HOT ISSUES IN HEALTH CARE

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HOT ISSUES IN HEALTH CARE
Sponsored by Rose Community Foundation
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HEALTH INSURANCE MARKET IN COLORADO

• W. N. Lindsay
• Benefit Management Design, Inc.
• 1720 South Bellaire Street, Suite 250
• Denver, CO 80222
• [phone]
• www.bmadinc.com

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Setting the Stage

• Urban and Rural Access
• Small Group Health Insurance Challenges
• Significant and sustained price inflation

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• But Colorado is Unique!

is it?
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National Trends?

• Influenced by large employers

• Health care prices vary by market

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Estimate is statistically different form the
previous year shown 1996-1999, 1999-2000,
2000-2001, 2001-2002. Note Data on premium
increases reflect the cost of health insurance
premiums for a family of four. SOURCE KAISER
FAMILY FOUNDATION AND HEALTH RESEARCH AND
EDUCATIONAL TRUST, SEPTEMBER 5, 2002
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Can we afford it or are we willing to pay for it?
Reden Anders, Inc. 2000
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Can we afford it or are we willing to pay for it?
Reden Anders, Inc. 2000
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The Factors Driving Rising Costs in Healthcare
(2001-2002) (PricewaterhouseCoopers)
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National Rx Drug Trends
Source Mercer/Foster Higgins National Survey of
Employer-Sponsored Health Plans 2001
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Total HMO enrollment and growth rate, July 1992
to July 2001
Note Growth rates based on total enrollment,
not the rounded-off numbers given in this chart
SOURCE EBRI 5/30/02
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Health Plan Enrollments For Covered Workers,
Selected Years 1996-2001
Sources Kaiser/Health Research and Educational
Trust (HRET) Survey of Employer-Sponsored Health
Benefits, 1999, 2000, 2001 and KPMG Survey of
Employer-Sponsored Health Benefits, 1996, 1998.
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Americas Health Care Providers Won the Battle
vs. Managed Care

• Network adequacy rules
• Any willing provider requirements
• External appeals required
• Gag clauses removed
• Out-of-network providers included
• Prompt pay rules
• Non-contracted reimbursement rates
• Health plan liability

But they may have lost the war.
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Consider This!
Shift cost to employees
Higher deductibles OOP limits
No reimbursement until a claim is processed
Removal of copayments from plans
Collections on an individual employee basis
Increased bad debt
No assignment of benefits for non-contracted
providers
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• The leading cause of personal bankruptcy is
  health care costs.

Source Prosperity Institute Report 2/2002
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The States as Laboratories!!
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Colorado Has Been a Laboratory

• 1992 RWJ Planning Grant
• 1994 Business Group of One
• 1994 Small Group Health Reform
• 1994 Modified Community Rating
• 1994 Small Employer Health Care Purchasing
  Cooperative
• 1996 Child Health Plan
• 1998 Child Health Plan Plus (SCHIP)

Andthere have been a few explosions!
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(No Transcript)
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Colorado HMO Enrollment
Source Interstudy Statistical Report 2000
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Colorado HMO Results
Source Colorado Division of Insurance, May 2001
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Insured StatusSmall Employer Market
Source Colorado Division of Insurance April
30, 2002
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Employers Reactions to Rising Health Care Costs
December 2000 26 74 38
December 2001 72 28 52
August 2002 88 12 52
Pass on Cost Increase Absorb Cost Change
Coverage
Source BMAD Employer Surveys
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Contrary Concepts
Public Policy
Insurance Principles

• Guarantee Issue all products (HIPAA)
• Open enrollment required (HIPAA)
• Limits on pre-ex (HIPAA)
• Maternity not pre-ex (HIPAA, Pregnancy
  Discrimination Act)
• Mandated coverage (e.g., Mental Health)

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Impacts of laws on Insurance
State Laws
Federal HIPAA Law

• Rate regulation
• Rating restrictions
• Market conduct rules

• Guaranteed availability
• Limiting restrictions by insurers
• Small employers only

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Challenges to Effective Competition

• The size of the pool is shrinking!
• Number of uninsured growing
• Number of small businesses not offering insurance
  is growing
• More employees not electing coverage when offered
  it

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Challenges to Effective Competition

• Different sets of rules!
• Self-funded small employers 8-10
• Individual insurance 3-7
• Employee leasing companies 2-5
• Others (METS, MEWAs, etc.) 3-5

Estimates
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Fact Based Assessment

• Example of individual insurance
• Age 25 125.89
• Age 35 150.13
• Example of small employer group insurance
• Age 25 193.25
• Age 35 206.41
• 500 deductible, 90/60 PPO, 5,000 Coinsurance,
  20 office copay,
• 10/30/50 Rx, 6/02 Denver rates

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Fact Based Assessment

• Individual Insurance is Cheaper
• New Pre-ex
• Subject to Medical Underwriting
• Policy limits, restrictions
• No state mandates

TINFL
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Current Status?

• Humanamajor off-anniversary rate change
• Sloans Lake HMO is sold
• Denver Health HMO withdraws from small group
• Aetna, Pacificare withdraw from Alliance
• Aetna withdrawal from HMO small group
• Alliance/CHIP fails

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Current Status?

• On-going challenges
• Rate increases (ALL groups)
• Stop-loss market has hardened
• Small employer pool decreases
• Rural access to insurance options
• Over age 65 access to physicians

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What are we to do?

• Re-entry penalty
• Gather data on insurance coverage
• Define insurance
• Provider cost data and quality

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Conclusion

• "Picking a healthcare financing system is kind of
  like picking someone to marry--you're picking a
  set of problems you are prepared to live with.
• Marc J. Roberts, Ph.D., Harvard School of Public
  Health

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Thank You