expanding private health insurance capitol briefing february 13, 2009 thank you to our presenting...
TRANSCRIPT
Expanding Private Health Insurance
Capitol Briefing
February 13, 2009 Thank you to our presenting sponsors:
Agenda
• Health Insurance 101– Stacey Pogue
• Health Insurance and Small Business– Lance Lively– Elena Marks
– Health Insurance Accountability and Transparency– Patricia Kolodzey
• Coverage for People with Chronic Conditions– Kim Suiter
• Increasing Affordability, Increasing Access– Stacey Pogue
What is Health Insurance
Protects people who become severely ill
from facing
extreme costs.
Helps ensure access to health care when needed.
Mechanism for financing health care that:
Why Coverage Matters Percent Reporting Barriers to Health Care,
Non-elderly Adults 2007
4%
3%
6%
10%
25%
23%
27%
52%
Could not affordprescription drug
Needed care but didnot get it
Postponed seekingcare due to cost
No usual source ofhealth care
Private Insurance Uninsured
Kaiser Commission on Medicaid and the Uninsured analysis of 2007 NHIS data
Where Do Texans Get Coverage?
Insurance Status in 2007, U.S. and Texas (All Ages)
59.3
50.4
10.9
11.0
15.3
25.2
7.1
6.7
7.8
6.3
0% 20% 40% 60% 80% 100%
U.S.
TX
Job-based Medicaid/CHIP Medicare only
Other insurance Uninsured
U.S. Census Bureau, 2008 Current Population Survey
Health Spending Concentrated Among Few People
24%33%
49%
64%
85%
97%
3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Top 1%
Top 2%
Top5%
Top10%
Top25%
Top50%
Bottom50%
Percent of Population Ranked by Health Care Spending
Pe
rce
nt
of
To
tal H
ea
lth
Ca
re
Sp
en
din
g
2003 Medical Expenditure Panel Survey data. Source: “Prescription Drugs and the Changing Concentration of Health Care Expenditures”, Health Affairs, Vol. 26, Jan-Feb 2007
Purpose of Health Insurance• Pool many people together• Spread or share risk of costs generated
by small number of people
Risk pooling:
Provides insurers with exposure to predictable levels of risk and costs
Allows consumers to pay a predictable, average
amount monthly (premium) when healthy and sick
Challenges to Risk Spreading
• Adverse selection: People who expect to need health care are more likely than healthier people to seek insurance.
Insurers guard against adverse selection with:– Medical underwriting (deny coverage based on health)– Risk-based rating (premiums vary by health status, age, gender)– Pre-existing condition exclusions– Benefit design
People wait to buy insurance until they
need care
Insurers “cherry pick” the healthiest people to
become more profitable
• Incentives to segment risks instead of spreading risk
Karen Pollitz, Health Insurance 101, KaiserEDU.org
Texas Provisions for Risk Spreading Large Group
(51+ employees)
Small Employer (2
to 50 employees)
Individual Market
Medical Underwriting
(deny coverage based on health)
Generally not in practice
No – guaranteed
issueYes
Risk-Based Premiums
Generally not in practice
Yes, but limited by
rates bandsYes
Pre-existing Condition
Exclusions
Max 1 year,Look back 6
months
Max 1 year,Look back 6
months
Max 2 years,Look back 5
years
Benefit Design – Mandated Benefits
27 14 20
TDI, Your Health Care Coverage, March 2008
What Does Health Insurance Cost?Average Premiums for Employer-Sponsored Coverage in Texas
Family Coverage Single Coverage
1999 $6,209 $2,336
2000 $6,638 $2,627
2001 $7,486 $2,925
2002 $8,837 $3,268
2003 $9,575 $3,400
2004 $10,110 $3,781
2005 $11,533 $4,108
2006 $11,690 $4,133
2007 est. $12,403 $4,385
2008 est. $13,023 $4,604
Medical Expenditure Panel Survey-Insurance Component. Estimates for 2007 and 2008 premiums trended forward from 2006 data using the national average increases for employer-sponsored premiums as reported by the Kaiser Family Foundation and Health Research Educational Trust, Annual Employer Benefits Surveys for 2007 and 2008.
What Does Health Insurance Cost?
YOUR premium depends on:• Who is covered (age, gender, health)• What is covered• Market you buy in• Insurer medical and non-medical (administration, marketing, profits) costs
Average Per-person Premium
Maximum Per-person Premium
Magnitude of Difference
$3,851 $22,413 6X
2006 Small Employer MarketAverage and Maximum Premiums in Texas
TDI, 2006 Group Accident and Health Insurance Survey
Growth of Health Insurance Costs
• In Texas, premiums for family coverage increased 40% from 2001 to 2005, while income increased just 3.5%.
Robert Wood Johnson Foundation, April 2008
1.00
1.20
1.40
1.60
1.80
2.00
2.20
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Gro
wth
In
de
x (
Ba
se
Ye
ar
is 1
99
6)
Average Paid by an Employee for Family Coverage in Texas
Median Family Income (4-Person Family)
Increase in Poverty Limit
States’ Role in Private Health Insurance
• State has primary responsibility for insurance regulation - TDI
• Within federal laws (HIPAA, COBRA, ERISA)• Solvency/financial standards• Market conduct• Risk spreading (medical underwriting,
guaranteed issue, rate bands or community rating)
• Premiums (Texas 1 of 10 states with no rate review)
Health Insurance Policy
ACCESS
AFFORDABILITY
ADEQUACY
•Guaranteed issue
•Medical underwriting
•Eligibility for coverage
•Low offer rates in small employer market
•High risk pool
•Pooling through cooperatives and coalitions
•Sole proprietors treated as groups
•Pre-existing condition exclusions
•Exclusionary rider
•Mandated benefits
•Consumer choice plans
•Balanced billing
•Annual and lifetime coverage maximums•Rate bands
•Community rating
•Medical loss ratios
•Employer tax credits
•Healthy Texas
•Multi-share plans
•Risk pool discount program
NFIB Texas
Solving the Health Care Crisis in Texas
Ten Principles• Universal: All Texans should have access to quality care and protection against catastrophic costs. A
government safety net should enable the neediest to obtain coverage. This does not mean a government-run, single-payer system.
• Private: To the greatest extent possible, Texans should receive their health insurance and healthcare through the private sector. Care must be taken to minimize the extent to which governmental safety nets crowd out private insurance and care.
• Affordable: Healthcare costs to individuals, providers, governments and businesses must be reasonable, predictable and controllable.
• Unbiased: Healthcare and tax laws should not push Texans into employer-provided or government-provided insurance programs and hobble the market for individually purchased policies. Small employers should be treated the same as large employers, who can already pool across state lines. A healthcare system built on employer mandates or on play-or-pay taxes is unacceptable.
• Competitive: Consumers should have many choices among insurers and providers. Policymakers
must alleviate the limitations that state boundaries and treatment mandates place on competitiveness.
Ten Principles• Portable: Texans should be able to move throughout the United States and change jobs without
losing their health insurance.
• Transparent: Information technology should enable all parties to access accurate, user-friendly information on costs, quality and outcomes. Providers must be able to obtain relatively complete medical histories of patients. At the same time, patients' privacy must be guarded zealously. The private sector must play a vital role in developing the new technologies.
• Efficient: Healthcare policy should encourage an appropriate level of spending on healthcare. Laws, regulations and insurance arrangements should direct healthcare spending to those goods and services that will maximize health. Adequate risk pools throughout the healthcare system are vital to accomplishing these goals.
• Evidence-based: The healthcare system must encourage consumers and providers to accumulate evidence and to use that evidence to improve health. Appropriate treatment choices and better wellness and preventive care should be key outcomes.
• Realistic: Healthcare reform should proceed as rapidly as possible, but not so quickly that firms and individuals cannot adjust prudently. It is important to ensure that no one’s quality of care suffers as we move to provide coverage for all Texans.
19
Health Insurance and Small Business in Texas
Elena Marks, J.D., M.P.H.Director of Health and Environmental Policy
Mayor’s Office, City of Houston
20
Small Business in Texas
Small Business 23.9%
Small Business 70.2%
Large Business 29.8%
Large Business 76.1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Businesses in Texas Private Sector Employees
Small businesses (fewer than 50 employees) make up 70% of all private business in Texas and employee 24% of private sector workers.
2006 Medical Expenditure Panel Survey-Insurance Component
21
Percent of Businesses Offering Coverage, Texas and U.S., 2006
U.S. Average
TexasTexas’ Rank
(50 states + D.C.)
% of Large Firms
(50+ employees)95.6% 88.9% 51st
% of Small Firms
(<50 employees)42.6% 32.2% 44th
% of Smallest Firms
(<10 employees)35.1% 25.6% 41st
2006 Medical Expenditure Panel Survey-Insurance Component
22
Texas Uninsured Rate by Company Size, 2005
Size of FirmPercentage of
Uninsured Employees
Not reported 54.7%
Less than 10 40.9%
10-24 37.5%
25-99 27.3%
100-499 22.1%
500-999 17.0%
1,000 or more 15.4%
All Firms 26.1%
Employees of small business are more likely to be uninsured.
U.S. Census Bureau, March 2006 Current Population Survey
23
What Does Employer-Sponsored Coverage Cost in Texas?
Type of Coverage Firm Size Texas U.S. Average
SingleSmall employer $4,463 $4,260
Large employer $4,057 $4,077
FamilySmall employer $11,310 $11,095
Large employer $11,745 $11,438
2006 Medical Expenditure Panel Survey-Insurance Component
24
Options to Enhance theSmall Business Market
• Require reporting of data on premiums, claims, and medical loss ratios
• Consider market penetration and consumer uptake in evaluating the health of the market
• Disallow the charging of excessive premiums • Require a minimum medical loss ratio• Adopt community rating or adjusted
community rating
Health Insurance Transparency and
AccountabilityPatricia Kolodzey
Associate Director-Legislative AffairsTexas Medical Association
Transparency and Accountability*
1. Health Coverage Cancellations/Rescissions –provide
patients due process before it happens
2. Calculation of Premium Quotes—provide small business about what drove the quote and provide a venue at OPIC to challenge
3. Medical Loss Ratio—standardize the formula and make it readily available; let’s know where the premium dollar is being spent
4. Silent “Rental” Networks –regulate and register entities that buy, sell or lease MD discounts to other payers
5. Physician Tiering or Ranking—prevent inappropriate use of claims data to tier or rank physicians and provide due process to correct wrong information prior to publication on website or in member materials
6. Claims Processing—continue to hold health plans accountable to the claim processing requirements agreed to in their RICO settlements
*See TMA’s Health Insurance Code of Conduct Act of 2009
What the Patient Thinks:
Patient assumes his health plan will pay 70% of the charge: $700
Patient assumes his share is 30% of the billed charge: $300
The Reality:
Plan E determines the value of the service (i.e., the maximum allowable charge) should be no more than $530. Plan E pays 70% of $530: $374
Patient is responsible for the remainder of the $1,000 charge: $626
Source: Self Reported Health Plan Data for Senate Bill 1731 Advisory Committee on Network Adequacy
Out-of-Network Coverage: 70/30 Coinsurance on a $1,000 Charge
Health Plan UCR/Max Allowable The impact on balance billing and out-of-pocket
costsSource: Self Reported Health Plan Data for Senate Bill 1731 Advisory Committee on Network Adequacy
Health Insurance: Challenges for People with Chronic Conditions
The Big Three
• Medical underwriting• Out of pocket costs• Pre-existing condition exclusions
Medical Underwriting
Spreading the Risk
Insurance premiums become more affordable when based on the broad dissemination of risk
Medical underwriting is a barrier particularly in the small employer market(the individual market is not an option for people with MS)
Possible solutions:
• Re-insurance
• Decreasing premium variability (tighten or eliminate health status rate band)
Out of Pocket Costs
People with chronic conditions are especially likely to be underinsured.
In a 2007 random survey of people with MS, 21% reported spending less on food, heat and other necessities to pay for health care needs and 22% did not fill prescriptions or skipped doses of medication despite having health insurance coverage.
Possible solutions:
Annual caps on medical expenses; stop loss provisions Sliding scale premium assistance
Pre-existing Condition Exclusions
These exclusions prevent consumers from participating in insurance and have negative health consequences for people who need insurance most.
Options for People with Chronic Conditions
If your employer does not offer health insurance:
• Medicare
• Medicaid
• Texas Health Insurance Risk Pool
Texas Health Insurance Risk Pool
• Created in 1989 by Texas Legislature to cover medically uninsurable Texas residents
• Activated in 1997 to serve as the Texas mechanism for compliance with federal HIPAA law.
• In addition to HIPAA eligibility, a Texas resident is eligible if under age 65, a US citizen or a permanent US resident for a minimum of 3 years, and documentation is provided of one of the following current criteria: Rejection by an insurer for health reasons, or acceptance but with a medical condition excluded. Diagnosed with one of the 55 medical conditions on the Pool Board’s list. Certification by a Texas insurance agent that the person would be declined for health insurance
coverage by a Texas insurer.
Eligibility Limitations
• Most individuals with access to employer sponsored coverage are not eligible for the pool
• Individuals transitioning from employer sponsored coverage who have not exhausted COBRA may now access pool coverage but with a minimum 6-month preexisting condition exclusion
How the Pool is Funded
• For the 10 years ending 12/31/2007, Pool enrollee premiums represented 63% of total revenues, while insurer assessments accounted for 36%.
• The most recent Risk Pool Board report (2/09) indicates that enrollee premiums now represent 72% of total revenues, while insurer assessments account for 28%.
• Since 1998, premium rates paid by Pool members have increased an average of 13% per year.
Pool Benefits
• The pool’s nine-member Board of Directors designs pool coverage to be consistent with policies available in the commercial individual health insurance market
• The Pool offers 4 deductible plans: $1,000, $2,500, $5,000 and $7,500. For network provider charges, the member cost share is 20% of allowable
expenses, after satisfaction of the calendar year deductible, with a $3,000 or $5,000 annual coinsurance out-of-pocket maximum, depending on the deductible plan selected.
For out-of-network provider charges, the member cost share is 40%, after satisfaction of the deductible, with no coinsurance out-of-pocket annual maximum.
The High Cost of Pool Coverage
• Statutory premium cap set at 200% of the average rate for commercial individual health insurance (individual health insurance rates in Texas are not regulated or even subject to rate bands used in the small employer market
• The average monthly premium in the pool is $595 per month (reflective of $2500 deductible
• Annual average costs per enrollee – before co-payments and co-insurance – are nearly $10,000
• Pool enrollees are charged premiums as high as $1700 per month
Case Study – Person with MS
• Annual premiums: $5500• Annual deductible: $5000• RX annual deductible: $250• MRI co-pay: $1500• Labs – out of pocket: $500• Tysabri infusions: $600 per month until $5k deductible is met - $200 per month
after $5k deductible• Co-pays for symptom management RX: $2100 annually• Doctor visits: 4 @ $35; 2 @ $200 = $340
Total costs = $15,700Her annual income = $55,000 - $15,700 = $39,300Her health care costs are nearly 30% of her income
Pool Enrollment by Year
Sliding Scale Premium Discount
• At least 10 of 34 states with Risk pools operate premium assistance programs
• Only 3 other states set their premium rate as high as Texas
Pre-existing Condition Exclusion
• Pool members without prior creditable coverage are subject to a 12-month preexisting condition exclusion period.
• Nationally, the most common preexisting condition exclusion in risk pools is 6 months – 7 risk pools set it at 3 months or less
Kim Suiter
National Multiple Sclerosis Society
512-340-2701
www. JointheMovementLonestar.org
More Affordable Coverage: Public/Private Partnerships
• 3-Share or Multi-share plans
• Healthy Texas– Increase access to coverage for uninsured
small employers– Limited/basic benefit plans – No medical underwriting – Public subsidy lowers premium
More Affordable Coverage
Multi-Shares• Authorized last session• Regional: Galveston, Central
Texas, El Paso, Harris County, North Texas
• Contributions from employer and employee
• 3rd share from local/state funds
• HHSC exceptional item request for $24 million: ½ of 3rd share for low-income members. Provided as match for local/regional funds
Healthy Texas• Study from SB 10 last
session• Bill forthcoming• Statewide• State funds “reinsure” – or
cover much of the high cost claims – for participating insurers.
• Risk reduced for insurers• Reflected in lower premiums
~$200/month• Based on Healthy NY
Improve Access for Sole Proprietors
• Single-employee businesses – Not treated as small business for health insurance– Must buy in individual market– Can be turned down for health status
• If treated as a small employer, sole proprietors would have guaranteed issue policies and rate bands– Define single-employee businesses as small
business for health insurance purposes: SB 813 (Watson)
– Let sole proprietors pool together to form a small group: SB 77 (Nelson), HB 663 (King)
Maintaining Access to Private Health Insurance in a Recession• Federal stimulus has 65% premium assistance for COBRA
coverage for nine months.– COBRA for firms with 20+ employees– Coverage lasts 18 months
• Same premium assistance for state continuation– Only option for small firms (under 20 full-time employees)– Coverage only for 6 months
• Short continuation period prevents recently unemployed in Texas from maximizing federal assistance
• Conversion: if employer goes under or stops offering coverage, allows you to buy an individual policy from the same insurer– Conversion policy has similar benefits with no pre-existing condition
limitations– Premium capped at twice group rate– Optional in Texas. Mandatory in 37 states
Expanding Private Health Insurance
Q & A
Thank you to our presenting sponsors: