1 Private Insurance: What State Advocates Need to Know Cheryl Fish-Parcham Families USA January 25, 2007

2 Insurance problems Not affordable: Older or sicker people Young people Some small businesses Not available to people in poor health Not adequate Employers are not covering their workers

3 Problem: Affordability Example: DC Blue Cross/Blue Shield premium prices for most comprehensive plans

4 Affordability Tool: Rate Regulation How much insurers can vary premium prices? Community rating: No price variation (NY, VT) Adjusted community rating: No variation based on health (ME, MD, MA, NH, NJ, OR, WA). May limit total price variation (e.g., 3:1). Rate Bands: Insurers identify their index rate and states limits how much more or less they can charge based on each factor (eg, +/-25% for each of age, health, industry)

5 Rate regulation can also: Limit insurers administrative expenses, surplus, and profits Medical loss ratios: Proportion of premium dollars used to pay medical claims Eg, New Jersey requires at least a 75% loss ratio Limit a non-profits surplus (what it retains over and above required reserves). Require excess resources to benefit the community. Eg, Pennsylvania uses CareFirst surplus to fund coverage for low-income adults

6 Questions to ask your state about rate regulation What factors can insurers use in setting premiums for individuals? For small groups? Does the state limit premium variation? How does the state review proposed rates? Do insurers issue refunds if premiums are unnecessarily high? What are nonprofit insurers surpluses? What must nonprofit insurers do in exchange for their tax exemptions? ( See Understanding How Health Insurance Premiums are Regulated,

7 Problem: Uninsurable LA Times reports people are turned down for insurance because they take medicines and based on profession:

8 Availability Tool: Guaranteed Issue Require all health insurers to sell policies to all, regardless of their health States that do this: MA, ME, NJ, NY, VT Require some insurers, such as nonprofits, to sell to all regardless of their health CA, DC (but law is ending), MI, NC, OH, PA, VA Source: Georgetown University Health Policy Institute, 2004.

9 Availability Tool: High Risk Pools Uninsurable people can purchase insurance through a state-established nonprofit association. Premiums are capped. The risk pool is subsidized, often through an assessment on insurers. In some states, premiums are further subsidized for low-income enrollees.

10 High Risk Pools: What to advocate 33 states have high risk pools (but 2 are quite limited). Advocate: Insurers, agents must tell people about them Short or no waiting period for coverage of preexisting conditions Premium caps no more than 125% of standard rates Additional income-based subsidies

11 High Risk Pools: More things to advocate Adequate funding, federal grants Decent benefits High coverage limits (See issue brief: High Risk Health Insurance Pools,

12 Availability and Affordability Tool: Reinsurance State or assessment on insurers subsidizes highest cost claims Can make insurers willing to sell to high- risk people and bring down cost of premiums (On go to 2006 conference call series for a recording of November call on reinsurance.)

13 Problem: Inadequate coverage

14 Adequacy tools Mandated benefits Standardized, comparable plans (e.g., NJ) Limit cost sharing Discourage high-deductible plans and HSAs, or if they exist, make sure consumers have reasonably priced low- deductible alternatives

15 Problem: Employer wont offer insurance

16 Employer coverage tool: pay or play Employer must pay an assessment to a state fund; however, that amount is reduced or eliminated if the employer pays for employee health care. VT and MA have enacted small assessments. (See Ideas That Work: Expanding Health Coverage for Workers, on

17 ERISA Cases Cant force an employer to buy health insurance, but true pay or play laws may be allowed. Maryland Fair Share case lost, but may be appealed. Issues: Whether it singled out Walmart Whether it required a national employer to change its accounting system and employee benefits for one state. ( See Making History: Marylands Fair Share Law, on Patricia Butler, ERISA Implications for State Health Care Initiatives, on

18 Other tools Pooled purchasing – generally doesnt bring down costs but helps make plans available to small businesses State-offered plan (eg, Medicaid buy-in) Connector sells certified plans to individuals as group coverage. (Eg, Massachusetts) Small business tax credits