Public and Private Initiatives
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Transcript of Public and Private Initiatives
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Public and Private Initiatives
J.P. Wieske
Council for Affordable Health Insurance
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Health Insurance Crisis
• Rising Costs– 9.2% (2005) preceded by double digit increases
• Fewer Businesses Offering Insurance– 59.8% of the population had employment based
insurance down from 60.4% in 2003
• Uninsured Numbers Rising
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Health Insurance Crisis
• 45.8 million were uninsured in 2004– Up from 45 million in 2003– National Percentage has remained at 15.7%– 1998 – 16.3% uninsured– 2000 14.2% uninsured– Illinois 14.2 % -- below the national average– Majority of uninsured work for firms with less
than 100 employees
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Who are the uninsured
• 1/3 have incomes less than $25,000
• 1/6 have incomes over $75,000
• 41% 18-34 years Old
• 21% 45-64
• 79% were employed full or part time
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Can we do more?
1. Provide access to low-cost health insurance for those with low incomes
2. Decrease the uninsured rate
3. Ensure health insurance remains affordable
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Targeting Solutions
• The uninsured are diverse…young, older, rich, poor, employed, and unemployed
• Solutions should be targeted to specific populations
There is no one solution to everyone’s problem
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How Do States Regulate Insurance
• Large Group– Mostly ERISA plans outside of state control– Flexibility in rating, no guaranteed issue
• Small Group & Individual– Primarily state regulated products– Face numerous cost drivers – Smaller groups
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State Regulation of Insurance
• Significant costs difference state by state– Mandated Benefits
– Plan Design Flexibility
– Community Rating / Rating Windows
– High Risk pools
– Rate / Form regulation
– Demographics
– Health Care Costs
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Federal Proposals
• Enzi Bill – Small Business– Small Business Health Plans– Elimination of Mandates and Rating Rules
• Choice Act -- Individual– Interstate insurance sales– Maintains state regulatory structure
• SMART Act / Optional Federal Charter– Simplify regulation of insurance– Replace state regulation with federal regulation
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State Activity
• Mandate-lite insurance plans • High Risk Pools• Rate Reform• Pooling Arrangements (co-op plans, MEWAS, AHP’s)• Public-Private “partnerships”
– Massachusetts– Healthy New York– Dirigo Health– Premium Subsidies
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Private market responses
• Health Savings Accounts/ Consumer driven plans
• Low-cost / mandate free plans
• Limited Benefit Policies
• Plan Design Flexibility
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Pooling Arrangements
Pooling arrangements are designed to provide large group benefits to small groups– Often increases choice in the marketplace– Competes with the private market– Usually limited to small segment of the
population (small businesses, farmers)– Rarely leads to significantly decreased costs
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Pooling Arrangements
• State Employee Plans – allows private individuals or small groups to purchase state employee insurance– Very difficult to appropriately price– Benefit plans often richer than the private
market– Guaranteed issue/ community rated coverage
leads to death spiral
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Pooling Arrangements
• MEWAs (Multiple Employer Welfare Arrangements) – Self-funded plans for multiple employers who
band together– Limited state regulatory authority and limited
federal oversight– If improperly funded, could lead to insolvency
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Pooling Arrangements
• Co-operative Plans – allows cooperatives – especially farmers – to sell a plan designed for its members– Flexible plan design allows coverage to reflect
members needs
– Community Rated plans may lead to “death spirals”
– May create unlevel playing field for the rest of the private market
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State Run Pools
• State-run pools – These plans compete with the private market replacing the private insurer with the state– Plans are often guarantee issue and community rated
– Unless the plans offer additional cost savings features (i.e. mandate-lite, or tax savings) very little savings
– Can become a dumping ground for high risk companies leading to a death spiral.
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Public-Private “Partnerships”
Dirigo Health – Sold as a public-private partnership– Created to solve problems caused by guarantee issue and
community rating– Subsidized with tax on insured people– Premiums and plan design based on sliding scale– Limits on private healthcare investment– Strict insurer rate review– Only 25% previously uninsured – Only 7300 currently enrollees
We’ve spent more than $40 million of federal money … to essentially insure 2,300 or 2,400 people” State Sen. Karl Turner
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Public-Private “Partnerships”
• Massachusetts Plan -- Market decimated by guaranteed issue and community rating
– Employer mandate • Employers pay $295 fee and responsible employee and dependent
claims in excess of $50,000 (in aggregate) • Must offer cafeteria / section 125 plan
– Individual mandate – lose tax deduction– Combines Individual and Small Group Market– Creates “Connector” which will define “affordable insurance” and
clearinghouse– Extensive reporting requirements including personal medical data
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Public-Private “Partnerships”
• Healthy New York– New York has guarantee issue, community rating and no high risk
pool– Covers 107,000 people– Reinsures coverage between $5,000 - $75,000– Community rated and guarantee issue (similar to NY)– HMO based (no out-of-network coverage)– Limited benefit policies (eliminates mandates)– Losses funded by the state of New York– Primarily targeted at uninsured poor (individual and small group
coverage)
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Public – Private Partnerships
• Premium Subsidy Plans– Montana
• Targeted at small employers 2-5
• Tax credits for providing health insurance
• Subsidies for those who do not
– Oklahoma• 185% of Federal Poverty
• Employer-based coverage
• Funded by tobacco revenue
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Mandate-Lite Insurance plans
• Lower cost benefit plans -- sometimes referred to as limited benefit plans
• Allow carriers to offer plans without state mandated benefits. (CAHI estimates Illinois has 38benefit mandates.
• States often limit the ability of carriers to offer these plans. (uninsured, market share, poor, or limited plan design)
• Uptake has been low in many states (commissions, up selling, unattractive benefit limitations)
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Health Savings Accounts
Health Savings Accounts have been successful at targeting some uninsured
• Consensus number is around 30% of H.S.A. purchasers were previously uninsured
• Successful at targeting very small businesses (50% previously uninsured)
• State Tax deductibility helps protect employees
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High Risk Pools
• 32 states have them including Illinois
• Targets individuals who are uninsurable
• Pools should have broad-based funding
• Extremely successful in ensuring healthy individual market
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Voluntary Reinsurance Pools
Voluntary reinsurance pools allow carriers to pool the costs of high risk cases
• Very few carriers participate in most states• Even fewer individuals are covered under
the pool• Primary benefit is to ensure solvency of
very small carriers
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List Billing
• Targets employed individuals not eligible for group insurance
• Allows individuals to purchase an individual insurance plan through payroll deduction
• Easier for individuals to purchase coverage• No employer involvement except agreement to
remit premiums• May receive favorable tax treatment
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Tax Credits / Tax deductibility
• Economic studies of tax credits targeted at the poor could substantially reduce the uninsured rate ( Cutting Taxes for Insuring (AEI Press, 2002), Mark V. Pauly and Bradley Herring, Tax Credits for Health Insurance, (Urban-Brookings Tax Policy Center) Leonard E. Burman and Jonathan Gruber
• Many states have considered additional tax credits to encourage very small businesses (2-25) to offer insurance
• Individual health insurance is still not tax deductible
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Underwriting
• Targets the young by making insurance more affordable
• Leads to more affordable insurance by creating a healthier pool
• Medical Waivers (or Riders) allow individuals with certain medical conditions to obtain standard coverage
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Association Insurance / Choice Act
Association Group insurance is currently sold to individuals in many states
• Many association carriers domiciled in Illinois• Premium taxes can affect their competitiveness in
other states • Targets a variety of the uninsured• Provides new insurance options in the states• Lower cost plans through administrative savings
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Sound / Tonik Benefit Plan
• Offered BC/BS and Unicare in a variety of states– Premiums in California and Illinois from $60-$83,
higher in other states
– Successful at targeting “invincibles”
– Unique plan designs • High deductible
• 4 Dr Visits
• Limited drug coverage
• Includes dental and vision coverage
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“Right Start” Plan
• Offered by Assurant Health– Premiums savings 15-20%– H.S.A. qualified plans– Targeting value buyer – Unique plan designs
• High deductible
• Savings through coverage options
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Limited Benefit Plans
• Offered by numerous carriers in the market
• Provides low co-pays and deductibles
• Benefits are limited – Limits on total reimbursement (sometimes
allow buy-ups)– Benefits are scheduled per service (i.e. $100/
Dr. Visit)
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Regulatory Reform / Speed-to-Market
• Targets the entire market
• Lowers administrative costs for insurers
• Lowers state oversight costs
• Increases consumer choice
• More market stability
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Resources
• Visit www.cahi.org to download publications including:– Mandates in the States– State Legislator’s Guide– Issues and Answers on Dirigo, Healthy New
York, and List Billing– Or contact me [email protected]