SustiNet Policy Options: Cost and Coverage Estimates SustiNet Partnership Board November 18, 2010 Stan Dorn Senior Fellow The Urban Institute

Overview Putting modeling results in perspective Overview of policy options and estimates More detailed analysis 2

Part I Putting Modeling Results in Perspective

Methodological comments Overview of Gruber Microsimulation Model Notes  Baseline reflects analysis of current spending, plus survey data  Only goes through age 64  Does not consider new federal categorical grants, etc.  Shows results in 2010 dollars, generally for o 2017 is often used to illustrate effects after full implementation  Cost savings from delivery system and payment reforms? o Pessimistic scenario: no savings o Optimistic scenario: slows annual growth by 1 percentage point  Cf. Cutler/Davis, 1.9 percentage point in Medicare Modeling can yield good general estimates, not precise and infallible predictions  More inputs and model refinements can change estimates 4

Part II Overview of policy options and estimates

Policy options Ongoing 1.SustiNet for current state populations 2.Add Basic Health Program to SustiNet 3.Permit small employers, municipalities and non-profits to buy SustiNet 4.Offer SustiNet to other employers and individuals, including through the exchange 5.Gradually raise HUSKY payments to private levels Short-term 6.Expand HUSKY to cover more low-income adults, in 2012 and

Five general results for the five ongoing options 1. More than half of the uninsured receive coverage 2. Net state budget deficits improve with most of these options, primarily because of a large infusion of federal dollars 3. Small firms experience savings, mainly because they cover fewer workers 4. Many people enroll in SustiNet 5. Aggregate household purchasing power is largely unaffected 7

Some key differences among options Adding Basic Health (BH)  Compared to subsidized coverage in the exchange, more affordable for low-income adults, including HUSKY parents  Additional state budget savings  Federally-funded reimbursement rate increases for BH members Raising HUSKY payment rates to private levels  Whether the resulting costs exceed other savings depends on SustiNet’s impact on health cost growth Short-term: expanding HUSKY before 2014  Increases coverage in , but costly to the state 8

How SustiNet options change cost and coverage, pessimistic and optimistic cost-savings assumptions: 2017 (except option 6, which shows 2013 results) Uninsured gaining coverage (thousands) Net changes to state spending (millions) Employer savings (millions) SustiNet members (thousands) PessimisticOptimisticPessimisticOptimisticPessimisticOptimisticPessimisticOptimistic Option 1: SustiNet for current populations 206 -$174-$371$ Option 2: Basic Health 207 -$224 -$418$ Option 3: Offer SustiNet to small firms, municipalities, non-profits $224 -$425$461$ Option 4: Offer SustiNet to all firms and individuals $224 -$427$461$ ,011 Option 5: Raise HUSKY payments $32-$244$461$ ,011 Option 6: Early HUSKY expansion 59 +$153 +$103$ Note: for options 2-5, estimates are cumulative. For example, the effects shown for Option 2 assume implementation of both Options 1 and 2; Effects shown for Option 3 assume implementation of Options 1, 2 and 3; etc. Option 6 estimates assume no other policy changes. Net changes to state spending incorporate revenue and outlay effects.

Part III More detailed cost and coverage estimates, by policy option

SUSTINET FOR CURRENT STATE POPULATIONS Option 1 11

Policy details Delivery system and payment reforms apply to Medicaid, HUSKY, and state employee/retiree coverage effective immediately SAGA immediately moved into Medicaid Full implementation of the Affordable Care Act (ACA) starting in 2014 General cost and coverage effects as described earlier for most options 12

Coverage effects, 2017 The number of uninsured falls from 376,000 to 170,000—a 55% drop Small firm ESI falls by 11%  Most of the affected small-firm workers (77%) go into the exchange, where the majority receive subsidies  Context: large-firm ESI is largely unaffected o Rises by 0.6 percent 13

Coverage of residents under age 65, with and without reform: 2017 Note: “Individual” coverage includes unsubsidized coverage in the exchange. 14

Public sector outlays, 2017 State budget situation improves  Pessimistic scenario: $174 million gain  Optimistic scenario: $371 million gain More Federal dollars in Connecticut for Medicaid, HUSKY, and subsidies in the exchange  Higher-cost scenario: $1.88 billion  Lower-cost scenario: $1.70 billion 15

Effects on state spending and revenue, pessimistic scenario: 2017 (millions) 16

Effects on state spending and revenue, optimistic scenario: 2017 (millions) 17

Net improvement to state budget, pessimistic scenario: (millions) 18 Note: budget totals include both outlay and revenue effects.

Net improvement to state budget, optimistic scenario: (millions) 19 Note: budget totals include both outlay and revenue effects.

Effect on employer costs Small firm savings (0-100 workers)  $459 million in net savings  6.2% cost reduction No significant net effect on larger firms (101+ workers)  $26 million net savings  0.2% cost reduction 20

Effects on small firm health costs: 2017 (millions) 21

No significant net effect on household post-tax purchasing power: 2017 Pessimistic scenario  $421 million increase  0.4 percent change Optimistic scenario  $417 million increase in purchasing power  0.4 percent change 22

Effects on household purchasing power, pessimistic scenario: 2017 (millions) 23

ADDING THE BASIC HEALTH PROGRAM TO SUSTINET Option 2 24

Policy details Individuals affected (2017 projections)  16,000 HUSKY parents, % FPL  41,000 other adults < 200% FPL who would otherwise be in the exchange o Adults % FPL o Newly legalized immigrants below 133% FPL The BH option covers them through state contracts with health plans  Minimum federal standards re benefits, costs, etc.  Enrolled in SustiNet, with HUSKY costs and benefits 25

Bottom-line results Most cost and coverage effects largely unchanged by adding BH to SustiNet Adding BH  Maintains affordability for HUSKY parents and improves it for other low-income adults  Increases net state budget savings  Increases SustiNet enrollment, hence its ability to reform delivery system and payment Concern: provider payment levels  Can raise above HUSKY levels, using federal funds 26

Affordability of subsidized coverage in the exchange FPLMonthly incomeMonthly premium Average out-of- pocket cost- sharing 150 $1,354 $54.156% 175 $1,579 $ % 200 $1,805 $ % Premium and out-of-pocket costs for a single, uninsured adult, at various income levels qualifying for subsidies under ACA Notes: Dollar amounts assume 2010 FPL levels. Out-of-pocket cost-sharing represents the average percentage of covered health care services paid by the consumer, taking into account deductibles, copayments, and co-insurance. 27

Other factors Federal BH dollars exceed HUSKY costs. E.g., in 2017:  Pessimistic scenario, $22 million  Optimistic scenario, $37 million HUSKY parents > 133% FPL can move to federally- funded coverage without reducing access to care. Resulting additional state budget savings in 2017:  Pessimistic scenario, $50 million  Optimistic scenario, $47 million Continuity of coverage and care More covered lives in SustiNet, hence more leverage to reform delivery system and payment 28

Net state budget savings, SustiNet with and without BH, pessimistic scenario: (millions) 29 Note: budget totals include both outlay and revenue effects.

Net state budget savings, SustiNet with and without BH, optimistic scenario: (millions) 30 Note: budget totals include both outlay and revenue effects.

Concerns about adults getting HUSKY rather than coverage in the exchange Fewer health plan choices Fewer covered lives in the exchange  Shift in leverage from the exchange to the state as a direct purchaser of care Lower reimbursement rates, hence less access to providers.  But must use federal “surplus” on BH members. Could raise reimbursement.  In 2017, increase of at least 7-13 percent 31

PERMITTING SMALL FIRMS, MUNICIPALITIES, AND NON- PROFITS TO BUY SUSTINET Option 3 32

Policy details and modeling constraints Policy: certain employers can buy SustiNet for their employees  Can begin as early as 7/1/2012  Small firms, small municipalities, and small nonprofits: same rules as small group market  Option to buy commercial-style benefits  Larger municipalities: to avoid adverse selection, experience-rated premiums (or act as ASO) Modeling does not show specific effects on municipalities and non-profits 33

Bottom-line results Most cost and coverage totals are unchanged SustiNet serves many small firms If SustiNet slows cost growth  A few more small firms offer coverage  A few more uninsured gain coverage 34

More details Many small firms buy SustiNet. In 2017 :  Pessimistic scenario: 136,000 covered lives, or 24% of small-group market  Optimistic scenario: 166,000 covered lives, or 29% of small group market Net coverage impact of small firm option, 2017 :  Under pessimistic scenario, no net coverage effects  Under optimistic scenario (SustiNet slows cost growth): o Small firm coverage rises by 9,000, or 1.4% o Number of uninsured falls by 2,000, or 1.2% 35

OFFERING SUSTINET TO ALL INDIVIDUALS AND FIRMS, WITHIN AND OUTSIDE THE EXCHANGE Option 4 36

Policy details SustiNet offered inside the exchange to small firms and individuals  SustiNet follows the same rules that apply to other plans in those markets SustiNet offered outside the exchange to large firms  To prevent adverse selection, premiums are experience-rated (or SustiNet acts as ASO) 37

Bottom-line results In addition to small firms, large firms and individuals enroll in SustiNet Very few other effects, beyond the previous option for small firm purchase  Under optimistic scenario, employer premiums drop by an additional $35 million, or 0.3 percent 38

Many firms and individuals enroll in SustiNet Small firm enrollment Large firm enrollment Individual enrollment Covered lives Share of small firm coverage Covered lives Share of large firm coverage Covered lives Share of individual market Pessimistic scenario 136,00024%126,000 8%32,00014% Optimistic scenario 164,00029% 165,000 10%33,00015% 39

INCREASING HUSKY REIMBURSEMENT Option 5 40

Policy details By 2019, average HUSKY costs per capita = average costs for large firm coverage in CT  34.5% increase  Note: federal law imposes some limits in going above Medicare rates Phased-in starting in

Effect of higher HUSKY reimbursement on net state budget savings, pessimistic scenario 42 Note: budget totals include both outlay and revenue effects.

Effect of higher HUSKY reimbursement on net state budget savings, optimistic scenario 43 Note: budget totals include both outlay and revenue effects.

SHORT-TERM: EXPANDING HUSKY IN 2012 AND 2013 Option 6 44

Policy details In , HUSKY expands to 185 percent FPL for all adults  This eligibility is limited to parents under current law Before 2014, federal government pays standard Medicaid match 45

Bottom-line effects The number of uninsured falls by 59,000, or 16% That results from:  82,000 more people in HUSKY  23,000 fewer recipients of ESI (a 1.1% drop) State and federal spending rises 46

Effects of HUSKY expansion on federal spending and state budget deficits, pessimistic and optimistic scenarios about cost growth: (millions) Pessimistic scenario Optimistic scenario Pessimistic scenario Optimistic scenario Change in federal spending $434$423$452$417 Increase in state budget deficit $139$123$153$103 State outlays $143$128$158$109 State revenue increases $4$5 $6 47

Conclusion and summary Similarities among ongoing options  Cover more than half of the uninsured  In most cases, improve state budget picture  Achieve modest savings for small firms Differences between ongoing options  BH: more affordable for low-income adults, more state savings, but smaller provider networks and fewer plan choices than in exchange  Offering SustiNet to new populations increases SustiNet enrollment (hence clout in achieving delivery system reforms), may yield modest savings, offers a new choice for buyers, but takes work  Raising HUSKY payment improves access; whether costs exceed other savings depends on the effectiveness of SustiNet reforms Short-term HUSKY expansion covers many uninsured, but costs money 48