Summary

Most state governments have recently passed legislation designed to improve portability, access, and rating practices for the small employer health insurance market and, to some extent, for the individual health insurance market. Congress is now considering legislation that would seek to reach the same goals within a consistent and uniform national framework. This report provides an overview of what states have adopted thus far and describes various ways that states have treated key components of their recently passed legislation. GAO identifies variations in how states define the types of small employers covered by their health insurance laws, focusing in particular on how these changes affect self- employed individuals and small employer insurance provided through group purchasing memberships or associations. GAO also provides detailed information on variations in state approaches to guaranteed issue and renewal provisions, premium rate restrictions, limitations on preexisting conditions, and renewability requirements as well as other key differences in state approaches.

GAO found that: (1) no state entirely adopted the National Association of Insurance Commissioners' (NAIC) model small-employer health insurance act; (2) the states did not consistently define small employers, eligible employees, carriers, and noncarrier groups offering small-employer insurance; (3) only 20 states included the self-employed, and not all of those states extended all provisions to that group; (4) 15 states passed some type of individual market reform, and 10 closely applied their small-employer reforms to their individual reforms; (5) states had the most difficulty in defining noncarrier groups offering insurance; (6) most states included limitations on preexisting condition exclusions and portability requirements, but differed on the length of the waiting period; (7) most states restricted insurer rating practices, but either significantly changed the NAIC model provisions or used a different approach; (8) states' approaches to rate determinations, permissible premium variations, and the number of carriers' business classes varied significantly; and (9) NAIC amended its model act to redefine small-employers to include the self-employed.