Limited Benefit Packages: Trends in the Public and Private Markets and Impact on the Uninsured

June 28-29, 2004Chicago, Illinois

Workshop for State Health Officials

Steven Findlay, MPH

National Institute for Health Care Management Foundation

Context Entering new “post MC” era of private health insurance

Partial retreat from social insurance model as reform impetus

Shift to “consumer-driven,” demand management + market model of HI as reform impetus

• Diversity of products• Variable pricing• Innovative benefit and product design• Consumer choice• Higher out-of-pocket costs for workers• Resurgence of underwriting and risk-based pricing• Less UR but strengthened DM for chronic ills

Good or bad? Depends on where you sit and stand

Limited Benefit Packages in Employer Market? Yes, occurring, but not yet well

documented or quantified, except for HRAs

Benefit “buy-down” – higher deductible options, higher co-pays, etc.

But little apparent elimination of, say, mental health, dental or Rx drug coverage from most PPO or HMO offerings

KFF/HRET study in 2003:

Most workers - no change in benefit value ‘01 - ‘03

13% of workers had fewer benefits in ‘03 than ‘02

• Deductible – up 57% 2000-2003 (PPO in network)

• 2 in 5 workers now face separate hosp ded or co-pay

• $29 for non-form brand drug in 2003, from $17 in 2000

The Individual MarketRAND Study of CA market in 2003 (Health Affairs):

Actuarial value unchanged 1997-2002 – with products covering average 75% of health spending (compared to 88% in group market)

Higher premium plans – $249/month for individual; lower premium plans $143/month

Higher premium products covered 85% of spending; lower premium products covered 63% of spending

No measure over time of shift to lower premium plans But in 2002, about 25% were in plans paying 95% or above of total

spending and 25% were in plans paying less than 67% of spending Decline in average OOP max and majority covered for prescription drugs.

But 30% increase in deductible, additional maternity care ded. and return to use of coinsurance for doc visits

NIHCM Foundation Study Funded by RWJF

Explore efforts by health plans to expand coverage among uninsured

Published in March 2003; Ex. Sum. report in the binder

13 initiatives by 10 health plans/insurers, most 1999-2002

6 targeted small group market; 7 the individual market

Limited study, by design; in-depth analysis of successes and obstacles

Half of the plans not-for-profit, half for-profit

Study Overview and Methods…Continued

Initiatives used no government money – were private sector tests of “sustainable” HI business models to reach uninsured

Some were cross-subsidized internally – with other product lines and business making up for lower profit margins

Benefit packages varied. Most were quite generous, “comprehensive.” Only two were “bare bones”

4 plans were age rated and 4 were both age rated and medically underwritten

Subscribers had choices in several but not all initiatives – of deductible, co-pay levels, and benefits

Assessed enrollment as reported by the plans and factors that led to success or failure

Results Mixed – Six of the initiatives met enrollment targets, with

25% to 100% of enrollees previously uninsured

Five did not reach enrollment targets and two initiatives didn’t get off the ground

Enrollment ranged from very small scale to large – with biggest initiative (WellPoint) including a rollover of existing small biz and individual members from previous targeted effort into new “choice” product line

As of mid-2002, total enrollment was 1.75 million, with over 1 million previously uninsured – 900,000 in two WellPoint initiatives

Enrollment Results UpdatedContacted several successful initiatives for update:

BCBS Kansas “Chamber Choice” for small biz – 53,868 enrollees as of May 2004, 24% previously uninsured. Up from 39,600 in Oct 2001. Average individual monthly premium: $193. No change in benefit package.

But other KC plan (Mid America Health Choice) aimed at uninsured small biz folded.

BCBS plans in Penn - “Special Care” products for uninsured only. 45,744 enrollees as of April ‘04, down from 61,000 in June ‘01. 4% premium increase last year.

Kaiser Permanente in Calif – “Steps” and Child Health Plans, for uninsured up to 300% FPL. Combined 28,800 enrollees as of May 2004, up from 19,600 as of May 2002.

Success Factors – Customer Perspective

Affordability – “psychological” price point of $150 for individual and under $300 for family coverage. Many overestimate cost.

Innovative benefit design – allowing choice and trade offs.

Broad provider networks

Marketing – They have to know about it, and interest generated! And they have to perceive as a good value.

Catch people in transitions – loss or gain of job or Medicaid, youth dropping off parent’s policy

Success Factors – Plan/Insurer Perspective Leadership commitment over time

Lower profit margin, internal cross-subsidization

Targeted and multi-pronged marketing effort; community outreach

Broker relationship and buy-in

Simple enrollment process

Explain choices and trade offs clearly

Benefits designed around price categories

Recommendations Re: Private Coverage

Health Plans• Avoid forcing people into

skimpy benefit plans; choice instead

• Allocate sufficient resources to marketing

Government• Consider trade off of state

mandates and affordability. Nine states in 2002-2004 considered small market products free of some or all state mandates

• Raise awareness among consumers of need to have HI

Government and Health Plans:

• Take new look at flexibility and diversity of benefit design

• Partner to build awareness of both public programs (Medicaid, CHIP, etc) and private sector options

Private Sector > Moderate and Higher Income Uninsured

Source: NIHCM Foundation, 2002, RWJF-sponsored project. Based on 2001 data.1. NIHCM Foundation estimates based on data from the Urban Institute.2. U.S. Census Bureau, Current Population Survey, 2002 Annual Demographic Supplement.3. Within these categories, the uninsured are not eligible for public programs.4. Nearly one million uninsured who are above 200% FPL are eligible for public programs and are therefore included in the

14 million who are eligible for public programs but not enrolled. Estimates based on Urban Institute data and CPS 2002.

Low-to-moderate income requiring premium

assistance

~15.4 million

Eligible for public programs but not

enrolled

~14 million1

<200% FPL

~9 million1,2,3

Higher income requiring education

on value

~11.4 million2,3,4

• Awareness• Stigma• Enrollment

barriers

• Affordability• Not offered at work• Transitions• Undocumented

• Perceptions of Affordability• Voluntarily Uninsured• Transitions (Employment, age)• Value (Cultural, age)• Small employer/Indiv. Market

200-299% FPL6.4 million2,3,4 300%+ FPL

Conclusions Market place will now test acceptability of new HI products and

designs, including high deductible plans and HSAs

Private HI sector could and should contribute on its own to reducing uninsured; long term commitment required.

But highly unlikely to be large impact b/c of voluntary nature of HI, prevalence of uninsurance among low income, and rising cost of health care and family HI.

HC and HI cost increases moderated in 2003 and this year, too. But marginal relief. Small employer market faces serious challenge in next five years.

If Kerry elected – HI reform a promised priority.