Managing Risk in Health Insurance Markets: A Challenge for States in the Midst of Health Care Reform

This NYHealth-funded report issued by the Health Policy Research Center at the Rockefeller Institute of Government and Harvard University reviews strategies New York State and other states could use to manage risk in the small-group and individual insurance markets, ultimately making health insurance more affordable and accessible.

Using Massachusetts and potential Federal reform options as a guide, the report discusses considerations that would need to be addressed to implement such risk management strategies as insurance exchanges and insurance mandates.

The risk of adverse selection is a major reason premiums in the small group and individual insurance markets are higher than in large group markets. States now have considerable jurisdiction over managing risk in these markets and likely will retain this authority under Federal reform. This report discusses several strategies States can use to manage risk and thereby make premiums more affordable. These strategies include insurance mandates; insurance exchanges; small and individual market mergers; community rating; group purchasing arrangements; high-risk pools; assessments of insurers; and reinsurance. While the report is applicable to all States, it includes a particular focus on current risk management strategies adopted by New York State and  strategies the State may want to consider depending on the outcome of Federal reform.