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Individual Health Insurance: Are You Ready for Change?

Slide Presentations (Text Versions)

This information is for reference purposes only. It was current when produced and may now be outdated. Archive material is no longer maintained, and some links may not work. Persons with disabilities having difficulty accessing this information should contact us at: https://info.ahrq.gov. Let us know the nature of the problem, the Web address of what you want, and your contact information.

Please go to www.ahrq.gov for current information.


This Web-assisted audio teleconference occurred on April 24, 2002, via the World Wide Web and telephone. The User Liaison Program (ULP) of the Agency for Healthcare Research and Quality (AHRQ) developed and sponsored the program.

This is the text version of slide presentations by Deborah Chollet, Karen Pollitz, and Steve Larsen. Select to access the PowerPoint® slides (368 KB).


Slide No. 1

The Agency for Healthcare Research and Quality Presents
Individual Insurance: Are you Ready for Change?
A Web-assisted Audio Conference for State and Local Health Policymakers.
April 24, 2002.

Slide No. 2

Individual Health Insurance: Are You Ready for Change?

Moderator: Cindy DiBiasi

Panelists:

Deborah Chollet, Ph.D.
Senior Fellow
Mathematica Policy Research, Inc.

Karen Pollitz, M.P.P.
Project Director, Institute for Health Care Research and Policy
Georgetown University

Steve Larsen, J.D., M.P.P.
Insurance Commissioner, State of Maryland
Health Committee Chair, National Association of Insurance Commissioners

Slide No. 3

Individual Health Insurance: Are You Ready for Change?

I. Market Dynamics
II. State Strategies
III. New Ideas in State and Federal Proposals

Slide No. 4

Question and Answer Period

On the Webcast?
     Type in the messaging field and hit Enter.
On the Phone?
     Press "14" to indicate you have a question.
Ready to E-mail?
     Send a message to info@ahrq.gov

Due to the high volume of messages, we may not be able to answer all questions during this session.

Slide No. 5

Individual Health Insurance: Are You Ready for Change? A Web-assisted audio conference

Interested in free access to the archive of this event?
On the internet, visit the AHRQ/ULP Web Site www.ahrq.gov/ulpix.htm

Interested in purchasing audio tapes of this event?
To order: Contact the AHRQ Publications Clearinghouse at 1-800-358-9295. Ask for AHRQ02-AV06A, "Individual Health Insurance: Are You Ready for Change?" The cost is $10.00 for the tape.

Slide No. 6

Individual Health Insurance: Are You Ready for Change? A Web-assisted Audio Conference

Deborah Chollet, Ph.D.
Senior Fellow
Mathematica Policy Research
April 24, 2002

Slide No. 7

Who Buys Individual Coverage?

  • Individuals and families who do not have employer-based or public health insurance.
  • In 1999, about 16 million people—7 percent of the population under age 65.

Slide No. 8

Who Buys Individual Coverage? (cont'd)

  • Most are:
    • Adults of childbearing age.
    • Employed full time and all year.
    • Live in urban areas.
  • Compared to the general population, they are more likely to be:
    • Early retirees or older workers.
    • Nonelderly spouses of Medicare enrollees.
    • Self-employed.
    • Live in rural areas.
  • Compared to people with employer coverage, they are:
    • Lower-income.
    • Older.

Slide No. 9

Income Distribution of People Under Age 65 With Group vs. Individual Coverage, 2000

Employer Group Coverage

  • 50 percent: 400 percent + Federal poverty level (FPL).
  • 44 percent: 200-399 percent + FPL.
  • 16 percent: 0-199 percent + FPL.

Individual Coverage

  • 43 percent: 400 percent + FPL.
  • 32 percent: 200-399 percent + FPL.
  • 25 percent: 0-199 percent + FPL.

Source: March 2001 Current Population Survey (Mathematica Policy Research, Inc.)

Slide No. 10

Age distribution of the Group vs. Individually Insured Populations, 2000

Employer Group Coverage

  • Less than 30 percent are < 18 years of age.
  • 10 percent are 18-24 years of age.
  • 30-40 percent are 25-44 years of age.
  • 15-20 percent are 45-54 years of age.
  • 10 percent are 55-64 years of age.

Individually Insured Population

  • 25 percent are < 18 years of age.
  • 10 percent are 10-24 years of age.
  • 30 percent are 25-44 years of age.
  • About 20 percent are 45-54 years of age.
  • About 18 percent are 55-64 years of age.

Source: March 2001 Current Population Survey (Mathematica Policy Research, Inc.)

Slide No. 11

Who Sells Individual Coverage?

  • 690 insurers (counted by state), compared to about 2,400 group insurers.
  • Blue Cross Blue Shield and commercial insurers dominate and are more prevalent in the individual market than n in the group market.

Slide No. 12

Market Share by Insurer Type: 1997

Individual Market

  • 28 percent Health Maintenance Organizations (HMO's).
  • 24 percent Commercial Insurers.
  • 50 percent Blue Cross Blue Shield.

Group Market

  • 45 percent HMO's.
  • 19 percent Commercial insurers.
  • 36 percent Blue Cross Blue Shield.

Source: "Mapping State Health Insurance: Structure and Change in the States' Group and Individual Health Insurance Markets, 1995-1997". Available at http://www.statecoverage.net/pdf/mapping.pdf

Slide No. 13

What does the market look like?

  • Compared to the group market:
    • Fewer insurers, but many more insurers per covered life.
    • Much lower premium volume per insurer.

Slide No. 14

Average Number of Insurers and Premium Volume: 1997

Individual Market:
Average Number of insurers: 14
Average earned premiums per insurer: $11.9 million

Group Market:
Average Number of insurers: 49
Average earned premiums per insurer: $59.2 million

Source: "Mapping State Health Insurance: Structure and Change in the States' Group and Individual Health Insurance Markets, 1995-1997". Available at http://www.statecoverage.net/pdf/mapping.pdf

Slide No. 15

What does the market look like? (cont'd)

  • In every state, the market is very concentrated.
    • 1-3 large insurers hold 50 percent to 97 percent of the market.
    • Smallest 50 percent of insurers account for about 8 percent of the market.
  • Small-population states have fewer insurers, but many more insurers per capita.
    • 17 insurers per million population in Wyoming.
    • 2 insurers per million population in California.

Slide No. 16

Major challenges

  • Small market fragmented among "many" insurers.
    • Small risk pools.
    • Low average premium volume encourages aggressive "cherry picking."
  • High administrative and marketing costs.
    • High turnover; most consumers stay less than one year.
    • Individual sales.
  • Adverse selection.
    • People who need health care are more likely to buy than people who do not.
  • Adequate coverage and an affordable price.

Slide No. 17

Individual Health Insurance: Are You Ready for Change? A Web-assisted Audio Conference

Karen Pollitz, M.P.P
Project Director
Institute for Health Care Research and Policy
Georgetown University
April 24, 2002

Slide No. 18

Individual Health Insurance Market Characterized by Medical Underwriting

  • Medical underwriting is a process for assessing the health and risk status of an applicant in order to decide whether to issue coverage, and, if so, at what price and under what terms.
  • Insurers medically underwrite coverage because sick people are more expensive to insure than healthy people.
    • By excluding expensive risks, carriers can keep the cost of coverage lower for those they insure.

Slide No. 19

How Medical Underwriting Works

  • Carriers use a variety of "underwriting tools."
    • Deny coverage.
    • Limit coverage.
      • Exclude conditions via "rider."
      • Otherwise reduce covered benefits (e.g., $1,000 prescription drug deductible.
  • Little consistency between carriers on which tools to apply and when; so impossible for consumers to predict outcome of medical underwriting.
  • Process usually takes two weeks to two months to complete.

Slide No. 20

Results of 60 applications for "Alice", 24, hay fever

Offer with Benefit Limits: 70 percent
Clean Offer: 5 percent
Reject: 8 percent
Offer with Premium Increase and Benefit Limits: 7 percent
Offer with Premium Increase: 10 percent
Average Annual Premium: $1,656
Ratio Highest:Lowest 11.4

Source: "How Accessible is Individual Health Insurance for Consumers in Less-Than-Perfect-Health?" available at www.kff.org.

Slide No. 21

Results of 60 applications by "Crane Framily", son, "Colin" has asthma

Offer with Benefit Limits: 52 percent
Clean Offer excluding Colin: 15 percent
Clean Offer: 5 percent
Offer with Premium Increase and Benefit Limits: 20 percent
Offer with Premium Increase: 8 percent
Average Annual Premium: $5,460
Ratio Highest:Lowest 9.1

Source: "How Accessible is Individual Health Insurance for Consumers in Less-Than-Perfect-Health?" available at www.kff.org.

Slide No. 22

Results of 60 applications for "Frank", 62, overweight smoker with high blood pressure

Offer with Premium Increase and Benefit Limits: 5 percent
Offer with Premium Increase: 37 percent
Clean Offer: 3 percent
Reject: 55 percent
Average Annual Premium: $9,936
Ratio Highest: Lowest 10.3

Source: "How Accessible is Individual Health Insurance for Consumers in Less-Than-Perfect-Health?" available at www.kff.org.

Slide No. 23

Results of 60 Applications for "Greg", 36, HIV Positive

Reject 100 percent

Source: "How Accessible is Individual Health Insurance for Consumers in Less-Than-Perfect-Health?" available at www.kff.org.

Slide No. 24

Other "Uninsurable" Conditions

  • Anorexia.
  • Arthritis.
  • Brain or Spinal cord injury.
  • Cancer.
  • Cystic fibrosis.
  • Diabetes.
  • Epilepsy.
  • Heart disease.
  • Hemophilia.
  • Hepatitis C.
  • Kidney disease.
  • Lupus.
  • Multiple sclerosis.
  • Muscular dystrophy.
  • Organ transplant.
  • Osteoporosis.
  • Paraplegia or quadriplegia.
  • Parkinson's disease.
  • Pregnancy.
  • Stroke.

Slide No. 25

Even for people in "perfect" health...

  • Covered benefits are often less comprehensive than in group health plans.
    • Maternity.
    • Mental Health.
    • Prescription drugs.
    • High cost sharing.
  • Age rating.
  • Stability/durability of coverage over time.

Slide No. 26

Individual Health Insurance: Are You Ready for Change? A Web-assisted Audio Conference

Steven Larsen, M.P.P., J.D.
Insurance Commissioner
Maryland Insurance Commission
State of Maryland
April 24, 2002

Slide No. 27

Impact of HIPAA*

  • Guaranteed renewal.
  • If coming from significant period of group coverage:
    • Guaranteed issues.
    • Portability.
  • But:
    • No constraints on price when policies are issued or renewed.
    • No guaranteed issue or portability within the individual market.

* The Federal Health Insurance Portability and Accountability Act, enacted in 1996.

Slide No. 28

State policies to improve access

  • Guaranteed issue.
    • All or only "qualified resident."
    • Some or all products or carriers.
    • Some or all of the time.
  • Limits on rate variation ("rate bands").
    • For specific rate factors (e.g. health, age) and/or overall.
  • Coverage for preexisting conditions.
    • Look-back and waiting periods.
    • Exclusion riders.
  • High risk pools.

Slide No. 29

Number of States with Access Regulation in the Individual Insurance Market

Guaranteed issue—all products: 7
Guaranteed issues—some products: 8
Limit health rating: 16
Limit age rating: 12
Limit composite rating: 10
Limit pre-ex look back: 34
Limit pre-ex waiting period: 35
Prohibit exclusion riders: 13
High risk pool: 28

Summary:
No provision for issue: 9
No issue or rating provisions: 5

Source: Mathematica Policy Research, Inc. 2001

Slide No. 30

Other State policy options

  • Standardized benefit packages.
    • Encourage comparison shopping and competition.
    • Discourage insurer "gaming" of risk selection through benefit design.
  • Mandated inclusion of benefits.
  • Mandated offer of benefits.

Slide No. 31

State Strategies:

  • High-Risk Pool Only.
  • Portability.
  • Comprehensive Limits on Medical Underwriting.
  • Other.

Slide No. 32

High Risk Pool Only

  • Few limits on medical underwriting by insurers.
  • Instead, public pool sells coverage to "uninsurables."
  • Pool losses subsidized by tax on insurers/general revenues.
  • Premiums > standard rates.
  • Benefit limits, pre-ex exclusions, enrollment caps.
  • 22 states (AK, AR, CO, CT, IL, IN, KS, KY, LA, MS, MO, NE, NH, NM, ND, OK, SC, TX, UT, WA, WI, WY).

Source: Health Insurance Info Web site

Slide No. 33

Portability

  • Limits on medical underwriting for residents with qualified prior coverage.
  • Guaranteed issue some/all products.
  • Community rating or rate bands.
  • No exclusion riders.
  • Credit for prior coverage.
  • Minimum benefit standards.
  • 11 states (CA*, FL, GA, ID*, IA*, MN*, MT*, NV, OH, OR*, SD).
  • 6 with high risk pool hybrid.

Source: Health Insurance Info Web site.

Slide No. 34

Comprehensive Limits on Medical Underwriting

  • Prohibition on medical underwriting for all residents/all the time.
  • Guaranteed issue all products.
  • Community rating.
  • No exclusion riders.
  • Credit for prior coverage.
  • Standardized benefits.
  • 5 states (NY, NJ, ME, MA, VT).

Source: Health Insurance Info Web site.

Slide No. 35

Other Individual Market Strategies

  • Carrier of last resort (HI, MI, PA, NC, VA).
  • Open enrollment period (DC, MD, MN, OH, WV).

Source: Health Insurance Info Web site.

Slide No. 36

Individual Market Alternatives

  • Self-employed/Group-of-one access to small group coverage (13 states).
  • COBRA*—like continuation rights for small group enrollees (38 states).
  • Individual access to small group purchasing cooperative (1 state).

*COBRA—Consolidated Omnibus Budget Reconciliation Act of 1985 which allows employees who would otherwise lost their coverage due to resignation or dismissal to continue under the employer's group health insurance plan for up to eighteen months if they pay for the coverage themselves.

Slide No. 37

Maryland's Strategy for Regulating the Individual Health Insurance Market

  • Substantial, Available, and Affordable Coverage (SAAC) Program.
    • For carriers that participate in the SAAC program: Semi-annual open enrollment, standard benefit package, no pre-existing condition exclusion period, guaranteed renewability.
  • Limits on pre-existing condition exclusions.
    • HMO's cannot impose pre-existing condition exclusions.
    • In non-HMO plans, pre-existing exclusion periods cannot exceed two years.
  • Guaranteed renewability.

Slide No. 38

Maryland's Future

Maryland legislature passed legislation:

  • To repeal semi-annual open enrollment for SAAC.
  • To open High Risk Pool.
  • To become effective July 2003.

Slide No. 39

National Association of Insurance Commissioners Model Laws

  • Individual Health Insurance Market.
  • High Risk Pools.

To obtain copies, contact Mary Beth Senkewicz msenkewi@naic.org

Slide No. 40

Question and Answer Period

On the Webcast?
     Type in the messaging field and hit Enter.
On the Phone?
     Press "14" to indicate you have a question.
Ready to E-mail?
     Send a message to info@ahrq.gov

Due to the high volume of messages, we may not be able to answer all questions during this session.

Slide No. 41

New ideas/issues

  • Regional vs. state individual markets.
  • Shore up "guaranteed renewability" especially renewal rates.
  • Improved high risk pools.
  • Federal tax credit to subsidize individual policies.

Slide No. 42

Question and Answer Period

On the Webcast?
     Type in the messaging field and hit Enter.
On the Phone?
     Press "14" to indicate you have a question.
Ready to E-mail?
     Send a message to info@ahrq.gov

Due to the high volume of messages, we may not be able to answer all questions during this session.

Slide No. 43

Individual Health Insurance: Are You Ready for Change? A Web-assisted audio conference

Interested in free access to the archive of this event?
On the internet, visit the AHRQ/ULP Web Site www.ahrq.gov/ulpix.htm

Interested in purchasing audio tapes of this event?
To order: Contact the AHRQ Publications Clearinghouse at 1-800-358-9295. Ask for AHRQ02-AV06A, "Individual Health Insurance: Are You Ready for Change?" The cost is $10.00 for the tape.

Slide No. 44

Bioterrorism and Health System Preparedness: Emerging Tools, Methods and Strategies

A Series of three Web-Assisted Audio Conferences for State and Local Health Policymakers

April 29 May 1, 2002 2:00-3:30 p.m. EDT each day

To register, go to http://www.hsrnet.com/meeting/bioterrorism

For more information, E-mail ULP at info@ahrq.gov

Current as of July 2002


Internet Citation:

Slide Presentations (Text Versions) from Individual Health Insurance: Are You Ready for Change? Web-Assisted Teleconference. Agency for Healthcare Research and Quality, Rockville, MD. http://www.ahrq.gov/news/ulp/indinsurancetele/insurslidetext.htm


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