Marketwatch - Trends in the golden state: Small-group premiums rise sharply while actuarial values for individual coverage plummet

Health Affairs

Volumn 26, Issue 4, 2007, Pages

  Gabel, Jon ^a   Pickreign, Jeremy ^b   McDevitt, Roland ^c   Whitmore, Heidi ^d   Gandolfo, Laura ^e   Lore, Ryan ^e   Wilson, Katy ^f  

^a NORC   (United States)

^b NORC   (United States)

^c Research   (United States)

^d NORC   (United States)

^e Watson Wyatt Worldwide   (United States)

^f NONE

Author keywords

[No Author keywords available]

Indexed keywords

ADULT; ARTICLE; ECONOMICS; FEE; FINANCIAL MANAGEMENT; HEALTH CARE COST; HEALTH INSURANCE; HEALTH MAINTENANCE ORGANIZATION; HUMAN; MIDDLE AGED; PATIENT; STATISTICAL ANALYSIS; STATISTICAL MODEL; STATISTICS; UNITED STATES;

ACTUARIAL ANALYSIS; ADULT; CALIFORNIA; FEES AND CHARGES; FINANCING, PERSONAL; HEALTH BENEFIT PLANS, EMPLOYEE; HEALTH EXPENDITURES; HEALTH MAINTENANCE ORGANIZATIONS; HUMANS; INSURANCE, HEALTH; MEDICALLY UNINSURED; MIDDLE AGED; MODELS, ECONOMETRIC; PREFERRED PROVIDER ORGANIZATIONS; UNITED STATES;

EID: 34548306603     PISSN: 02782715     EISSN: 02782715     Source Type: Journal    
DOI: 10.1377/hlthaff.26.4.w488     Document Type: Article

References (31)

1. M.V. Pauly and L.M. Nichols, "The Nongroup Health Insurance Market: Short on Facts, Long on Opinions and Policy Disputes," Health Affairs (2002): w325-w334 (published online 23 October 2002; 10.1377/hlthaff.w2.325);
2. and M.S. Marquis and S.H. Long, "Effects of 'Second Generation' Small Group Health Insurance Market Reforms, 1993 to 1997," Inquiry 38, no. 4 (2001/02): 365-380.
3. J. Gabel et al., "Generosity and Adjusted Premiums in Job-Based Insurance: Hawaii Is Up, Wyoming Is Down," Health Affairs 25, no. 3 (2006): 832-843.
4. P. Fronstin, "Sources of Health Insurance: Analysis of the March 2003 Current Population Survey," Issue Brief no. 264 (Washington: Employee Benefit Research Institute, 2003), 12.
5. M.B. Buntin, M.S. Marquis, and J.M. Yegian, "The Role of the Individual Health Insurance Market and Prospects for Change," Health Affairs 23, no. 6 (2004): 79-90.
6. As discussed in the next section, we surveyed firms with three or more workers. The reason that we did not interview firms with two workers is that our experience has been that firms this small are too unstable and often are little more than a household.
7. California HealthCare Foundation, "California Health Benefits Survey 2006," November 2006, http://www.chcf.org/topics/healthinsurance/index. cfm?itemID=127480 (accessed 17 May 2007).
8. P. Fronstin, "Snapshot: California's Uninsured," October 2006, http://www.chcf.org/topics/healthinsurance/index.cfm?itemID=126257 (accessed 7 March 2007).
9. M.B. Buntin et al., "Trends and Variability in Individual Insurance Products in California," Health Affairs 22 (2003): w449-w459 (published online 24 September 2003; 10.1377/hlthaff.w3.449).
10. Gabel et al., "Generosity and Adjusted Premiums."
11. Unpublished data based on Medical Expenditure Panel Survey Household and Insurance Components.
12. The technical appendix displays key assumptions underlying the simulated bill paying. It is available online at http://content.healthaffairs.org/cgi/ content/full/26/4/w488/DC2.
13. Table 1 in the technical appendix displays the seven major databases used in the study and the key data elements derived from each database. Ibid.
14. The California HealthCare Foundation selected these counties to capture California's major population centers as well as the diversity of its health insurance markets.
15. In a forerunner of this study, the actuarial firm Milliman and Robertson collected individual insurance plan summaries in 2003 from the six markets mentioned previously that were made available to us. However, we did not possess information on the distribution of purchases by plan type and deductible in 2003. Moreover, the earlier study had limited information from the second-largest carrier in the state, Kaiser Permanente, which precluded us from constructing figures for 2003 in the individual insurance market.
16. If both the reference group plan and Plan N have an actuarial value of 0.80 and an unadjusted annual premium of $300, then the adjusted premium = ($300)/(0.80/0.80) = $300. If Plan N has an unadjusted premium of $300 and an actuarial value of 0.40, then the adjusted premium of the premium of the second plan = ($300)/(0.40/0.80) = $600.
17. Because individual insurance ismedically underwritten, we did not present adjusted premium figures in our analysis for people in different states of health and having different chronic conditions. Insurers adjust premiums upward for people in poorer health to cover the higher expected claims expenses. The study did not solicit premium quotes for people in various states of health.
18. The experience of Watson Wyatt Worldwide indicates that average out-of-pocket expenses are approximately three times greater for a family with two adults and two children than for a single adult.
19. When patients use providers who have not signed participating agreements with the insurer, we assumed that the patient is liable for the physician's charge, so that his or her liability includes "balance billing" as well as deductible, copayment, and coinsurance requirements.
20. L. Dubay, J. Holahan, and A. Cook, "The Uninsured and the Affordability of Health Insurance Coverage," Health Affairs 26, no. 1 (2007): w22-w30 (published online 30 November 2006; 10.1377/hlthaff.26.1.w22).
21. This figure includes POS and HMO plan enrollment because many carriers could not estimate POS plan market share and distinguish it from HMO enrollment.
22. Buntin et al., "Trends and Variability."
23. Ibid.
24. Differences in actuarial values between smallg-roup and individual plans are smaller for people in poorer health (as opposed to excellent health) because for high users of health care, the majority of expenses are incurred by people who have exceeded the out-of-pocket maximum. For lower users of health care (who are more likely to be in "excellent" or "very good" self-designated health status), the size of the deductible largely determines the share of expenses that the health plan pays. Deductibles for small-group plans are considerably lower than those for plans sold in the individual market.
25. Not all out-of-pocket expenses apply to the out-of-pocket limit set by the health plan. For example, balance-billing liabilities of patients often do not apply, nor do deductibles and copayments in some cases.
26. Premiums in the individual market are for healthy people. Without medical underwriting, claims expenses, and consequently premiums, would be higher also.
27. Most economists view the cost of health coverage to be ultimately borne by the worker in the formof lower wages. Most employers, judging by their statements through their associations, do not accept this viewpoint. An alternative view would posit that wages do not instantaneously adjust to higher health care costs, so that in the short run, some costs are borne by employers.
28. P.B. Ginsburg et al., "Tracking Health Care Costs: Continued Stability but at High Rates in 2005," Health Affairs 25, no. 6 (2006): w486-w495 (published online 3 October 2006; 10.1377/hlthaff.25.6.w486).
29. CHCF, "California Health Benefits Survey 2006."
30. Calculations from California Health Interview Survey, 2005.
31. We note that out-of-pocket medical expenses used in this estimate are for a standardized population not subject to medical underwriting.