Private Health Insurance Slides

					                     Slide 1




 Private Health
 Insurance 101


    Karen Pollitz
Georgetown University
Health Policy Institute
    August 2006

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                                               Slide 2


              Why Health Insurance Matters
                Percent Reporting Barriers to Health Care, 2003

              Postponed seeking care                                             47%
                  because of cost                             15%

              Needed care but did not                                      35%
                      get it                             9%
                                                                                     Uninsured
             Did not fill a prescription                                   37%
                 because of cost                            13%                      Insured

                 Had problems paying                                       36%
                     medical bills                            16%

           Contacted by collection                                   23%
          agency about medical bills                   8%

Notes: *Experienced by the respondent or a member of their family.
Insured includes those covered by public or private health
insurance. SOURCE: Kaiser 2003 Health Insurance Survey.                          Return to tutorials
                                                        Slide 3

                  Diagnosis of Late-Stage Cancer,
                  Uninsured vs. Privately Insured
            Ratio of the Probability of Diagnosis of
                 Late vs. Early stage Cancer.                                   Ratio of the Risk of Death, *
                 Uninsured/Privately Insured                                    Uninsured/Privately Insured
   3
                                        Equally likely to
                                        have late-stage             2                                    Equal chance
   2                                                                                                       of death
                                            cancer

   1                                                                1




   0
                                                                    0
        Colorectal    Melanoma        Breast        Prostate
                                                                                     Colorectal Cancer
         Cancer                       Cancer        Cancer
                                             Uninsured people are almost 3 times as
                                             likely to have late stage melanoma than
                                                   people with private insurance.

*Among cancer cases identified in 1994, mortality follow-up through 1997
SOURCE: Roetzhelm RG, et. Al., 1999, 2000 from Headley, J., Sicker and Poorer: The
Consequences of Being Uninsured, 2003, prepared for KCMU.                                          Return to tutorials
                                                Slide 4

     Where do people under age 65 in the
         U.S. get health insurance?
                          Employer,                    • Two-thirds of nonelderly
                          Dependent
                             30%
                                                         population has private
          Uninsured/
                                                         coverage
             IHS                                            – 62% have employer-
             18%                                              sponsored covered
                                   Employer,
                                     Own                    – 5% purchase individual
            Medicaid/
           Other public
                                     32%                      policies
              15%                                      • 15% have Medicaid or
                                                         other public coverage
                          Individual Policies
                                                       • 18% are uninsured
                                  5%
        Total = 255 million people under 65
Source: KFF analysis of Urban Institute estimates of March 2005 Current
Population Survey, U.S. Census Bureau.                                     Return to tutorials
                  Slide 5


              Key Players
• Consumers/Patients

• Providers

• Insurance companies

• Employers

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                     Slide 6


         Some Basic Concepts

• Risk spreading/Risk selection

• Pluralism in private health insurance

• Dynamics of insurance coverage




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                                                Slide 7

                                Risk Spreading
         Concentration of Health Spending in the U.S. Population, 2003:

    100%                                                                       97%
                                                                  80%
     80%                                              73%
                                         64%
     60%                     49%

     40%
                24%
     20%
                                                                                             3%
       0%
              Top 1% Top 5% Top 10% Top 15% Top 20% Top 50% Bottom
                                                                    50%
                 Population Percentile Ranked by Health Care Spending
Note: Population includes those without any health care spending. Health
spending defined as total payments, or the sum of spending by all payer sources.
Source: KFF calculations using data from Agency for Healthcare Research and
Quality, Medical Expenditure Panel Survey, 2003.                                   Return to tutorials
                      Slide 8


    Challenges to Risk Spreading

• Adverse selection
  – Medical underwriting
  – Pre-existing exclusions
  – Risk-based rating
  – Benefit design
• Risk selection
• Trade off of availability and adequacy vs.
  affordability

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                            Slide 9

 Pluralism in Private Health Insurance…
Not all health insurance is created equal.

• Employer-sponsored coverage:
  – Often comprehensive, but not always
  – Variation in benefits covered as well as premium and
    deductible costs
• Individually-purchased policies:
  – Typically less comprehensive
     • Less coverage of maternity, mental health and prescription
       drugs
     • Can have high deductibles as well



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                    Slide 10


     Models of Private Insurance

• Indemnity

• “Managed Care”
  – Preferred Provider Organization (PPO)
  – Health Maintenance Organization (HMO)
  – Point of Service (POS)

• “Consumer-Directed” Health
  Arrangements

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                                Slide 11


       Dynamics of Health Coverage
• Health insurance coverage is not static

• 45 million uninsured in 2004, vs. 80 million uninsured
  over two-year period

• Approximately 2 million Americans lose health
  insurance every month – often for a short period

• Coverage options can change with…
   –   Loss or change of job
   –   Change in family status (e.g. divorce, death of spouse)
   –   Birthday (e.g. 19th)
   –   Move
   –   Change in health status

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                             Slide 12

    Who is eligible for private health
               insurance?
• Employer-Sponsored Insurance (ESI)
   – Up to employers
   – Less likely to be offered to
      • Employees of small (vs. large) firms
      • Part time/seasonal workers (vs. full time)
      • Low wage workers
      • Newly hired workers (waiting periods)
      • Dependents (vs. employees)
      • Retirees
   – Eligibility cannot be based on health status
• Individual insurance
   – Purchased by individuals
   – Age and health status are a determining factor, called
     Medical Underwriting
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                     Slide 13

    Health Conditions Denied by
     Individual Market Insurers
• Always denied
  o Cancer           o Multiple Sclerosis
  o HIV/AIDS         o Pregnancy
  o Diabetes         o Stroke
• Often denied
  o Overweight       o High blood pressure
  o Cancer history   o Asthma
• Sometimes denied
  o Acne             o Hay fever
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                                        Slide 14

             What does private health
           insurance cover? It depends.
•   Covered benefits
        • Standard policy: rarely defined in law
        • Mandated benefits
        • Benefit limits (annual, lifetime, service and cost limits)
•   Cost-sharing
         • Deductibles, co-pays, co-insurance
         • Out of pocket cost sharing maximums, balance billing
•   Terms of coverage
        • Provider networks
        • Care authorization/utilization review
•   Condition exclusions
        • Pre-existing
        • Other conditions
•   ESI typically (not always) more comprehensive
•   Individual insurance typically (not always) less so
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                            Slide 15

    What does health insurance cost?
              It depends.
• Cost (premium) of health insurance depends on:

  – Who’s covered (age, gender, health)

  – What’s covered (benefits, cost sharing/deductible, terms,
    pre-existing conditions)

  – Insurer profits, administration

  – Subsidies (premium, reinsurance)

  – Underlying health care costs, inflation

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                                         Slide 16
        Variation in Individual Market Policies
                   “HI PREME”                “HEALTHY STATE”        “HEY DUDE”
                      Policy                      Policy               Policy
Policy type       Guaranteed issue,           Guaranteed issue,     Underwritten,
                  community rated,            community rated,      risk/age based
                  comprehensive               limited               rating, limited
Premium           $449/ any age,              $139/ any age,        $64/ up to age 29 in
cost/month        health status               health status         perfect health
Doctor Visits     Unlimited, $15 copay        Unlimted, $20 copay   4/ year @ $20 copay
                  Unlimited, $100 ded. $5-
Rx Drugs          $10 copay                   Not covered           Generic Only
Maternity         Covered                     Covered               Not Covered
Mental
health/Rehab      Covered                     Not covered           Not Covered
Deductible/year   None                        None                  $5,000
Pre-ex            Covered, up to 12 month     Covered up to 12      Likely permanent
condition         exclusion                   month exclusion       exclusion or denied


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                         Slide 17


   Regulation of Health Insurance
• Purpose
  – Insure solvency
  – Oversee risk spreading/risk selection
    • Guaranteed issue
    • Community rating
• Government Role
  – State primary regulator
  – Rules vary by state/insurance market
  – Federal government sets national rules


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                               Slide 18


                             ERISA
• Initially a pension law
• Federal law, national reach
• Preempts state regulation of employee health benefits;
  “saves” state regulation of insurance that employers buy
   – Fully-insured plans
   – Self-insured plans
• Few health benefit standards at outset
   – Disclosure: summary plan document
   – Fiduciary standards: plan operated in interest of beneficiaries
   – Claims standards
• Health benefit standards augmented by COBRA, HIPAA



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                        Slide 19


                     COBRA

• Applies to job-based plans sponsored by
  employers with > 20 employees
• Temporary continuation of coverage after
  qualifying event
  – Loss of employment: 18 months
  – Change in family/dependent status: 36 months
  – Disability: 29 months
• Employer premium contribution not required
• Can be very costly for individuals to afford

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                      Slide 20


                    HIPAA
• Protections for all group plan participants
  – Nondiscrimination
  – Limits on pre-existing conditions
  – Special enrollment periods
  – Credit for prior coverage
• Standards for individual policies
  – Guaranteed issue, no pre-ex for HIPAA-
    eligible individuals
  – Silent on what can be charged – often costly

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                               Slide 21


                     Case Example
Ryan (47) lives in Tennessee and has diabetes. He worked for years
in a job with health benefits. His employer paid most of the premium,
which was about $350/month.

Four months ago, Ryan was laid off. His unemployment benefits pay
$210/week. Most of that goes for rent ( $630/month.) Staying insured
is important because care for Ryan’s diabetes is expensive. Insulin,
test strips, other meds, and doctor visits cost $400 in an average
month. But Ryan couldn’t afford either insurance or the cost of care to
manage his diabetes, so he tried to do without both.

Ryan developed liver problems and neuropathy in his feet and was
hospitalized for a week. He asked the hospital to forgive at least some
of this bill (over $10,000), but a collections agent recently called.




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                               Slide 22


 Health Insurance Options for Ryan
• COBRA?
   – No, monthly premium of $350 was too high.
• Individual health insurance?
   – No, he has diabetes and would be turned down
• HIPAA?
   – No, Ryan didn’t elect COBRA. If he had, HIPAA policies in
     Tennessee can cost over $800/month.
• Other ESI?
   – No, Ryan’s unemployed
• Medicaid?
   – No, Ryan is not disabled or a parent of dependent child.




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                               Slide 23

                      Conclusions
• Private insurance is mainstay of health coverage for
  most Americans, but…
   – Access, affordability, adequacy of coverage not guaranteed


• Difficulty of getting/keeping private coverage
  increases with health problems, especially during
  coverage transitions

• Regulation to limit risk selection involves tradeoffs:
  access vs. adequacy vs. affordability

• Additional public policy responses needed to
  subsidize and expand coverage


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       Slide 24




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