Excerpted From: Maria O'Brien Hylton, Some Preliminary Thoughts on the Deregulation of Insurance to Advantage the Working Poor, 24 Fordham Urban Law Journal 687 (Summer 1997) (46 Footnotes) (Full Document)
The regulatory framework in which employee benefits products are marketed and consumed by individuals and groups seeking to reduce exposure to covered events creates a set of background rules. These rules influence the way in which insurance products are developed and impact the number of people who will enjoy the protection these insurance products afford. This means that every proposal to regulate an employment-related insurance product likely will affect both the quality and quantity of insurance available to consumers. For example, over the past decade, as the public and professionally-interested parties have grappled with the insurance implications of the AIDS epidemic, the very function of insurance and, in particular, risk classification, has come into question. Risk classification rules and other regulatory initiatives have important implications for everyone, particularly those residing in impoverished urban areas. The optimal regulation of employee benefits, specifically those designed to protect against ill health and its consequences, has enormously important implications for the so-called working poor. In many cases the value to low wage employees of their employee benefits exceeds 15 percent of their total compensation.
This paper examines the important role that various forms of insurance play in the total compensation of low wage employees, focusing in particular on disability and health insurance. Disability and health insurance share a common purpose of protecting employees against ill health and/or the inability to work and generate an income. This paper evaluates the current regulatory regimes in which these welfare plans are provided and considers ways in which meaningful access by the working poor might be enhanced. The working poor, however, are not limited to urban areas, the principal focus of this discussion. Nonetheless, urban environments generally contain large numbers of low wage employees whose often limited access to medical care constitutes a constant concern of policy makers. The normative viewpoint of this paper is as follows: it seeks to understand the ways in which the applicable regulatory framework might be altered to improve access and coverage. In many cases this implies a move away from government regulation and toward a regime that will flexibly meet the needs of the largest number of individuals possible.
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I do not expect that a return to the use of explicit racial (and, by extension sexual) classifications will be warmly welcomed as a step in the right direction. On the contrary, I recognize that the process of classification itself is an anathema to many, and that racial classifications have many negative associations. For those who can accept the appropriateness of the classification of risks in certain contexts such as automobile insurance, I suggest only that the analysis can be usefully extended to other areas.
My claim about the destructive effects of state insurance mandates is one that is supported by empirical work and an enormous amount of legal anecdotal evidence. It is hard to accept that well-intentioned regulatory efforts have gone awry (although this is not uncommon). A persistent refusal, though, to recognize state mandates as a major cause of the drop in employer-sponsored health and disability group insurance plans demonstrates a basic indifference to the needs of millions of uninsured. Moving away from a regime dominated by mandates would free employers and insurers to fashion contractual arrangements that suit their particular needs and result in broader, yet shallower coverage. This arrangement might not be ideal in every sense, but it would certainly be preferable to the status quo which flatly excludes millions from any coverage at all.
Professor of Law, Boston University School of Law.