Approaches to Expanding Employer Sponsored Health Insurance: Learning from Experience

1
Approaches to Expanding Employer Sponsored Health
Insurance Learning from Experience

• Presented to
• The West Virginia Health Advisory Council (HAC)
• Presented by
• John Sheils
• The Lewin Group
• February 3, 2003

2
Distribution of Non-Elderly Adult Uninsured in
West Virginia by Work Status in 2001
Unemployed 30,796
14
Employed 134,402
Not in Labor Force 54,773
61
24.9
Total Uninsured Non-Aged Adults in 2001 219,971
Source West Virginia Health Care Survey
3
Uninsured Workers by Eligibility Status for
Employer Sponsored Health Insurance National
Estimates (in millions)
Eligible Decline 4.1
24.1
Firms Offering Coverage 7.5 (44.1)
Firms not
55.9
Offering 9.5
20.0
Ineligible 3.4
Uninsured Workers 17.0 million
Source Lewin Group Analysis of February Current
Population Survey Data
4
Percent Increase in Premiums by Firm Size
Firm Size
3 to 49
50 to 199
200
16
14.5
14.5
12.5
14
11.9
10.8
12
10.2
9.5
10
7.8
7.5
8
6.4
5.5
6
4.1
3.7
3.2
3
4
1.9
0.7
2
0.5
0
1996
1998
1999
2000
2001
2002
Source The Kaiser Family Foundation and Health
Research and Educational Trusts Employer Health
Benefits Annual Survey
5
Number of States Reporting Changes in Small
Employers Benefits Offerings
12
12
10
8
8
Number of Sites
6
5
6
3
4
2
0
Decreased
Increased Cost
Changed
Reduced Services
Reduced Eligibility
Premium
Sharing
Product/Carrier
Covered
Contribution
Type of Change
Source Short, Ashley C., and Lesser, Cara S.,
Cutting Back but not Cutting Out Small Employer
Response to Premium Increases. Center for
Studying Health System Change, No. 56, October
2002.
6
Impact of Strategies for Making Health Insurance
More Affordable
Source Helms, D., et al., Mending the Flaws in
the Small Group Market, Health Affairs, Summer
1992.
7
Lessons Learned

• People tend to want large employer benefits of
  nothing
• Creative Cost sharing works better than
  limiting covered services but still unpopular
• Very limited network plans dont sell (e.g.,
  clinics and public hospitals only)
• Programs are most attractive to smallest of small
  firms (2.8 worker average)
• Plans with subsidies have highest enrollment
• Indirect subsidies are more stable than direct
  subsidies (e.g. reinsurance, administration,
  etc.)

8
Regulation of Small Group Health Insurance in
West Virginia

• Health Insurance Portability and Accountability
  Act (HIPPA), 1996
• Applies to insured workers changing health plans
• Guaranteed issue
• Portability No pre-existing condition exclusions
  for continuously insured persons
• Permits rating by health status, age or other
  risk factors
• State Laws
• Preexisting condition look-back of six months
• Twelve month preexisting duration
• or 30 percent rating band for underwriting
  factors
• Age rating
• 65 percent minimum loss ratio

9
Goals of Employer Purchasing Pools

• Aggregate Purchasing Power in Small Group Market
• Increase Competition in Small Group Market
• Lower Premiums
• Reduced Administration
• Increased Coverage
• Greater Choice for Workers

Source Kahn C., Pollak, R.., Have Small Group
Health Insurance Purchasing Alliances Increased
Coverage?, Health Affairs, 20(01)m 154-163, 2000.
10
Purchasing Pool Is Designed to Provide Access to
a Choice of Health Plans Competing on the Basis
of Price and Quality
Employer 1
Employer 2
Employer 3
Workers Dependents
Workers Dependents
Workers Dependents
Purchasing Pool 1. Choice of Health Plans 4.
Simplify Process 2. Perform agent/broker
function 5. Negotiate Discounts with
Providers 3. Plan Comparisons
Workers Choose Plan
Plan 1 Indemnity
Plan 2 HMO
Plan 3 PPO/POS
11
Percentage of Covered Employees and Choice of
Health Plans by Firm Size, 1999
1 Plan Only
2 Plans
3 or More Plans
100
80
60
40
20
0
3-9
10-24
25-49
50-199
200-299
1,000-
5,000 or
4,999
More
Number of Employees
Source Kaiser Family Foundation and Health
Research and Educational Trust, Employer Health
Benefits 1999 Annual Survey in Purchasing.
12
Characteristics of Four Small Employer Health
Purchasing Cooperatives
Source Private Health Insurance Cooperatives
Offer Small Employers Plan Choice and Market
Prices, U.S. General Accounting Office (GAO),
March 2000, GAO/HEHS-00-49.
13
Selected Insurers Premiums for a Plan Offered
Through a Cooperative and a Similar Plan Outside
the Cooperative
14
Health Plan Competition in West Virginia

• Small Group Carriers in West Virginia (from WV
  DOI)
• 30 carriers
• Market share for largest carrier 39.1
• Market Share for largest three carriers 58.7
• HMO Enrollment (from Interstudy)
• 18.7 of Medicaid
• 3.6 of Medicaid
• 10.0 of total population
• Change in total enrollment in 2002 -8.7

15
Achieving Savings by Aggregating Purchasing Power
Requires Competition Among Providers
Plans Negotiate Discounts with Providers in
Exchange for Volume
Health Plans Negotiate Partnerships with
Providers (e.g., Selective Contracting)
Health Plan 1 (e.g., HMO)
Health Plan 2 (e.g., PPO)
Providers Agree to Cooperate with Insurers
Utilization Management Policies
16
There are 46 Counties with One or Fewer Hospitals
17
Lessons Learned

• Need large market share to reduce costs
• Open to currently insuring firms
• Administrative savings and discounts
• Need not too few or not too many participating
  plans
• Need to manage risk selection to attract plans
• Standard benefits
• Plans most offer HMO POS plans
• Minimum enrollment
• Conducive legal environment
• Rating rules similar in/out of pool
• Authority to limit number of participant plans
• Permitted to pass-on administrative savings to
  participants
• Permit negotiation of discounts for pool
• Need good marketing
• Advertisements
• Use of brokers
• Expect previously uninsured to be 10 percent to
  25 percent of enrollment

18
Healthy New York Program - Subsidized Coverage
for Small Businesses in New York

• Eligibility Limited to Firms
• 50 or Fewer Workers With at Least Half Enrolling
  in Plan
• Have Not Offered Coverage in Prior Year
• Less Than 30 Percent of Workers Earning Over
  30,000
• Employer Pays at Least Half of Premium
• Insurers May Offer Lower Cost Benefits Package
• Exempt From Benefit Mandates - Chiropractic,
  Alcohol and Drug, Home Health
• No Mental Health
• 500 Deductible, 100,000 Maximum Per Beneficiary
• Reinsurance
• 90 Percent of Costs Between 30,000 and 100,000
• Subsidized With Tobacco Settlement Funds
• Similar Program for Individual Market
• Self-employed and Individuals Below 250 of FPL
• Uninsured for Prior 12 Months

19
Mandatory Benefits in West Virginia

• Required policy provisions.
• 33-16-3a. Same -- Mental health.
• 33-16-3b. Home health care coverage.
• 33-16-3c. Coverage for alcoholic treatment.
• 33-16-3d. Medicare supplement insurance.
• 33-16-3e. Policies to cover nursing services.
• 33-16-3f. Required policy provisions --
  Treatment of temporomandibular joint disorder and
  craniomandibular disorder.
• 33-16-3g. Third party reimbursement for
  mammography or pap smear testing.
• 33-16-3h. Third party reimbursement for
  rehabilitation services.
• 33-16-3i. Coverage of emergency services.
• 33-16-3j. Hospital benefits for mothers and
  newborns.
• 33-16-3k. Limitations on preexisting condition
  exclusions for health benefit plans.
• 33-16-3i. Coverage of emergency services.
• 33-16-3m. Creditable coverage.
• 33-16-3n. Eligibility for enrollment.
• 33-16-3o. Third party reimbursement for
  colorectal cancer examination and laboratory
  testing.
• 33-16-3p. Required coverage for reconstruction
  surgery following mastectomies.
• West Virginia Code. Chapter 33, Section 16-3a-p.

20
Healthy New York Subsidized Insurance for Small
Groups Through State-funded Reinsurance
Source Lewin Group estimates using the Health
Benefits Simulation Model (HBSM).
21
Effect of Reinsurance on Premiums
Source Based on tabulations by Actuarial
Research Corporation, September 2000.
22
December 2001-December 2002 Healthy New York
Source Report on the Healthy New York Program
2002, (Report to the New York State Insurance
Department), The Lewin Group, December 31, 2002.
23
Monthly Contributions for Healthy New York Small
Employer Group Enrollees
Source Report on the Healthy New York Program
2002, (Report to the New York State Insurance
Department), The Lewin Group, December 31, 2002.
24
Impact on Changes in Premiums on Coverage for
Small Employers and Individuals
a/ More than 75 percent of workers earning less
than 14,000 per year. Source Marquis, S.M.,
Long, S.H., To Offer or not to Offer The Role
of Price in Employers Health Insurance
Decisions, Health Services Research, 365,
October 2001, and Lewin Group Estimates
25
Impact of a 30 Percent Premium Subsidy on
Coverage in Firms with Fewer than 50 Workers
National Estimates (in millions)
Number of Workers
Source Reschovsky, J.D., and Hadley, J.,
Employer Health Insurance Premium Subsidies
Unlikely to Enhance Coverage Significantly,
Issue Brief No. 46, Center for Studying Health
System Change, December 2001.