Health Insurance

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Access to health insurance ≠ Access to health care.

June 27, 2011 in Health Insurance, Health Reform, Public Policy | 3 comments

Is the Massachusetts health reform a success?  Yes and no.

In terms of increasing access to health care, it has been an unqualified success.  According to the Economist, only1.9% of Massachusetts residents were uninsured in 2010.

Massachusetts’ health reform has not been able to offer universal access to health care or to constrain costs. “ One in five working-age adults say they have trouble finding a doctor who will see them…Spending on MassHealth, the programme for the poor, rose 40% between 2006 and 2010….average monthly premiums rose by 12% between 2006 and 2008. True, a higher share of firms now offer coverage, but they are also shifting costs for that coverage to employees”

Massachusetts is trying to legislatively block health premium increases.  Reducing health insurance cost, however, will likely drive down provider reimbursement and either increase cost sharing or decrease access to health care.

The key takeaway from this post is the following: “Access to health insurance does not guarantee access to health care.”

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Cash and Counselling

April 28, 2011 in Health Insurance, Optimal Ins (Theory) | 1 comment

Many economists claim that insurance that gives  sick people cash to pay for their medical treatments is more efficient than insurance that provides in-kind medical services directly.  Although providing in-kind services is more likely to decrease the number of false claimants than insurance that provides cash, cash benefits allow beneficiaries to control how they spend their money.  These patients will generally be more frugal since any savings in medical spending goes directly into their pocket.

The Cash and Counselling demonstration is one effort to give beneficiaries cash when they become disabled.  A Health Affairs paper by Foster et al. describes the demonstration.

“About 1.2 million Medicaid beneficiaries receive disability-related supportive services in their homes. Most receive them from government-regulated agencies, whose professional staff arrange services and monitor quality, but a growing number manage their services themselves.As one model of consumer-directed supportive services, Cash and Counseling gives consumers a flexible monthly allowance to purchase disability-related goods and services (including hiring relatives as workers), provides counseling and financial assistance to help them plan and manage their responsibilities, and allows them to designate representatives (such as family members) to make decisions on their behalf.”

Did it work?

“Our survey of 1,739 elderly and nonelderly adults showed that relative to agency-directed services, Cash and Counseling greatly improved satisfaction and reduced most unmet needs. Moreover, contrary to some concerns, it did not adversely affect participants’ health and safety.”

Rather than spending this money on formal care services, almost all beneficiaries used their cash benefit  to hire family members or friends.  Other funds were directed to pay for assistive equipment, personal care supplies, and medications.  Could the Cash and Counselling model be a viable care alternative, especially for high cost patients?

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Health Insurance for Truckers

March 2, 2011 in Health Insurance, Nonphysician Clinicians, Supply of Medical Services | 1 comment

Accountable Care Organizations.  Medical Homes.  Integrated networks of providers.  Many of the latest health services research catch phrases are attempting to provide patients with a one-stop shop for all their health care needs.  The integrated systems attempt to prevent situations such as when  multiple physicians prescribe a host of drugs, some of which could be contraindicated.

These integrated models, however, may not serve one population very well: truckers.  Because truckers are on the road all the time, they frequently will need care outside of their area.  In fact, they may often need moderate amounts of treatment initially and then well seek more intensive treatment with their primary care doctor upon returning home.

The Healthy Trucking Association of America (HTAA) and the Convenient Care Association (CCA) have announced one solution to this problem: provide health insurance which relies on a geographically widespread network of retail clinics.  Although the CCA clinics may not be perfect, they do have two advantages: i) they are cheap, ii) they are located nationwide.

According to a recent press release:

“Located in retail stores like major pharmacies and large supermarkets, CCA clinics are much more accessible and affordable for drivers than traditional doctors’ offices or emergency rooms,” says Tine Hansen-Turton, executive director of the CCA. “Retail-based convenient care clinics provide a perfect venue for employees, and their families, to receive accessible, affordable, high-quality services.”

Are these cut-rate plans?  Possibly.  I don’t know about the generosity of these plans in terms of cost sharing or benefit structure.  The plans, however, are interested in adopting recent initiatives shown to improve patients care.

“…other trucking organizations who have expressed great interest in the clinics’ ability not only to identify and manage chronic disease risk but to support Compliance Safety Accountability Act 2010 federal guidelines through electronic medical records, standardized medical protocols, and technology solutions to reach drivers while traveling on the road,” says Stewart Levy, R.Ph., President of Health Promotion Solutions.

Medical homes and ACOs may help most people, but tailoring health care needs to the individual patient is vital.  The HTAA-CCA partnership seems to provide a good fit for the trucker population.

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Employer Health Benefits in California

December 18, 2010 in Health Insurance | 3 comments

California is in the midst of a fiscal crisis.  The New York Times reports that the state now faces a $28.1 billion shortfall in revenue over the next 18 months.  For California workers, things are also bleak.  Unemployment has reached 12% and the cost of health insurance premiums increased by 8.1%.

The California Health Care Foundation (CHCF) provides additional information on sorry state of health insurance in California in their 2010 Employer Health Benefits Survey.  Some highlights from the survey include the following.

  • Since 2002, premiums have increased 134.4 percent, more than five times the 25.4 percent rise in California’s overall inflation rate.
  • The proportion of employers offering coverage is similar to last year. However, firms that went out of business are not captured in this survey. according to the U.S. Bureau of Labor Statistics (BLS), California lost nearly 210,000 jobs from July 2009 to July 2010.
  • Single-coverage premiums in California were $5,463 annually, significantly more than the national average of $5,049. Premiums for family coverage were $14,396.
  • California workers contributed $725 annually for single coverage in 2010, and $3,632 for family coverage. The contribution for single coverage is less than for workers nationally ($899), but increased from 12 percent of the premium in 2009 to 15 percent this year.
  • Enrollment in plans with a deductible of $1,000 or more for single coverage has increased significantly for California workers in small firms, now at 27 percent, up from 7 percent in 2006.
  • Twenty-eight percent of California firms either reduced benefits or increased cost sharing for employees as a result of the economic downturn in 2010, up considerably from the 15 percent who did so in 2009.
  • Cost sharing may continue to increase for California workers. Just under half of large firms (200 or more workers) are “very” or “somewhat” likely to increase the amount workers pay for coinsurance or copayments in the next year.  Sixty-eight percent are “very” or “somewhat” likely to raise the amount workers pay toward premiums.
  • Four percent of California firms indicated they are “very likely” to drop coverage entirely in the next year. in 2008, only 1 percent of firms said this.

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Health Insurance for Part Time Workers

September 15, 2010 in Health Insurance, HSA | 6 comments

The goal of LyfeBank is basically to serve as a 401(k) for health insurance.  Employers can make contributions to the employees health insurance into a fund and workers can use this money to buy various health insurance products, reimburse themselves for co-payments or deductibles, or pay for medical costs directly.

LyfeBank has two key innovations.  The first is that part-time workers can still receive money for health insurance on a pre-tax basis.  Further, multiple employers can contribute the the worker’s health insurance premiums as these funds go directly into the employee’s LyfeBank account.  Second, workers can apply for a LyfeBank Visa which will automatically deduct covered medical expenses from their bill.  If this credit card works well, it could reduce paperwork needed to reimburse providers.  However, there will likely still be arguments from benefciaries about what is or is not covered by the insurance company they choose.

The main drawback of Lyfebank is that workers must purchase health insurance on the individual market.  There is no pooling mechanism.  Thus, although part-time workers can now receive funding from multiple employers, the cost of their health insurance premiums will still be much higher than it would be if they worked at a large firm.

LyfeBank thus helps reduce the health insurance complexities for individuals working multiple part-time jobs.  It does not, however, offer these individuals a mechanism to pool their risk with other part time workers.  It will be interesting to see how this innovation will evolve when Health Insurance Exchanges appear in a few years.

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Labor Day Post II: Health Insurance Cost Shifting

September 6, 2010 in Health Insurance | 2 comments

Sticky wages is the concept that few employees will agree to a nominal decrease in wages even if there is a decrease in productivity.  However, the Kaiser Family Foundation found that although nominal wages may not be decreasing, the amount of money workers are paying for health insurance is rising quickly (full report).

“Workers on average are paying nearly $4,000 this year toward the cost of family health coverage – an increase of 14 percent, or $482, above what they paid last year… The jump occurred even though the total premiums for family coverage, including what employers themselves contribute, rose a modest 3 percent to $13,770 on average in 2010, the survey found.  In contrast, the amount employers contribute for family coverage did not increase.”

With employees bearing a larger and larger share of health insurance costs, pressure to increase decrease benefit generosity will build as workers begin to switch to less generous health insurance plans.

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Over the last 15 years, Income Inequality has decreased?

June 2, 2010 in Economics - General, Health Insurance | 6 comments

Many economists have lamented that income inequality has grown over recent decades.  Although it is true that wage inequality has increased, compensation inequality may not have.  When I mention “compensation inequality,” I refer to the total package of compensation that a worker receives.  This includes wages, health insurance, 401(k) benefits, and other non-wage forms of compensation.  In previous posts, I have mentioned that once health insurance is taken into account, inequality may in fact be shrinking.

A recent NBER working paper by Burkhauser and Simon (2010) also shows that inquality is in fact decreasing once one taking into account health insurance costs.  This chart provides information on changes in income and total income between 1995 and 2008.  Income includes only raw wages, but “total income” also takes into account workers compensation in the form of health insurance.  The authors use this evidence to claim that “…ignoring the value of health insurance coverage will substantially understate the level of economic well being of Americans and its upward trend and overstate the level of inequality and its upward trend.”

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Estimating the elasticity of health insurance offering for firms: Part II

May 25, 2010 in Health Insurance, Taxes | 1 comment

How does the price of health insurance affect the probability that a firm will offer health insurance to their workers?  A previous post provides a variety of estimates of the elasticity of firm health insurance offering with respect to premiums.  A more recent article by Gruber and Lettau (2004) needs to be added to this mix.

This paper uses data from the 1983-1995 National Compensation Surveys to determine that “there is a moderately sized elasticity of insurance offering with respect to after-tax prices (-0.25), and a larger elasticity of insurance spending (-0.7). We also find that the elasticities are driven primarily by small firms, for whom the elasticity is larger.” Additionally, the authors claim that if the tax subsidy to employer-provided health insurance were eliminated, 15 million fewer workers would be offered health insurance.

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Health Care Reform in Massachusetts

May 3, 2010 in Health Insurance, Regulation | 7 comments

With healthcare reform having passed, how will the health insurance market look a few years from now?  Although Mitt Romney may (or may not) deny it, Massachusetts has been a model for President Obama’s health reform bill.  In 2006, Massachusetts passed its own health reform and when the share of uninsured residents was at 14%.  By 2008, this figure had fallen to 2.6%.  Let us now take a look at the specific reforms Massachusetts implement to increase coverage.

Based on the research of Doonan and Tull (2010), one can divide the Massachusetts expansion efforts into five broad categories.

  • Medicaid Expansion. Massachusetts expanded Medicaid eligibility to all children below 300% of the federal poverty line (FPL) and all adults below 150% of the FPL.
  • New subsidized health insurance exchange.  Commonwealth Care is a program that provides aces to health insurance for individuals with incomes between 150% -300% FPL.  The government subsidizes these plans depending on the individual’s income.  The state moved individuals who were previously in the stat’s uncompensated care pool (UCP) to Commonwealth Care by restructuring the UCP so that copays, deductibles, and premiums were similar to those offered in Commonwealth Care.
  • Insurance Exchange for Individuals and Small Businesses.  Commonwealth Choice is a program that provides a number of unsubsidized insurance plans to individuals and small businesses (with 50 or fewer employees).
  • Mandates.  The Massachusetts legislature enacted an employer mandate and an individual mandate.  The employer mandate stats that employers with more than 50 people who do not provide insurance must pay a “fair share” assessment of $295/employee/year.  The state also mandates that all residents purchase insurance through an individual mandate.  Each year, each Massachusetts resident must submit a Schedule HC to the Massachusetts Department of Revenue to verify that they do indeed have Connector-approved insurance.  After a 90 day grace period, individuals are penalized each month that they are not insurance in the previous tax year.  The penalty for not having health insurance in Massachusetts is generally much larger than what Congress is currently considering.
  • Insurance Regulation.  The Commonwealth Health Insurance Connector Authority (the Connector) created minimum standards for any insurance product to be offered in the state.  Thus, individuals could not bypass the individual mandate by taking out a very inexpensive health insurance product with a $50,000 deductible.  The Connector Board recommended that the minimum credible coverage (MCC) include preventive and primary care, emergency services, hospitalization benefits, ambulatory patient services, mental health services, and prescription drug coverage.  Doonan and Tull (2010) claim that the mandated benefits were fairly generous, but not out line with what private insurance companies previously had offered.  Because there is more heterogeneity in insurance products across the country than within Massachusetts, Congress would have a much more difficult time determining a valid coverage minimum that did Massachusetts.

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The Cost of Health Insurance Mandates

March 30, 2010 in Health Insurance | 1 comment

Health insurance mandates increase health insurance cost.  By compelling insurance companies to cover certain medical treatments, cost inevitably rise.  Of course the people who receive these treatments benefit while those who do not must pay additional premiums.  A recent paper by the Pacific Research Institute summarizes the findings of various studies of the impact of mandates on health insurance premiums.

  • CBO (2000): 4 to 9 percent of premiums, all mandates aggregated
  • Graham (2008): 5 to 23 percent of premiums, all mandates aggregated
  • Bunce and Wieske (2009): 20 to 50 percent of premiums, all mandates aggregated
  • New (2006): 15 percent of premiums, all mandates aggregated
  • Congdon et al. (2006): 0.3 to 0.7 percent of premiums, per mandate above 20
  • Wisconsin OCI (2002): 1 to 3 percent of premiums, five specific mandates aggregated
  • GAO (2003): 3 to 5 percent of premiums, all mandates aggregated
  • Krohm and Grossman (1990): 0.2 percent of claims, specific mandated benefits
  • Maryland HCC (2006): 2 percent of premiums, all mandates aggregated
  • Maryland HCC (2008): 0.01 to 1 percent of premiums per each of five specific mandates

Of course, the actual mandate will affect the increase in premiums. For instance, a mandate to cover one specific vaccine likely would provide only a small increase in premiums, especially since many insurance policies would already cover this treatment. On the other hand, a mandate to cover all forms of cancer treatment for all types of cancer likely would drive up premiums significantly.  What one can conclude from the above studies is that mandates do increase cost.  The degree to which health insurance premiums increase, however, is not a settled matter.

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