Private Health Insurance: Problems Caused by a Segmented Market

GAO discussed health insurance options and private health insurance reforms, focusing on the affordability and availability of such insurance for small business employees. GAO noted that: (1) about one-third of all uninsured persons work for or are dependents of those who work for small businesses; (2) small businesses typically faced restricted availability of health insurance and higher premiums because of competition among insurers to cover only the best risks, large firms' abilities to self-insure, restrictive underwriting practices, and purchasing power advantages available only to larger firms; (3) industry efforts to benefit the small business health insurance market include rating and underwriting reforms, exemptions from state-mandated benefits, and subsidies for purchasing health insurance; and (4) those reform proposals did not sufficiently address problems caused by redistribution of premium costs among employees or stop or reduce rising health care costs.