SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 1 Garrett-Bovbjerg, Modeling Modeling & Other Consultation Presentation to Reinsurance Institute’s Kick-Off Meeting with States, Albany Marriott, NY, Tuesday, September 12, 2006 Bowen Garrett, Ph.D. Co-PI for UI Reinsurance Inst.Team Lisa Clemans-Cope, Ph.D. Research Associate Randall R. Bovbjerg, J.D. The Urban Institute

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 2 Garrett-Bovbjerg, Modeling Modeling the Effects of Reinsurance Programs  Goal: –Estimate effects of policy alternatives on Health insurance coverage Employer offer Health care expenditures State program costs  Major part of the overall Reinsurance Institute effort

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 3 Garrett-Bovbjerg, Modeling Overview of Modeling Steps  Create individual-level database representing a state’s non-institutionalized population –Demographics, employment, insurance coverage, health care expenditures, premiums  Specify alternative reinsurance policy options  Estimate effects reinsurance program –Premiums, employer offer, individual take-up, expenditures –Program costs  Report results

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 4 Garrett-Bovbjerg, Modeling Create Individual-Level, State-Specific, Baseline Database (1)  Start with national data from the Medical Expenditure Panel Survey (MEPS) –Provides individual-level demographic, employment, insurance coverage, and health care expenditure data for non-institutionalized population –Pool three years of data to obtain total N of about 100,000  Adjust expenditures to be consistent with National Health Accounts and high-cost claims data  Re-weight national MEPS data to match state’s demographic, employment, and other characteristics as measured by the Current Population Survey (CPS)

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 5 Garrett-Bovbjerg, Modeling Example of Reweighting Procedure Results: New York (Family income) MEPS Northeast CPS New York Reweighted MEPS (NE) <100% FPL11.1%14.8%14.0% % FPL % FPL >400% FPL Source: Bovbjerg et al. (draft)

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 6 Garrett-Bovbjerg, Modeling Example of Reweighting Procedure Results: New York (Insurance coverage) MEPS Northeast CPS New York Reweighted MEPS (NE) Private75.9%68.7%68.6% Public Uninsured Source: Bovbjerg et al. (draft)

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 7 Garrett-Bovbjerg, Modeling Create Individual-Level, State-Specific, Baseline Database (2)  Assign workers to synthetic employers, approximating the state’s establishment size/industry mix  Impute distribution of baseline premiums for group and individual coverage –Compute pure premiums –Apply loading factors with input from actuaries  Age the data to present or future year, based on projections  Database ready for simulating reinsurance programs

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 8 Garrett-Bovbjerg, Modeling Information from States (1)  Decision of modeling year  Projections of state demographic/economic changes between baseline data year and year to be modeled (for ageing of baseline database)  Data on firm size/establishment size of the employers within a state, by industry  Characteristics and premiums of typical existing health plans in their state (large group, small group, individual)

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 9 Garrett-Bovbjerg, Modeling Information from States (2)  Characteristics and premiums of state workers’ health plans  Other state heath plan and premium data if available  Description of regulations in the small group and individual insurance markets (to supplement NAHU reports)  Small group market details (to supplement GAO report) –Number of licensed carriers –Market share of each of the five largest carriers –Market share of all BCBS carriers

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 10 Garrett-Bovbjerg, Modeling Identify and Model Major Features of Alternative Reinsurance Policy Programs  In the case of Healthy NY: –Individual stop-loss reinsurance policy floor ($5,000) and ceiling ($75,000), with 10% coinsurance –Small employer eligibility criteria including 50 or fewer employees, 30% employees earn <$34,000 –Eligibility criteria including working in a non-offering firm, meeting income guidelines, worked in past 12 months  We cannot measure or model: –Whether a non-offering employer offered coverage in past 12 months –Certain reasons for having lost coverage (death of family member, termination/cancellation of COBRA coverage)

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 11 Garrett-Bovbjerg, Modeling Simulating Policy Effects (1)  Each policy scenario will include different changes in group and nongroup premiums –Will need to maintain manageable number of alternative scenarios for full analysis  We will establish best-guess estimates of the responsiveness of firm offer, group coverage take- up, and individual coverage take-up to changes in premiums –Based on economics literature on insurance demand  Responsiveness often summarized as elasticities – percent change in coverage due to a percent change in premiums

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 12 Garrett-Bovbjerg, Modeling Simulating Policy Effects (2)  We will simulate –Employers who switch their offer status due to the reinsurance program –Individuals in the database who switch their coverage status due to the program  For the newly insured, we’ll adjust expenditures upwards to reflect higher use among the insured –e.g., Hadley and Ruhter estimate that Medical spending on an uninsured adult in NY would increase from $1,279 to $2,430 if insured.

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 13 Garrett-Bovbjerg, Modeling Reporting the Results  Tally up changes in employer offer and individual coverage –By employer size –By income –By age/health status  Describe –Changes in aggregate health care expenditures –State program costs related to reinsured claims Results reflect full phase-in  Repeat for manageable number of policy options

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 14 Garrett-Bovbjerg, Modeling Software Tool for States  We’ll provide each focus state with a software modeling tool near the end of the modeling phase that will –Report primary modeling results –Allow users to modify Eligibility rules Reinsurance design parameters Certain model assumptions

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 15 Garrett-Bovbjerg, Modeling Key Modeling Limitations  Even with best information available, significant uncertainty remains in the magnitude of behavioral parameters  Model does not capture –Administrative costs –Certain policy details –Implementation issues

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 16 Garrett-Bovbjerg, Modeling Key Modeling Benefits  Uses a systematic approach to produce best-guess estimates of policy effects and costs  Highlights key uncertainties  Can be effective in providing a good understanding the relative benefits/costs of major program features –Eligibility rules, reinsurance thresholds, coinsurance levels  Highlights key trade-offs

SCI Reinsurance Institute, Albany Marriott 12 Sept ; slide 17 Garrett-Bovbjerg, Modeling Parallel, Qualitative Consultation  Will stand ready to consult on other issues of design and implementation –much as done for this meeting, with more specifics  Necessarily state-specific, unpredictable in advance  Will base input on literature, existing expertise, plus limited additional research Note: In addition to offering focus states input on quali- tative issues, we will be calling to seek input from them