based on the risk presented by an individual or group. For example, almost all state insurance regulations permit risk-based premium differences, but they vary greatly in the limits they place on underwriting practices. Several states have attempted to preserve a degree of community rating and open enrollment through their regulation of Blue Cross and Blue Shield plans. However, the success of medically underwritten individual and small-group coverage and the spread of self-insurance for large groups have undermined these state policies. The federal Americans with Disabilities Act permits most medical underwriting, and the Employee Retirement Income Security Act of 1974 (ERISA) is silent on the issue.

As a consequence of the deterioration and fragmentation in community risk pools, states are increasingly looking for new risk-spreading strategies. A few have recently adopted limits on medical underwriting along the lines discussed later in this chapter (Freudenheim, 1992c). In addition, some have imposed taxes on insured health plans, health care providers, and other sources to support state-subsidized programs for high-cost and low-income individuals. One problem with such subsidy strategies is that, as noted in Chapter 2, ERISA generally protects employee health benefit plans from state-imposed premium or claims-based taxes and from other state regulations.

Access to Health Care

Risk selection can affect access to health care in at least four ways. First, to the extent that fear of unfavorable risk selection leads insurers to refuse coverage—in whole or part—to higher-risk individuals, those individuals may face barriers in obtaining needed health care. Second, if health plans fear that covering, providing, or improving specific services will attract higher-risks, they may limit coverage of those services even more than they might simply in pursuit of cost containment. Third, to the extent that some individuals are discouraged from selecting a health plan that fits their particular needs because the plan's premiums have been raised by unfavorable selection, the result may again be reduced access to appropriate health care. Fourth, if people worry that their use of health services may disqualify them from future insurance coverage, they may limit their use of needed services, fail to submit claims for covered expenses, or pressure physicians to record diagnoses that are less likely to attract an underwriter's attention. The last two actions add error to the data bases used for health care research and monitoring.

Strategies to control or compensate for risk selection may make health coverage more affordable and accessible for many high-risk individuals in the short run, but they will not by themselves make coverage more affordable in general. In fact, by limiting the degree to which low-risk individu-



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