Use of a Simulation Model to Inform State Policy: The Case of New Jersey’s Non-Group Health...
-
Upload
claribel-bates -
Category
Documents
-
view
220 -
download
1
Transcript of Use of a Simulation Model to Inform State Policy: The Case of New Jersey’s Non-Group Health...
Use of a Simulation Model to Inform State Policy:
The Case of New Jersey’s Non-Group Health Coverage Market
Alan C. Monheit, Ph.D.Joel C. Cantor, Sc.D.Piu Banerjee, Ph.D.
Academy Health Annual Research MeetingJune 4, 2007
Rutgers Center for State Health Policy 2
Acknowledgements
Rutgers Center for State Health Policy contributors: Margaret Koller, Senior Associate Director Carl Schneider, Senior Research Analyst
Funded by the Robert Wood Johnson Foundation and the Commonwealth Fund
Rutgers Center for State Health Policy 3
Key Features of NJ’s 1992 Non-Group Market Reforms
Response to troubled market Carrier of last resort (BCBS) losses Repeal of all-payer rate hospital setting
Replaced carrier of last resort with… Guaranteed issue, renewal, portability for all carriers Pure community rating (modified CR in small-group market)
Other features Encourage carrier participation Standardization of policies Minimum loss ratio (75%) Subsidies for moderate income participants (phased out by
1997)
Rutgers Center for State Health Policy 4
NJ Non-Group Enrollment
Source: NJ Individual Health Coverage Program & Monheit, et al. Health Affairs, July/ August 2004.
50
100
150
200
250
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Four
th Q
uart
er E
nrol
lmen
t
(in
thou
sand
s)
Rutgers Center for State Health Policy 5
Non-Group Policy Debate Today
Policy debate under way Some committed to community rating & guaranteed
issue Others support reform, but little consensus on strategy
Policy options… Modified community rating Reinsurance Merge non-group with small-group market Replace non-group market with new state-run plan Individual mandate
Rutgers Center for State Health Policy 6
Simulate move from pure to modified community rating Age-sex based rates 3.5:1 and 5:1 rate bands Sensitivity analysis
Simplifying assumptions Non-elderly adults (21-64) Single coverage Affordability limit, no person pays >10% of family income
Model the decision to participate or withdraw Compare projected reservation price to projected
premiums
Simulation of Modified Community Rating
Rutgers Center for State Health Policy 7
Decision to Enroll
Projected “Reservation Price” > Projected “Premium”
Reservation Price (Ri)
Ri = [0.5 * ri * V($)j ] + E($)i, where:ri = risk aversion parameter for individual i
V($)j = variance of expected plan payout for rating group j
E($)i = expected plan payout for individual i
Projected Premium
Average of E($)i * 1.25 for each rating group (j)
Simulation Details
Rutgers Center for State Health Policy 8
Data Needed Expected health plan spending for…
NJ non-group enrollees NJ uninsured
Data not available for NJ
Data Used MEPS two-part model predicting plan payout, as function of
age, gender, region, health, and coverage type Apply model to state non-group and uninsured survey data
500 uninsured persons from RDD NJ Family Health Survey 701 non-group subscribers sampled from subscriber lists of 4
of five largest non-group carriers (representing 95% of enrollment)
Estimating Expected Plan Payout
Rutgers Center for State Health Policy 9
Data Needed Reservation price: [0.5 * ri * V($)j ] + E($)i
Risk aversion parameter (ri) not observable
Data Used Baseline, risk aversion parameter (ri) calibrated to actual
behavior… For insured, ri = minimum required for Ri > actual
premium For uninsured, ri = maximum value for Ri < actual
premium
Predict change in enrollment due to premium changes: Apply elasticity from published literature to each rating
cell Iteratively change ri to obtain predicted change in
enrollment
Estimating the Risk Aversion Parameter
Rutgers Center for State Health Policy 10
0
0.5
1
1.5
2
Age 21-24
25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64
Rat
io to
Pur
e C
omm
unit
y R
ate
*Monthly premium for the lowest cost HMO in the NJ non-group market ($15 copay plan in October, 2004).
$461*
$523$523$523$511
$415$349
$320
$243
$159
Change in Monthly Non-Group Single Premium
Simulation of Age Rating with 3.5 to 1 Rate Bands
Rutgers Center for State Health Policy 11
$525 $523 $534
$107$159$150
$461*
$0
$100
$200
$300
$400
$500
$600
PCR MCR Age/Gender3.5:1
MCR Age-Only3.5:1
MCR Age/Gender5:1
Mon
thly
Pre
miu
m
Lowest Highest rating category
*Monthly premium for the lowest cost HMO product in the NJ non-group market ($15 copay plan in October, 2004). PCR is pure community rating and MCR is modified community rating
Monthly Non-Group Single Premiums Baseline and Alternative Policy Scenarios
Rutgers Center for State Health Policy 12
62.6
135.3
109.0
194.9
0.0
50.0
100.0
150.0
200.0
250.0
PCR MCR Age/ Gender 3.5:1 MCR Age-Only 3.5:1 MCR Age/ Gender 5:1
Enr
ollm
ent (x
1,000)
Non-Group Enrollment Actual and Alternative Policy Scenarios
Notes: Enrollment in four of the five largest carriers, representing 95% of total covered lives. PCR is pure community rating and MCR is modified community rating.
Rutgers Center for State Health Policy 13
Reallocate top 10% of predicted expenditures for top decile of individuals in the expenditure distribution
Mandatory for all carriers Fund within non-group market versus external financing
Reinsurance Simulation
Rutgers Center for State Health Policy 14
$525 $523
$446
$127$150$150
$461*
$0
$100
$200
$300
$400
$500
$600
PCR MCR Age/Gender3.5:1
MCR Age/Gender3.5:1 - Internally
FundedReinsurance
MCR Age/Gender3.5:1 - Externally
FundedReinsurance
Mon
thly
Pre
miu
m
Lowest Highest rating category
Monthly Non-Group Single Premiums Baseline and Alternative Reinsurance Scenarios
*Monthly premium for the lowest cost HMO product in the NJ non-group market ($15 copay plan in October, 2004). PCR is pure community rating and MCR is modified community rating.
Rutgers Center for State Health Policy 15
62.6
135.3 135.9148.4
0.0
50.0
100.0
150.0
200.0
250.0
PCR MCR Age/ Gender 3.5:1 MCR Age/ Gender 3.5:1- Internal Reinsurance
MCR Age/ Gender 3.5:1- External Reinsurance
Enr
ollm
ent (x
1,000)
Non-Group Enrollment Actual and Alternative Policy Scenarios
Notes: Enrollment in four of the five largest carriers, representing 95% of total covered lives. PCR is pure community rating and MCR is modified community rating.
Rutgers Center for State Health Policy 16
Implications
Modified community rating in non-group market Reduce uninsured by 46,000 - 132,000 with no state
dollars Modestly higher premiums for near-elderly, but few
drop out Reinsurance
Holds older non-group enrollees “harmless” if externally financed
Rutgers Center for State Health Policy 17
Discussion
Simulation model has informed policy development Using NJ data important to stakeholders Creatively blended state-based survey data with
MEPS Extensive briefings for stakeholders and policymakers
Vigorous policy debate under way
Full report at www.cshp.rutgers.edu