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June 2008

Failing Grades: State Consumer Protections in the Individual Health Insurance Market

As pressure mounts to find a solution to our health care crisis, some lawmakers are promoting the individual health insurance market as the best avenue for reform. But without adequate consumer protections, the individual insurance market offers a raw deal. Individuals seeking health coverage on their own have virtually no bargaining power to obtain good health benefits at a reasonable rate.
The task of protecting consumers in the individual market has mostly been left to the states. States have taken some steps to protect consumers, but they face limitations.

To understand what Americans face when they buy health insurance in the individual market, we surveyed all state insurance departments and compiled information on the laws that each state has in place to protect consumers. We divided these protections into the following areas:

  • Availability of coverage
  • Premiums
  • Pre-existing conditions
  • Coverage revocation
  • Enforcement of rights

We found that protections vary greatly across the country, and in many states, because of a lack of consumer protections, insurance companies can deny people coverage, raise premiums significantly, refuse to cover treatment for certain conditions, and revoke the coverage of policyholders who have paid premiums for years.