A Presentation of the Colorado Health Institute 1576 Sherman Street, Suite 300 Denver, Colorado...
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Transcript of A Presentation of the Colorado Health Institute 1576 Sherman Street, Suite 300 Denver, Colorado...
A Presentation of the
Colorado Health Institute
1576 Sherman Street, Suite 300
Denver, Colorado 80203-1728
www.coloradohealthinstitute.org
Hot Issues in Health Care
Legislative Conference
November 17-18, 2006
Colorado’s Private Health Insurance Market
Hot Issues in Health Care Legislative Conference
November 17-18, 2006
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Overview
• Place private health insurance market in competitive market context
• Describe small group market trends• Describe individual market trends• Discuss market-driven versus publicly
supported policy approaches • Present various policy options
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Health insurance markets compared to competitive markets
• The health care insurance market rarely meets conditions necessary for a competitive market
• Conditions for competitive markets include……
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Competitive market
Health insurancemarket
Making informed purchases by having sufficient information regarding:
Most health care consumers lack information regarding:• Cost of services
• Cost• Quantity • Quality
• Scope of services they consume
• Variation in quality among providers
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Competitive market
Health insurancemarket
• Easy entry and exit of suppliers
• Suppliers seek consumers who will use products
• Difficult to enter the health care market
• Suppliers seek consumers who will minimize use of products
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Competitive market
Health insurancemarket
• Consumers pay for what they consume
• Consumers are free to purchase a product as long as costs are covered
• Some consumers pay for more than they consume; others pay for less than they consume
• Employer chooses products; limited employee choice
• Individual market closed to consumers with pre-existing conditions
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In 2004-05, Colorado regulated about 23% of private insurance market
Source: Kaiser Commission on Medicaid and the Uninsured, Colorado Division of Insurance, 2006. Data from 2004-05.
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Adults are more likely to be uninsured than children
Source: U.S. Census Bureau, Current Population Survey
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Trends in the U.S. insurance market: Increases in premiums relative to inflation and earnings
Source: Kaiser Family Foundation, 2006.
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Trends in Colorado’s employer-based market: Employee premium increases over time
Source: Medical Expenditure Panel Survey
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Trends in Colorado’s employer-based market: Family premium increases over time
Source: Medical Expenditure Panel Survey
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Trends in health insurer market in Colorado
• Enrollment in state’s top 10 health plans has increased:– 1.8 million people at end of 1995– 2.9 million at end of 2005
• For-profit health plans make up greater share of the market than nonprofit plans
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Erosion of Colorado’s small group health insurance market, 1997-2005
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What defines the small group health insurance market in Colorado?
• Small employers between 2 – 50 employees • Business Groups of One (self-employed
individuals)• Guaranteed issue (cannot be denied coverage
due to health status) • Use of claims experience and health status to
set rates is allowable • Some rate-setting controls
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Small group market
The decline in participation corresponds with increasing premiums.
Source: Medical Expenditure Survey and Colorado Division of Insurance, 2006.
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Small group market
Disagreement as to source of increasing premiums –
• Reforms passed by Colorado legislature in 1994 (HB 94-1210) or
• Inflationary market trends across the country mitigated by HB 94-1210
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Small group market: Impetus for H.B. 94-1210
• No limits on annual rate increases for small employers – premiums could double in one year based on health status of employees.
• Carriers could decline or limit coverage of individuals in the small group market.
• Led to very unstable market conditions.
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Small group market: HB 94-1210
HB 94-1210 included various changes to the small group market: • Guaranteed issue• Market conduct rules • Modified community rating with rate controls
implemented over 3-year period• Business Group of One added
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Small group market: HB 94-1210
• Since its passage, most of HB 94-1210 has been rescinded by the legislature or superseded by federal HIPAA rules
• Remaining/modified regulations from 1210: – Business Group of One remains, but greater controls
on employment documentation– Premiums can range from an annual 25% reduction to
a 10% increase based on health status (claims experience) on top of medical inflation, geographic region and industrial classification
– All carriers must offer standard and basic plans
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What is the individual health insurance market in Colorado?
• Roughly 11% of Colorado’s privately insured population is in the individual health insurance market
• No guaranteed issue; carriers allowed to deny applicant based on health status
• Very few mandates apply
• Health plans must file premiums with the state and must be found actuarially sound
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Individual market
Colorado’s high-risk pool: CoverColorado
• State established, subsidized health insurance plan for people “uninsurable” because of a pre-existing medical condition
• A few other qualifying circumstances (see CHI brief on high-risk pool)
• 23 states have a high-risk pool• 180,000 participants nationwide; 5,000+ in
Colorado
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Individual market
Funding for CoverColorado• Premiums, state unclaimed property fund and
assessment on insurers• Premiums set between 100% and 150% of
annual average small group premium rate • High premiums, high deductibles • In 2005, almost 50% of CoverColorado
members had a deductible > $5,000
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Individual market:High-risk pool claims vs. premiums
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Two approaches to stimulate small group health insurance market
• Structure health insurance to operate more like a competitive market through greater consumer-directed health care purchasing
• Increase government involvement through regulatory mechanisms and subsidies to increase coverage for low-income workers
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Consumer-directed purchasing
• High-deductible health plans can be coupled with health savings accounts (HSAs)
• Greater cost sharing, more out-of-pocket expenses when shopping for health care
• Consumers with more out-of-pocket expenses will require greater transparency in pricing and quality information, a “Consumer Reports” for health care consumers
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Regulatory guidance and publicly financed subsidies
• Individual mandate to obtain health insurance coverage (same as auto insurance mandate)
• Employer mandate to provide coverage to employees
• Reinstate modified community rating/risk pooling
• Publicly financed premium subsidies for low-income workers
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Now for the experts………
• Ruth Benton - CEO, New West Physicians
• Bill Lindsay – President, Benefit Group, Lockton Companies of Colorado