Nongroup Health InsuranceGary Claxton

Vice President

Kaiser Family Foundation

What Is the Nongroup Market? People purchasing coverage directly from

insurer People purchasing coverage through

discretionary associations

Who Uses the Nongroup Market Generally it is a residual market

People not offered coverage at work Self-employed (varies by state) People not working and not eligible for public

coverage People between jobs Early retirees Sometimes people who cannot afford contribution for

ESI Most with access to ESI take it

Percent of Nonelderly With Direct Purchase Health Insurance, Current Population Survey, 2001-2007

6.4%6.6% 6.6%

6.9%6.7% 6.6% 6.5%

5.6%5.4% 5.4% 5.5%

2%

3%

4%

5%

6%

7%

8%

2001 2002 2003 2004 2005 2006 2007

Census Bureau

Adjusted for duplicatecoverage

Census Bureau, Current Population Survey (CPS) Annual Social and Economic Supplement, www.census.gov/hhes/www/hlthins/historic/index.html.Adjusted figures: Revised CPS data from KCMU/Urban Institute analysis of 2005-2008 ASEC Supplement to the CPS.

Percent of Nonelderly With Direct Purchase Health Insurance, Medical Expenditure Panel Survey, 1999-2005

4.6% 4.7% 4.8%4.6%

3.7% 3.7% 3.8% 3.7%

0%

1%

2%

3%

4%

5%

6%

7%

1999 2001 2003 2005

Any Nongroup At Least 6 Months Nongroup, Public Removed

Kaiser Family Foundation analysis of Medical Expenditure Panel Survey (HC), 1999, 2001, 2003, 2005. Nongroup includes people with nongroup, self-employed group of one and private other group coverage. Public removed excludes people with 6 months or more of Medicaid or Medicare.

How Nongroup Coverage Differs from ESI Tax treatment/subsidy Adverse selection

Group v. individual underwriting Administrative costs

Underwriting and marketing cost Persistency Credit/other

Premiums Tend to be lower (for less coverage) Vary by factors

Benefits Higher cost sharing Limitations

Regulation more at state level

Adverse Selection / Underwriting Applications

Collect health history Consent to review medical history

Accept/Deny Accept at substandard rate Accept with coverage limit

Preexisting conditions generally excluded even if accepted Look back quite far in some states Problem if switching non-group coverage

Discuss rescissions later High Risk Pools

Premiums Tend to be lower than total cost of ESI Vary by age, location, health and other factors AHIP survey 2006/2007

Range average individual premium $1,359 (18-24) to $5,090 (60-64)

Range average family premium $2,850 (18-24) to $9,201 (60-64)

Large variation based on deductible and other factors

Benefits Benefits generally leaner than ESI AHIP survey average PPO/POS deductible

Individual: $1,747 Family: $2,753

AHIP survey average HSA/MSA deductible Individual: $2,905 Family: $5,329

Limitations Eg: Maternity, mental health, prescription drugs,

service and visit limits

All diagnoses or treatments of mental disorders, as defined in the policy, including substance abuse, are limited to a lifetime maximum benefit of $3,000 (not covered in Saver Plans, subject to state variations). Covered expenses for outpatient diagnosis or treatment of mental disorders are further limited to $50 per visit. As with any other illness or injury, inpatient care that is primarily for educational or rehabilitative care is not covered.

Regulation Nongroup regulated primarily by states Variation in rules

Acceptance and types of limits Rating Benefits and terms

HIPAA Regulates terminations and renewals Guaranteed acceptance for a limited group

High Risk Pools

Policy Issues Nongroup market has the advantage of letting

people shop for what they want Size and structure limit what is available Comparing benefits and terms can be difficult

(People unaware of potential costs and service use of different illnesses)

Access to coverage is limited by health and risk Risk pools are somewhat costly alternative Preexisting condition exclusions present risk that is

hard to evaluate

Policy Issues Renewability risks (difficult to know)

Closed blocks of business Durational rates

Cost-sharing impacts on low and moderate income families

Benefit Mandates Cost

Current issue with rescissions Federal or state regulation

Small Group Coverage Adverse selection

Self-employed and very small groups Premiums and Benefits

Small group premiums similar to large groups But higher deductibles (not as high as NG)

Regulation State and Federal regulation

Accept all groups; no health status adjustments for worker contributions, but health affects group rate

Rating bands Policy Issues

Associations, self-funded pools Combine small group with nongroup