State Impact on Private Health Insurance

J.P. Wieske

Council for Affordable Health Insurance

Health Insurance Crisis

• Rising Costs– 9.2% (2005) and 6.4% (2006) preceded by double digit

increases

– Other estimates indicate lowest health care increase in 10 years for 2007, but still potentially double digit

• Fewer Businesses Offering Insurance– 59.5% of the population had employment based

insurance down from 60.4% in 2003 and 59.8 in 2004

Health Insurance Crisis

• 46.5 Million People were uninsured in 2005– 45.8 million were uninsured in 2004– Up from 45 million in 2003– National Percentage has remained at 15.7% (2 year

average)– 1998 – 16.3% uninsured– 2000 14.2% uninsured– Majority of uninsured work for firms with less than 100

employees

The Uninsured

• 1/3 have incomes less than $25,000• 19% have incomes over $75,000 (up from 16%)• 18% 18-24 years Old• 21% 45-64• 32.7% of Hispanics are uninsured• 81% of the uninsured were employed full or part

time• Anecdotal evidence of employee refusal of health

insurance coverage

How Do States Regulate Insurance

• Large Group – Primarily federally regulated– Mostly ERISA plans outside of state control– Flexibility in rating and plan design, no guaranteed

issue• Small Group & Individual - Primarily state

regulated products– Mandated Benefits– Community Rating / Rating Windows– High Risk pools– Rate / Form regulation

Affordable Health Insurance (Indiv.)

Lowest Cost Cities1. Grand Rapids MI

$159.062. Columbus OH $179.683. Akron OH $191.464. Des Moines IA $194.405. Louisville and Lexington

KY $197.756. Phoenix, Tucson, Mesa,

and Scottsdale $202.34

Highest Cost Cities1. Spokane WA $962.002. Yonkers and New York

NY $916.793. Boston MA $865.184. Wichita, KS $773.065. Augusta GA $758.576. Jersey City and Newark

NJ $744.02

Low Cost vs High Cost States

Low Cost States

• Carriers are allowed to underwrite

• No guarantee issue requirement

• Fewer mandated benefits

• More choices

• Many have high risk pools

High Cost States

• Community Rating or Modified Community Rating

• Guarantee Issue

• Lots of mandated benefits

• Fewer choices

• No High Risk Pools

Community Rating

“At the same time, premium rating restrictions in the small group market were just as clearly associated with lower rates of private and overall health insurance coverage…”

“…our results strongly suggest that guaranteed issue plus nongroup premium rating restrictions in tandem work to decrease overall and private health insurance coverage…”

Variations in the Uninsured : State and County Level Analyses published by the Urban Institute.

Targeting Solutions

• The uninsured are diverse…young, old, rich, poor, employed, and unemployed

• Solutions should be targeted to specific populations

There is no one solution to everyone’s problem

Targeted Solutions

• Chronically Ill – High Risk Pools• “Invincibles” – Plan Design Flexibility• Poor – Targeted Tax Credits • No Group Coverage – Individual Tax Deduction,

List Bill, Mandate-lite• Affordability – Health Savings Accounts• Small Business – Plan Design Flexibility,

Mandate-Lite, Tax Credits, Subsidies

High Risk Pools

• 32 states have them• Provides access to health insurance for the chronically ill • Pools should have broad-based funding – typically a

partnership– Individuals pay premiums– Insurers pay assessments (tax credit)– State and federal government provide additional funding

• Extremely successful in ensuring healthy and thriving individual market

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

Public – Private Partnerships

• Tennessee – Replaced TennCare with Gov. Bredesen’s targeted and market-based approach. – AccessTN – Tennessee’s high risk pool– CoverTN – A program to provide low-cost health

insurance. Contributions to premium from the state and optionally from employers. Expected to be priced at $100

– CoverKids – Tennessee’s SCHIP program – CoverRX – A subsidized prescription program

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 11,100 currently enrollees (Sept 2006)

“We’ve spent more than $40 million of federal money … to essentially insure 2,300 or 2,400 people” State Sen. Karl Turner

Public Private Partnerships

• Arkansas -- Arkansas Safety Net Benefit Program – Targeted at businesses with fewer than 500 employees

that do not provide health insurance in previous 12 months

– Employers pay $15 for employees below 200% of poverty (state and feds pay the rest) $100 for above federal poverty

– Bare Bones-style benefit plan – Demonstration begins in 2007 with maximum of

15,000 participants

Mandate-Lite Insurance plans

• Lower cost benefit plans -- sometimes referred to as limited benefit plans

• Allow carriers to offer plans without state mandated benefits. (See www.cahi.org for the state mandate chart.)

• 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)

Reinsurance

• Reinsurance Pool (Voluntary)• 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

• Minimum Coverage Model allows the state to provide reinsurance after a certain amount of coverage– Typically provides very little real savings– State will define minimum benefit plans and coverage limits– Wisconsin is looking at this model

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

Resources

• Visit www.cahi.org to download publications including:– Mandates in the States

– State Legislator’s Guide to Health Insurance Solutions

– Issues and Answers on Single Payer, Dirigo, Massachusetts, Healthy New York, and List Billing

– Or contact me jpwieske@cahi.org

– 920-499-8803