TUESDAY, Feb. 8, 2005 (HealthDay News) -- States should adopt stricter regulations to ensure that individual health insurance is available and affordable for Americans everywhere, researchers from the Harvard School of Public Health report.

Their research, based on a seven-state analysis of regulatory reforms, exposes many inadequacies within the current system. The problems include exorbitant premiums, high rates of individuals being rejected for coverage, and lack of coverage for important benefits, such as maternity, mental health and prescription drugs.

"We think regulation can help make the market fairer, and we think that regulation can make coverage more available to people who don't have coverage at the moment," said co-author Nancy C. Turnbull, a lecturer in health policy at Harvard and a former first deputy commissioner of insurance in Massachusetts.

If states fail to act, the federal government should impose a set of standards that states must abide by, the authors recommended in the report, which received support from The Commonwealth Fund, a nonprofit group supporting research on health and social issues.

The Harvard reform plan comes as President Bush looks to expand health coverage to people without insurance. His fiscal year 2006 budget blueprint calls for providing tax credits to encourage individuals to buy their own coverage.

But the Harvard analysis suggests tax credits won't succeed unless the individual insurance market provides reasonably comprehensive coverage that is available and affordable to those who need it.

Turnbull said tax credits will mostly benefit younger, healthier people in states that are less regulated. She believes these credits are unlikely to have a major effect on expanding coverage to the nation's 45 million uninsured, however.

"Tax credits are not going to work very well for most people in terms of making coverage affordable," she said.

But proponents of a free-market approach say adopting the Harvard report's suggested reforms would only make things worse.

"These ideas are just horrible," asserted Greg Scandlen, director of the Center for Consumer Driven Health Care at the Galen Institute in Alexandria, Va.

New Jersey, which enacted stricter regulations more than a decade ago, is a prime example, he said. A healthy 25-year-old male with a $500 deductible health insurance policy pays about $450 a month for individual coverage, more than three times what his counterpart would pay in Iowa, which has much less stringent regulations in place, the Harvard report shows.

What's more, the number of uninsured in New Jersey has been increasing quite dramatically, according to Scandlen.

"My contention is the market is broken because of the regulatory policies that groups like this have pushed for the last 20 years," he asserted.

Regulators face a difficult trade-off between making insurance available to people with chronic or expensive health conditions and making it affordable for healthy, low-risk individuals, the authors explained.

"The states that have taken a less-regulated approach have cheaper products for people who are younger and healthier, but that comes at the cost of having insurance that is less available" to older, sicker patients, Turnbull said.

New Jersey, for one, requires insurers to charge the same premium for a plan, regardless of an individual's age, gender or health status. That means a high-risk male, age 60, pays the same as a healthy 25-year-old male. In states with weaker requirements, there is a fourfold to almost 15-fold difference in the rates charged to those two segments of the population, the study found.

Insurance regulators continue to grapple with these problems of affordability and access.

"There needs to be some way -- a more effective way -- of spreading risk, but pricing the young, healthy people out of the market is counterproductive," said Sandy Praeger, Kansas' insurance commissioner. Her state is exploring the notion of using "reinsurance" to spread the risks of sicker patients across a base of healthier individuals.

Praeger, who chaired the National Association of Insurance Commissioners' Health Insurance and Managed Care Committee last year, praised the Harvard report for nicely laying out the problems in the individual insurance market and offering possible solutions. But those ideas probably won't stick in an environment "when less regulation, and allowing the market to work its magic" tends to be the favored approach, she said.

"The bottom line is it's not about health insurance; it's about health-care costs," Praeger added. Unless insurers are required to cover everyone without regard to health status, "I don't see how these folks that have any kind of an illness are going to be able to afford coverage," she said.

More information

Georgetown University Health Policy Institute offers a state-by-state consumers' guide to health insurance.

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