First, do no harm: Developing health insurance market reform packages

Health insurance reform is complex, and discussions about preferred reforms are often marked by confusion. This paper focuses on the fundamental issue: how best to address adverse selection. We develop four reform packages that could improve insurance market performance without aggravating risk selection problems. We then compare the principles applied in our packages with two specific proposals that formed the basis for the compromise federal legislation passed in August 1996. We also review the evidence to date on the effects of small-group reforms on health insurance markets in various states, and conclude with suggestions for further research.