable to this added protection.
There certainly continue to be a large number of small employers who don't purchase health insurance. But it appears that the reason for not purchasing is the affordability of insurance, not its accessibility. Prior to guaranteed issue requirements, some insurers certainly turned down high risks, but they were not turning down very many people who actually wanted to purchase insurance for the price at which it could be offered.
In sum, HIPAA's small-group provisions might be scored a draw. By increasing accessibility but not helping affordability problems, HIPAA at best creates a modest gain at no great cost, but also with no great improvement. Appearances, however, can be deceiving. In addition to the added regulatory and administrative costs entailed in HIPAA's portability provisions, there are two sets of hidden costs: the foreclosure of market innovations, and the creation of new administrative burdens at the state level.
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