Health Insurance Options for Small Business Employers

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1 Health Insurance Options for Small Business Employers April 2, 2008 Insure the Uninsured Project Rebecca Pizzitola and Lucien Wulsin, Jr. Funded by: L.A. Care Health Plan The California Endowment The California Wellness Foundation The Blue Shield of California Foundation 1

2 California Context 6.5 million (20.2% of CA) uninsured age 0-65 at some point in the year 2.1 million uninsured in LA County (23.5% of LA) 1/3 of CA s uninsured reside in LA County! Nearly 80% are legal workers and their family members 66% Full-time workers and dependents 63% U.S. Citizens 15% Green Cards Source: The UCLA Center for Health Policy Research. The State of Health Insurance in California: Findings From the 2005 California Health Interview Survey. (2007). 2

3 California Context Low and moderate income are most at risk of being uninsured 61% are <200% FPL 74% are <300% FPL FPL (2005) = $9,973 for one person per year, $12,755 for two, $15,577 for three Many can t get public insurance Source: The UCLA Center for Health Policy Research. The State of Health Insurance in California: Findings From the 2005 California Health Interview Survey. (2007). 3

4 California Context And, it s getting worse: Employer-based coverage is eroding for those <300% FPL 55% of uninsured work for employers with no offer of health insurance Most working uninsured are younger, minority and/or noncitizens with less education and/or lower income Age: Race: Source: The UCLA Center for Health Policy Research. The State of Health Insurance in California: Findings From the 2005 California Health Interview Survey. (2007).; Kaiser Family Foundation. Kaiser State Health Facts: Health coverage and uninsured. (2005) 4

5 Main Problem for the Uninsured Lack of access to affordable insurance 5

6 Average Family Premium Contributions and Out-of-Pocket Health Costs Private Insurance, Western U.S. Annual premiums Annual copays and OOP Single Adult $764 $340 Single-Parent + 2 Kids $1,501 $558 Two-Parent + 2 Kids $1,777 $1,018 Total annual costs $1,351 ($113/mo.) $2,728 ($227/mo.) $3,389 ($283/mo.) Minimum annual income to afford this $25,912 (253.8% FPL) $51,532 (300.1% FPL) $40,488-$61,146 ( % FPL) Source: California Budget Project. What Does It Take for a Family to Afford to Pay for Health Care? (2007). 6

7 Median Premium and Out-of-Pocket Spending as a Percentage of Income, US % of Income % of Income Income Level Income Level Average Cost of Coverage California: Single: $4,482 - worker contributed $561 Family: $12,297 - worker contributed $3,103 Los Angeles: Single: $4,313 - worker contributed $562 Family: $11,830 - worker contributed $3,375 Source: California Budget Project. How much is too much? A framework for evaluating health care affordability. (2007).; California HealthCare Foundation. California Employer Health Benefits Survey (2007). 7

8 Supports for Working Families End Before Families Reach Self-Sufficiency Earnings Needed for Self-Sufficiency* Earnings Limit for Subsidized Child Care* Earnings Limit for Earned Income Tax Credit** Earnings Limit for Food Stamps* Earnings Limit for Parents to Receive No-Cost Medi-Cal* Earnings Limit for CalWORKS*** Poverty Guideline* California Minimum Wage Hourly Wage Source: California Budget Project. Two steps back: should California cut its way to a balanced budget? (2008). Note: *Family of three. **One parent family with 2+ children. ***Family of three in a high cost county. 8

9 Consequences of Being Uninsured Sicker and Shorter Lives Lower access to care & treatment compliance (e.g., prescriptions) Preventable illness and death Higher System Costs and Cost Shifting Total CA spending on uninsured (2005): $13.4 billion $4.6 billion in Los Angeles $31.2 billion for the U.S (5.7% of hospital expenses) Large and growing burden for CA government Decline in private insurance = increase in public Medi-Cal: $38.9 b; Healthy Families: $1.2 b; County Health Services: $57.6 m Hidden Tax : Cost shift of up to 10% to private payers Source: California Budget Summary (2008).; American Hospital Association. (2008). Note: Total Health Spending U.S (All Sources): $2.3 trillion or $7,600/person 9

10 Options to Cover the Uninsured Public Coverage: e.g., Medi-Cal, HFP, and County Health Private Coverage: 1) Employment-based and 2) Individual Public-Private Partnership: Shared financing Public Insurance Employment-Based Private Insurance Pros Comprehensive care at low cost Tax advantages; employerfinanced; small business underwriting reforms (e.g., guaranteed issue); high employee enrollment rate Cons Inefficient; stigmatized and poorer choice of care and lower compensation Low employer participation rate when converting from nonoffering to offering employer Individual Private Insurance Public-Private Partnerships Good response rate when subsidized; single purchaser Shared financing; can build on existing public programs Adverse selection; high non benefit costs; higher expense for less coverage Lots of players and moving pieces 10

11 Public Programs in California Priority: Pregnant Women and Kids 11

12 Some Private Plans and Prices CIGNA UnitedHealthcare / PacifiCare Aetna Health Net Blue Shield Blue Cross Kaiser Permanente Many plans include options designed to provide care in both the United States and Mexico for those living in border towns. Average Price Per Member Per Month (PMPM) By Plan Type: Source: California HealthCare Foundation. California Employer Health Benefits Survey. (2007). 12

13 Costs in the LA Market: Kaiser Kaiser, 2008 Subscri ber <30 y Monthly premium, Small Group Empl. Empl. + Fam. $106 $351 $125 $392 $170 $441 $227 $521 $281 $641 $260 $798 Monthly premium, Individual Empl. Empl. + Fam. $106 $330 $150 $452 $218 $638 $311 $746 $311 $766 $373 $814 Kaiser Area 5 individual and family plan with $1,500 individual and $3,000 family deductible and $30 co-payments. Prices are rounded averages and/or quotes. Group rates are RAF Premium 13 Age

14 Costs in the LA Market: Blue Cross Blue Cross, 2008 Subscri ber <30 y Monthly premium, Small Group Empl. Empl. + Fam. $269 $899 $338 $1,048 $451 $1,163 $610 $1,377 $749 $1,663 $986 $2,136 Monthly premium, Individual Empl. Empl. + Fam. $310 $831 $413 $969 $499 $1,173 $582 $1,415 $713 $1,701 $841 $1,846 Area 5 Blue Cross small group PPO 40 with a $40 co-payment and $500 individual and $1,000 family deductible. Area 5 Blue Cross individual PPO Share 500 with 30% coinsurance and $500 individual and $1,000 family deductible. 14

15 Costs in the LA Market: Health Net Health Net, 2008 Subscri ber <30 y Monthly premium, Small Group Empl. Empl. + Fam. $232 $778 $287 $886 $378 $985 $514 $1,176 $631 $1,416 $831 $1,830 Monthly premium, individual Empl. Empl. + Fam. $90 $401 $114 $421 $169 $510 $253 $677 $369 $909 $468 $1,107 Health Net Small Group Region 5 PPO 30 Standard with $500 single and $1,000 family deductible and $30 co-payments. Health Net Individual Region 1 SimpleChoice PPO Plan 15 with $1,500 deductible (2 per family) and $15 co-payments. Note: Premiums are rounded averages. 15

16 Costs in the LA Market: Blue Shield Blue Shield, 2008 Subscri ber <30 y Monthly premium, Small Group Empl. Empl. + Fam. $127 $427 $155 $492 $215 $563 $291 $667 $362 $818 $472 $1,025 Monthly premium, Individual Empl. Empl. + Fam. $199 $712 $315 $954 $462 $1,242 $660 $1,552 $849 $1,857 $1,099 $2,318 Blue Shield PPO Plan 1500 Value with $1,500 per member deductible and $30 co-payments. Blue Shield Spectrum PPO 1500 with $1,500 individual and $3,000 family deductible and $40 co-payments. Note: Premiums are rounded averages. 16

17 Another Option: HSAs Recall: Health Net Small Group Region 5 PPO 30 Standard with a) $500/$1,000 deductible, b) $30 co-payments, c) 80%/50% coinsurance, d) $15/$30/$50 Rx copayment, e) out-of-pocket yearly maximum $3,500/$7,000, f) lifetime benefit maximum $5 million: Health Net, 2008 Monthly premium, Small Group Subscriber Empl. Empl. + Fam. <30 y $232 $ $287 $ $378 $ $514 $1, $631 $1, $831 $1,830 Compare: Health Net Small Group Region 5 PPO HSA 30 with a) $3,500/$7,000 deductible, b) $30 co-payments, c) 70%/50% coinsurance, d) $15/$30/$50 Rx co-payment, e) out-of-pocket yearly maximum $4,500/$9,000, f) lifetime benefit maximum $5 million: Health Net, 2008 Subscriber <30 y Monthly premium, Small Group Empl. Empl. + Fam. $96 $269 $127 $357 $186 $456 $218 $482 $281 $611 $352 $719 17

18 Average Annual Firm and Worker Premium Contributions HMO PPO POS HDHP/SO All Plans $4,299 $4,637 $4,337 $3,869 $4,479 $11,879 $12,443 $11,588 $10,693 $12,105 Worker Contribution Firm Contribution 18 Source: Kaiser Family Foundation & Health Research and Educational Trust (HRET). Survey of Employer Sponsored Benefits. (2007).

19 Tax Breaks for Employer Health Coverage Tax subsidies (U.S.): $209 billion or $1,585 per worker* (~$3,800 for family insurance) Regressive: High-wage subsidy = $2,525 per worker >$23/hour or $47,800/year Low-wage subsidy = $637 per worker <$10.43/hour or $21,700/year Average tax subsidies cover over 35% of premium costs Median household income, Los Angeles: $43,500 Source: Selden, T. & B. Gray. Tax subsidies for employment-related health insurance: estimates for (2006). Health Affairs, (25): 6.; U.S. Census Bureau. State and County Quickfacts. (2004). *These subsidies are per worker. Different (higher) amounts showing the same pattern exist per covered worker. 19

20 Average Federal Health Benefit Tax Expenditure By Family Income Source: Shells, J. and R. Haught. (2004). The cost of tax-exempt health benefits in Health Affairs, Web Exclusive. Retrieved March 31,2008 from 20

21 Covered CA Workers Plan Types Source: California HealthCare Foundation. (2007). California Employer Health Benefits Survey. 21

22 Recently in the Policy World: Kuehl, Schwarzenegger, Nuñez, Perata; Obama, Clinton, Edwards Fairness Shared responsibility with small business rules/exemptions Affordability and Leverage Premium subsidies based on income Purchasing pool, individual mandate Prevention Guaranteed issue Incentives for healthy behavior Efficiency, Effectiveness, & Quality 85% premiums to care P4P for Medi-Cal Scope of practice changes Transparency: HIT, PMR, data monitoring 22

23 Opportunity for Change Still Exists 1. Half the care and half the dollars are already in the system 2. High area of concern among opinion-makers, voting public, and interest from state and national government and elected officials and business New administration in White House Increasing bi-partisan representation of poor communities Consensus possible with a lot of hard work 4. Main St. coalitions for the uninsured possible and being built Small employers, chambers, doctors, hospitals, pharmacists, brokers, local plans, advocates, faith and CBOs 23

24 Obstacles Money Federal, state and local budget deficits National economy: recession, subprime mortgage failures Need for state participation, but little interest in local pilots 24

25 Kids first, parents second Next Steps FFP for Low Wage Working Adults, third Older Adults Very Young Adults Link public programs to low-wage employers whose premiums are a high percent of employee compensation and employer costs Agriculture, construction, garment workers, restaurants, tourism For more information, see ITUP s Help Your Employees Help Themselves! Public Health Insurance Options in California State and Los Angeles County Create and subsidize structures for the flex workforce 25

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