The following cases are the chronology of what happen in 2 of 8 insurance markets in the United States:

Kentucky

1994: GI & CR.

1996: CR modified. Reforms never fully penetrated individual market.

1998: Only two insurers remained in individual market after 40+ fled; CR repealed.

2000: GI repealed.

2004: Three-year moratorium on new state benefit mandates, other modifications to encourage insurers to return.

2012: Six insurers in the individual market.

Maine

1993: GI & CR; individual market insurers required to offer "basic" and "standard" plans. (1995: all HMOs required to offer individual market GI coverage.)

1994-2001: Individual market health insurers dropped from five to one.

2000: Premiums increased 30%-64%.

2001: Individual rates exceeded group rates by as much as 102%.

2012-2015: Rate bands expanded; subsidized high-risk reinsurance pool established.

Where GI (Guaranteed Issue) requires insurers to issue coverage to all applicants without any prejudice. CR (Community Rating) prohibits insurers from varying premiums that the policy holder needs to pay.

# Explain the problem arises in these insurance markets. Why such a problem arises? What is its impact on the insurance market and what steps can be taken to overcome the problem? ( 15 marks)