private health insurance: challenges for reform karen pollitz research professor georgetown...

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Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform October 3, 2008

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Page 1: Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform

Private Health Insurance:Challenges for Reform

Karen PollitzResearch Professor

Georgetown University Health Policy InstituteAlliance for Health Reform

October 3, 2008

Page 2: Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform

Some basics

• We don’t buy health insurance in case we stay healthy

• For insurance to protect us, it must be

– Available

– Affordable

– Adequate

– Always

Page 3: Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform

Sources of health coverage, non-elderly

• 71% of uninsured are in full-time working families

• 2/3 of uninsured are poor or near-poor (below 200% FPL)

• Most uninsured are ineligible for ESI or Medicaid

• 1/3 of non-elderly will have spell uninsured over 4-year period

Total = 255 million people under 65

Source: Urban Institute estimates of March 2006 Current Population Survey, U.S. Census Bureau.

Employer, Dependent

30%

Employer,Own32%

Uninsured18%

Medicaid/Other public

15%

Individual Policies5%

Page 4: Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform

Risk spreading

24%

49%

64%73%

80%

97%

3%0%

20%

40%

60%

80%

100%

Top 1% Top 5% Top 10% Top 15% Top 20% Top 50% Bottom50%

Population Percentile Ranked by Share of Health Care Spending

Note: Population includes those without any health care spending. Health spending defined as total payments, or the sum of spending by all payer sources.

Source: Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey, 2003.

Concentration of Health Spending in the U.S. Population

Page 5: Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform

Availability challenges

• Job-based plans– ESI is voluntary– Eligibility cannot be based on health status

• Individual health insurance – Medically underwritten in most states,

eligibility is based on health status

Page 6: Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform

Always available?

• Job based plans– Loss of eligibility due to layoff, retirement,

change in family status, employer drops benefits

– Continued eligibility cannot be based on health status

• Individual health insurance– Ability to switch plans limited if health declines– Rescission

Page 7: Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform

Affordability challenges

• Job-based plans– Average price ($4,000/$12,000) reflects broad

pooling, comprehensive benefits– Significant tax subsidies– Significant employer subsidies

• Individual health insurance– Price based on health status, age, industry– Price varies dramatically – Few subsidies

Page 8: Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform

Affordability always?

• Job-based plans– Medical costs rise faster than wages, straining

affordability over time– “Experience rating” hikes price of employer group

policies when claims are made– Employee contribution must not be based on health

status• Individual health insurance

– Premiums rise with age, change in health status– “Durational rating” penalizes policyholders who stay– Other renewal and marketing practices strand sick in

policies whose premiums spiral

Page 9: Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform

Adequacy challenges

• Job-based plans– Generally comprehensive benefits (varies)– Cost sharing is increasing

• Individual health insurance– Benefit exclusions, caps– Pre-existing conditions permanently excluded– High cost sharing

Page 10: Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform

Adequacy always?

• Job-based health plans– Gradual erosion of coverage, mostly through

increased cost sharing

• Individual health insurance– Policyholder “option” to trim coverage, raise

cost sharing to offset renewal premium increase

– Policyholder option to increase coverage often restricted

Page 11: Private Health Insurance: Challenges for Reform Karen Pollitz Research Professor Georgetown University Health Policy Institute Alliance for Health Reform

Many approaches to reform……but not just anything will do

• Public vs. Private Coverage

• Single vs. Multiple Payers

• Federal vs. State

• Competition vs. Regulation

• Beginning discussion with the 4 As can shape design of any of these approaches