State Run Purchasing Pools

Excerpted From: State Briefing Book on Health Care

September 23, 1994
W35

State Run Purchasing Pools

Good Idea: Collectively Renewable Insurance.

There is some evidence that state regulation is largely responsible for the absence of guaranteed renewable health insurance. Insurers have been unwilling to make long-term commitments to policyholders in the face of arbitrary and unpredictable rate regulations. Even without guaranteed renewability, however, many of the same benefits could be obtained if insurance were required to be collectively renewable. This requirement, which usually applies to individual policies, often is not a feature of policies sold to small groups. Thus insurers can refuse to renew the policy of one employer (because, say, an employee has an expensive illness) while agreeing to renew an identical policy of another employer. If insurance were required to be collectively renewable, insurers would either have to renew all similar policies or none of them. They could not single out healthy clients and discard the unhealthy after policies had been purchased.

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© 2001 NCPA

Excerpted From: State Briefing Book on Health Care