OUT-OF-STATE TRUSTS AND THE POTENTIAL DEMISE OF THE INDIVIDUAL INSURANCE MARKET

Abstract

Group and individual health insurance coverage differ. Group coverage is federally regulated and involves large groups of healthy individuals whose insurance is typically provided through an employer. Individual insurance is more costly, is regulated, often quite strictly, by each state and involves a diverse and fluid set of individuals, including many who are unhealthy. By domiciling in states with relatively little regulation, while operating in states with strict regulation of insurers domiciled within the state, organizations such as out-of-state-trusts can avoid consumer protection mandates and compete unfairly with in-state individual insurers. New public policy models are needed to correct this threat to the individual health insurance market.

Full text

OUT-OF-STATE TRUSTS AND THE POTENTIAL
DEMISE OF THE INDIVIDUAL INSURANCE MARKET
D. ROB HALEY
Blue Cross-and Blue Shield Public Health Science
and the University of North Florida
and
TIM STRAWDERMAN
American Heart Association
©Copyright Sacks Publications-Scipolicy, 2003
Box 504 Haverford, PA 19041USA Editor@Scipolicy.net
Scipolicy and The Journal of Science and Health Policy
are trademarks of Sacks Publications, USA
http://Scipolicy.net
Keywords: Association Health Plans, Health Insurance, Health Care Trusts, Guaranteed Issue, Mandates, Florida, Health Care Fi-
nancing, Delivery of Health Care, Managed Care Programs, Multiple Employer Welfare Arrangements, Out-of-State Trusts, Pr e-
ferred Provider Organizations, Insurance Coverage, Quality of Health Care, Health Care Economics and Organizations
Abstract: Group and individual health insurance coverage differ. Group coverage is federally regulated and involves large groups of
healthy individuals whose insurance is typically provided through an employer. Individual insurance is more costly, is regulated, of-
ten quite strictly, by each state and involves a diverse and fluid set of individuals, including many who are unhealthy. By domiciling
in states with relatively little regulation, while operating in states with strict regulation of insurers domiciled within the state, organiza-
tions such as out-of-state-trusts can avoid consumer protection mandates and compete unfairly with in-state individual insurers.
New public policy models are needed to correct this threat to the individual health insurance market.
Introduction
In an era of increasing health insurance premi-
ums, regulatory requirements, and benefit man-
dates, insurers are searching for opportunities to
become more affordable and competitive in an
uncertain healthcare marketplace.1,2 While this is
true in the health insurance market in general, it
is especially true within the weak, and somewhat
volatile, individual market.
Contributing to this volatility is the fact that the
individual market is relatively small compared to
that of group health insurance, with over 65% of
Americans under age 65 having employer-
sponsored insurance and less than 10% percent
relying on private, individual health insur-
ance.3Although this may appear to be a fairly
small segment of the market, individuals with
this latter type of coverage are typically not eligi-
ble for other forms of health insurance such as
group coverage, Medicaid or Medicare; so indi-
vidual health insurance fills an important niche in
the health coverage market.
The individual market typically covers a fluid
and quite diverse set of persons while group
coverage is typically offered to employers with a
relatively homogenous, healthy workforce. Some
persons seeking individual coverage may work
for an employer that does not offer health insur-
ance, while others may be early retirees, unem-

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2
ployed, or dependants of those with group cov-
erage. Others may have lost group coverage
due to a change in their employment status. In-
dividual purchasers are also characteristically a
much more heterogeneous group compared to
those covered by large group plans, resulting in
premiums for some to be higher relative to those
associated with group coverage.
While the heterogeneity characteristic of the in-
dividual market presents many challenges to the
affordability of health insurance, business prac-
tices can also contribute to the volatility and af-
fordability of premiums. States implement rules
and regulations in an attempt to provide stability
to this market. Each state regulates the indivi d-
ual market in different ways, with some, more
than others, opting for regulation of eligibility,
premiums and benefit mandates.
One of the most problematic aspects of this
market stems from the practice of certain health
insurers to avoid state regulation and mandates.
They achieve this by domiciling in one state, and
then marketing and offering coverage to indi-
viduals in a more regulated state.4 This allows
these insurers to gain a competitive advantage
over the domiciliary insurers by freely entering
and exiting a particular state’s marketplace. We
call these insurers “out-of-state trusts” (OSTs),
and will show how the growth of OSTs can po-
tentially harm consumers in some states and
lead to the collapse of their individual health in-
surance market.
Background
Comparison of Individual with Group Health
Insurance - We define individual health insur-
ance as insurance plans that are not attached to
a business or sponsored by an employer or
other group, and are issued directly to the poli-
cyholder. Alternatively, group insurance is a
health services contract or insurance policy that
covers a group of persons, usually employees of
a business or other entity. The majority of
Americans obtain their health coverage through
an employment-based group.5 This coverage
may also include an employee’s family members
within one contract with which the policyholder’s
employer provides or sponsors.
Within a group arrangement, health insurance is
usually much more affordable than that pur-
chased by the individual because employers re-
ceive a federal tax benefit if they fund all or part
of their employees’ health insurance. Plus, in
most cases, the value of the full premium can be
excluded from an employee’s taxable income.
Individual health insurance purchasers do not
receive this same type of employer subsidy.
Also unlike participants in group markets, indi-
viduals must pay the full cost of their health in-
surance premium and, under current federal tax
law, can claim an itemized tax deduction only if
premiums and out-of-pocket expenses exceed
7.5% of adjusted gross income.6 Therefore,
those who are not self-employed typically pay
individual health insurance with after-tax dollars.
When employers purchase group health insur-
ance for their healthy employees, they are, in ef-
fect, cross-subsidizing those employees that are
considered to be sicker or “higher-risk” since
premiums are determined by the risks associ-
ated with the group of beneficiaries as a whole.
Unlike individual coverage, most group insur-
ance is issued without a medical examination or
other evidence of individual insurability. The in-
surer understands that as groups become larger
it can insure enough individuals to balance those
in poor health against those in good health.
Thus, the group purchase of health insurance by
larger employers generally makes the coverage
more affordable to higher risk employees.
Individual insurance purchasers typically pay a
premium that more closely represents their cur-
rent and projected healthcare experience--they
generally pay premiums that are based on their
individual health status and risk characteristics.
Individual coverage is medically underwritten,
meaning that the insurance company gathers
health information on the proposed insured and
determines the individual’s insurability and base
premiums on these data. This information can
be obtained from questionnaires, doctor and
hospital records, and/or medical examinations.
The risk of individual health insurance is not
spread over a large group of individuals, result-
ing in individual purchasers often experiencing
higher and more volatile premiums for either the
same or even less generous benefits than those
obtained by large employer group purchasers.
As a result, the decision making process is dif-
ferent for a person who is purchasing coverage
within the individual market compared to an em-
ployer-based purchase. Relative to those par-
ticipating in employer-sponsored coverage, indi-
vidual purchasers compare the cost of coverage
with the value of the benefits that are offered
and often make economic decisions that benefit
their personal financial performance.7As a result,

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3
they may choose the least costly policy offered,
often trading fewer benefits for lower cost.
Regulation of Individual and Group Health
Insurance - Both group and individual health in-
surance coverage are regulated, albeit in differ-
ent ways. Because of the federal McCarran-
Ferguson Act of 1945 (P.L. 79-15), almost all
health insurance is regulated at the state level,
except for employer-sponsored group insurance
coverage, which is federally regulated.8Individual
health insurance coverage is subject to different
regulations and mandates than insurance that is
sponsored by employers, and is typically and
almost exclusively, regulated at the state
level.9Regulation for individual coverage often
includes benefit mandates that require insurers
to design their products in a particular way. Fed-
eral regulation of large group coverage, on the
other hand, tends to have far fewer benefit man-
dates and requirements.
Since 1983, state governments have passed
over 800 mandates designed to correct per-
ceived or actual inadequacies within the health
insurance market. Such mandates are require-
ments that an insurance company offer specified
benefits within its insurance plan. Some states
have proposed and implemented significantly
fewer mandates than others. States such as
Delaware, Connecticut, Idaho, and Wyoming,
have enacted far fewer mandates on health in-
surers relative to other states such as California,
Maryland, Florida, and New York.10 While Mas-
sachusetts enacted the first health insurance
mandate in 1956, it does not rank first in total
number of mandates. Maryland and Florida re-
spectively rank first and second in the number of
mandated health insurance benefits. While
there are a number of reasons why state gov-
ernments seek these types of interventions, the
following four reasons appear to be the most
prevalent:
First, consumers may have mistakenly under-
valued their need for some types of health bene-
fits. Mandates may then cause these benefits to
be offered, thus informing the public and in-
creasing the demand for these previously un-
dervalued benefits.
Second, there may be selection of certain types
of expensive, relatively rarely used health cov-
erage options, such as maternity or infertility
treatment. A mandate may be employed to im-
prove the affordability of coverage for these op-
tions by spreading their cost over a larger popu-
lation including individuals who will not need or
use such options.
Third, mandates may serve the political interests
of state legislators, regulators and policy mak-
ers. For example, mandates enable them to
broaden the protection of society and meet the
needs of certain constituents or interest groups
without directly raising taxes.
Fourth, mandates may also serve to shift the
cost of state-funded health care services, such
as mental health care, to the private sector.
State funding is then available to spend on po-
litically popular agenda items.
While an individual’s personal health care ex-
perience influences the premium he or she will
ultimately pay, there are also other factors that
affect a person’s premium. Health insurance
mandates tend to cause the cost of health insur-
ance to rise, with a number of studies indicating
that mandated benefits raise the price that indi-
viduals and employers pay for health insur-
ance.11 For example, one study by the National
Center for Policy Analysis (NCPA) indicates that
mandates are increasing the cost of health in-
surance by as much as 30 percent.12 Another
study found that the total cost of the state of
Maryland’s mandates is about 14% of premium,
which was 2.1% of Maryland’s average annual
wage.13
Health insurers experience the actual cost of
coverage mandates in addition to the adminis-
trative cost of complying with each mandate.
These costs are passed on to the consumer
through higher premiums.14 Therefore, if an in-
surer can avoid some or a majority of a state’s
coverage mandates, they can avoid the cost of
complying with and implementing these man-
dates. As a result, insurers who avoid mandates
may either lower their premiums relative to their
competition or may reinvest the resulting sav-
ings back into their organizations.15
A concern about the inclusion of benefit man-
dates on health insurance is that they do not ap-
ply to all insurers, and therefore do not consis-
tently and equitably affect coverage or costs for
all insured people.16 Insurers of most concern in
this regard involve the out-of-state trusts
(OSTs). Such OSTs have emerged as an alter-
native business model within the individual
health insurance market. As noted earlier, the
typical OST is a corporation, or association,
which has its principal office in another state and
is authorized to act as executor or administrator

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4
of health care benefits offered in states in which
it is not domiciled.
Many states allow insurers to establish OST ar-
rangements. These arrangements typically
mimic large-group plans but are actually vehi-
cles to sell health benefits to individuals. The ar-
rangements involve an insurer creating a legal
entity, an OST, which issues a single master
group policy in a similar way that employees
sign up for health insurance under an employer
plan. The OST then issues certificates of cover-
age to individuals who are enrolled in the trust
group.17 Sometimes the trust is described as a
group or association that individuals join in order
to obtain insurance. Sometimes these trusts
have membership qualifications that are broad
enough so that anyone may join. From one per-
spective they appear to be group coverage, but
unlike group coverage the OST, like individual
insurers, can underwrite individual premiums
and exclude anyone from the group.
Out of State Trusts and Regulation - Insurers
selling coverage to individuals have sought to
avoid regulation as individual insurance by the
use of group trust arrangements.18 These trusts
mimic self-funded groups but are typically ex-
empt from individual state health insurance
mandates. The opportunity to mimic self-funded
plans presents a potential for OSTs to avoid the
costs that are associated with mandates for
which in-state insurers must comply.
“Specifically, 1) OSTs do not have to file
and seek approval of policy forms in every
state where the OSTs do business; 2)
they can avoid prior rate approval by issu-
ing the group policy in a state where this
is not required; 3) they can avoid certain
coverage mandates; and, 4) they pay
lower premium taxes relative to instate in-
surers.”19
While state regulators have the authority to en-
force their state’s rules and regulations on their
domiciled insurers who sell individual coverage,
they may not have authority to similarly regulate
OSTs. Therefore, OSTs avoid the more tradi-
tional regulatory burdens such as rate regula-
tion, premium taxes and other health coverage
mandates that apply to in-state insurers who of-
fer individual health insurance. 20
An insurer who seeks to develop an OST typi-
cally chooses to domicile in states with the most
favorable regulatory environment since the large
“group” involved can avoid regulation, except in
the state where the trust is formed. As a result,
OSTs tend to be domiciled in states with the
least amount of state health insurance man-
dates, such as Wisconsin, Alabama, Delaware,
Illinois, and choose to sell their insurance prod-
ucts in other states that require their state-
domiciled insurers to comply with relatively more
mandates.
These trusts then provide coverage to individu-
als in states with relatively more health coverage
rules and regulations, but are only subject to the
rules and regulations of the state in which they
are domiciled. Since OSTs typically claim to be
exempt from state law because they believe
they fall under the same federal rules that allow
employers to self-insure, they typically do not
have to meet fiscal oversight and other require-
ments imposed by states. Therefore, OSTs be-
lieve they are subject to far fewer regulatory
rules and regulations than in-state insur-
ers.21These factors can create unfair competition
between in-state insurers and OSTs.
Consumer Protection Implications - Since
OSTs may not be regulated by the state in which
they sell their products; there is greater potential
for the consumer to experience unfair business
practices. One such practice in which out-of-
state trusts may engage is the so-called “death
spiraling”. Death spiraling begins when an in-
surer sells a certain number of policies and then
closes that particular insurance pool to new
members. The next group of buyers goes into a
different pool. With no new individuals coming
in, the first pool begins to age and average
claims costs and premiums increase. As premi-
ums increase, the healthier members switch to a
cheaper policy. The individuals remaining in the
first pool are sicker, so average claims costs go
even higher and premiums rise again. Eventu-
ally, the sick will drop their coverage leaving only
healthy or ‘good risk’ individuals in the OST’s
coverage pool.
For example, a class-action lawsuit was recently
brought in Palm Beach County Circuit Court on
behalf of hundreds of Florida customers accus-
ing one OST of violating a 1997 state law that
delineates the rights to new coverage for can-
celed policyholders. Allegedly, the OST began
canceling an entire policy line and offering new
health coverage to many of its Florida customers
at higher rates as a means to separate healthy
customers from sicker ones who posed a bigger
claims risk.22 As a result of such business prac-
tices, the sick or ‘high risk’ individuals will join

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5
the pool of the state’s uninsured or will seek
coverage from in-state insurers under ‘guaran-
teed issue’ requirements laid out in state and
federal law.
State Regulation of OSTs - In states where
OSTs are ‘loosely’ regulated, they may be used
as a vehicle to disrupt a state’s health insurance
market. Since the business practices, rates and
forms of OSTs are not typically filed (or regu-
lated) in the state in which they sell their prod-
ucts, OSTs can move more easily into and out of
a state’s health insurance market without having
to re-file with a state’s Department of Insurance
(DOI) for approval each time. OSTs may also
operate through various names and organiza-
tions, creating confusion for the consumer and
the provider on who is ultimately responsible for
paying claims.
This flexibility in movement and structure can
create an ideal way for OSTs to disrupt a state’s
individual market by transferring the OSTs’ high-
risk members to in-state insurers. The market for
in-state insurers then becomes increasingly
smaller and less profitable as they risk insol-
vency without a pool of healthy individuals to
balance the rising costs of an increasingly ex-
pensive high-risk pool. The OSTs then end up
with the very healthiest of individuals, otherwise
known as “cream skimming.” This practice can
be especially evident if an OST can avoid a
state specific guaranteed issue requirement.
State Specific Examples – Florida - Due to the
practices of some OSTs, the Florida Office of In-
surance Regulation (OIR) has launched educa-
tional campaigns warning individuals not to buy
insurance from health insurers that are not li-
censed within the state.23From 2001 to first
quarter 2002, the OIR had tried to take action
against four OST entities that attracted as many
as 15,000 Floridians into plans, then stopped
paying claims and went out of business when
the incoming premiums were no longer enough
to cover costs.24
Furthermore, an OST called Employers Mutual,
L.L.C., was an unlicensed insurance company
that was based in Nevada and sold health insur-
ance in Florida. Employers Mutual presented it-
self as an OST that was not subject to state in-
surance regulations. It sold insurance to 22,000
people who paid Employer’s Mutual $14 million
in premiums. Of this amount, it only paid $3 mil-
lion in claims. Similarly, T.R.G. Marketing group
had been selling health insurance and marketed
itself as an OST that was exempt from Florida
regulation. T.R.G. left the state of Florida in
2001 leaving thousands of Floridians with un-
paid claims.
Since OSTs may choose to offer a lower priced
health insurance product by not having to com-
ply with all of a state’s mandates, individuals will
find these lower premiums attractive and more
affordable compared to in-state insurers. How-
ever, the rates may not be actuarially sound and
the OST may not be required to set aside funds
for reserves to cover the claims of OSTs. Ac-
cording to the Florida DOI, OSTs do not partici-
pate in a state guaranty fund, a fund that covers
unpaid claims in the event of bankruptcy, and a
fund to which state licensed companies must
contribute. Policyholders in unlicensed trusts are
usually left with the responsibility for unpaid
claims when the trust leaves the market or be-
comes insolvent.25Between 2001 and 2002, the
Florida DOI estimates that the loosely regulated
practices of OSTs, as well as practices of unli-
censed insurance companies, affected more
than 30,000 Floridians with over $6 million in
unpaid claims. It is estimated that, in addition to
the cost of complying with state mandates, the
practices of the ‘loosely’ regulated OSTs and un-
regulated insurance companies added as much
as $1,400 a year to the premium costs of a Flor-
ida family who purchased its health insurance
from in-state insurers.26
The regulatory advantages of an OST are sig-
nificant in states, such as Florida, with guaran-
teed issue requirements within their individual
market. Guaranteed-issue laws typically forbid
insurance companies from rejecting applicants
based on the condition of their health. Other
states have elected to implement a "community
rating" system, which requires insurers to charge
everyone the same rates, regardless of health,
or otherwise limits the insurers’ ability to raise
premiums. OSTs can typically avoid a state’s
guaranteed issue laws and community rating re-
quirements while in-state insurers must comply
with these requirements. In Florida, for instance,
OSTs can avoid issuing guaranteed issue prod-
ucts by having the flexibility to raise rates on
these products by as much as 500% to 1000%
over their standard rates. Florida’s in-state in-
surers are limited in their pricing practices for
guaranteed issue products with a cap of 200%
over their standard rates. This disparity in rates
encourages high-risk individuals disproportion-
ately to seek guaranteed issue products from in-
state insurers.

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6
Other State Examples - Similar to Florida, Ken-
tucky, Hawaii, Indiana, and Louisiana have ex-
perienced OSTs that disrupted their individual
coverage markets. Regulators of these states
claim they lack the regulatory authority to en-
force a system of “checks and balances” on
OSTs.27 Such OSTs have diverted millions of
dollars in premiums from other state initiatives
and then exited the state once their “members”
experienced claims. These OSTs had promoted
themselves as self-funded insurance plans for
individuals at greatly discounted premiums, with
benefits resembling standard health insurance
and provider networks, then withdrew, leaving
their sickest members with unpaid medical
bills.28
The impact that OSTs have on the regulation of
insurance depends on the provisions of each
state’s insurance law. If these laws apply to indi-
vidual policies sold, rather than to certificates is-
sued, OSTs avoid regulation as individual insur-
ers because the policy is issued to the trust on a
group basis, and coverage is sold to individuals
as certificates for members, rather than as indi-
vidual policies.29
Federal Regulation of OSTs - The federal gov-
ernment has traditionally done a weak job of
regulating the health care industry. One can
clearly see this with the ERISA (Employee Re-
tirement Income Security Act of 1974) law that
regulates employer-sponsored insurance plans.
This law provides employers with a tremendous
amount of leeway in designing group health care
benefits and has few strict standards.30
This weakness at the federal level was also ap-
parent when the government was charged with
regulating Multiple Employer Welfare Arrange-
ments (MEWAs). These MEWAs were a means
for small employers and other groups to band
together to purchase health care coverage and
be regulated by the federal government rather
than individual states. Unfortunately, the federal
government was unable to adequately regulate
these MEWAs. Resulting fiscal insolvency, fraud
and mismanagement caused scores of people to
lose their health care coverage. Today, MEWAs
are regulated by the states, although there is
push at the federal level to regain regulatory au-
thority.
More recently, the US Congress has begun con-
sidering another public policy involving Associa-
tion Health Plans (AHPs), which would be simi-
lar to MEWAs. Like MEWAs, AHPs would be a
mechanism for small employers and purchasers,
without the benefit of larger purchasing power,
to form larger groups in order to gain leverage in
health care purchasing decisions. A number of
trade groups and national associations, includ-
ing the Blue Cross and Blue Shield Association,
National Governor’s Association and National
Association of Insurance Commissioners have
lobbied against AHPs31 because they would
place heavily state regulated insurers at a par-
ticular disadvantage compared to these less
stringently, federally regulated health plans.
These lobbying groups note the disastrous fed-
eral regulation of MEWAs in advocating against
AHPs. Under the current proposed legislation, it
appears that OSTs would be allowed to operate
as AHPs and therefore gain federal sanction for
their business practices.
Overall, federal regulation of health insurance
typically provides freedom over more stringent
state regulation. Current proposals in the US
Congress would only exacerbate this and result
in tacit, if not explicit, federal promotion of OSTs
and their business practices.
Public Policy Options - The insurance market
in almost every instance operates at a regional
or state level, with competition among insurers
occurring in particular geographic areas. There-
fore, regulation of the industry is best designed
and implemented at that level, rather than at the
national level. As was noted earlier, the federal
McCarran-Ferguson Act of 1945 (P.L. 79-15)
specified just that - that health insurance be
regulated at the state level. But how can a state-
regulated health plan be expected to compete
fairly and equitable with a national health plan
that could legally operate without many of the
costly mandates required by most states?
Clearly, state public policy options must be de-
veloped to ensure that a fair market continues to
work.
State regulation allows individual states to craft
regulation to protect their own citizens and to
enable legislation that meets their own particular
needs. All insurers participating in a particular
state market ought to be required to abide by the
same regulations. Aligning the regulation of in-
state and out-of-state insurers would provide for
strong consumer protections, promote fair cor-
porate competition, and encourage economic ef-
ficiency.
One option to promote fairness would consist of
banning the practice of what is termed “re-
underwriting”. This practice allows OSTs to dis-
criminate against individual consumers based on

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7
their actual or perceived health status.In addi-
tion, OSTs ought to have to abide by the same
portability requirements and rating practices,
along with the same rate filing and benefit cov-
erage mandates, as in-state insurers. This will
ensure that individuals with OST coverage have
the same coverage options should they lose
coverage, as do all other individuals with plans
that are regulated by the state. These require-
ments ensure that policies offered by OSTs pro-
vide a minimum level of benefits and benefit of-
ferings and act to prevent OSTs from gaining a
competitive advantage over in-state insurers.
Recent Developments - One recent example of
public policy that attempts to regulate OSTs is
provided by Florida. n July 2003, new state leg-
islation (SB 2264) was signed into law that now
protects thousands of Floridians and in-state in-
surers by helping to mitigate some of the prac-
tices of ‘loosely’ regulated OSTs.This law now
requires OSTs to disclose, in bold type, that their
insurance plans may result in premium hikes at
renewal that would not be permitted under a
Florida-approved policy. It also defines the
"death spiral" as a rate escalation caused by
segregating healthy and unhealthy groups of in-
sured people. The bill declares that this practice,
engaged in by some OSTs, amounts to "preda-
tory pricing" and is now illegal under an unfair
discrimination provision.32
CONCLUSION
With the proliferation of out-of-state trusts, some
states are experiencing a bifurcated individual
health care coverage market characterized by
in-state and out-of-state insurers. This divided
system contributes to the instability of a state’s
individual insurance market and raises some
significant public policy concerns. The ability for
out-of-state groups to freely enter and exit a
state’s individual coverage market creates an
environment that can harm a state’s most vul-
nerable individuals.
Ironically, as OSTs proliferate, those persons
most in need of coverage are those least likely
to afford and acquire that coverage. Such prolif-
eration can potentially contribute to the pool of
uninsured individuals through ‘death spiraling’
and can also impact negatively the financial sta-
bility of in-state insurers who are subject to a
state’s guaranteed issue mandate and must ac-
cept a disproportionate number of high-risk indi-
viduals. It is essential, therefore, that as with
Florida’s new legislation (SB 2264), public policy
be developed to protect consumers and attempt
to guarantee that all insurers have the ability to
function under the similar rules and meet similar
standards.&
The Authors:
Rob Haley, Ph.D.
Dr. D. Rob Haley is a Director in Consumer
Market Development at Blue Cross and Blue
Shield of Florida where he researches the indi-
vidual insurance market and identifies health
policy and product opportunities. Dr. Haley is
also a Visiting Assistant Professor at the Univer-
sity of North Florida's College of Health where
he teaches in the Department of Public Health's
Health Administration Program where his re-
search focus is on managed care and public
health. Dr. Haley began his career as a Director
in Strategic Planning with Martin Memorial
Health Systems in Stuart, Florida. He has a
Ph.D. in Health Policy and Administration from
the University of North Carolina at Chapel Hill,
School of Public Health and an MBA and MHS
from the University of Florida. His doctoral re-
search focused on Public Health Department
Childhood Immunization Programs and under-
standing the affect of their administrative proc-
esses, management culture, and organizational
linkages on immunization rates.

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8
Tim Strawderman, Ph.D.
Dr. Tim Strawderman is currently a Senior Man-
ager in Strategic Alliances with the American
Heart Association.In that role, he identifies, de-
velops and capitalizes on alliance opportunities
between the AHA and health care organizations,
particularly health plans, purchasers and na-
tional associations. Prior to that, he was a Sen-
ior Policy Analyst with Blue Cross and Blue
Shield of Florida where he created public policy
positions for use in business planning and op-
erations, public influencing strategies, and
communications. He began his career as a Pro-
gram Analyst for the Texas Legislature where he
conducted budgetary and programmatic reviews
of the state's health-related institutions of higher
education. Dr. Strawderman
has PhD in Health Policy from the University of
Texas Health Science Center at Houston,
School of Public Health, and a Master of Public
Administration from Texas A&M University. His
doctoral research focused on understanding and
analyzing public policy development theories us-
ing the Labour Party reforms of the British Na-
tional Health Service (NHS) in 1997 as a model.
Notes
1 T. Humphrey. How and Why the Health Insurance System Will Collapse. Health Affairs. Vol. 21 (6). No-
vember/December 2002.
2 Harris et al.. Managed Care at a Crossroads. Health Affairs. Vol. 19 (1). January/February 2000.
3 GAO. Private Health Insurance: Access to Individual Coverage May Be Restricted for Applicants with
Mental Disorders.GAO-02-339. February 2002.
4 D.J. Chollet and A.M. Kirk, Understanding Individual Health Insurance Markets (Menlo Park, Calif.: Henry
J. Kaiser Family Foundation, March 1998).
5 M. Pauly, A Percy, B. Herring. Individual Versus Job-Based Health Insurance: Weighing the Pros and
Cons. Health Affairs. Vol. 18 (6). November/December 1999.
6 GAO. Private Health Insurance: Access to Individual Coverage May Be Restricted for Applicants with
Mental Disorders.GAO-02-339. February 2002.
7 W. Custer, C. Kahn, T. Wildsmith. Why we should keep the employment-based health insurance system.
Health Affairs. Vol. 18 (6). November/December 1999.
8 Beaufort B. Longest, Jr., Health Policymaking in the United States, 3rd Edition, Chicago: Health Admini-
stration Press, 2002, p. 358.
9 GAO. Private Health Insurance: Access to Individual Coverage May Be Restricted for Applicants with
Mental Disorders.GAO-02-339. February 2002.
10 Employee Benefit Research Institute, “Issues of Quality and Consumer Rights in the Health Care Mar-
ket’ EBRI Issue Brief no. 196 (Washington: Employee Benefit Research Institute, 1998).
11 Mathews, Merrill, An Easy Way to Make Health Insurance More Expensive. NCPA. February 21, 1997;
W. Custer, C. Kahn, T. Wildsmith. Why we should keep the employment-based health insurance sys-
tem. Health Affairs. Vol. 18 (6). November/December 1999; and, J. Cubanski, H. Schauffler. Mandated
Health Insurance Benefits: Tradeoffs Among Benefits, Coverage, and Costs?. California Health Policy
Roundtable, Kaiser Family Foundation. July 2002.

©Scipolicy Journal™ Fall 2003http://Scipolicy.net
9
12 Menges, K.M. Mandates Increase the Cost of Health Insurance by 30%. NCPA. August 13, 1997.
13 William M. Mercer, Inc., “Mandated Health Insurance Services Evaluation”, Maryland Health Care Ac-
cess and Cost Commission, December 15, 1998.
14 U.S. General Accounting Office, “Health Insurance Regulation: Varying State Requirements Affect Cost
of Insurance,” Report No. GAO/HEHS-96-161 (Washington: U.S. General Accounting Office, August
15 J. Cubanski, H. Schauffler. Mandated Health Insurance Benefits: Tradeoffs Among Benefits, Coverage,
and Costs?. California Health Policy Roundtable. Kaiser Family Foundation. July 2002.
16 Ibid., p.2.
17 M. A. Hall. The Geography of Health Insurance Regulation. Health Affairs. Vol. 19 (2). March/April 2000.
p. 176.
18 Ibid., p. 175.
19 Ibid., p. 175
20 M. A. Hall, “An Evaluation of Health Insurance Reform Laws: The Views of National Insurers” (Winston-
Salem, NC: Wake Forest University School of Medicine, February 1999).
21 Personal Conversation with Florida DOI, August 14, 2002.
22 Terhune, “State Alleges Insurer Sifted Sick Clients,” Wall Street Journal (August 23, 2000).
23 Florida DOI. Florida DOI Issues Warning To Consumers: Stay Away From Unlicensed Insurance Enti-
ties. (Tallahassee: Florida Department of Insurance, April 9, 2002).
24 Appleby, Julie. More patients get stuck with the bills. USA Today.April 30, 2002.
25 Personal Conversation with Florida DOI, August 14, 2002.
26 J. Kreuger. State insurance department unveils list of top 10 frauds. The Business Journal.June 10,
2002.
27 M. A. Hall. The Geography of Health Insurance Regulation. Health Affairs. Vol. 19 (2). March/April 2000.
28 Lankarge, V. Kentucky besieged by unlicensed health insurers.Insure.com March 20, 2002.
29 M. A. Hall. The Geography of Health Insurance Regulation. Health Affairs. Vol. 19 (2). March/April 2000.
p. 176.
30 Anthony R. Kovner and Steven Jonas, Health Care Delivery in the U.S., 6th Edition, New York: Springer
Publishing, 1999, p. 333.
31 Mary Nell Lehnhard, Will Unregulated AHPs Benefit Consumers?, NCOI Letter, May 2003, Washington,
DC: National Conference of Insurance Legislators.
32 Florida Senate Bill 2264. June 2003.