The Massachusetts Health Reform

1
The Massachusetts Health Reform

• IAHU Presentation
• April 12, 2007
• Adam Brackemyre
• Director of State Affairs
• National Association of Health Underwriters

2
The Massachusetts Reform

• Background
• The reform (its complicated)
• How would this reform work in Idaho?

3
MA Insurance Pre-Reform

• The MA nongroup market was guaranteed issue and
  community rated, and suffered from adverse
  selection
• High health care costs
• Generous MassHealth (Medicaid) program
• 1 billion uncompensated care fund
• Partially funded by a Medicaid waiver
• The waiver drove this reform- you will understand
  this statement in a moment

4
Massachusetts

• In April 2006, Gov. Romney signed major health
  insurance reform
• The motivation behind the reform was to preserve
  385 million in annual federal funding (via a
  Medicaid waiver)
• MA had to craft a plan that would reduce the
  number of uninsured to renew the funding
• No reform, no money

5
Politics

• Former Gov. Romney is a Republican
• The Legislature is overwhelmingly Democrat
• Time was an issue
• CMS had a waiver application deadline
• The Governor, Senate President and Speaker were
  able to agree on some compromises, but they left
  many important details to the regulatory process
• Regulators continue to fill in the details

6
Insurance Coverage Expansion

• Insurance coverage was expanded in three ways
• Private insurance sold through the Connector
  (over 300 FPL)
• Subsidized Commonwealth Care insurance (100 to
  300 FPL)
• MassHealth (Medicaid) expansion

7
The Connector

• The Connector is a purchasing pool that will
  offer nongroup insurance to groups of 1-50
• Small groups can purchase from the Connector or
  the traditional small group market
• The nongroup market is the Connector
• Policyholders pay for the Connectors operations
  through a policy surcharge
• All MA employers must establish a Section 125
  plan so employees have the option to buy from the
  Connector
• Enrollment begins in May 2007

8
Connector Plans

• The plans were recently named the Gold, Silver
  and Bronze plans
• The Bronze plan has the highest cost-sharing and
  lowest premiums. It is also the most basic plan
  that will qualify as minimal creditable coverage.
• The Gold plan is Cadillac coverage
• The next slide shows individual premiums

9
Bronze Plan Premiums- Boston
Includes prescription drug coverage
10
Gold Plan Premiums- Boston
11
Commonwealth Care

• Once fully operational, cost 20 million/yr
• Utilize current Medicaid HMOs
• Sliding-scale subsidies provided for those
  earning less than 300 federal poverty level
• No Commonwealth Care product has a deductible.
  Co-pays vary by income.
• Monthly Sample Premiums (annual salary)
• Single adult (14,000) 18/mo
• Two adults, two children (47,000) 180/mo

12
Commonwealth Care Monthly Premiums
13
MassHealth (Medicaid)

• Children whose guardians earn up to 300 FPL are
  now eligible for MassHealth
• The reform restores adult dental, vision and
  chiropractic, prosthetic benefits cut in 2002
• Medicaid payments to doctors and hospitals
  increase by
• 90 million in FY 07
• 180 million in FY 08
• 270 million in FY 09

14
Connector Commissions

• If an agent brings group risk to the Connector,
  he or she shall be compensated 10 PSPM
• Mass AHU worked very hard to get agent
  compensation put into the legislation
• Previous legislation eliminated commissions from
  nongroup products
• The Connector board had the opportunity to set a
  commission on nongroup products, but chose not to
  do so
• Individuals can buy directly from the Connector

15
Individual and Business Mandates

• All individuals will be required to have
  insurance by July 1, 2007
• First-year penalty Loss of personal tax
  exemption
• Penalty thereafter A fine equal to half the cost
  of the lowest-priced product
• Businesses (11 employees) must offer a health
  insurance contribution
• Businesses must offer to pay 33 of premiums or
  have 25 of the group accept coverage
• Penalty for noncompliance 295/yr per employee

16
Insurance Regulation Changes

• HSA-compatible plans available for HMOs
• Mandate-lite plans for those ages 19-26 (young
  adult plans, or YAPs)
• Dependent age increased to age 27
• Two-year moratorium on new mandated benefits

17
What We Dont Know

• How many people choose to remain uninsured and
  pay the penalty?
• How well will the reform contain health care cost
  increases?
• Health insurance premium increases will mirror
  health care cost increases
• The reform established a Cost-Quality Council,
  statewide infection control program, pay for
  performance
• Expands preventive programs
• How effectively will MA track the health
  insurance status of its 6,500,000 residents?
• Most states mandate auto insurance, but coverage
  is not universal
• Health and auto uninsurance rates are similar

18
Final Questions

• How much will this reduce bad debt and charity
  care?
• If uncompensated care decreases, more dollars
  will be available for subsidies
• About 100,000 more MA residents are covered,
  mostly through Medicaid and the Commonwealth Care
  Plan 1.
• Plan 1 is designed for the low income. No
  premiums. Minimal cost-sharing.
• Can universal coverage be achieved with the
  established budget?

19
Idaho Implications

• Will CMS approve a Massachusetts-like Medicaid
  waiver?
• Federal money is necessary
• How many state dollars would be needed?
• Will policymakers want to duplicate the MA
  results?

20
Massachusetts vs Idaho

• Idaho
• 215,000 uninsured
• Moderate health care costs
• Median household income 45,000
• Affordable nongroup market
• No uncompensated care pool

• Massachusetts
• 550,000 uninsured
• Very high health care costs
• Median household income 54,500
• Expensive nongroup market
• 1 billion uncompensated care pool

21
MA and ID Comparison

• ID median household income is about 17.5 lower
  than MA
• ID has over twice as many uninsured per capita
• MA health care and insurance costs are much
  higher
• ID much more rural
• ID has a vibrant individual insurance market

22
Will It Work Here?

• The MA reform is not one-size-fits-all
• MA individual and small group products were
  guaranteed issue and community rated (rare)
• ID uses rate bands
• ID and MA seem to have some major differences
  (income and percentage of uninsured)
• Will the numbers work?
• ID needs to find subsidies for much larger
  portion of the population than MA and create a
  subsidization pool (MA had the uncompensated care
  pool)

23
Some States May Look to Add MA Reform Components

• Implement an individual mandate
• Must define what people must buy to meet the
  mandate
• This can affect both fully and self-funded plans
• Must have subsidies to help the lower income meet
  the mandate
• Must define penalties for noncompliance
• Must create some way to monitor health insurance
  status

24
Massachusetts Components

• Implementing a stand-alone Connector
• Merge the small group and individual markets?
• Allow a small group market outside of the
  Connector?
• How will the products be rated?
• Include health status?
• If the individual market is included, will this
  affect the high risk pool?
• Who determines agent commissions?

25
Final Observations

• People are uninsured for different reasons
• Dont see the value in the product
• Cannot afford it
• Nationally, about 20 percent of the uninsured
  could afford insurance, but do not buy it
• There is pressure to expand public program
  eligibility, but many could be covered now
• Between 25 to 33 percent of the uninsured are
  eligible for public programs (CHIP and Medicaid),
  but not enrolled

26
NAHU Supports

• There is no silver-bullet solution
• Medical underwriting rate bands
• High-risk pools
• Flexible benefit designs to meet consumer choice
• Price transparency and wellness
• Targeted tax incentives and subsidies
• We have created a Real Choice Working Group to
  update NAHUs solutions for the uninsured.

27
Contact information

• If you would like to reach me
• Phone [phone]
• Email abrackemyre_at_nahu.org