Maryland’s Small Group Health Insurance Market

September 14, 2012

Ben Steffen

Acting Executive Director

Maryland Health Care Commission

PresentationSmall Group in 2012

Trends in Small Group Coverage

Small Group Post ACAWhat we knowWhat we need to worry about

2

A Word about Data SourcesMHCC sources:

Survey of carriers active in the small group marketAll Payer Claim Data Base

Federal SourcesBureau of the Census -- Current Population SurveyAgency For Healthcare Research and Quality – MEPS-IC

4

- Guaranteed issue and guaranteed renewal

- No pre-existing condition limitations on individuals under age 19

- Community rating, adjusted for age and geography only, with rating bands at +/- 50% of the community rate

- Benefits may be improved BUT NOT reduced (positive riders)

- Affordability cap (Insurance Article § 15-1207): Average premium without riders cannot exceed 10% percent of average annual wage (current estimate: $52,999)

Comprehensive Standard Health Benefit Plan:Basic Provisions --2012

Small employer engagement with CSHBP – Trending Down

Covered Lives0

100,000

200,000

300,000

400,000

500,000

381,517 365,176

355,014

2009 2010 2011

5

Groups0

10,000

20,000

30,000

40,000

50,000

60,000

47,661 44,618

41,109

2009 2010 2011

Percent of Population Insured through Employer-Sponsored Plans

2001 2002 2003 2004 2005 2006 2007 2008 2009 201040

45

50

55

60

65

70

75

8076.8

75.373.4

71.6 70.8 71.6 71.1 71.169.6

67.9

67.6 66.665.0 64.5 64.0 63.5 63.4 62.3

59.6 58.6

MarylandU.S.

Source: Bureau of the Census, Current Population Survey, accessed at http://www.census.gov/hhes/www/hlthins/data/historical/HIB_tables.html

Measuring Affordability

8

2004 2005 2006 2007 2008 2009 2010 20110%

25%

50%

75%

100%

125%

102% 103%

91%86% 85% 88%

95% 98%

Cost of the CSHBP (without riders) in Relation to Cap

2004 – 2011

The affordability cap is defined as 10% of the average annual Maryland wage.

Average Individual Premium (w/riders)by Plan Type - 2011

HMO/H.S.A. HDHMO PPO/H.S.A. HMO PPO$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$3,910

$4,597 $4,889

$5,545

$6,216

CSHBP avg. premium = $5,186

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MHCC’s StateStat Measures of Affordability

2009 20100%

5%

10%

15%

9.5% 9.7%9.7%

9.2%

Average total single person premium for all group plans di-vided by the Maryland average

wage

Small group Large group

Per capita health expendi-

tures

Small Group* Large Group*$0

$500

$1,000

$1,500

$2,000

$1,402 $1,349$1,701

$1,288

Maryland Per Capita Health Care Spending and Typical Employee Out-of-Pocket Ex-

penditures by Employer Size

2009 2010Average employee out-of-pocket expenditures = premium contribution for single coverage plus median patient out-of-pocket spending for covered services

Perspective from Maryland’s APCD -- Current Spending in 2009

Individual Market CSHBP Total Privately Fully Insured

# Full-year Users 100,515 163,758 297,307

Mean spending $2,574 $3,888 $3,404

% Out-of-pocket 31% 20% 13%

% with inpatient stay

4.3% 5.8% 5.8%

Challenges to Small Group

Self-insurance by EmployersEmployer pays for employees’ health care directly

Employer assumes risk for health care claims

Exempt from state regulation by federal law (ERISA) Plan design is determined by employer Exempt from State health benefit mandates, premium taxes

Small employers who currently self-insure Have an expected health care spending to wages ratio that is 50% lower

than for small employers with fully insured plans

Typically less expensive than fully insured (commercial) plans Exempt from mandates Employees are healthier than average

Small Employers Offering Insurance in Maryland and U.S.

2008 2009 2010 21110

10

20

30

40

5044

49 47.2

39.143.2 41 39.235.7

Offering Coverage

Maryland US

%

2008 2009 2010 21110

10

20

30

40

50

10.112.8 14.9 13.4

12.2 11.6 12.5 10.8

Self-Insuring Coverage

Maryland US

%

Source: AHRQ MEPS-IC, MD coverage different from US at 90% CI in 2009, 2010. No statistical difference in self-insurance rate.

Carriers and TPAs Are Actively Marketing Self-insured Plans to Small EmployersPlans include:

Administrative services – typical self-insured product “Stop-loss” coverage with a low attachment point

Insurance that protects the employer against higher than expected enrollee spending

MIA requirement on attachment point: may not be less than $10,000. 

Could result in “adverse selection” An increase in the number of small employers with healthier employees

who choose to self-insure Potential to drive up premiums for the fully-insured today and post-2014

in and outside of the SHOP Exchange

Looking Ahead to 2014- Launch Of Health Benefit Exchange

Guiding principles• Promote affordability for the consumer and small employer• Ensure access to quality care for consumers presenting with a range of

health statuses and conditions • Facilitate informed choice of health plans and providers by consumers

and small employers• Reduce health disparities and foster health equity

CSHBP Post-2014*Inside the Exchange Outside the Exchange

Who participates Plans Issuers with Premiums Above $20 Million; must be recognized as qualified health plan

All issuers, must also participate in Exchange if premiums above $20 million

Who decides Employer choice Employee choice -- multiple products from one issuer, employee choice multiple issuers same metal level

Employer Choice, but issuers may offer additional plan options.

Consumer protections Guarantee issue; guarantee renewal; no pre-ex up to age 19; modified community rating based on age and geography (3:1)

Guarantee issue; guarantee renewal; no pre-ex regardless of age; modified community rating based on age only(3:1)

Scope of Coverage MHCC defines benefit package; positive riders permitted; includes 10 broad categories of EHBs

EHB and metal levels; Issuers MAY be limited in # of offerings at each metal level; riders defined within scope of metal levels. Limited issuer flexibility in benefit design

EHB and metal levels; greater flexibility in # of plans, Limited issuer flexibility in benefit design

Number of plan choices Unlimited products Bronze, Silver, Gold required, QHPs offer at most 3 plans at any metal level

Silver and gold required to be offered

Affordability Basic Product must be < 10% of MD Annual Wage. Limited options don’t purchase.

Opt out for low wage workers under law. Individuals who are eligible for employer sponsored coverage may apply for a premium if premiumsexceed 9.5% of their income. Catastrophic benefit can be made available for adults younger than 30 with EHB's if they can't find a plan with a premium of 8% or less of their income regardless of age with deductible capped at $2000/4000

Marketing Channels Brokers or Direct Purchase Brokers, Navigator, Direct Purchase Brokers and Direct PurchaseMLR 75% (incurred claims/premiums earned) 80% (incurred claims, quality improvement expenses/premiums earned, taxes,

etc.)Mandated Benefits Includes all state mandates except IVF,

hair prostheses, smoking cessation, amino acid elemental formula

Current mandates must be included if included in the selected benchmark plan. Benchmark must be selected by September 2012.

Subsidies/Tax Credits State Partnership subsidy available to qualifying small low wage businesses; Federal 2-yr. tax credits for qualifying employers that offer coverage.

2-yr. tax credits for qualifying employers that offer coverage.

State Partnership subsidy available to qualifying small low wage businesses; Federal 2-yr. tax credits for qualifying employers that offer coverage.

What Changes?

Pressure on Small Employers post-2014

Smallest firms especially question if they can continue offering a group plan

Significant price sensitivity among businesses with lower wage employees

No requirement under Maryland law for small employers to offer coverage No requirement under the ACA for small employer to offer coverage or

contribute.

SHOP Exchanges offer promise but employer must contribute to take advantage of tax credits.

Tax credits limited to 2 years Only available for firms with 25 employees or less

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Why Is Self-Insurance a Threat for the Small-Group Market? Insurers must treat all their (insured) small-group business (both inside and outside the

SHOP Exchange) as one “pool.”

Rating bands within that pool, premium rates are to vary only by the age of the covered person (with a maximum variation of 3:1 from highest to lowest—the equivalent of ±50%) and by geographic location, tobacco use, and whether or not dependents are covered.

Risk adjustment, which also applies across the entire insured small-group market, as well as risk corridors, help to pool risks across the entire insured small-employer market.

If the lowest cost (small) employer groups choose self-insurance, then they are not part of the insured small group market.

With the lowest cost groups out of the insured pool, the average premium for the groups remaining in the pool will be higher.

Other aspects of the ACA that could encourage self-insurance

Greater employer flexibility: Insurance rules do not apply: a SG employer that self-insures is exempt … from having to offer plans that meet the essential health benefits package

requirements. from having to offer plans that conform to minimum medical loss ratio, state and

federal insurer fees/taxes.

Ease of entry to small group: if a self-insured employer’s enrollee risk profile increases, employer can purchase a fully-insured product either in or outside the Exchange (similar to current option to purchase the CSHBP).

Uncertainty about benefit structure in 2014: essential health benefits (EHB) will provide a framework for what is offered. Current mandates must be included, if the mandates are included in the benchmark plan selected by the state.

Other ACA provisions that could encourage self-insurance (continued)

More attractive employee options: subsidies will be available for individuals who purchase through the individual exchange (< 400% FPL). For lower wage employees total costs of coverage could be lower in the individual exchange.

Me-too impact: steady opposition to ACA from some small business organizations and skepticism that what is offered today via CSHBP will NOT be available in 2014. but… NFIB and CoC like some features of SHOP: new employer options for offering

coverage, employer defined contributions (in terms of global budget or defined percentage of a reference plan), and employee choice of issuer and plan design.

Some argue small group employer offer rate will continue to fall, but design of SHOP will matter… a lot.

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Factors that could discourage self-insurance

Balance scope of coverage with affordability, link EHB to existing CSHBP benefit package employers.

Promote the SHOP Concept:Promote concept of employee choice (liked by employers), Facilitate positive actions of key stakeholders, specifically issuers

and brokers, Make SHOP experience easy and less burdensome for employers,Market SHOP as the environment where innovations can be tested.

Adopt business rules that do not impose penalties on SHOP – build SHOP fees into premiums

Change rules governing self-insurance. Attachment points in Maryland are only $10,000.

Percentage Of Small Firms Offering Health Insurance In 2016, After Implementation Of Health Reform, By Source of Coverage

Eibner C et al. Health Aff 2012;31:324-331

©2012 by Project HOPE - The People-to-People Health Foundation, Inc.

• Access to health insurance will modestly increase if self-insurance is preserved nationally about 1 million more would be insured.

• RAND Study found that employers that self-insure have moved beyond other types of coverage.

Small Firms’ Actions And Exchange Premium And Enrollment Impact

Eibner C et al. Health Aff 2012;31:324-331

©2012 by Project HOPE - The People-to-People Health Foundation, Inc.

SHOP Exchange Premiums For Individual Coverage, 2016

Scenario

Coverage tierBaseline Affordable Care Act

Strong grandfathering No self-insurance

Bronze $3,304 $3,605 $3,298

Silver 3,855 4,206 3,848

Gold 4,405 4,807 4,398

Platinum 4,956 5,408 4,948

Change relative to baseline scenario —a 9.1% −0.2%

• Premiums in SG are stable because if not, employers that self-insure would drop coverage not move back into SG

• Authors identified low attachment points as a concern, lower attachment points was a scenario that led to death spiral in SG.

Conclusions

MHCC will continue to closely monitor the self-insurance rate among small employers and their enrolled workers Increases in the rate could adversely affect SG market participation Self-insurance by “Healthiest 10%” can magnify problems for SG SG employers’ fears stoked by information about the ACA.

Change in Maryland law would require legislation. Debate could focus on higher attachment points and limits on when an employer can obtain coverage. As this is an ERISA domain, MIA’s scope of authority is limited.

Federal regulations on stop-loss may be forthcoming. May 1, 2012 DOL releases RFI on stop-loss. Responses available at http://www.dol.gov/ebsa/regs/cmt-StopLoss.html