Health insurers have a good shot at turning a profit on 1-person and family policies even in states that require insurers to accept all applicants.[@@]
Researchers at Harvard University have published data supporting that conclusion in a report on a detailed look at 7 states’ individual health insurance markets.
The researchers, Nancy Turnbull and Nancy Kane, included 3 states ? Massachusetts, New Jersey and New York ? that require individual health insurers to sell coverage on a “guaranteed issue” basis and offer the same rates to sicker applicants that they offer to healthier applicants.
The researchers also included 4 states ? Iowa, Kansas, Kentucky and Washington ? that let the free market set individual rates and rely on government-run “high-risk pools” to insure residents rejected by the commercial insurers because of health problems.
Although claims costs might be higher in the guaranteed-issue states, rates are also higher. Thanks to the high rates in the 3 guaranteed-issue states, individual market medical loss ratios there range from about 75% to 85% of premium revenue, just as they do in the 4 free-market states, the researchers write in their study report.
The researchers did not have direct access to individual market profitability data, but they argue that the product loss ratios suggest that the individual products are profitable.
“The withdrawal of carriers suggests that reform has made the individual market less attractive for some insurers in some states,” the researchers write. “Yet the individual market has been profitable for the largest carriers in each of the study states.”