Sponsored by The Robert Wood Johnson Foundation's State Coverage Initiatives Program
Conducted by AcademyHealth

Q: Does the employer have to offer dependent coverage to be eligible for Healthy NY? When you say there is a 50 percent minimum contribution by the employer, does that refer to the individual or family coverage?

A: [Cresho] The 50 percent refers to the contribution to employee coverage. The employer does not have to provide dependent coverage to be eligible for Healthy NY. If they do offer dependent coverage, they are still only responsible for contributing 50 percent of the employee premium.

Q: You said that in New York many employers were under the impression that they could only offer this program to low-income employees. What created this misperception?

A: [Cresho] Even after a year of educating people about this program, most of the information did not trickle down to our customer service representatives. As a result, many employers received incorrect information about the program.

Q: Can you tell me why New York decided to provide stop-loss coverage to all individual high-cost cases instead of looking at the profitability of the plan's whole line of business and then seeding losses only if they lost money on average?

A: [Cresho] Stop-loss is not my area, but my understanding is that it was seen as a way to take some of the risk out of the market. There was an issue about unpredictability for some of these groups.

Q: What impact on premiums does the Healthy NY stop-loss feature have? Can you translate it into a percentage of premiums?

A: [Cresho] We estimate that on average it will save small employers 10 percent to 15 percent.

[Chollet] Remember that New York is one state that put guaranteed issue and full community rating into effect early on. In that particular market, therefore, a high-risk pool made no sense. Since Healthy NY is, in effect, cost-triggered and not diagnosis-triggered, it is a very reasonable and inventive alternative to a high-risk pool in a state that has a regulatory base that would make a high-risk pool unnecessary.

Q: What is the impetus in Arizona for restructuring the risk or being concerned about restructuring the risk if you have a comfortable margin on indemnification of losses?

A: [Cheatham] I would not say that it is a comfortable margin since the legislature has to fund it, and it comes to about $500 per member per year. I do think that that's cheap in the larger scheme of things though. We believe that Healthcare Group was originally structured at a time when there was no other help in he marketplace. We now need to be self-supporting again and we need to market, restructure, and reach out to the small businesses that need us. Ideally, we would be self-supporting and be able to help this portion of the population that has some risk. But we don't think we should be pulling against the state except for catastrophic reserves. We also do not want to be a risk pool; even though we have become one, that was not the original intent of the program.

Q: Deborah Chollet, you mentioned that community rating decreases coverage and Tony Cresho mentioned that in his state where there is community rating that they have had to develop a state-sponsored subsidy program to get more people into the market. Leigh mentioned that her program in Arizona is community rated whereas the rest of the market is not, so subsidies are needed. The insurance market would argue, based on this information, that community rating does decrease coverage and that having risk rating is a better way to get the healthy people into the pool. I am interested what your research indicates. Are there states that have risk rating that can demonstrate that they have had a major impact on the number of uninsured?

A: [Chollet] In my research to date, I have not seen it. In addition, I have not seen that if you go back to no community rating that you will have the symmetric effect and the market grow larger. To restrict the ability of insurers to rate health is a conscious decision about equity/fairness in the market. I once questioned a state's insurance department about what happened in their market when they went to pure community rating. The insurers claimed that their population became older, not necessarily sicker, but older. The insurance department was not able to say from what they had observed that there was a drop in coverage. The statistical results of how coverage levels change in response to community rating are not robust, so you need to take them with a grain of salt. There are conclusions in that information, but they are not dramatic. In states that have community rating laws in place, I personally do not believe that they can boost coverage by allowing insurers to tailor rates to very healthy people.

Q: Deborah, you mentioned age briefly when you spoke of the insurers' observations about what happened when they went to community rating. As we know, age correlates with wage and income but not nearly as much with health status, and since risk aversion varies considerably with age, particularly among males, a bigger impact on coverage may come from a situation in which age rating is not allowed. I think it is true that New York is the only state to prohibit age rating entirely. The data that I see does show a lot fewer young workers working for small firms. So, it seems to me that there probably is an effect there.

A: [Chollet] I actually have been able to peel away this effect in some statistical work that I did and I found no significant impact of age rating. I was surprised that I did not find any impact. I did find an impact with health rating, but not age rating. I also found that there is some impact on insurers' loss ratios, which seem to rise when there is a composite rate band, but nothing on the individual age or health rating. I would have thought the same thing as you are suggesting, but I have not been able to produce that result.

Q: In Oregon, we have been debating the pros and cons of a high-risk pool in the small group market (less than five workers). If you had a high-risk pool for a small group, would it relieve the state of the guaranteed issue requirement? If the state could argue that everyone has coverage using our high-risk pool, could the insurers then go back to underwriting?

A: [Chollet] I am not sure, but my reading of HIPAA is that it would prohibit that. Furthermore, there is no provision in HIPAA for waivers of any kind, so I do not think you can do it in a small group market. Basically, that leaves you with indemnification of losses strategies in this market.