The state legislature, however, repealed that last provision two years later. With the guaranteed-access provisions still standing, the state saw premiums rise and enrollment drop, as residents purchased coverage only when they needed it. Health insurers fled the state and, by 1999, it was impossible to buy an individual plan in Washington — no company was selling.
Washington is among a handful of states that have pursued universal access to health insurance. The challenges they have faced could give some clues about the federal overhaul’s fate should the individual mandate get struck down.
“There are seven states that tried this in the mid-1990s and, in every case, it was a disaster,” said MIT health-care economist Jonathan Gruber, who worked on Massachusetts’ health-insurance law and the Affordable Care Act. “It became pretty clear that, if you want a market to work, you need a mandate.”
Washington state began pursuing health-care reform in 1990, when its legislature created a commission to study how best to provide universal coverage for the state’s 5 million residents. The commission weighed a single-payer scheme in which the state would create and run its own health-insurance plan, but it settled on a “managed competition” model in which the state would play a greater role in regulating the insurance market.
“There were essentially three goals of the law: To cover everybody, to reduce the rate of health-care cost growth by managing competition better and to improve health-care outcomes,” says Aaron Katz, a University of Washington health policy professor who served on the commission.
Starting on July 1, 1993, health insurance companies were required to accept all state residents who applied for coverage — and it barred health plans from charging sick subscribers more, a practice known as underwriting. The requirement to purchase coverage, meanwhile, was not slated to take effect until five years later, in 1998.
That didn’t happen. Republicans took control of the state legislature in 1994 and repealed the individual mandate. The guaranteed-issue provision, however, remained on the books.
“The legislature was loath to repeal the insurance reforms because those were very popular,” says Katz, who advised the legislature on the issue. “That put the insurance companies in a bind.”
The bind they were in was this: The only people buying health insurance were those who foresaw themselves incurring high medical costs. That drove health insurance premiums up. As premiums went up and insurance became less affordable, enrollment decreased significantly.
As one report from the Washington State Insurance Commissioner’s Office described it, the insurance market entered a “death spiral,” with customers buying coverage only “when they needed it.”