Ohio Health Policy Review

Individual insurance may be better for people who come into poor health than small group insurance

A new analysis by Mark Pauly and Robert Lieberthal examines the relationship between type of health insurance coverage and the risk of becoming uninsured (Source: How risky is individual insurance?" Health Affiars Web Exclusive, May 6, 2008 - available for free access to two weeks only).  The authors find that people with median health status have a higher risk of becoming uninsured if they are individually uninsured and the lowest risk if they are insured through large group insurance.

On the other hand, the authors report that individuals who start out healthy and then develop fair or poor heatlh do better in keeping their health insurance when covered through the individual market than people covered on the small group market.  The risk of being uninsured in the next renewal period was 44 percent for those on the small group market, a rate almost twice as high as for those covered through the individual market.

According to the authors, "high risks pay more if they seek individual coverage after they have
become high risks, but individual coverage provides better protection (compared to group insurance) against high premiums for already individually insured peoplewho become high risk."

The analysis cites two main reasons for this finding.  One reason is that the individual market is supposed to employ guaranteed renewability at class average rates.  This feature means that a downward change in health status is not to specially affect the premium rate at renewal.  The second reason is that a downward change in health status often leads to a loss of employment.  If the person's health insurance is tied to their employment, this loss of employment results in a loss of health insurance.

As the authors conclude, "group insurance has a tear in its net of protection; it leaves a person who becomes a high risk more vulnerable to dropping or losing any and all coverage than does individual insurance."

Age of firm affects likelihood of small firms offering coverage

A new Kaiser Family Foundation analysis examines the relationship between the age of a firm and its likelihood of offering health coverage for firms with less than 100 employees (Source: "Offer rates for smaller establishments by business age," Snapshots: Health Care Costs, Kaiser Family Foundation, May 2008).  The analysis divded these firms into three groups: less than 10 employees; 10 to 24 employees; and 25 to 99 employees.  It looked at data from the Insurance Component of the Medical Expenditure Panel Survey for the years 1997 to 2005.

According to the study, firms with less than 5 years of age had the lowest rate of offering health insurance coverage.  For firms with less than 10 employees 24 percent of firms with less than five years of age offered health benefits compared to 32 percent for firms between 5 and 9 years of age, 37 percent for firms 10 to 19 years of age, and 43 percent for firms with more than 20 years of age.  The report also found the greatest volatility in offer rates occurs across years among firms with less than 5 years of age. 

The report concludes that "These findings suggest that policymakers interested in policies to boost health benefit offer rates may want to give special focus to the issues faced by smaller businesses starting-up or in the early years of operation. Special subsidies or special insurance products for these businesses or their workers may be needed in order to encourage more offering."

New report assesses what Ohioans can afford to pay for health insurance coverage

Policy Matters Ohio released a new report assessing what Ohioans can afford to pay for health insurance coverage (Source: "Reasonable costs: what can Ohioans afford to pay for health care? ", Policy Matters Ohio, April 29, 2008).  According to this analysis, families with incomes below 200 percent of poverty cannot afford to pay any funds for health insurance premiums, while families with incomes between 300 and 500 percent of poverty should not be expected to pay more than 4 percent of total income for total health spending.

The authors recommend that any cost sharing be set on a progessive, sliding scale.  They write that "People with lower incomes can afford to spend not only less in absolute dollars, but also less as a percentage of their income — they have less disposable income, with more of their basic family budgets devoted to other core necessities such as housing, food, and transportation."

The report calculates the cost of a basic family budget before paying for services.  This budget includes costs for housing, food, child care, transportation, school supplies, and taxes.  IThe analysis then determines what percent of poverty a family's salary needs to be cover such a basic budget and what, if anything, they have left to pay for health care costs.

Rising bad debt and limited benefit plans causing more hospitals to require payments upfront before treatment

The Wall Street Journal focsued attention on an increasing trend by hospitals to require patients with inadequate health insurance to pay large sums of money before providing treatment (Source: ("Cash Before Chemo: Hospitals Get Tough," The Wall Street Journal, April 28, 2008).  The article primarily focused on the case of Lisa Kelly who was required to provide $105,000 in cash before M.D. Anderson would admit her for treatment for leukemia.  The hospital required this payment because it refused to accept her limited benefit plan insurance, a plan that would only pay a maximum of $37,000 per year.

M.D. Anderson stated that it went to its payment policy because of a large jump in its amount of unpaid bills, from $18 million in 2004 to $52 million in 2005.  This policy is not unique to M.D. Anderson.  Fourteen percent of non-profits hospitals reported in a 2006 voluntary IRS survey that they require patients to make payment arrangements before being admitted.

According to the article, the increasing amount of bad debt across hospitals which is fueling this prepayment requirement, "is driven by a larger number of Americans who are uninsured or who don't have enough insurance to cover medical costs if catastrophe strikes. Even among those with adequate insurance, deductibles and co-payments are growing so big that insured patients also have trouble paying hospitals."

Ohio health insurance costs rise, while median income drops

Between 2001 and 2005 health insurnace premiums rose 34 percent in Ohio (Source: "Rise in health coverage charted," Health policies harder to afford," The Enquirer, April 29, 2008).  By 2005, the average Ohio family health insurance premium was $10,662 up from $7,944.

This report, by the Robert Wood Johnson Foundation and the State Health Access Data Center at the University of Minnesota, also found that Ohio's premium growth exceeded the national average of 29.6 percent during this time period. 

As insurance premium costs rose, median income fell by 5 percent in Ohio, dropping from $41,596 to $39,380.  This drop in income made it even harder for families to afford the increase in health insurance costs in Ohio.  Nationally, family income rose by 3.06 percent from $40,818 to $42,068.

In addition, the report concluded that more than 8,000 Ohio companies stopped providing health coverage between 2001 and 2005.  This stopping of offering health insurance coverage affected more than 515,000 workers.

According to  Risa Lavizzo-Mourey, M.D., M.B.A., president and CEO of the Robert Wood Johnson Foundation, “This study makes plain what every working parent knows—that providing insurance coverage takes a bigger bite from the family budget every year,” said Risa Lavizzo-Mourey, M.D., M.B.A., president and CEO of the Robert Wood Johnson Foundation. “There is a clear connection between the rising cost of health care and the increasing number of uninsured Americans. As costs continue to go up, fewer people can pay their portion of the premium, and fewer employers are able to offer insurance benefits. This research shows that an ever-increasing number of people will join America’s uninsured unless our nation’s leaders act to reform our health care system” (Source: "Cost of insurance far outpaces income," The Robert Wood Johnson Foundation press release, April 29, 2008).

New analysis suggests many uninsured lack assets to handle cost sharing demands of high deductible plans

Researchers at the Kaiser Family Foundation released a new analysis examining the amount of assets that uninsured families have available to pay for cost sharing requirements of consumer-directed health plans (Source: "Modest Number Of Uninsured Families Have Sufficient Assets To Cover Cost Sharing In HSA-Qualified Plans," Press Release, Kaiser Family Foundation, April 15, 2008).  Their research, which is currently available through free online access at the Health Affairs website, found that only 33 percent of families with at least two uninsured members had gross financial assets of $2,000, the minimum deductible for an HSA-qualified family health plan.  In addition, only 9 percent had assets greater than the $10,000 out-of-pocket maximum for such plans.

The study also found a significant gap in assets between uninsured and insured individuals, even for people with low incomes (less than 300 percent of poverty).  Uninsured low-income families had assets of $300, on average, compared with $900 for insured low income families.

According to the authors, "Although lower premiums may increase the ability of the uninsured to buy some coverage, high out-of-pocket liability may leave families exposed to costs that they cannot meet. Paying premiums for a policy that exposes the uninsured to unaffordable medical bills may be viewed as an uneconomical use of their limited assets."

Senator Voinovich becomes cosponsor of the Universal Health Care Choice and Access Act

Senator George Voinovich has agreed to be a co-sponsor of Senator Coburn's Universal Health Care Choice and Access Act (Source: "Senator Voinovich Co-Sponsors Universal Health Care Choice and Access Act," Press Release, April 16, 2008.  This legislation aims to make private health coverage for affordable and accessible, including providing for MediChoice tax rebates ($2,000 for individuals and $5,000 for families) for people who buy their own insurance.

The legislation also seeks to bring greater focus on prevention, on transparency, on creating more competition among health plans serving older adults; and enhanced flexibility for designing Medicaid programs tailored to the particular needs of different people and different states.

According to Senator Voinovich's letter to Senator Coburn, "It is clear that you have seriously explored the issues surrounding the increasing cost of health care and the growing number of uninsured Americans. I agree with you that we must make it a priority to provide access to quality, affordable health care for every individual, and I believe your legislation is a step in that direction."    

Milliman study finds consumer-driven health plans produce slightly better savings of 1.5%

The actuarial firm, Milliman, released its new study on consumer driven health plans (CDHPs) on April 1st.  The report, "Consumer-driven impact study" seeks to provide an independent analysis on the value of CDHPS.  The study examines the results from over 30,000 employees in six firms who have used some form of CDHP.

The study concludes that CDHPs produce a net savings on average across the six plans of 1.5% beyond non-CDHPs.  According to the study, its findings on savings contrast with the more dramatic savings reported by previous studies.  The suggested reason for this difference is that this study makes adjustment to account for the expected effects that come from higher levels of cost sharing and a healthier population using the plans.  The study states, "After all of these adjustments, CDHP-allowed claims are only slightly better than would be predicted by typical risk and benefit-design factors."

The study did find differences in effects between the six plans.  The savings beyond a high deductible health plan ranged from -5.3% to 12.1%.

Smallest firms experienced the highest rate of growth in health insurance costs between 2000 and 2005

A new Rand Corporation study, "The Economic Burden of Providing Health Insurance: How Much Worse Off Are Small Firms," found that the percent of payroll dedicated to health insurance increased by nearly 30 percent for firms with fewer than 25 employees between 2000 and 2005.  This rate of increase was greater than what firms between 25 and 49 employees (16%) and firms between 50 and 99 employees (25%) experienced (Source: Economic Burden of Health Insurance Increasing for Small Employers Providing Health Insurance, Rand Corporation, April 4, 2008).   

By 2005, firms with less than 25 employees were spending 10.8% of payroll for health benefits, up from 8.4% in 2000.  Even with this increase in costs, the study found that these firms showed no greater likelihood of stopping providing coverage to their workers than firms with more employees.

The study did find that these small firms offered plans of slightly lower quality.  They were less likely to offer drug and dental coverage and more likely to have higher deductibles and coninsurance rates.  According to the report, the average worker at firms with less than 25 employees spent 1.9% of their income on medical expenses compared to 1.3% for workers in firms with more than 100 employees.

Ohio expands coverage for children and workers with disabilities

On April 1st Ohio launched two new health care coverage expansions: the Children's Buy-In Program and a Medicaid buy-in program for workers with disabilities (Source: "More kids can get coverage" Columbus Dispatch, April 2, 2008). 

The Children's Buy-in Program is for children who live in families with incomes above 300 percent of poverty and meet one of the following conditions: unable to obtain health insurance due to a prexisting condition; private insurance would cost more than twice the cost of the buy-in program; or they have exceeded their lifetime benefit limit. The expectation is that this program will help around 5,000 uninsured children. 

The Medicaid buy-in program for workers with disabilities is available to individuals with incomes up to 250 percent of poverty for a family of two.  Its purpose is to allow workers with disabilities to accept higher paying jobs without fear of losing their Medicaid benefits, benefits many of them need to be able to be successfully employed.  The expectation is that around 7,000 workers with disabilities will take advantage of this program.