A Presentation of the Colorado Health Institute
The Private Market: The Foundation of Health Insurance
Health Policy RoundtableMarch 10, 2011Legislative Services Building
Colorado Health Institute: Our missionTo serve as an independent and impartial source of reliable and relevant health information. CHI provides:– Presentations and roundtables– One-on-one briefings with legislators,
caucus or staff upon request– Succinct publications (LOT report) – Custom research – No spin, just the facts
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Questions CHI is often asked• How are Coloradans currently insured?• How will that change under national
reform?• What are other options?• What are decisions the General Assembly
will make?• What else can the state legislature do?
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Four sessions will address these issues• Thursday, March 10: The Private Market:
The Foundation of Health Insurance
• Thursday, March 24: The Changing Landscape of Publicly Funded Insurance
• Thursday, March 31: A Profile of Your Community’s Health
• Thursday, April 14: The State Health Insurance Exchange
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Today’s discussion• Overview of the private insurance
market and policy implications• Frame current legislative issues in
greater national and policy-oriented context
• Share how CHI can be a resource for your health policy interests
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What is health insurance?The intended purpose of health insurance is to collectively pool risk to protect individuals from incurring large expenditures or losses associated with illness, injury or disability.
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Why we are discussing health insurance today• 14% of Coloradans have no
insurance– Nearly 700,000 people
• The cost of insurance is significant and rising– Over past 5 years: Small group
premiums up 20%, large group up 23% and individual policies up 56%
• Evidence suggests that insurance leads to better outcomes and more coordinated care
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Insurance markets and spectrum of risk
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Private insurance covers 71% of Coloradans
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SOURCE: 2008-09 Colorado Household Survey, Colorado Department of Health Care Policy and Financing, analyzed by the Colorado Health Institute
Employer Sponsored
64%Individual Pol-
icy7%
Medicare7%
Medicaid6%
Child Health Plan Plus1%
Other1% Uninsured
14%
Percent of Coloradans
Overview of private insurance markets in Colorado • Individual market– Individually purchased plans– High-risk pools • CoverColorado • GettingUSCovered
• Employer-sponsored insurance– Small group market – Large group and self-insured plans
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INDIVIDUAL (NON-GROUP) HEALTH INSURANCE MARKET IN COLORADO
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Individual market in Colorado• Individuals secure insurance
directly with health insurance plans
• Few mandated benefits • No guaranteed issue–plans can
rate or reject individuals based on claims experience
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CoverColorado: High-risk pool for individuals underwritten out of individual market • State subsidized health insurance plan • Individuals with pre-existing medical
condition and rejected from individual market
• CoverColorado currently has 13,200 enrollees
• Premiums are relatively high and may not be affordable
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Individual market post-federal health reform • Ban on lifetime limits and rescission (2010)• Guaranteed issue for children (2010)• 80% of premiums must be spent on medical care (2011) • Guaranteed issue for adults (2014) • GettingUSCovered high-risk pool (2010)• Subsidies provided on exchange for people with incomes
between 134% and 400% of FPL (2014) • Individual policies can be purchased through state’s health
insurance exchange (2014)• Insurance policies (in all markets) must include essential
benefits package (2014)
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What is the “essential benefits” package?• Comprehensive set of services approved
by Secretary of Health and Human Services
• Limits annual cost-sharing to $5,950 individual, $11,900 family
• No annual or lifetime limits on coverage• No co-pays for prevention• Many individual plans will not meet new
requirements (underinsurance)
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EMPLOYER-SPONSORED COVERAGE IN COLORADO
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Why we have employer-sponsored insurance• Result of WWII wage
restrictions and freezes
• Birth of employee benefit packages
• 1954 employer contributions to employee health plans were exempt from taxable income
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Health insurance offer rates by size of employer, Colorado, 2009
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SOURCE: Medical Expenditure Panel Survey, 2008.
Fewer
than 1
0 emplo
yees
10-24
emplo
yees
25-99
emplo
yees
100-9
99 em
ployee
s
1000
or m
ore em
ployee
s0%
20%40%60%80%
100%
38%62%
84% 92% 100%
Employee-only premiums by firm size, U.S.
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Less than 10 employees
10 - 24 employees
25 - 99 employees
100-999 employees
1,000+0
1,000
2,000
3,000
4,000
5,000
6,000
$4,982$4,573 $4,521 $4,702 $4,673
SOURCE: Medical Expenditure Panel Survey
SMALL GROUP MARKET IN COLORADO
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Decline of small group market in Colorado
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-
100,000
200,000
300,000
400,000
500,000
600,000
$0$500$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500$5,000Covered Lives Annual premiums (in $)
Cove
red
Live
sAnnual Prem
iums
Small group health insurance market in Colorado
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• 1-50 employees• Mandated benefits• Guaranteed issue and renewal • Includes Business Group of One• Premium rating based on smoking
status, industry, age, family size and geographic location
Small group market post-federal health reform • No employer penalties for small employers• Tax credits for firms with 25 or fewer employees and
average wage at or below $50,000 (2010)• Must spend 80% of premiums on medical care (2011)• Small Business Health Options Program (SHOP)
exchange for small businesses to pool lives and purchase insurance (2014)
• Must include essential benefits package (2014) • With federal subsidies for low- and middle-income
workers, small employers may discontinue coverage and send workers to state’s health insurance exchange
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LARGE GROUP AND SELF- FUNDED PLANS
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Large employers and self-funded plans• 38% of Coloradans with employer-sponsored
insurance are in self-funded plans• Employer assumes risk to pay health care
claims• May hire third-party administrator to process
claims• Usually includes stop-loss coverage• Regulated by federal Employee’s Retirement
income Security Act (ERISA)
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Large group market and self-funded plans post-federal health reform • Amendments to ERISA to bring all
employers into conformance with market reforms
• Employers with more than 50 employees must provide affordable coverage or pay penalties
• Coverage must include essential benefits package (existing plans can be grandfathered)
• Temporary reinsurance program for early retirees
• Excise tax on “Cadillac” plans 26
LEGISLATIVE CONTEXT
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Where we differ
• Extent of insurance and how to provide access
• Lower total health care costs• Improve quality of care• Colorado – before and after reform –
has grappled with these issues
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One example: Pooling risk• The question: To what degree should
risk be shared?• Last year:– HB10-1008: Insurers cannot use gender
to determine rates– HB10-1021: Covering maternity and
contraception– HB10-1252: Covering mammography for
those at risk29
Legislation this year: Debating pooled risk
• SB11- 019 (King/Stephens) Small employers’ payments to cover individual purchase of health insurance
• HB 11-1273 (Nikkel, Stephens, Kopp), Interstate compact to opt out of federal health reform
• Health insurance exchange legislation (not yet introduced)
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Wrapping up• Thank you• CHI as resource for you• Key insurance concepts at work–Mechanics of the market– Legislative environment and themes of
the time
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CHI as your resource• How will certain legislation affect your
district?• How many constituents will be affected
by the “individual mandate?”• Does your district have the workforce to
meet current and future health needs?• What can I tell my constituents about
the cost of reform?
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Contacts
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• Allison Summerton• Amy Downs• Michele Lueck
303.831.4200www.ColoradoHealthInstitute.org
Twitter: @CoHealthInst