Assessing the Implications of Moving to Modified Community Rating in the New Jersey Individual Health Coverage Program

Transcription

1 Assessing the Implications of Moving to Modified Community Rating in the New Jersey Individual Health Coverage Program Application of a Simulation Model March 8, 2005 Revised, March 16, 2005 Alan Monheit Joel Cantor Piu Banerjee Margaret Koller

2 Acknowledgements Funded by The Commonwealth Fund and The Robert Wood Johnson Foundation Conducted in cooperation with NJ Individual Health Coverage Program (IHCP) Board and the NJ Department of Banking and Insurance Four IHCP carriers (representing 95% of covered lives) provided subscriber lists that were used to sample IHCP enrollees for the project survey Rutgers Center for State Health Policy 1

3 CSHP Mission To inform support and stimulate sound and creative state health policy in New Jersey and around the nation Rutgers Center for State Health Policy 2

4 Outline Background Policy Context and IHCP Trends Modified Community Rating Simulation Goal Approach Findings Discussion Rutgers Center for State Health Policy 3

5 Prior to 1992 Policy Context BCBS plan and non-group market failing Courts overturn subsidy mechanism (hospital rates) Significant support for introducing market forces 1992 Reforms Individual Health Coverage Program (IHCP) Pure community rating, open enrollment Standard plans Carrier loss assessment mechanism Small Employer Health Benefit Program (SEHBP) Modified community rating Semi-standard plans Rutgers Center for State Health Policy 4

6 IHCP Trends Enrollment decline, High premium growth Market segmentation Adverse risk retention Enrollment stabilized, 2002 Source: Monheit AC, Cantor JC, Koller M and Fox K. Community Rating and Sustainable Individual Health Insurance Markets: Trends in the New Jersey Individual Health Coverage Program. Health Affairs, 23:4 (July/August 2004) Rutgers Center for State Health Policy 5

7 Figure 1: Declining enrollment in the New Jersey Individual Health Coverage Program Fourth Quarter Enrollment (in thousands) Internal Forces End of Access Program subsidy, 1995 Unintended impact of loss assessment, 1998 External Forces Tight labor market, rise in employer coverage, mid/late 90s Small-group modified community rating Leveling Off Weaker labor market, 2000 Rising employer costs Basic & Essential plan (Q2) Source: New Jersey Individual Health Coverage Program Administrative Data Rutgers Center for State Health Policy 6

8 Figure 2: Percentage of older (age 45-64) IHCP enrollees grew 100 New Enrollees All Enrollees Percent of Enrollees Sources: 1996 data from Swartz and Garnick and 2002 data from NJ Family Health Survey, IHCP Supplement Rutgers Center for State Health Policy 7

9 Simulation Goal Assess the likely impact of modified community rating on IHCP premiums and enrollment. Rutgers Center for State Health Policy 8

10 Simulation Approach Simplifying assumptions Limit to non-elderly adults (21-64) Single coverage only Apply formal rule to determine individuals decisions to participate or withdraw from coverage Compare projected willingness to pay (person s expected plan payout plus risk premium ) to projected premiums (expected plan payout in rating cell plus 25%) Apply affordability constraint Assume no person pays >10% of family income for coverage Compare implications of alternative policy scenarios and underlying assumptions Rutgers Center for State Health Policy 9

11 Data Sources New Jersey Family Health Survey (NJFHS) Total of families in NJFHS (2001), 500 uninsured individuals Supplemental survey of IHCP subscribers (2002), 701 IHCP enrollees 2000 Medical Expenditure Panel Survey (MEPS) Used to develop model of health plan payout Payout estimates projected for NJFHS populations Rutgers Center for State Health Policy 10

12 Policy Scenarios 1. Age-Gender Rating; 3.5 to 1 Rate Bands 2. Age-Only Rating; 3.5 to 1 Rate Bands 3. Age-Gender Rating; 5 to 1 Rate Bands Rutgers Center for State Health Policy 11

13 Simulation Findings Impact of Modified Community Rating on: Premiums by rating category Enrollment, total and by rating category Characteristics of enrolled population Impact of alternative assumptions Rutgers Center for State Health Policy 12

14 Figure 3: Change in IHCP monthly single adult premiums under Scenario 1 (3.5 to 1 bands with age-gender rating) 2 Men Women Ratio to Pure Community Rate $150 $299 $193 $463 $312 $523 $525 $523 $525 $523 $461* 0 Age Source: Rutgers Center for State Health Policy, New Jersey Individual Health Insurance Market Simulation Model *Monthly premium for the lowest cost HMO in the NJ IHCP with a $15 copay (October, 2004). Rutgers Center for State Health Policy 13

15 Figure 4: Change in IHCP monthly single adult premiums under Scenario 2 (3.5 to 1 bands with age-only rating) Ratio to Pure Community Rate $159 $243 $320 $349 $415 $511 $523 $523 $523 $461* 0 Age Source: Rutgers Center for State Health Policy, New Jersey Individual Health Insurance Market Simulation Model *Monthly premium for the lowest cost HMO in the NJ IHCP with a $15 copay (October, 2004). Rutgers Center for State Health Policy 14

16 Figure 5: Change in IHCP monthly single adult premiums under Scenario 3 (5 to 1 bands with age-gender rating) 2 Men Women Ratio to Pure Community Rate $295 $107 $191 $457 $534 $307 $518 $534 $534 $534 $461* 0 Age Source: Rutgers Center for State Health Policy, New Jersey Individual Health Insurance Market Simulation Model *Monthly premium for the lowest cost HMO in the NJ IHCP with a $15 copay (October, 2004). Rutgers Center for State Health Policy 15

17 Figure 6: IHCP monthly single adult premiums under alternative simulation scenarios $600 $500 $461* Lowest Highest rating category $525 $523 $534 Monthly Premium $400 $300 $200 $100 $150 $159 $107 $0 PCR MCR Age/Gender 3.5:1 MCR Age-Only 3.5:1 MCR Age/Gender 5:1 Source: Rutgers Center for State Health Policy, New Jersey Individual Health Insurance Market Simulation Model *Monthly premium for the lowest cost HMO product in the NJ IHCP ($15 copay plan in October, 2004). Rutgers Center for State Health Policy 16

18 Figure 7: Total adult IHCP enrollment under alternative simulation scenarios Enrollment (x1,000) Pure Community Rating Age/Gender 3.5:1 Age-Only 3.5:1 Age/Gender 5:1 Source: Rutgers Center for State Health Policy, New Jersey Individual Health Insurance Market Simulation Model Note: Limited to four of the five largest carriers, representing 95% of total covered lives Rutgers Center for State Health Policy 17

19 Figure 8: Adult IHCP enrollment under pure community rating and Scenario 1 (3.5 to 1 bands with age-gender rating) 80.0 Pure Community Rating Modified Community Rating 70.0 Enrollment (X 1,000) Men Women Men Women Men Women Men Women Men Women Source: Rutgers Center for State Health Policy, New Jersey Individual Health Insurance Market Simulation Model Note: Limited to four of the five largest carriers, representing 95% of total covered lives Rutgers Center for State Health Policy 18

20 Figure 9: Adult IHCP enrollment under pure community rating and Scenario 2 (3.5 to 1 bands with age-only rating) 80.0 Pure Community Rating Modified Community Rating 70.0 Enrollment (X 1,000) Age Source: Rutgers Center for State Health Policy, New Jersey Individual Health Insurance Market Simulation Model Note: Limited to four of the five largest carriers, representing 95% of total covered lives Rutgers Center for State Health Policy 19

21 Figure 10: Adult IHCP enrollment under pure community rating and Scenario 3 (5 to 1 bands with agegender rating) 80.0 Pure Community Rating Modified Community Rating 70.0 Enrollment (X 1,000) Men Women Men Women Men Women Men Women Men Women Source: Rutgers Center for State Health Policy, New Jersey Individual Health Insurance Market Simulation Model Note: Limited to four of the five largest carriers, representing 95% of total covered lives Rutgers Center for State Health Policy 20

22 Figure 11: Percent of adult IHCP enrollees under age 40, alternative simulation scenarios 100% 80% 60% 60.8% 51.3% 66.0% 40% 20% 15.8% 0% Pure Community Rating Age/Gender 3.5:1 Age-Only 3.5:1 Age/Gender 5:1 Source: Rutgers Center for State Health Policy, New Jersey Individual Health Insurance Market Simulation Model Rutgers Center for State Health Policy 21

23 Figure 12: Median family income of adult IHCP enrollees, alternative simulation scenarios Median Family Income (Thousands $) $80 $70 $60 $50 $40 $30 $20 $10 $0 $57.1 Pure Community Rating $40.0 $42.0 $40.0 Age/Gender 3.5:1 Age-Only 3.5:1 Age/Gender 5:1 Source: Rutgers Center for State Health Policy, New Jersey Individual Health Insurance Market Simulation Model Rutgers Center for State Health Policy 22

24 Impact of Alternative Assumptions Lowering price sensitivity assumption Assume 0.4 price elasticity, consistent with recent studies Assuming lower price responsiveness (0.2 elasticity) brings in fewer young individuals. Little impact on older enrollees Removing affordability limit Assume no individual willing to pay >10% of income Removing limit increases enrollment among young and lower income individuals Rutgers Center for State Health Policy 23

25 Summary of Findings: Modified Community Rating Large increase in total enrollment 1.7 to 3 fold increase, depending on rate band width Higher premiums for older adults, few drop out Up to about 15% premium increase Significantly lower premiums for younger adults, many new enrollees Up to 55% to 77% decline in premiums 21 to 39 year old grow from about 16% to over half of IHCP More moderate income individuals gain coverage Rutgers Center for State Health Policy 24

26 Summary of Findings: Alternative Policy Scenarios Large enrollment impact across all three scenarios Age-only rating reduces gender differential May be more realistic under single only assumption Dampens impact on enrollment of young men Wider rate bands increase enrollment of young adults Reduces lowest premiums by about 1/3 but increases highest premiums little Rutgers Center for State Health Policy 25

27 Limitations Data constraints 4 of 5 top carriers only (95% of covered lives) Limited sample size (701 IHCP, 500 uninsured) Expenditure information is based on statistical model, understates variation Simplifying assumptions Economically rational behavior Single coverage-only assumption exaggerates gender differences in premiums and enrollment Responses may differ in complex, multiple choice environment Ignores impact of changes in labor market and employer coverage Rutgers Center for State Health Policy 26

28 Discussion Rapid decline in enrollment under PCR End of subsidies & adverse incentives from loss assessment triggered early decline Strong economy & employer coverage led to continuing erosion Age rating in SEHBP likely exacerbated adverse retention in IHCP Result: adverse retention, rising premiums, market segmentation Non-group market is fragile and interdependent with group market Rutgers Center for State Health Policy 27

29 Discussion (2) Modified community rating likely to boost to NJ nongroup market but increase premiums for most current enrollees Many young people had already left the market Older enrollees would pay about 15% higher premiums Reshaped market would serve more younger (healthier) and moderate income individuals MCR may stem future market erosion but stability depends on external factors as well Policymakers face tradeoff: increasing coverage among young brings higher premiums among for older enrollees Rutgers Center for State Health Policy 28

30 Discussion (3) Ongoing research Pooling non-group and small-group markets Reinsurance mechanism Findings Spring/Summer 2005 Rutgers Center for State Health Policy 29

31 Selected Project Bibliography Monheit AC, Cantor JC, Koller M and Fox K. Community Rating and Sustainable Individual Health Insurance Markets: Trends in the New Jersey Individual Health Coverage Program. Health Affairs, 23:4 (July/August 2004) Cantor JC, Koller M, Schneider C and Brownlee S. Facts & Findings: Non-Group Health Insurance in New Jersey. Rutgers Center for State Health Policy: New Brunswick, NJ, Cantor JC, Monheit AC and Brownlee S. Bias in Estimates of Non-Group Health Insurance Coverage: Comparison of Surveys and Administrative Data. Poster Presentation. Academy Health Annual Research Meeting, San Diego, CA, June Monheit AC, Banerjee P, and Cantor JC. Assessing Policy Options for the New Jersey Individual Health Coverage Program: Application of a Simulation Model. Rutgers Center for State Health Policy: New Brunswick, NJ. Forthcoming Winter Koller M, Tiedemann A. Individual Health Insurance Markets: A Case Study. Rutgers Center for State Health Policy: New Brunswick, NJ. Forthcoming Spring Cantor JC, Monheit AC, Koller M and Schneider C. The New Jersey Individual Health Coverage Program: A Chartbook. Rutgers Center for State Health Policy: New Brunswick, NJ. Forthcoming Spring Rutgers Center for State Health Policy 30