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Merging the Massachusetts Non-Group and Small Group Health Insurance Markets. SCI Winter Meeting. Background on previous MA reforms Overview of MA small group and non-group markets Key changes made to the markets The uninsured Uptake assumptions Expected rate impacts of merger - PowerPoint PPT Presentation
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Merging the Massachusetts Non-Group and Small Group Health Insurance Markets
SCI Winter Meeting
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Background on previous MA reforms Overview of MA small group and non-group markets Key changes made to the markets The uninsured
Uptake assumptions Expected rate impacts of merger Identified issues
MAHCR - built upon earlier reforms
Employer Tax and MandateFunds UCP – expanded to CHCs,
Hospital Deregulation1988- 1992
Reform Private Insurance Market Small Group, Non-Group
1992-2000
Expand Public Programs MMC waiver,
SCHIP, IP, Sr. Pharmacy 1992-2002
Individual Mandate, Employer Fair Share, Connector
2006
MA nongroup market vs. national nongroup market
National MAPPO 83.4% 10.0%HMO/POS 14.9% 90.0%Indemnity 1.7% 0.0%< 19 5.6% 20.0%19-29 19.8% 15.0%30-39 21.1% 17.0%40-49 24.8% 17.0%50-59 20.2% 18.0%60-64 8.5% 14.0%
MA non group market
2 products are allowed to be sold Standard - very comprehensive with minimal cost sharing Alternative – increased cost sharing and no rx
Guaranteed issue/renewal with continuous open enrollment 6 mo. waiting period or pre-ex condition exclusion period, but offset
by prior continuous coverage 63 days prior to enrollment
No waiting period for “buy up” Overall MLR is 91%
94% for individuals and 83% for other rate basis types Deterioration from 83% in 2003 5% higher than for small group
MA non group market
42,500 subscribers Will comprise 11% of the merged market
90% of the market is with BCBS Non group membership decreased by 10% 2003-2005 Average premium is $650 for standard and $450 for
alternative Declining plan value
35% purchased alternative in 2003 45% purchased alternative in 2005
MA non group market
Average pmpm claim costs was approximately 40% higher than for small group in 2005 due to the following: Older than average subscriber age (1.13) Much lower number of children covered 77% of those that purchase buy Individual-only
Non group pmpm claims Average is $375 15% have pmpm claims greater than $650 15% have pmpm claims under $50 50% have PMPM claims under $200
MA Small group market
700,000 members in 2005, 92% of which are written by 7 not-for-profit HMOs Includes groups of 1-50 FTEs Overall small group claims pmpm is $262
11% of groups (which are 3% of members) have pmpm claims under $50
9% of groups (which are 5% of members) have pmpm claims of more than $650
50% of groups have pmpm claims under $200 16% of groups have PMPM claims greater than $350
2:1 rating band Age, geography, industry, size, 4 rate basis types – all inside the
band
MA Small group market Purchasing patterns
87.7% are HMO/POS 11.75% are PPO 0.54% are indemnity
Plan value 70% of small group members have “medium” plan values
between 0.85 and 0.92 $15-$20 office visit co-pays $250-500 in patient and out patient co-pays drug co-pays of $10/25/40
12% of small group membership has “low” plan values between 0.65 and 0.85
3% of small group membership has plan values between 0.65 and 0.75 (high deductible plans)
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Summary of 2005 data
Groups / Purchasers Subscribers Members
Average Family
Size
Average Premium
PMPM
Average Claims PMPM
Average MLR
Non-Group 42,500 42,500 66,000 1.55 $413 $375 91%Small Group 112,000 350,000 700,000 2.00 $304 $262 86%Combined 154,500 392,500 766,000 1.95 $313 $272 87%
Summary of 2005 Data
Note: Summary based on data received from the carriers. It has not been normalized to reflect the size of the entire market.
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Overview of Small Group by group size
Group Size
Number of
Groups Subscribers MembersClaim PMPM
Premium PMPM MLR
Age Factor
Industry Factor
Plan Value
1 52,000 52,000 112,000 $296 $305 97% 1.20 1.01 0.870 2 - 5 28,000 82,000 152,000 $273 $323 85% 1.03 1.01 0.890
6 - 10 8,000 60,000 117,000 $250 $309 81% 0.94 1.00 0.890 11 - 25 6,000 96,000 194,000 $251 $298 84% 0.94 1.00 0.900
26+ 2,000 59,000 119,000 $250 $287 87% 0.93 1.00 0.900
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Key changes to small group and non-group markets
Small Group and non-group risk pools to merge Connector empowered to arrange for sale of products to
individuals and small groups Commonwealth Care available for those at 300% FPL or below “Seal of Approval” products to small groups or individuals above
300% FPL Young Adult Plan available for purchase to those 19 to 26
Individuals considered groups of one Merged pool rating based on current small group
Group size adjustment for smallest groups increased from 1.05 to 1.10
Group size adjustment moved OUTSIDE the 2:1 band
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Uninsured uptake assumptions
Four Different Uptake Estimates Elasticity of Demand Low Medium High
Elasticity – based on changes in the price of insurance and the relative cost compared to a subscriber’s income Income level Age Penalty for not meeting Individual Mandate
Low, Medium, and High – based on a review of data, impacts of Chapter 58, and key informant interviews Individual mandate Income level Increasing cost of coverage Affordability & eligibility waivers Health Status Age
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Other key projection assumptions
Medical Trend 11% annually
Benefit Buy-down 1.5% annually One time adjustment for those groups that receive high premium
increase due to merger 1.5% buy-down if increase is between 2.5 and 5% 3.0% buy-down if increase is greater than 5%
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Rate impacts
With Market merger only Change in non-group due only to claims and conversion factor alone: -
21.1% Change in small group due only to claims and conversion factor: +2.0%
With Market merger + new rating rules For Non-group this corresponds to a decrease of approximately 15% For Small group this corresponds to an increase of approximately 1 to
1.5%
With assumptions of individual mandate Merged market rates anywhere between -3% to +6%
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Summary of findings
Merger will lead to a decrease in non-group rates of approximately 15% and an increase in small group rates of approximately 1 to 1.5%
Average book of business rate impact will vary substantially by carrier -2% to -50% for Non-group +1 to +4% for Small Group
Given assumptions, adding currently uninsured will lead to rate impacts of from approximately -3% to +6%, depending on: Current number of uninsured Number of uninsured purchasing coverage Morbidity of the newly insured Presence or absence of 10% group size load on groups of one
$30 to $45 million in reinsurance dollars required to offset increase in Small Group rates due to merger
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Issues remaining List billing and composite rating in the same marketplace Underwriting and product selection requirements for the
Connector Decreasing plan values Administrative expenses Young Adult Plan and 2:1 compression Robustness of individual mandate: want healthy lives in
MA Health Market Pre-Reform Total Population 6,400,000 Currently insured (93%) 5,940,000
Employer, individual, Medicaid, Medicare
Currently Uninsured (7%) 460,000
_________________
≤ 100% FPL Medicaid eligible 106,000* 100-300% FPL Subsidy eligible 150,000* >300% FPL 204, 000
* FFP eligible under waiverNote: Based on August 2004 Division of Health Care Finance Data
Key Questions to designing any Health Care Reform
Who are the 460,000 uninsured? Why don’t they purchase it?
Are they not offered by employer? If offered, do they choose not to purchase?
What is their health status? What is their employment status?
Characteristics of MA Uninsured
23% are income eligible for Medicaid 33% have incomes between 100-300% FPL and
unless they have children are not eligible for traditional Medicaid
54% have incomes above 300% FPL 16% are employed part-time
Ch. 58 of Acts of 2006 Merge Non Group and Small Group Markets
15% decrease in Non Group Rate 1 to 1.5% increase in Small Group Rate (can be offset
with purchase of $33-48 million reinsurance plan) Represents $25-$38 million subsidy from small group
to non group New distribution channel (Health Connector) Individual Mandate
Loss of tax deduction in 2007 Assessed 50% cost of MCC in 2008+
Fair share employer assessment & Free rider surcharge,
Commonwealth Care (subsidized coverage)
Role of the Health Connector Nexus between buyers and sellers
Premiums paid with pre-tax dollars (125 Cafeteria Plan)
Pay premium assistance for 100-300% FPL Mechanism for reaching non-traditional
workersPart-timers and seasonal workersContractors and sole-proprietors Individuals with more than one job
Alternative distribution system
Eligibility for Accessing Health Insurance via the Connector
Uninsured resident (6 mo.) Not eligible for any MassHealth program,
Medicare, or S-CHIP program. Employer has not provided health insurance in
the last 6 mo. for which the employee is eligible and for which the employer covers at least 20% of annual family premium or 33% of individual premium. (Board Waiver)
Individual has not accepted a financial incentive from his employer to decline employer’s plan.
Health Connector Commonwealth Care Subsidy Program
$300 target monthly premium Assumption is that 260,000 will be eligible for subsidy payment
which will be between 80-85% of monthly premium $795.6 M/year subsidy (50% FFP - $398 M net cost)
Premium Assistance Program <100% $ 0 monthly enrollee contribution >100% - 150% $ 18 monthly enrollee contribution >150% - 200% $ 40 monthly enrollee contribution >200% - 250% $ 70 monthly enrollee contribution >250% - 300% $106 monthly enrollee contribution
Provides “Seal of Approval” for commercial products
Challenges with Selection List billing vs. composite rating
Connector list bills charge each subscriber a rate specific to his demographic
characteristics – age, industry, geography) Other major sector rates using composite billing
a group is charged a rate based on the average demographic characteristics of its membership as a whole.
This can create adverse selection. Continuous Open Enrollment
Ability for individuals to change products at any time creates an opportunity for adverse selection – groups are limited to open enrollment period.
Things that will impact “Take Up” Rate
Individual Mandate and Waiver policies Affordability waivers from requirements of individual
mandate Waivers for enrollment into Commonwealth Care for
persons eligible for employer sponsored coverage, but employer covers only 33%
Employer sponsored coverage Increasing costs of coverage over time Income and health status of currently uninsured Subscriber age
Access + Benefits = Cost Current monthly premium for Non Group is $650
($450 w/o drugs) and $350 for Small Group. Assuming 15% reduction is correct – average monthly
premium drops to $553 ($383) – still $253 ($83) above target.
Legislation requires all existing mandates to be included.
Cost sharing is forbidden for certain income classes (≤100% FPL) and limited for others (100-300% FPL).
Limited Access networks have not “sold” well in past.
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