alan c. monheit, ph.d. joel c. cantor, sc.d. piu banerjee, ph.d
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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 Meeting June 4, 2007. Acknowledgements. - PowerPoint PPT PresentationTRANSCRIPT
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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
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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
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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)
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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)
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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
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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
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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($)i * 1.25 for each rating group (j)
Simulation Details
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Data Needed Expected health plan spending for…
NJ non-group enrollees NJ uninsured
Data not available for NJ
Data Used MEPS two-part model predicting plan payout, as function of
age, gender, region, health, and coverage type Apply model to state non-group and uninsured survey data
500 uninsured persons from RDD NJ Family Health Survey 701 non-group subscribers sampled from subscriber lists of 4
of five largest non-group carriers (representing 95% of enrollment)
Estimating Expected Plan Payout
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Data Needed Reservation price: [0.5 * ri * V($)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
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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
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$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
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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.
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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
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$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.
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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.
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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
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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