Presentation on theme: "State Reforms of Small-Group Health Insurance Vivian Ho, Ph.D. Baker Institute Chair in Health Economics, Rice University Associate Professor, Baylor College."— Presentation transcript:
State Reforms of Small-Group Health Insurance Vivian Ho, Ph.D. Baker Institute Chair in Health Economics, Rice University Associate Professor, Baylor College of Medicine November 7, 2008
Outline History of State Reforms The Effect of Reforms Why? Implications for Three-Share Programs
History Source: CDC, NCHS, Health, United States 2007
History In early 1990’s 45 U.S. states enacted new regs governing the sale of insurance to small-employer groups. – Guaranteed issue – Guaranteed renewal – Premium rating reform – Pre-existing conditions limitations – Portability provisions.
History NY and NJ had strongest reforms. NY – Prohibited insurers from denying coverage to any small group or individual. – Required premiums to be community rated All subscribers charged same price, regardless of age, sex, or any other predictor of medical expenditures.
Effect of NY Reforms 40% of individuals saw premiums rise >=20% – Mostly for younger consumers. 18% of individuals saw premiums fall >=20% – Mostly for older consumers.
Effect of NY Reforms Analysis comparing NY to PA (w/ no reforms) and to large firms in NY (not subject to reforms) finds no effect of NY’s reforms on health insurance coverage rates. (Buchmueller & DiNardo, American Economic Review 2002) Age distribution of the insured became older, but this occurred in all states. Studies using data from other states also found little/no effect of state reforms. → State reforms were ineffective
Why were State Reforms Ineffective? In many states, the laws had little “bite.” – Most states allow rates to vary by age & sex. – Rate bands (e.g. 35% +/- plan’s standard rate) are still too wide. Insurers could avoid the intent of new regs. – In many states, insurers required to sell only 1 or 2 products as guaranteed issue. When new regs raised rates for lower-risk groups, they moved to less costly HI – In NY, HMO coverage rose 25% after state reforms.
Why were State Reforms Ineffective? These studies suggest that demand-side (not supply-side) factors are the reason for falling insurance coverage. “…near-universal coverage can be achieved only with a combination of public subsidies and some kind of requirement that people obtain health insurance. It is not reasonable to expect supply-side policies, like the state-level small- group reforms, to have had a major effect on coverage.” (Buchmueller, in Monheit & Cantor, State Health Insurance Market Reform, 2004)
Implications for Three-Share Programs 3-share programs are demand-side in nature and should be effective in raising coverage. However, only one has been successful long-term. – Access Health in Muskegon, MI – Origins: planning grant from the Kellogg Foundation – Operating since 1999.
Access Health ~1,100 covered for the past 3 years. Medical costs ~ $155 pmpm Admin costs ~ $17 pmpm Adult premium: $46 contributed by both employer and employee.
Access Health Funded by state’s Medicaid DSH funds. Employers’ payments to Access Health treated as an “intergovernmental transfer” (IGT) to the state. State certifies the IGT as a DSH payment to Muskegon’s 2 hospitals, which generates a federal match. The federal match goes to the 2 hospitals, which turn funds over to Access Health.
Access Health Average monthly premium for employer sponsored coverage in 2008 is ~$390. How does Access Health keep costs so low? HI coverage is interwoven into the local community support system. – Blended health insurance/social insurance
Access Health If customer can’t afford copays, Access Health will help them apply for heating assistance, so funds can be used to pay for health care. If breast or cervical exam indicates an abnormality, Access Health helps patient get into Medicaid BCCPT program. Connection w/ Lions Club helps customers get glasses for $30/pair. Pharmacy assistance programs sponsored by drug companies
Access Health Focuses on employees earning $7-$9/hr and part-time workers (20-30 hrs/wk). If try to cover workers earning $13-$14/hr, will crowd-out existing employer programs.
Additional Role for Government? Government as a reinsurer. Health care expenditures are highly skewed. – The top 1% of people account for 28% of total health care expenditures. Gov’t could offer to pay 90% of costs for insurees w/ $50k costs in a year. Reinsurance would dramatically lower risk, so HI premiums would fall.
Conclusions Changing state regulations of the insurance market have not helped raise coverage. 3-share programs can be helpful, because they address demand-side problems in the market. Successful 3-share programs require integration with a well-integrated community safety net. Future reforms should consider government as a reinsurer.