In 1993, New York adopted two of the most popular parts of the health care reform bill that recently passed the Senate: "guaranteed issue," or a rule that insurers must sell to anyone, regardless of pre-existing conditions; and "community rating," which prevents insurers from setting premiums based on characteristics like age and sex. (New York's reform is more radical than proposed federal reforms, as it allows no variance at all on age; the Senate bill would cap the amount of age-based difference).

New York did not require anybody to buy health insurance, nor did it give out subsidies to help people pay for it (though it did expand government-provided insurance at vast taxpayer expense.)

These reforms were supposed to make it possible for more people to get insurance coverage. Instead, what they did was drive premiums through the roof. Now, the cheapest insurance plan for a family in New York City costs $26,040, compared to a national average of around $13,000.

Unsurprisingly, few New Yorkers find these prices affordable, and the share of New Yorkers with individually-purchased coverage has fallen by 96%, to about 2 in 1000. Functionally, New York barely even has an individual insurance market anymore. As a result, New York's rate of uninsurance is in the middle of the pack nationally, even though the state ranks 4th in the share of residents on Medicaid.

New York experienced what is known as an "insurance death-spiral." Under community rating and guaranteed issue, healthy people found insurance premiums to be a bad deal and they dropped out. This increased the average risk among insureds, so premiums rose once more, again driving the healthier and poorer participants to drop. The process repeated itself until almost nobody found it worthwhile to buy their own insurance.

Labels: Insurance, NY, States

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