Presents

1
Presents
The Agency for Healthcare Research and Quality

• Individual Health Insurance
• Are You Ready for Change?
• A Web-assisted Audio Conference
• for
• State and Local Health Policymakers
• April 24, 2002

2
Individual Health InsuranceAre You Ready for
Change?
Moderator Cindy DiBiasi Panelists
Deborah Chollet, Ph.D. Senior Fellow Mathematica
Policy Research, Inc. Karen Pollitz,
M.P.P. Project Director, Institute for Health
Care Research and Policy Georgetown
University Steve Larsen, J.D.,
M.P.P. Insurance Commissioner, State of
Maryland and Health Committee Chair, National
Association of Insurance Commissioners
3
Individual Health Insurance Are You Ready for
Change?

• Market Dynamics
• State Strategies
• New Ideas in State and Federal Proposals

4
?On the Webcast? Type in the messaging field
and hit Enter.?On the Phone? Press 14 to
indicate you have a question. ?Ready to E-Mail?
Send a message to ulp_at_ahrq.gov. Due to the
high volume of messages, we may not be able to
answer all questions during this session.
Question and Answer Period
5
Individual Health InsuranceAre You Ready for
Change? A Web-assisted Audio Conference

• Interested in free access to the archive of this
  event?
• On the internet, visit the AHRQ/ULP Web Site
• www.ahrq.gov/news/ulpix.htm
• Interested in purchasing audio tapes of this
  event?
• To order Contact the AHRQ Publications
• Clearinghouse at 1-800-358-9295
• Ask for AHRQ02-AV06A,
• Individual Health Insurance Are You Ready for
  Change?
• The cost is 10.00 for the tape.

6
Individual Health Insurance Are You Ready for
Change?
A Web-assisted Audio Conference
Deborah Chollet, Ph.D. Senior Fellow Mathematica
Policy Research, Inc.
April 24, 2002
7
Who buys individual coverage?

• Individuals and families who do not have
  employer-based or public health insurance
• In 1999, about 16 million people -- 7 of the
  population under age 65

8
Who buys individual coverage? (contd)

• Most are
• Adults of childbearing age
• Employed full time and all year
• Live in urban areas
• Compared to the general population, they are more
  likely to be
• Early retirees or older workers
• Nonelderly spouses of Medicare enrollees
• Self-employed
• Live in rural areas
• Compared to people with employer coverage, they
  are
• Lower-income
• Older

9
Source March 2001 Current Population Survey
(Mathematica Policy Research, Inc.).
10
17
10
SourceMarch 2001 Current Population Survey
(Mathematica Policy Research, Inc.).
11
Who sells individual coverage?

• 690 insurers (counted by state), compared to
  about 2,400 group insurers
• Blue Cross Blue Shield and commercial insurers
  dominate and are more prevalent in the individual
  market than in the group market.

12
Source Mapping State Health Insurance
Structure and Change in the States Group and
Individual Health Insurance Markets, 1995-1997,
2000. Available at Available on State Coverage
Initiative website.
13
What does the market look like?

• Compared to the group market
• Fewer insurers, but many more insurers per
  covered life
• Much lower premium volume per insurer

14
Source Source Mapping State Health
Insurance Structure and Change in the States
Group and Individual Health Insurance Markets,
1995-1997, 2000. Available at Available on State
Coverage Initiative website.
15
What does the market look like? (contd)

• In every state, the market is very concentrated
• 1-3 large insurers hold 50 to 97 of the market
• Smallest 50 of insurers account for about 8 of
  the market
• Small-population states have fewer insurers, but
  many more insurers per capita
• 17 insurers per million population in Wyoming
• 2 insurers per million population in California

16
Major challenges

• Small market fragmented among many insurers
• Small risk pools
• Low average premium volume encourages aggressive
  cherry picking
• High administrative and marketing costs
• High turnover many consumers stay lt 1 year
• Individual sales
• Adverse selection
• People who need health care are more likely to
  buy than people who do not.
• Adequate coverage and an affordable price

17
Individual Health InsuranceAre You Ready for
Change?
A Web-assisted Audio Conference

• Karen Pollitz, M.P.P.
• Project Director
• Institute for Health Care Research and Policy
• Georgetown University

April 24, 2002
18
Individual Health Insurance Market Characterized
by Medical Underwriting

• Medical underwriting is a process for assessing
  the health and risk status of an applicant in
  order to decide whether to issue coverage and, if
  so, at what price and under what terms
• Insurers medically underwrite coverage because
  sick people are more expensive to insure than
  healthy people
• By excluding expensive risks, carriers can keep
  the cost of coverage lower for those they insure

19
How Medical Underwriting Works

• Carriers use a variety of underwriting tools
• Deny coverage
• Limit coverage
• Exclude conditions via riders
• Otherwise reduce covered benefits (e.g., 1,000
  prescription drug deductible)
• Charge additional premiums
• Little consistency between carriers on which
  tools to apply and when so impossible for
  consumers to predict outcome of medical
  underwriting
• Process usually takes 2 weeks to 2 months to
  complete

20
Results of 60 applications for Alice, 24, hay
fever
Average Annual Premium 1,656 Ratio
HighestLowest 11.4
Source How Accessible is Individual Health
Insurance for Consumers in Less-Than-Perfect-Healt
h?, 2001. Available on the Kaiser Family
Foundation website.
21
Results of 60 applications by Crane Family,son
Colin has asthma
Average Annual Premium 5,460 Ratio
HighestLowest 9.1
Source How Accessible is Individual Health
Insurance for Consumers in Less-Than-Perfect-Healt
h?, 2001. Available on the Kaiser Family
Foundation website.
22
Results of 60 applications for Frank 62,
overweight smoker with high blood pressure
Average Annual Premium 9,936 Ratio
HighestLowest 10.3
Source How Accessible is Individual Health
Insurance for Consumers in Less-Than-Perfect-Healt
h?, 2001. Available on the Kaiser Family
Foundation website.
23
Results of 60 applications for Greg, 36,
HIV-positive
Source How Accessible is Individual Health
Insurance for Consumers in Less-Than-Perfect-Healt
h?, 2001. Available on the Kaiser Family
Foundation website.
24
Other Uninsurable Conditions

• Anorexia
• Arthritis
• Brain or spinal cord injury
• Cancer
• Chemical dependency
• Cystic fibrosis
• Diabetes
• Epilepsy
• Heart disease
• Hemophilia

• Hepatitis C
• Kidney disease
• Lupus
• Multiple sclerosis
• Muscular dystrophy
• Organ transplant
• Osteoporosis
• Paraplegia or quadriplegia
• Parkinsons disease
• Pregnancy
• Stroke

25
Even for people in perfect health

• Covered benefits are often less comprehensive
  than in group health plans
• Maternity
• Mental health
• Prescription drugs
• High cost sharing
• Age rating
• Stability/durability of coverage over time

26
Individual Health InsuranceAre You Ready for
Change?
A Web-assisted Audio Conference
Steven Larsen, M.P.P., J.D. Insurance
Commissioner Maryland Insurance Commission State
of Maryland
April 24, 2002
27
Impact of HIPAA

• Guaranteed renewal
• If coming from significant period of group
  coverage
• Guaranteed issue
• Portability
• But
• No constraints on price when policies are issued
  or renewed
• No guaranteed issue or portability within the
  individual market

The Federal Health Insurance Portability and
Accountability Act, enacted in 1996.
28
State policies to improve access

• Guaranteed issue
• All or only qualified resident
• Some or all products or carriers
• Some or all of the time
• Limits on rate variation (rate bands)
• For specific rate factors (e.g., health, age)
  and/or overall
• Coverage for preexisting conditions
• Look-back and waiting periods
• Exclusion riders
• High risk pools

29
Source Mathematica Policy Research, Inc., 2001.
30
Other State policy options

• Standardized benefit packages
• Encourage comparison shopping and competition
• Discourage insurer gaming of risk selection
  through benefit design
• Mandated inclusion of benefits
• Mandated offer of benefits

31
State Strategies

• High-Risk Pool Only
• Portability
• Comprehensive Limits on
• Medical Underwriting
• Other

32
High Risk Pool Only

• Few limits on medical underwriting by insurers
• Instead, public pool sells coverage to
  uninsurables
• Pool losses subsidized by tax on insurers/general
  revenues
• Premiums gt standard rates
• Benefit limits, pre-ex exclusions, enrollment
  caps
• 22 states (AK, AR, CO, CT, IL, IN, KS, KY, LA,
  MS, MO, NE, NH, NM, ND, OK, SC, TX, UT, WA, WI,
  WY)

Source Health Insurance Info website.
33
Portability

• Limits on medical underwriting for residents with
  qualified prior coverage
• Guaranteed issue some/all products
• Community rating or rate bands
• No exclusion riders
• Credit for prior coverage
• Minimum benefit standards
• 11 states (CA, FL, GA, ID, IA, MN, MT, NV,
  OH, OR, SD)
• 6 with high risk pool hybrid

Source Health Insurance Info website.
34
Comprehensive Limits on Medical Underwriting

• Prohibition on medical underwriting for all
  residents/all the time
• Guaranteed issue all products
• Community rating
• No exclusion riders
• Credit for prior coverage
• Standardized benefits
• 5 states (NY, NJ, ME, MA, VT)

Source Health Insurance Info website.
35
Other Individual Market Strategies

• Carrier of last resort (HI, MI, PA, NC, VA)
• Open enrollment period (DC, MD, MN, OH, WV)

Source Health Insurance Info website.
36
Individual Market Alternatives

• Self-employed/Group-of-one access to small group
  coverage (13 states)
• COBRA-like continuation rights for small group
  enrollees (38 states)
• Individual access to small group purchasing
  cooperative (1 state)
• COBRA - Consolidated Omnibus Budget
  Reconciliation Act of 1985 which allows employees
  who would otherwise lose their coverage due to
  resignation or dismissal to continue under the
  employers group health insurance plan for up to
  eighteen months if they pay for the coverage
  themselves.

37
Marylands Strategy for Regulating the Individual
Health Insurance Market

• Substantial, Available and Affordable Coverage
  (SAAC) Program
• - For carriers that participate in the SAAC
  program Semi- annual open enrollment, standard
  benefit package, no pre- existing condition
  exclusion period, guaranteed renewability.
• Limits on pre-existing condition exclusions
• - HMOs cannot impose pre-existing condition
  exclusions
• -In non-HMO plans, pre-existing exclusion
  periods cannot exceed two years.
• Guaranteed renewability

38
Marylands Future

• Maryland legislature passed legislation
• To repeal semi-annual open enrollment for SAAC
• To open High Risk Pool
• To become effective July 2003

39
National Association of Insurance Commissioners
Model Laws

• Individual Health Insurance Market
• High Risk Pools

To obtain copies, contact Mary Beth
Senkewicz msenkewi_at_naic.org
40
?On the Webcast? Type in the messaging field
and hit Enter?On the Phone? Press 14 to
indicate you have a question. ?Ready to E-Mail?
Send a message to ulp_at_ahrq.gov. Due to the
high volume of messages, we may not be able to
answer all questions during this session.
Question and Answer Period
41
New ideas/issues

• Regional vs. state individual markets
• Shore up guaranteed renewability especially
  renewal rates
• Improved high risk pools
• Federal tax credit to subsidize individual
  policies

42
?On the Webcast? Type in the messaging field
and hit Enter?On the Phone? Press 14 to
indicate you have a question. ?Ready to E-Mail?
Send a message to ulp_at_ahrq.gov. Due to the
high volume of messages, we may not be able to
answer all questions during this session.
Question and Answer Period
43
Individual Health InsuranceAre You Ready for
Change? A Web-assisted Audio Conference

• Interested in free access to the archive of this
  Event?
• On the internet, visit the AHRQ/ULP Web Site
• www.ahrq.gov/news/ulpix.htm
• Interested in purchasing audio tapes of this
  Event?
• To order Contact the AHRQ Publications
• Clearinghouse at 1-800-358-9295
• Ask for AHRQ02-AV06A,
• Individual Health Insurance Are You Ready for
  Change?
• The cost is 10.00 for the tape.

44
A Series of three Web-Assisted Audio Conferences
for State and Local Health Policymakers April
29 - May 1, 2002 200-330 p.m. EDT each day
Bioterrorism and Health System Preparedness
Emerging Tools, Methods and Strategies

• To register, go to
• http//www.hsrnet.com/meeting/bioterrorism
• For more information, e-mail ULP at ulp_at_ahrq.gov