The Potential Economic Impact of 3-Share Programs in Texas Texas Communities Healthcare Coalition Presented by TXP & RH2 | November 7, 2008

2 Presentation Overview Study Purpose Approach Benefits of Health Coverage Preliminary Economic Impact Estimates Conclusions

3 Study Purpose Estimate the potential economic impact on Texas communities implementing 3-Share health coverage initiatives –Galveston, Harris County, Dallas, El Paso and Central Texas –A 3-Share Health Coverage Plan Reduces employer and employee costs by splitting the cost for coverage 3 or more ways between the employer, employee and a 3 rd party – often a foundation, local government or local safety net providers.

4 Study Approach Best practice research - other states –Examined 3-Share enrollment by businesses and employees Small business case studies –Talked to businesses enrolled in TX 3-Share Plan and uninsured small businesses Examined literature on benefits of health coverage -- economic and otherwise Economic impact analysis

5 Benefits of Health Coverage Decreased Morbidity and Mortality Uninsured lack access to necessary treatments and care – Lack of access to medical technology necessary to treat heart attacks, cataracts, and depression results in $1.1 billion per year in excess sickness and death( Glied and Little 2003) Lack of health insurance causes roughly 18,000 unnecessary deaths every year in the United States. (Institute of Medicine 2004)

6 Benefits of Health Coverage Increased Labor Force Participation/Productivity Uninsured participate in the work force in lower numbers because they are sicker. (Commonwealth Fund 2006) – 18 million Americans did not work because of health conditions or disability If these workers made minimum wage the economy would expand by $185 billion/yr 55 million workers annually can’t concentrate on the job because of personal or family illness. –Resulting 478 million days reduced productivity Based on their average earnings economic losses estimated at $27 billion.

7 Benefits of Health Coverage Job mobility 3 in 10 Americans stayed in a job they wanted to leave to keep their health benefits (New York Times/CBS News Poll 2008) In 2002 California found 2.3% of employees with employment based coverage would have made productivity-improving job changes absent job lock. –Leading to $772 million in annual foregone productivity gains in CA alone.

8 Trends- Health Insurance Overview Employers want to control health insurance costs Employers are asking employees to to pay an increasing share of their health insurance. Employers are using prevention/disease management to control costs Other approaches (such as managed care) perceived to be losing effectiveness. Health coverage among employers is declining, especially in sectors where smaller firms are more prevalent

9 Health Insurance Trends Decline % of Firms Offering Health Insurance Source: Kaiser Foundation

10 Health Insurance Trends Growth in the Cost of Health Insurance vs. Inflation & Worker Earnings

11 Measuring the Potential Economic Impact Methodology Step 1. Determine uninsured rates by firm size –Employee and dependent –Develop assumptions for % dependents - adults/children Step 2. Apply rates from Step 1 to TX counties to estimate number of uninsured by firm size in each 3-Share county Step 3. Using Muskegon/Central Texas model estimate potential universe of uninsured employees

12 Measuring the Potential Economic Impact Methodology Step 4. Assume 35% of firms from Step 3 would purchase health coverage for employees –75% of eligible employees in qualified firms would enroll in health plans Step 5. Calculate economic impacts of employee 3-Share health plan enrollment –Estimate increased health spending (direct spending) –Estimate indirect and induced spending (related sectors - medical supplies, office rents, etc.) –Estimate job creation from increases attributable to total health spending

13 Ex. Calculation - Preliminary Estimate Tarrant County 1. Health Insurance Coverage Rates AllEmployer Own NameDependent Individually Purchased Total Public Medic aidUninsured All Workers100.0%70.2%52.8%17.4%6.9%10.9%4.8%17.4% Private Sector100.0%69.8%52.7%17.2%5.8%10.3%5.2%18.7% under %48.2%26.1%22.2%10.8%14.7%7.2%32.1% 10 to %58.6%37.0%21.6%7.4%10.5%5.7%27.7% 25 to %68.5%50.6%17.9%5.7%10.0%4.9%20.0% Firm Size1 to 45 to 910 to # of Firms18,2056,9394,9463,7561,360 Avg. # of Employees/ Firm Total # of Employees36,41048,57369,244112,68088, Tarrant County Employment Data

14 Ex. Calculation - Preliminary Estimate Tarrant County (continued) 4. Estimates of Actual Coverage (35% of Businesses and 75% Within Business) CoveredEmployer TotalOwn NameDependant under 1040,99122,16618, to 2440,57425,62314, to 9977,19156,99120,200 Not CoveredEmployer TotalOwn NameDependant under 1043,99223,78920, to 2428,67018,10510, to 9935,48926,2029, Estimates of Universe of Potential Covered Employees TotalOwn NameDependant under 1011,5486,2455, to 247,5264,7532, to 999,3166,8782,438 TOTALS28,39017,87510,514

15 Ex. Calculation - Preliminary Estimate Tarrant County (continued) Estimated Number of Tarrant County 3-Share Participants Employees17,875 Dependants10,514 Total28,389 Health Spending by Uninsured (Hadley, et al - $ national data) Baseline "Average” Private"Average" Public Children $ 733 $1,408 $1,008 Adults $1,644 $3,187 $2,568 Health Spending by Uninsured (2007 Estimate) Baseline"Average" Private"Average" PublicBlend Children $971 $1,865 $1,335 $1,600 Adults$2,178 $4,222 $3,402 $3,812 Increased Health Spending if All Uninsured Had Enrolled in 3-Share EmployeesDependents Children$3,307,639 Adults$29,205,977$8,589,417 Totals$29,205,977$11,897,056$41,103,033 Total Economic ImpactOutputEarningsEmployment $104,112,153$35,761, Economic Impact Calculations

16 Results Total 3-Share Enrollees & Estimated Economic Impact Enrolled Employees Enrolled DependantsTotal Lives Central Texas18,95711,39230,349 Dallas30,36217,77948,141 El Paso6,2303,7519,981 Galveston2,3451,4313,776 Harris42,50225,17767,679 Tarrant17,87510,51428,389 All Regions118,27170,044188,315 Texas241,828145,003386,831 Direct SpendingTotal SpendingTotal EarningsTotal Employment Central Texas$43,864,410$111,106,597$38,164,4331,052 Dallas$69,726,221$176,613,415$60,665,6231,672 El Paso$14,423,624$36,534,399$12,549, Galveston$5,450,737$13,806,475$4,742, Harris$97,932,941$248,059,782$85,207,0112,348 Tarrant$41,103,033$104,112,153$35,761, All Regions$272,500,967$690,232,821$237,090,7336,533 Texas$559,200,273$1,416,429,404$486,534,79713,407

17 Summary Economic estimates are preliminary and assume no funding limits -- that is, everyone that wants to enroll in a 3-Share coverage health plan can If funding were not an issue the potential economic impact both locally and to the state would be substantial