What are Connectors and How do they work?

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What are Connectors and How do they work?. April 26, 2007. Agenda. Introduction to Connectors The vision for the Connector in Massachusetts What data did MA use to think through the Connectors structure and functions? Connectors, Exchanges and Employee Choice Pools - PowerPoint PPT Presentation

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  • What are Connectors and How do they work?April 26, 2007

  • AgendaIntroduction to ConnectorsThe vision for the Connector in MassachusettsWhat data did MA use to think through the Connectors structure and functions? Connectors, Exchanges and Employee Choice PoolsWashington DC Model - Robert MoffittMassachusetts Model Robert CareyConnecticut Model Phil VogelDigging Deeper: Connectors, Federal Law, and Moving Forward A facilitated discussion among states and panelists

  • The Connector in MassachusettsWhat was and wasnt working (background)Understanding the insurance markets (small and nongroup)Understanding who the uninsured are and the reasons they are uninsured Understanding employer coverageVision for functionality of the Connector (and how that grew)Connector in context of MA health care reform

  • DataIndividual data (age, insurance status, employment, income, family status, health status)Employer data (average price of plan, % contribution, offer rate by size)Insurance market (number, price, type of plans in each market, benefit coverage)Medicaid and other public program cost and benefit dataUncompensated Care Pool data

  • Questions asked about insurance marketsAre the nongroup and small group markets functioning well?Is anything working well? What are the barriers to entry?What is the product availability?How many carriers are in the markets? Is there adequate competition?Is there choice, portability, flexibility?What is the states experience with adverse selection, risk pooling, reinsurance?What reforms have been made to the markets in the past, were they successful?

  • MA nongroup market vs. nationalNational MAPPO83.4%10.0%HMO/POS14.9%90.0%Indemnity 1.7% 0.0%< 19 5.6%20.0%19-2919.8%15.0%30-3921.1%17.0%40-4924.8%17.0%50-5920.2%18.0%60-64 8.5%14.0%

  • MA nongroup market - rules2 products are allowed to be sold Standard - very comprehensive with minimal cost sharingAlternative increased cost sharing and no RxGuaranteed issue/renewal with continuous open enrollment6 mo. waiting period or pre-ex condition exclusion period, offset by prior continuous coverage 63 days prior to enrollmentNo waiting period for buy up Overall mlr is 91%94% for individuals and 83% for other rate basis typesDeterioration from 83% in 20035% higher than for small group

  • MA nongroup market enrollment and premiums42,500 subscriberswill comprise 11% of the merged market90% of the market is with BCBSNongroup membership decreased by 10% 2003-2005Average premium is $650 for Standard and $450 for AlternativeDeclining plan value 35% purchased Alternative in 2003 45% purchased Alternative in 2005

  • MA nongroup market claims experienceAverage pmpm claim cost was approximately 40% higher than small group in 2005 due to the following:Older than average subscriber age (1.13)Much lower number of children covered77% of those that purchase buy individual-onlyNongroup pmpm claimsAverage is $375 15% have pmpm claims greater than $65015% have pmpm claims under $50 50% have pmpm claims under $200

  • MA small group market enrollment and premiums700,000 members in 2005 92% of which are written by 7 not-for-profit HMOsIncludes groups of 1-50 FTEsOverall small group claims pmpm is $26211% of groups (which are 3% of members) have pmpm claims under $509% of groups (which are 5% of members) have pmpm claims of more than $65050% of groups have pmpm claims under $20016% of groups have pmpm claims greater than $3502:1 rating bandAge, geography, industry, size, 4 rate basis types all inside the band

  • MA small group market - productsPurchasing patterns87.7% are HMO/POS11.75% are PPO0.54% are IndemnityPlan value70% 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-paysDrug co-pays of $10/25/4012% 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)

  • Small group enrollment by group size

    Group Claim PremiumAgePlanSize Members PMPM PMPMMLRFactorValue

    1112,000$296 $30597%1.200.87 2-5152,000$273 $32385%1.030.89

    6-10117,000$250 $30981%0.940.89

    11-25194,000$251 $29884%0.940.90 26+119,000$250 $28787%0.930.90

    Source: Gorman Actuarial

  • Summary of findingsUn-level playing field between employees of firms that dont offer (nongroup purchase) and self-employed (small group purchase)Little choice of product in nongroup marketNo pre-tax payment for people purchasing in nongroup marketSmall employers have minimum participation and contribution requirementsVery small groups are older and use more services

  • The Connector in MassachusettsWhat was and wasnt working (background)Understanding the Insurance markets (small and nongroup)Understanding who the uninsured are and the reasons they are uninsured Understanding employer coverageVision for functionality of the Connector (and how that grew)Connector in context of MA health care reform

  • Key questions about the uninsured? Who are the uninsured?Why dont they have health insurance?Are they employed, type of employment?Are they offered insurance by employer?If offered, do they choose not to purchase?Demographic profile?What is their health status?How do they receive and pay for care? Who uses the uncompensated care pool?

  • Insurance status of MA residentsTotal Population6,400,000Currently insured (93%)5,940,000Employer, individual, Medicaid, MedicareCurrently 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 and Policy Data

  • Uninsured rates by age (2002-2004)

    Younger adults have higher uninsured rates although significant increases were also found in the older age groups in 2004.

  • Distribution of uninsured by age (2004)The uninsured span all ages with 67% between the ages of 25 and 64.

  • Uninsured rates by gender and marital status, 2002-2004 Males have higher rates of uninsurance than females.Never married people have higher rates of uninsurance.Married people saw a significant increase in their rate of uninsurance from 2002 to 2004.

  • Uninsured rates by education and employment status (2002-2004)Rates of uninsurance are much higher for those without a high school degree and lowest for those with a college degree. Rates of uninsurance are lowest for those working full-time jobs.

  • Distribution of the uninsured by education and employment status (2004)Most of the uninsured are high school graduates; almost one fifth have college degrees. A little more than two thirds of the uninsured work, and most of those who do work hold full-time jobs.

  • Uninsured rates by size of firmPeople working for small firms are more likely to be uninsured than those working for larger firms.Increases in uninsured rates were found for both large and small firms from 2002 to 2004.

  • Distribution of employed uninsured by size of firm (2004)While the rate of uninsurance is far greater for people working in small firms, a significant percent of the working uninsured are employed by firms with greater than 50 employees.

  • Distribution of uninsured and ucp users by region

  • Components of UCP demand

  • Distribution of ucp claims by site of service (2006)67% of pool users are between the ages of 25 and 64.

  • What we learned about the uninsuredThe uninsured are not a homogenous group; however, they are likely:to be employed to have been born in the U.S. to be singleto be whiteto be between 25 and 64to have at least a high school educationto have moderate incomes and reportedly willing to pay for health insurance.more likely to use free care pool if they live close to Boston.

  • The Connector in MassachusettsWhat was and wasnt working (background)Understanding the Insurance markets (small and nongroup)Understanding who the uninsured are and the reasons they were uninsured Understanding employer coverageVision for functionality of the Connector (and how that grew)Connector in context of MA health care reform

  • Questions to ask about employer-coverageWho does and doesnt offer?Are they dropping or likely to drop coverage?Reasons for not offeringWhat do they offer?How much do they subsidize?How many employees take up offer of coverage?Do they offer pre-tax payment of premium?How much choice?

  • Employers that offer health insurance The change in offer rate is not statistically significant.

  • Employers that offer health insurance by employer size

  • Employers that offer health insurance to full-time employees onlyThe change in offer rates is not statistically significant.

  • Hours required to qualify for health insurance

  • Total monthly premium for indiv. plans

  • Monthly employer contribution to individual plan$78$88Employee pays

  • Total monthly premium for family plans

  • Monthly employer contribution to family premium $237$269Employee pays

  • Employers offering pre-tax plan for hi premiums (2005)

  • Eligible employees who enroll in employers health insurance

  • Employers ask for proof of hi if employee turns down insurance

  • Employers that offer compensation to employees who turn down hi

  • Employers impose a waiting period

  • Waiting periods

  • Does employee contribution to health insurance premium vary by?

  • Reasons for not offering health insurance

  • Employers who do not offer hi: what would motivate?

  • Employers who do not offer health insurance: ways to constrain costs

  • What we learned about employer hi coverageEmployers have not been dropping coverage in MAMany small employers who offer hi do not offer pre-tax treatment of premium paymentsMany employers have difficulty providing hi for part time workersWaiting periods have increased slightly Most employers do not vary contribution or cost sharing by employee characteristicsEmployers who do not offer insurance are looking for lower cost alternativesMost employers do not ask for proof of coverage if employees turn down coverage

  • The Connector in MassachusettsWhat was and wasnt working (background)Understanding the insurance markets (small and nongroup)Understanding who the uninsured are and the reasons they are uninsuredUnderstanding employer coverageConnector in context of MA health care reformVision for functionality of the Connector (and how that grew)

  • MedicaidCost/QualityImprovementsCommonwealthCareInsuranceReformsSharedResponsibility ConnectorAuthorityMassachusettsHealth Care Reform

  • Ch. 58 of Acts of 2006Merge nongroup and small group markets 15% decrease in nongroup rates 1 to 1.5% increase in small group rates (can be offset with purchase of $33-48 million reinsurance plan)Represents $25-$38 million subsidy from small group to non groupNew distribution channel (Connector)Individual MandateLoss of tax deduction in 2007 Assessed 50% cost of MCC in 2008+Fair share employer assessment & Free Rider surchargeCommonwealth Care (subsidized coverage)

  • Ch. 58 of Acts of 2006Section 125 Plan is required of employers with more than 10 FTEs Excused from Free Rider SurchargeAllows employees to pay with pre-tax dollarsExpanded dependency status for health insurance purposes to 2 years past loss of tax dependency status or age 26Young Adults PlanMoratorium on mandated benefitsHMOs can use coinsurance

  • Key changes made to small group and nongroup marketsSmall group and nongroup risk pools to mergeConnector empowered to arrange for sale of products to individuals and small groupsCommonwealth Care available for those at 300% FPL or belowSeal of Approval products to small groups or individuals above 300% FPLYoung Adult Plan available for purchase to those 19 to 26All individuals considered groups of oneMerged pool rating based on current small group Group size adjustment for smallest groups increased from 1.05 to 1.10Group size adjustment moved OUTSIDE the 2:1 band

  • Rate impact on the merged market with the new rating rulesMerger will lead to a decrease in nongroup 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 nongroup+1 to +4% for small groupAdding currently uninsured will lead to rate impacts of -3% to +6%, depending on:Current number of uninsuredNumber of uninsured purchasing coverageMorbidity of the newly insured$30 to $45 million in reinsurance dollars required to offset increase in small group rates due to merger

  • The Connector in MassachusettsWhat was and wasnt working (background)Understanding the insurance markets (small and nongroup)Understanding who the uninsured are and the reasons they are uninsuredUnderstanding employer coverageConnector in context of MA health care reformVision for functionality of the Connector (and how that grew)

  • The Connector makes it workBlue Cross Blue ShieldFallonHarvard PilgrimInsurance ConnectorNew EntrantsMMCOsTuftsNHP

  • Governors vision for the ConnectorNexus between buyers and sellers Premiums paid with pre-tax dollars (125 Cafeteria Plan)Facilitate premium assistance for 100-300% FPL Mechanism for reaching non-traditional workersPart-timers and seasonal workersContractors and sole-proprietorsSpouses with two employers wanting to contribute towards family planIndividuals with more than one jobAlternative distribution systemPromotes shift to defined contribution

  • Eligibility for accessing subsidized health insurance via the Connector Uninsured resident of MA (6 mo.)Not eligible for any MassHealth program, Medicare, QSHIP, or SCHIP program.Legal citizenEmployer 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 can waive in future)

  • But, some wanted moreReally wanted purchasing poolFinal legislation did not allow as much flexibility in product design as we would have likedOpen meetingsAmbitious timelines Change in administration Tension between the business plan of connector and regulatory authorityDefining affordabilityDefining minimum creditable coverage

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