1 February 2, 2009 SB 08-217 Report 1. Executive Summary Colorado faces an enormous challenge in assuring access to health care for all of its citizens. There are well documented problems of cost, quality, and access. Of particular concern are the 700,000 Coloradoans without health insurance. It is well documented that people without insurance do not receive appropriate health care. Last year, the 208 Commission reported on the results of their yearlong process trying to understand and address these issues. Senate Bill 08-217 built on those recommendations by studying practical steps to provide coverage to some of Colorado’s uninsured residents through low cost, state subsidized value benefit plans called “Centennial Care Choices.” The Centennial Care Choices Panel has worked for six months to evaluate the impact of this solution. It is not the Panel’s responsibility to weigh in on whether value benefit plans themselves are good public policy. The Colorado Legislature determined that these plans represent a strategy worth exploring when it passed Senate Bill 08-217. Instead, the Panel has endeavored to provide expert opinion on what policy changes would be needed to make value benefit plans reduce the number of uninsured Coloradoans, and comment on additional strategies that may provide partial solutions to providing access to coverage and access to care in our state. 2. Introduction This report is respectfully submitted to the House and Senate Health and Human Services committees of the Colorado General Assembly by the Department of Health Care Policy and Financing (HCPF) and the Department of Regulatory Agencies, Division of Insurance (DOI), as required by SB 08-217. Senate Bill 08-217 created a framework for developing the Centennial Care Choices Program, requiring the Department of Health Care Policy and Financing, in coordination with the Division of Insurance and a panel of experts, to acquire actuarial projections, research potential cost savings, and develop a request for information from health insurance companies for a new health insurance product known as a value benefit plan (VBP). The purpose of this report is to detail the results of the Request for Information (RFI) process and the actuarial and cost savings research, including a detailed summary of the information submitted by health insurance carriers and other interested parties, along with the Department’s and Division’s evaluation and analysis. The report also includes information regarding policy decisions required should the General Assembly proceed to implement the Centennial Care Choices Program, VBPs, and a premium subsidy program. DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 2 3. Background As described in an Interim Report dated December 15, 2008 (included as Appendix 1), on June 24, 2008, Governor Ritter appointed 19 members to an expert panel to assist the Department of Health Care Policy and Financing (HCPF) and the Colorado Department of Regulatory Agencies – Division of Insurance (DOI) in seeking information from the health insurance industry about the development of value benefit plans. From July through December, the panel has met and provided input on a Request for Information (RFI) and proposal review process. The RFI was released on October 7, 2008, and eight responses were received by HCPF on December 2. Seven of these responses were evaluated by the Panel, the Department, the Division and their consultants. 4. Change in Colorado’s environment since SB 217 was passed When Senate Bill 08-217 was proposed in March, and even signed in June, Colorado was not yet feeling the severe negative effects of the current economic environment. While Colorado did not experience job losses until September (Channel 9 News 1/27/09), according to the National Bureau of Economic Research, the U.S. economy has been in recession since December 2007. Now Colorado’s unemployment rate is at its highest level in nearly five years. When people lose their jobs, they also lose their health insurance. Colorado’s unemployment rate grew by another half point to 5.7 percent in October, the highest in nearly five years. With every 1 percentage point increase in Colorado’s unemployment rate, 19,000 adults and more than 800 children enter the ranks of the uninsured. (Unpublished data from the Urban Institute provided to The Colorado Health Foundation earlier this year). Some newly unemployed people will become eligible for public health insurance programs like Medicaid and the State Children’s Health Insurance Program, while others will rely on safety net clinics that serve the uninsured, or go without needed health care. Colorado experienced a 12% Medicaid caseload increase in 2008, driven by enrollment of non-disabled, non-elderly clients who would typically be able to afford and access a private insurance product. At the same time, the State is seeing significant revenue shortfalls that are forcing lawmakers to make tough choices. Gov. Ritter presented the legislature’s Joint Budget Committee with recommended budget cuts on January 15, after directing his department heads and Budget Director Todd Saliman to prepare plans for a 10 percent, or nearly $800 million, reduction through a combination of programmatic cuts, cash-fund transfers and utilizing the state's emergency reserve. State leaders are striving to protect programs we have today, but everything is on the table. This is a difficult environment to advocate for new programs, particularly something as significant and costly as a massive subsidy program. DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 3 There is already talk at the federal level of helping states meet the increased demand for public programs by including some health care spending in the next stimulus package. An increase to the federal matching rate for Medicaid would help shore up this program during the times it is needed most. As Anne Warhover, Executive Director of the Colorado Health Foundation wrote in a recent Denver Business Journal editorial: Though it’s counterintuitive, the economic meltdown may be the catalyst for meaningful health care reform. It’s time to change the way health care is delivered in this country to make it more efficient. Health information technology and care coordination hold potential to both increase quality and drive down costs. Changing the way we pay for health care is also an important component of reforming the system. And finally, we must tackle the problem of the growing number of people without health insurance. There are powerful ethical and moral arguments for a health care system in which everyone has access to health care. But there is a strong economic case as well. The cost to reform our health care system will be significant. But the cost of doing nothing could be even greater, in both financial and human terms. We simply can’t afford to do nothing. Friday, January 16, 2009 | Modified: Tuesday, January 20, 2009, 6:09pm VIEWPOINT: The time is right to fix our health care systemDenver Business Journal - by Anne Warhover http://denver.bizjournals.com/denver/stories/2009/01/19/editorial2.html Ms. Warhover’s thoughts are consistent with the view of the Centennial Care Choices Panel. The money to fund state subsidized, mandated, value benefit plans under the framework of Centennial Care Choices may be even harder to find in the current environment, but the demand for these low cost plan is likely even higher. The rising number of uninsured Coloradoans emphasizes the need for meaningful healthcare reform, of which the Centennial Care Choices program may be a part. DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 4 5. Key Findings While none of the experts on the Panel believe that Centennial Care Choices is “the” solution to health care reform in our state, it could provide a partial solution to some people who are currently uninsured. Following are the key findings from the Value Benefits Plan Request for Information process: The private health insurance sector is willing to help the State find a solution to the problem of the uninsured. The health care experts that made up the Centennial Care Choices Panel, in addition to the health plans and interested parties that responded to the RFI, struggled with the question: “Is something better than nothing in providing insurance coverage for Coloradoans who are currently uninsured?” The large price tag needed to provide the subsidies that would make Centennial Care Choices Value Benefit Plans affordable is the primary barrier to implementing the program. The Request for Information Process and the analysis and evaluation undertaken by staff and the panel of experts resulted in some worthwhile next steps that can continue moving Colorado’s health care reform discussion forward. Below, each of these findings is discussed in more detail. The private health insurance sector is willing to help find a solution to the problem of the uninsured. The following companies participated in a response to the Request for Information: Celtic Insurance Company (subsidiary of Centene Corporation) Colorado Access Colorado Choice Health Plans (dba San Luis Valley) Cover Colorado Delta Dental Kaiser Permanente Pinnacol Assurance Rocky Mountain Health Plans United Health Group Anthem BCBS also submitted a response which was not considered in the analysis and evaluation because it did not comply with the requirement of SB 217 to limit the characteristics used in determining premium rates exclusively to the age of individuals to be covered under the VBP and the DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 5 geographic location of the policyholder. Rates for Anthem’s SmartSense 1500 VBP were determined by age, geographic location, and initial health status. Panel members, staff and other observers initially had concerns about whether health plans and other interested entities would participate in the process due to concerns about making public proprietary information and strategies. That was not the case for the ten organizations that shared in developing responses for the Panel. Their responses show that the insurance industry can develop health insurance products that are less expensive, and provide primary and preventive care without large out of pocket costs. However there were clearly tradeoffs in terms of other benefit categories, deductibles, and coinsurance that are too costly for many of Centennial Care Choices’ potential clients. More detail from the RFI responses is discussed in Section 7. Regardless of personal opinions about the usefulness of specific Value Benefit Plans, the RFI process was clearly important in terms of creating a dialogue and understanding roles, information needs, and concessions that can be made in the development of a true public private partnership. The health care experts that made up the Centennial Care Choices Panel, in addition to the health plans and interested parties that responded to the RFI, struggled with the question: “Is something better than nothing in providing coverage to Coloradoans who are currently uninsured?” According to a recent national survey, among the uninsured, 76 percent said that someone in their family didn’t see a doctor during the past year when they were sick because of cost, and 57 percent of the uninsured said they had to choose between paying medical costs or their rent, mortgage or utilities (High Costs Force Third of Americans to Skip Needed Health Care – AFL-CIO report found 95 percent of those surveyed feel U.S. system needs overhaul By Steven Reinberg Posted 3/25/08 http://health.usnews.com/usnews/health/healthday/080325/high-costs-force-third-of-americans-to- skip-needed-health-care.htm). Low cost limited benefit plans can offer a solution for uninsured citizens struggling with these tradeoffs. Of the seven VBPs analyzed through the RFI process, five offered access to primary and preventive care with very low, or no out of pocket costs. For example benefit designs included: no deductible on office visits, lab, drugs no deductible on preventive office visits no cost sharing on preventive services no cost sharing on prevention or PCP visits for evaluation and management DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 6 no charge for appropriate physicals, lab work, immunization, and prenatal care While the panel and the companies that responded to the RFI understand that for many people, low cost primary and preventive care won’t meet all their needs, it can, in many cases, keep currently uninsured patients out of the Emergency Department or operating room. However, in providing this basic level of services in an affordable manner, VBPs make other benefit categories expensive through deductibles, copayments, and coinsurance, making participants gamble that they won’t need these higher cost services, and putting at financial risk the citizens that can least afford uncertainty. Such “underinsurance” could cause lower-income consumers to face catastrophic costs, medical debt, or even bankruptcy. As described in a 2002 Commonwealth Fund report, “Although stripped-down policies are meant to make insurance more affordable for low-income consumers, they do so only with enormous risks” (Families USA 2008). Nationally, this high level of risk has led to low enrollment in basic benefit plans. In most states that permit the sale of limited-benefit plans, enrollment has fallen far short of expectations. For example, during the first year of Montana’s mandate-lite health plan, the administrator received 400 requests for applications, but only 53 individuals enrolled. The program, which provided office-based care but no inpatient coverage, could serve up to 1,000 Montanans. According to the Director of Health Care Access for the plan, “After individuals reviewed the plan, they realized that the package didn’t cover enough to be of value to them.” In 2007, the plan administrator discontinued the program due to low enrollment (Families USA 2008). As panel members reviewed proposed value benefit plans, a central concern was about the trade-off among cost-sharing (particularly deductibles), benefit levels, and premiums. Some of the responses explicitly stated they designed their plans, including cost sharing, to bring down premiums. Examples of benefit limits proposed included: inpatient charges limited to an annual max of $35,000 or $50,000 $200,000 annual benefit maximum and a $1,000,000 lifetime max exclusion for pregnancy $50,000 annual benefit max Balancing the benefit of “something” (primary and preventive care) vs. the choice to forego care by many currently uninsured citizens, Panel members were divided as to whether the benefit justified the cost and the risk to the consumer. The value benefit plans that received the most praise from Panel members had explicit support of 7 panel members (out of 9 who provided detailed reviews ), while the VBP that created the greatest amount of concern was only supported by one panel member. In Section 7 of this report (“Making VBPs Work”), we offer considerations that could potentially address some of the concern that VBPs will create a problem of underinsurance, underuse of appropriate services, and undue financial hardship for the very participants they endeavor to help. Section 6 (“Observations”) describes concerns that cannot be explicitly addressed through the VBPs and the DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 7 Centennial Care Choices Program – issues in the larger health care system that create barriers to humane, effective, high quality services for Coloradoans covered by VBPs, public programs, or other private health insurance. The large price tag needed to provide subsidies that make Centennial Care Choices Value Benefit Plans affordable in an individual mandate environment is a barrier to implementing the program. As explained in more detail in Section 6 (“Making VBPs Work”), the Centennial Care Choices Panel believes that the program and Value Benefit Plans can only work if there is an individual mandate and a state subsidy. Because the State is not currently in a position to fund a new subsidy program, it cannot be implemented as envisioned at this time. The Request for Information Process and the analysis and evaluation undertaken by staff and the panel of experts resulted in some next steps to continue the process of moving forward with meaningful health reform in Colorado. The process of studying VBPs and the Centennial Care Choices program did result in next steps and areas where additional study may inform a way forward to providing better access to care for currently uninsured residents. These are described in more detail in Section 11 (“Next Steps”) and include: Debrief with Health Plans/Interested Party Increasing our Understanding VBPs Explore what a mandate means and how to do it Option for State Plan/Role of Cover Colorado Reinsurance as part of the solution Division/Department involved in other innovative approaches that are also options for increasing access to care for the uninsured: o Pueblo o Colorado Indigent Care Fund o Primary Care Fund o CCMCN/CCHN Access for All Colorado Plan o Provider Fee Assessment o Anything from statutory changes? DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 8 5. Observations The panel was not able to ignore the health care system that surrounds the current insurance market in considering how VBPs could improve access to care for uninsured Coloradoans. Several system changes were discussed that are important but outside the scope of the panel’s charge to evaluate Value Benefit Plans. Bill When and how the system can actually take the time out to promote health in our population by building relationships with the consumer. Relationships are the exception rather than the norm. I view health promotion as different from care, but an important component of coverage. Capacity/access, particularly for primary care 6. Making Value Benefit Plan’s Work Policy Requirements: Subsidies and Individual Mandate Most respondents (in addition to the Panel) believe that the Value Benefit Plans would work best in the context of subsidies and an individual mandate. Subsidies would use state funding to reduce the cost of the Value Benefit Plan premium to the consumer. Although respondents did not agree on the ideal level of premium subsidies, most agreed that to avoid or mitigate adverse selection, Centennial Cares products must be price-competitive with products in the individual market. The Centennial Care Choices Panel and staff developed RFI questions assuming that state funds would subsidize premiums for Value Benefit Plans to make them affordable for low income individuals and families. But the design of the resulting plans and suggestions from respondents led the reviewers to question whether subsidies have to provide support for premiums only; perhaps there is a way to subsidize the cost sharing provisions (deductibles, copayments, coinsurance) of VBPs, to truly make accessing health care affordable. A second policy issue related to subsidies is whether use of subsidy dollars should be restricted to the VBP market vs. products available in the broader individual market. Respondents and reviewers agree that this requirement would also be important in reducing adverse selection in VBPs relative to the larger individual insurance market. An individual mandate requires that individuals have health insurance, either through an employer, an individual plan, or a public insurance program (such as Medicaid). In the absence of an individual mandate, many question the viability of a guaranteed issue/community rated product that exists DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 9 “alongside” underwritten products in the individual market. Most respondents believe that such a program would result in moderate to significant adverse selection. With a mandate in place, insurers would likely be less concerned about the occurrence of adverse selection, in which only those who are sick purchase health coverage, enabling the purchasing pools to work as designed. It is also more feasible to enforce requirements that insurers guarantee issue and limit rating variation in the individual market. However, the challenges associated with implementing and enforcing an individual mandate are substantial. Additional Policy Concerns: Crowd-Out Limited-benefit plans that are touted as an option for covering the uninsured do not necessarily reach their intended audience. Instead, limited-benefit plans can lead individuals or employers who previously had or offered comprehensive health insurance to reduce the breadth of their benefits, because of the lower cost. This impact to existing individual, small group, and even large group markets is commonly called “crowd out.” Crowd out can destabilize existing markets as lower income individuals drop existing coverage to buy subsidized VBPs, as the sickest individuals buy guaranteed issue VBPs, or individuals with non-creditable coverage are forced to drop coverage under an individual mandate. Respondents comments about crowd out issues in the RFI focused on establishing specific annual enrollment periods or criteria for enrollment in VBPs. Several respondents suggested a waiting period ranging from 60 to 120 days before an individual would be eligible to enroll in a VBP. Lessons from other states confirm that crowd out can be a real issue when introducing limited benefit plans. For example, in 2006, only 11 percent of enrollees in Texas’s limited-benefit plan were previously uninsured. Limited-benefit plans can be much more appealing to young and healthy individuals than they are to older people or those with health care needs who have greater risk of large out of pocket expenditures under the plans. In fact, some policy makers have proposed limited-benefit plans specifically targeted at young adults. These plans may draw low-cost enrollees out of comprehensive coverage, leaving behind only older and sicker enrollees in plans with comprehensive benefits. With fewer young and healthy enrollees to spread the financial risk of illness, the price of comprehensive plans in a state’s insurance market may skyrocket (Families USA 2008). Lessons from the RFI In addition to the policy considerations of subsidies and mandates, there are operational considerations for Value Benefit Plans that could increase their opportunities for success if the State were to pursue this strategy. Requirement for statewide vs. regional plans SB 08-217 explicitly states that VBPs will, at a minimum, “Be offered statewide and issued to any Colorado resident eligible pursuant to the terms of the approved VBP who agrees to make the premium payments required for that person.” In developing the RFI, Panel members and staff DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 10 assumed that the requirement for statewide operation of VBPs was to assure that plans could not participate in “cherry picking,” of offering coverage only to the most attractive (low cost) clients in the areas of the state that are the least costly within which to operate. Therefore, the RFI required each respondent to describe in which regions of the State they could you offer their proposed VBP, and if necessary, describe how they would partner with another entity to create a statewide program. However, this requirement does create a hardship for regional plans that provide appropriate health care coverage in specific areas of the state. If VBPs were to be implemented, the same protection against cherry picking could be addressed by requiring plans to offer their VBP anywhere they are licensed to provide any health insurance products, instead of requiring each VBP to itself be a statewide plan. Decision on health mart, brokers, and payment of commissions Based on the language in SB 08-217, the RFI instructed respondents to assume that the Legislature could establish “health marts” through which an individual may select a VBP that best meets his or her needs. More details around this process of marketing to and enrolling clients into VBPs will need to be specified before an RFP could be let, as differences in understanding led to differences in pricing (i.e. some health plans included broker commission in their cost for operating a VBP while some did not) the plans. An additional question posed was whether VBPs should be offered to small groups that do not currently offer health coverage, through the Health Mart or a similar mechanism. 80% actuarial equivalence with state employees PPO benchmark Because SB 08-217 required development of VBPs with a benchmark standard that was of approximately 80% of the actuarial value of a state employees’ PPO plan, benefits were automatically starting from a place that is inferior to typical commercial products. While this was consistent with the concept of minimum or value benefit plans… In addition to structural changes to the Centennial Care Choices Program which could be addressed through defining Value Benefit Plans, respondents offered advice on statutory changes that would make the VBPs easier to operate. In any future RFP for Value Benefit Plans, the following changes, which were each suggested by more than one respondent, should be considered: Integrate/coordinate eligibility determination with CoverColorado and other public programs such as CHP+ and Medicaid One respondent suggested that the exhaustion of VBP benefits be a qualifying event for CoverColorado enrollment. Another respondent suggested that the State build on programs already in place (Medicaid) and utilize CoverColorado to offer an array of VBP products, while at the same time improving CoverColorado’s care management. The ability of the DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 11 state to accept the risk for VBP clients through different cost sharing, risk pooling, or reinsurance mechanisms should be studied further. Specify same rating standards and structure for individual and small group markets as what is required for VBPs Extending the requirement that health plans only use age and geography only to determine rates would help minimize adverse selection. Exempt VBPs from premium taxes Respondents also suggested detailed statutory changes regarding organizations that could offer VBPs, limits on the number of VBPs offered (to maintain economies of scale) and provider contracting arrangements that would be beneficial to VBPs. 7. Detailed Results from the Request for Information: VBP Benefits As described in Section 5, the following companies participated in a response to the Request for Information: Celtic Insurance Company (subsidiary of Centene Corporation) Colorado Access Colorado Choice Health Plans (dba San Luis Valley) Cover Colorado Delta Dental Kaiser Permanente Pinnacol Assurance Rocky Mountain Health Plans United Health Group Anthem BCBS also submitted a response which was not considered in the analysis and evaluation because it did not comply with the requirement of SB 217 to limit the characteristics used in determining premium rates exclusively to the age of individuals to be covered under the VBP and the geographic location of the policyholder. Rates for Anthem’s SmartSense 1500 VBP were determined by age, geographic location, and initial health status. Copies of each response are included in Appendix2 (?) Key characteristics of the Value Benefit Plans are summarized in three tables to follow, with narrative descriptions of broad themes. DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 12 Panel members were asked to submit worksheets describing their reactions to each Value Benefit Plan proposal including a recommendation on whether they would support offering the plan to uninsured Coloradoans. Ten panelists provided written feedback on some or all plans (members abstained from commenting on health plans with which they had a relationship): Value Benefit Plan “Yes” votes “Maybe” votes “No” votes Comments Celtic 4 3 3 Medicaid and SCHIP experience in other states Maternity benefits excluded Broad PPO network – not cost- effective Colorado Access 7 3 Safety net provider with experience in Medicaid and SCHIP Strong systems for managing uninsured/Medicaid enrollees Colorado Choice 1 3 5 Regional plan Consumer education focuses on web access Kaiser Permanente 3 3 2 Proven model Good use of HIT Don’t have safety net relationships Recognizes association between oral health and overall health Pinnacol Assurance 3 2 4 No safety net relationships Innovative Discusses 24-hour coverage Interesting partnership with CoverColorado Rocky Mountain 7 1 1 Extremely successful in Health Plans managing Medicaid Focus on prevention and wellness Good use of HIT United Health Care 2 2 6 Good national systems Focused on underwriting DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 13 The Panel specifically noted that the two Value Benefit Plans with the greatest level of support (“yes” votes) are non-profit, Colorado-based companies (highlighted above). Plans that had the least support were most often criticized for higher costs, lack of knowledge of the population, or perceived “cherry picking.” The Request for Information was designed to gather information on specific plan requirements included in SB 08-217. Highlights from this information are described below. Summary Table: Benefits Primary care and preventive benefits As described in Section 5 and detailed above, the Value Benefit Plans offer low cost access to primary care and preventive services. Five carriers offered zero copays on prevention (one offered zero dollars for children’s services and low costs for adults). None of the preventive services were subject to deductibles. Wellness benefits and incentive The majority of Value Benefit Plans would encourage members to take Health Risk Assessments (HRAs) and offer coaching to members. Incentives to participate in HRAs and health education included reward points that could be redeemed for prizes, premium reductions, cash, gifts, drawings, and reduced fees and /or premiums for completing HRAs or participating in interventions. Provider Networks Each respondent promised a statewide provider network to offer the proposed VBP in all areas of the state, though in reality, several plans currently only serve regions of the state. Only one plan discussed strong network adequacy standards. The RFI specifically asked plans to discuss inclusion of safety net providers in their networks. Some plans have experience with Colorado’s safety net through Medicaid or the Child Helath Plan, other companies described experience with safety net and public programs in other states. Only one plan had neither (?). Reimbursement levels depend on current provider arrangements and are based on everything from Medicaid to Medicare and commercial contracts. Pay for Performance According to respondents, pay for performance reimbursement is not currently in wide use in Colorado. Several responses mentioned pilot programs and a willingness to develop programs in future. DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 14 Optional coverage choices Respondents offered a variety of optional or “buy up” coverage including: dental, prescription coverage, short term disability, and accidental death and dismemberment insurance. Several carriers also offered plans with lower cost sharing for a higher premium. Health Outcomes Plans did not offer specific goals for health outcomes for the most part, instead providing general discussion of performance measurement and quality improvement processes including HEDIS… HIT offerings Respondents discussed collaborative health information networks (CORHIO, Quality Health Netowrk), personal health records and e-prescribing most often under Health Information Technology (HIT) initiatives. Some are also working on web-based practices for the future, such as information exchange, web consultations and the Colorado Telehealth initiative. Consumer Education Responses mentioned fairly typical member handbook and web-based educational opportunities without much discussion of the particular needs of the currently uninsured (low income, minority) populations. Cost Summary Table As described in Section 5, while RFI respondents endeavored to create plans with low premiums, the result, in many cases, was significant costs sharing requirements to the enrollee. As described above, deductibles ranged from $0 to $6,000, depending largely on benefit maximums (that is, lower deductibles were seen in plans were benefits had caps on hospital, prescription drugs, or overall health benefits). Copayments were generally low for prevention and primary care services, but hospitalization would range in cost from 20 to 30%, often after meeting the deductible. 8. Detailed Results from the Request for Information: Actuarial Analysis (benchmark, cost, savings) Number of plans that met 80% benchmark Upon initial analysis, our actuarial consultant was able to replicate the computations that proved that five out of eight VPBs fell into the range (75 to 85%) of actuarially equivalence set forth by the RFI. The remaining plans were only slightly above the upper limit, and were deemed to have met the intent of the RFI. DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 15 Due to time constraints and the realization that a formal RFP process was not likely in the immediate future, staff and consultants did not follow up with plans to clarify their calculations. VBP Pricing Pricing Summary Table The RFI permitted respondents to make different assumptions about key program elements that affect pricing. This decision was based on both a lack of precision in the authorizing legislation on several features of the Centennial Care Choices Plan as well as a desire to encourage creative responses reflecting industry knowledge and best practices. As a result, many of the respondents’ specific program and policy assumptions – especially subsidy levels and the effect of an individual mandate -- directly affect their enrollment projections and pricing assumptions, making apples-to-apples comparisons difficult. Proposed provider reimbursement also varies widely and affects final pricing. Readers of the RFI responses are cautioned to note scenario-specific details. As a result, benefits and premium pricing across responses often cannot be directly compared. At a high level, premiums for value benefit plans depend on which of the uninsured decide to enroll. There are generally three categories of uninsured: 1. Those who cannot afford coverage, 2. Those who are unable to obtain coverage due to health conditions, 3. Those who elect to decline coverage because they are generally healthy. In general, the respondents agreed that the first and third groups are less expensive to cover than the second group (e.g., those unable to obtain coverage due to health conditions). Respondents’ final premium estimates reflect, in part, their predictions about how many people with ongoing health conditions (group 2) decide to enroll, as compared to the less expensive persons in group 1 and group 3. The tendency for more expensive individuals to enroll in coverage is known as “adverse selection.” Most of the responses assumed that group 2 is least sensitive to premium price increases. Even if premiums are on the high side of affordable, people with on-going health concerns remain financially motivated to enroll. Individuals who face higher prices in the traditional individual market are also more likely to enroll, such as women and people who live in high- cost counties. Gender and regional differences in premium pricing can be significant in the individual market, as documented in the responses. DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 16 By contrast, healthy young men and those facing affordability issues are most likely to enroll when premiums are very low. Premium subsidies can play an important role in lowering the out-of-pocket portion of the premium, thereby offsetting the tendency toward adverse selection that many respondents view as inherent in the Centennial Cares design. Most respondents appear to believe that subsidized premiums for Centennial Cares products needs to be combined with an individual mandate in order to achieve significant enrollment of healthy, low-cost individuals. Potential costs and savings from Centennial Choices Two areas are often cited when describing savings that can be achieved by providing universal health care coverage: reduction in cost shifting, and savings gained from providing preventive care. Cost shifting occurs when someone with no insurance and a low income receives care for which they cannot pay. So how much uncompensated care is received by the uninsured? One study put the number at about $35 billion a year in 2001, or only 2.8 percent of total health care expenditures for that year. One reason uncompensated care is such a small fraction of health care spending is that uninsured people simply get less health care than others (CATO, September 2007). Assuming this 2.8% number is correct, the “shift” occurs when health care providers add on to the bill of paying customers (insured or self pay) to make up for the unpaid bills of the uninsured. If everyone were insured, the theory goes, then the prices that we are all charged can go down. But quantifying this number is complex… Savings from providing appropriate preventive care may seem more tangible, but they can also take a long time to materialize. Louise Russell, Ph.D., a professor of health economics at Rutgers University in New Brunswick, N.J., said most prevention efforts do not result in cost savings. Her viewpoint was countered by Ron Goetzel, Ph.D., director of the Institute for Health and Productivity Studies at Emory University in Atlanta, who argued that prevention "offers a very good return on investment." Russell and Goetzel published their respective views in the January/February issue of Health Affairs. According to Russell, prevention efforts can result in savings to the health care system, but in most cases, the savings are "outweighed by the cost of the prevention/intervention itself." “There are many, many medical interventions that we do routinely that cost hundreds of thousands of dollars for a life that is saved, some of them millions of dollars for DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 17 a life that is saved." Russell said there have been thousands of carefully designed cost- analysis studies conducted in the area of prevention during the past 40 years that consistently point to one conclusion: The vast majority of preventive interventions add more to medical spending than they save. For example, said Russell, the Tufts Medical Center Registry reviewed the cost-effectiveness of hundreds of treatments and prevention efforts between 2000 and 2005 and found that more than 80 percent of the prevention efforts increased medical costs rather than reduced them. "This conclusion applies to a wide range of interventions and to the major preventive interventions that we all know about -- drugs to reduce high blood pressure, drugs to reduce high cholesterol, cancer screening tests and lifestyle changes to prevent or delay the onset of diabetes," Russell said. Prevention efforts are aimed at the probability of a condition -- something that might happen, not something that has happened, she said. Although Russell said she is convinced that prevention does not save costs in most cases, she nevertheless described prevention as a worthwhile component of good medical care, noting that "for chronic conditions, as well as other health problems, our goal should be to use prevention as effectively as possible." Goetzel responded to Russell's comments, saying that prevention and health promotion can provide high value by improving lives at a relatively low cost when compared with the expense of treatments. The discussion should focus on ways to achieve enhanced health care for the population and to allocate resources most effectively to "get the biggest bang for the buck," said Goetzel. He acknowledged that certain clinical preventive services do not save money. Prevention efforts encompass a broad range of diverse and far-reaching initiatives, including childhood immunizations, raising taxes on cigarettes, cancer screenings and eliminating the sale of sugary beverages in schools. "Health care spending in the United States exceeds $2 trillion a year, with three-fourths of that spending directed at treating chronic diseases," said Goetzel. "Nearly two-thirds of the growth in spending is a result of Americans' worsening health habits." The nation's health care delivery system "favors paying for the treatment of chronic diseases rather than preventing them in the first place," he said. "We need to improve the health of Americans and, thereby, reduce the social and financial burdens imposed by preventable diseases," DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 18 Goetzel said (Health Experts Clash Over 'Cost Savings' From Prevention Measures By James Arvantes Washington 1/14/2009 http://www.aafp.org/online/en/home/publications/news/news-now/health-of-the- public/20090114hlth-aff-prev.printerview.html). Although these cost savings opportunities are well documented in the health policy literature, in the absence of detailed plans for subsidy and mandate provisions, the RFI process did not yield detailed enrollment information (see Section 9 for summary data). A cost savings projection for covering more Coloradoans through Value Benefit Plans is not possible at this time. 9. Detailed Results from the Request For Information: Target Markets Centennial Care Choices staff and consultants provided estimates of the number of uninsured in Colorado by federal poverty levels, by state-defined age increments, and by 9 regions currently used in the Colorado small group market. Many of the responses did not project enrollment for all 9 regions (statewide). However, most respondents appear to have considered the entire uninsured population within each region targeted by their proposed VBP product. However, several respondents noted that “care would most likely be unaffordable for those over 300% FPL without a subsidy.” Perhaps for this reason, at least one respondent appears to restrict its VBP enrollment assumptions to only the subsidy-eligible population (e.g., 100-300% FPL). While not able to explicitly exclude enrollees with chronic illness, some plans did comment... Also, two (?Celtic) plans excluded maternity coverage in at least one version of their Value Benefit Plans. Potential enrollment coverage increase – Bill? 10. Need for further study/Next Steps In spite of mixed feelings about the specific plans proposed during the RFI process, the Centennial Care Choices Panel found value in the process of learning about Value Benefit Plans and other potential fixes for Colorado’s health care system, and keeping the discussion and understanding of reform options moving forward. The following recommendations provide a path for moving ahead in the absence of state funding for subsidies to compliment an individual mandate in Colorado in the near future. DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 19 Debrief with Health Plans/Interested Parties The Department and Division are interested in understanding more about the health insurance industry’s reaction to the RFI process and their proposed VBPs, including: 1. How the proposed VBPs differ from limited benefit plans already on the market? 2. What market research/consumer information did they use to develop benefits and other programs? 3. What additional data is needed from the State to do a better job in developing Value Benefit Plans? 4. Increase our Understanding VBPs While Value Benefit Plans are obviously of interest in providing access to critical health care services for currently uninsured Coloradoans, there is much more to be learned about this concept and its implementation. Several states have implemented versions of Value Benefit Plans with little background research and have seen limited enrollment as a result. The high cost-sharing and minimal protection in limited-benefit plans make it questionable as to whether they are even worth purchasing for many consumers. Uninsured individuals may feel that they are better off paying no premiums at all and instead rely on safety-net care. In response to the barebones “Cover Florida” program, one 42-year-old mother replied, “One hundred fifty dollars a month for a policy that doesn’t cover anything? I wouldn’t pay. If you want to see a doctor, you can go to a walk-in clinic and pay $95 when you are sick (Families USA 2008). To ensure a successful Centennial Care Choices program if and when funding becomes available, the state should continue its exploration of what would make a limited benefit plan attractive to the target market, and what people who currently do not have insurance want in terms of access to health care. This would necessarily include exploration of how the intended clients prioritize various benefit options, but also could focus on how they currently access care (safety net providers) and identification of their greatest needs. The CHAT process, which is described in the December 15 report, on page x), provides one option for prioritizing benefits. Other processes would need to be planned to take into account the opinions of potential purchasers of VBPs, with particular emphasis on those who are low income, minority, non-English speaking, and have chronic health care needs. Explore what a mandate means and how to implement it DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 20 Questions about implementing individual mandates include defining minimum creditable coverage and an enforcement mechanism. According to SB 08-217, Value Benefit Plans would become minimum creditable coverage, but more analysis of what this means in terms of existing health insurance products in Colorado’s market should be conducted. Enforcement mechanisms that include financial penalties to low income citizens are not supported universally, so options should be examined here as well. In Massachusetts, the first year’s penalty for noncompliance with the individual mandate was the he loss of the state income tax exemption (about $200). The penalty in subsequent years will be up to 50% of the premium an individual would otherwise have had to pay (RAND: Health COMPARE: Policy Options: Overview of Individual Mandate. Accessed on 1/27/2009. http://randompare.org/options/mechanism/individual_mandate). Option for State Plan/Role of Cover Colorado SB 08-217 specifically includes the State as an eligible entity to develop a Value Benefit Plan: …CREATES THE OPPORTUNITY FOR HEALTH INSURANCE CARRIERS AND OTHER INTERESTED PARTIES, INCLUDING THE STATE OF COLORADO, TO DEVELOP AND OFFER TO INDIVIDUALS THROUGHOUT THE STATE AN AFFORDABLE , BASELINE HEALTH INSURANCE PRODUCT, REPRESENTING THE MINIMUM BENEFITS PACKAGE FOR THE STATE'S INDIVIDUAL MARKET, THAT IS NOT CURRENTLY AVAILABLE IN THE INDIVIDUAL MARKET, TO PROVIDE ACCESS TO HEALTH CARE COVERAGE FOR THE STATE'S UNINSURED POPULATION; A working group or task force within the Department of Health Care Policy and Financing could develop a proposal… Reinsurance as part of the solution A strategy for improving the affordability of coverage is to provide some form of reinsurance for high cost claims. These high cost claims are incurred by a small share of individuals but represent a large share of total health costs. By limiting insurance companies’ exposure to very high health costs, reinsurance programs enable insurers to lower the premiums they charge to employers and individuals. This type of program is a form of subsidy to the insurer that lowers the premium cost for all purchasers. Currently, a handful of states, including New York and Arizona, operate reinsurance programs (KFF Approaches). In addition to these areas of further study, the Division/Department are involved in other innovative programs and approaches that are not necessarily insurance approaches, but could provide health care DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 21 for the uninsured. These options should be watched for potential applicability to the problem of Colorado’s uninsured residents. Pueblo Colorado Indigent Care Fund The CICP distributes federal and State funds to partially compensate qualified health care providers for uncompensated costs associated with services rendered to the indigent population. Qualified health care providers who receive this funding deliver discounted health care services to Colorado residents, migrant workers and legal immigrants with limited financial resources who are uninsured or underinsured and not eligible for benefits under the Medicaid Program or the Children's Basic Health Plan. Local hospitals and clinics enroll families into the CICP. To qualify, applicants must have income and resources combined at or below 250% of the Federal Poverty Level (FPL), and cannot be eligible for Medicaid or CHP+. There are no age limitations for CICP eligibility. Under CICP, clients never have to pay more than 10% of their income in a 12-month calendar period for medical care from a participating health care provider. Primary Care Fund In accordance with Section 21 of Article X (Tobacco Taxes for Health Related Purposes) of the State Constitution, an increase in Colorado's tax on cigarettes and tobacco products became effective January 1, 2005, and created a cash fund that was designated for health related purposes. House Bill 05-1262 divided the tobacco tax cash fund into separate funds. The law assigns 19% of the tax collections to establish the Primary Care Fund and it specifies how the funds are to be allocated. The Primary Care Fund provides an allocation of moneys to health care providers that qualify under specific criteria and that make basic health care services available in an outpatient setting to residents of Colorado who are considered medically indigent. Moneys are allocated based on the number of medically indigent patients served by one health care provider in an amount proportionate to the total number of medically indigent patients served by all health care providers who qualify for moneys from this fund. CCMCN/CCHN Access for All Colorado Plan A new plan developed by the Colorado Community Health Network (CCHN) and Colorado’s Community Health Centers shows how increasing funding over the next 20 years will allow Health Centers to serve as the health care home to one million Coloradans, approximately half of them uninsured. In the first five years, Health Centers would expand capacity to care for 200,000 low-income uninsured and another 199,000 Coloradans in need of a health care home. The plan will require: DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 22 • $206 million in capital investments • 322 new physicians, nurse practitioners and physician assistants • $236 million in new operational dollars to care for the low-income uninsured patients. This is less than $500 per patient per year for medical care. The proposed expansion will require additional support from local communities and businesses, patients, foundations, and the state and federal governments. Provider Fee Assessment One commonly used source of revenue to fund health initiatives in other states is provider fees. Provider fees are a legal funding source eligible for federal matching funds when used to reimburse Medicaid covered services. More than 40 states have imposed some provider fee, including more than 15 states that have imposed hospital provider fees. Colorado approved a nursing home provider fee in the 2008 session (HB 08-1114). Last spring, the Governor’s Office and the Department of Health Care Policy and Financing entered into collaborative discussions with the Colorado Hospital Association about the establishment of a hospital provider fee in Colorado. We have been working together for seven months to develop a proposal. As currently modeled, we are considering a hospital fee based on patient days that will generate new revenue to: o Increase hospital reimbursement rates under Medicaid and CICP, which will help reduce uncompensated care and cost shifting; and o Cover the uninsured by increasing eligibility for Medicaid and CHP+. The hospital provider fee will also create an opportunity for the state to reform and modernize the way payment rates are set for various hospital services. This will allow for a more rational and transparent hospital payment structure. Anything from statutory changes? DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 23 11. Conclusion Centennial Care Choices Panel, Department, and DOI consider this a successful RFI with cooperation from private sector and a number of interesting responses Some plans attractive (especially primary/preventive) and premium is affordable if Legislature had political will to impose individual mandate and guaranteed issue Some concerns about cost sharing (deductible, copay, coinsurance) affordability for currently uninsured No money for state to spend on subsidies now – and Centennial Care Choices won’t work without them Potential federal funding as part of stimulus package (Medicaid expansion, COBRA subsidy) Important to keep moving forward; the demand is higher than ever Look at additional information gathering and approaches so that the State can close in on options DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!! 24 12. Appendices December 15 Report RFI Responses Response summary grid/side by side (Ed) Actuarial Report (Julie) Demographic/Uninsured Data Report (Tracey) DRAFT - NOT YET APPROVED BY DIVISION, DEPARTMENT, OR CENTENNIAL CARE CHOICES PANEL!!
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