Effects of "Second Generation" Small Group Health Insurance Market Reforms, 1993 to 1997

In the mid-1990s, several state legislatures enacted a "second generation" of small group health insurance reforms that required guaranteed issue of all products and prohibited the use of health as a rating factor. We use data from two large employer surveys to compare the behavior of small business in nine states that adopted these reforms between 1993 and 1997 to the behavior of small business in 11 states and the District of Columbia, where neither of these small group health insurance market reforms existed prior to 1997 (N = 8,465 in 1993; N = 12,219 in 1997). Our analyses focus on several outcomes: health insurance offer and enrollment rates in any employer plan, and in an HMO plan; turnover in offer decisions; and premiums, variability in premiums, and the rate of change in premiums. Overall, we find no effect of small group reform on any of the outcomes; the sign of the effect is not consistent across reform states, the estimates rarely attain statistical significance, and they show no consistent pattern across the outcomes within each state. Therefore, predictions of the harm these regulations might cause to the market have not come to pass. On the other hand, proponents' hopes for a solution to low coverage rates among small businesses have not materialized either.