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The Individual Insurance Market: A Building Block for Health Care Reform?

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Abstract:

This synthesis presents findings from a group of projects exploring various aspects of the individual insurance market. They were funded by the Robert Wood Johnson Foundation's Changes in Health Care Financing and Organization (HCFO) initiative throughout the past decade. Topics include:

* characteristics of the current individual market and potential changes for the future;
* lessons from Association Health Plans;
* efforts to reform and stabilize individual insurance markets;
* premium subsidies via tax credits: the case of the Health Coverage Tax Credit;
* comprehensive state reform; and
* the role and experience of high-cost individuals in the market.

Along with individual research findings, the synthesis presents common themes that emerged from this body of research.

* Risk can shift quickly and dramatically in the individual market and policy-makers should remain alert to the creation of regulatory gradients within and between markets that may set the stage for adverse selection. Imposing federal policy over state regulation of markets creates a similar set of challenges.
* The individual market is characterized by a series of one-on-one transactions, including marketing, product selection, payment and underwriting. This fundamentally retail nature of the market underlies both its vulnerability to adverse selection and its inherent administrative inefficiency; policy-makers should be realistic about what administrative efficiencies are possible even in an expanded market.