Maryland Health Insurance Plan Analysis of Preexisting Condition Exclusion Buy Down Rider

Transcription

1 September 2009 Maryland Health Insurance Plan Analysis of Preexisting Condition Exclusion Buy Down Rider Richard Popper, Executive Director Frank Yeager, FSA, MAAA

2 Why do health plans impose preexisting condition exclusions? The traditional arguments for preexisting condition exclusion: To protect those who are insured, from bearing the sudden and significant cost from those who have been uninsured for lengthy period. Price of cost shift particularly significant for high risk pools: Uninsurable who qualify for risk pools more likely to incur higher plan costs, since pools created to receive adverse selection Risk pools have smaller capacity to absorb and spread new high risk, compared with large group plans, Medicare, Medicaid, SCHIP (individual market only 6 to 10% of insureds, while employer coverage is appx 75% of insureds) Prevents enrollment cycling (gaming) of people only purchasing individual coverage when they need it (pregnancy, knee surgery, hip replacement), and/or dropping coverage after treatment While group market and Medicare may not have preexisting condition exclusions, they do restrict enrollment or penalize uninsured (open season, qualifying events, late enrollment penalties in Medicare Parts B &D) 1

3 Most pools do not impose preexisting condition exclusion on those with recent prior coverage July 2009 GAO report 28% of 2008 risk pool enrollees are HIPAA eligible, and were automatically not subject to preexisting condition exclusion Other risk pool applicants not typically subject to preexisting condition exclusion in risk pools because they have creditable coverage, such as those coming off Medicare, Medicaid, SCHIP, spouse s plan, parents plan, conversion or individual policy 2

4 Background: Maryland and MHIP s History with Preexisting Condition Exclusion and Buy Down Rider Maryland s risk pool (MHIP) has a statutory mission to reduce uncompensated care Opened in 2003 with no preexisting condition exclusion for first 3 months, after which a 6 month preexisting exclusion was imposed After lackluster enrollment, Board elected to lift the preexisting condition exclusion on all applicants in No pre-ex imposed on any applicant for 3 years, thru June Enrollment grew by over 200%, to 11,000 members In 2007, MHIP Board sought state legislation to allow plan to offer purchase of optional rider to those otherwise subject to a pre-ex which removes the exclusion After enactment of pre-ex rider legislation, MHIP Board adopted a 2 month preexisting condition exclusion on new applicants who lacked recent prior coverage, or option to pay additional premium over standard rates for 6 months to buy down preexisting exclusion For , pre-ex buy down surcharge was 30% over standard pool rates, with lesser surcharge of 10% for those with income under 300% FPL (MHIP+ income subsidy). Plan enrollment continued to grow by 27% over next year For , preexisting condition exclusion extended to 6 months, buy down surcharge increased to 50% for standard pool members, and 30% for low income members. Premium surcharge paid for 1 year. For , buy down surcharge to be maintained at 50% for standard pool members, dropped to 10% for low income members under 200% FPL and 30% for those who are % FPL 3

5 Pre-ex Buy Down Structure MHIP Standard Rates and Preex "Buy Down" Rates - Both Vary by Income Standard Pool Rates for All Members 1 Year "Buy Down" Surcharge Regular Rates 22 to 32% above market 50% charge above standard pool rates MHIP+ Income Subsidy Rates individual FPL income Under 150% FPL - $16,245 61% below market rates 10% charge above income subsidy rates % FPL - $21,660 47% below market rates 10% charge above income subsidy rates % FPL - $32,490 18% below to 4% above market rates 30% charge above income subsidy rates 4

6 Applicant Selection of Pre-Ex Buy Down Option Buy Down premiums and rates clearly identified in MHIP application materials Application specifically asks applicant at signature line whether they wish to purchase buy down rider (yes/no question) Once enrolled, member cannot retroactively purchase preexisting condition Buy Down Most prevalent diagnosis among claimants purchasing Buy Down Musculoskeletal/connective tissue Respiratory/Circulatory Infectious and Parasitic Diseases Neoplasms Mental Health Half have no medical claims! 5

7 Introduction of Pre-Ex and Buy Down Has Not Suppressed MHIP Enrollment Demand & Growth MHIP Enrollment 20,000 15,000 14,754 16,505 10,000 5,000 6,246 8,758 11,236 0 June-05 June-06 June-07 June-08 June-09 Pre-Ex & Buy Down Begin 6

8 Background: Terminology and Data The MHIP fiscal/plan year extends from July 1 through June 30 Fiscal/plan year 2009 is July 1, 2008 through June 30, 2009 A short term subscriber is defined as one who enrolled in the plan and terminated within the same fiscal/plan year A long term subscriber is defined as one who enrolled in the plan prior to the middle of a fiscal/plan year (or in previous years) and was still enrolled at the end of the fiscal/plan year Short term and long term subscribers were compared to understand how costs differ between those who remain in the plan for shorter versus longer periods of time CareFirst, MHIP s plan administrator, provided enrollment data for all subscribers enrolled in MHIP at any point from 7/1/07 through 6/30/09, including: Termination dates, if applicable Means by which the subscriber entered the plan i.e. qualifying medical condition, HIPAA, HCTC, etc. This determined whether the subscriber was subject to the preexisting condition exclusion Whether the subscriber purchased the preexisting condition exclusion buy down rider CareFirst also provided records of all claims incurred 7/1/07 through 6/30/09 and paid through 6/30/09 7

9 Background: Data Limitations For fiscal/plan year 2009, the claims data does not provide adequate payment runout for claims incurred after March 2009 For fiscal/plan year 2009, analysis was limited to claims incurred from July 2008 through March 2009 and exposure data over the same period Creates difficulties in comparing some analyses for 2008 and 2009 Particularly in groups of short term subscribers, claims costs were measured for small groups of individuals Although logical patterns emerged, statistical credibility is an issue which could be resolved through longitudinal study 8

10 Findings Among short term subscribers subject to the preexisting condition exclusion, those who purchased the buy down rider had much higher plan costs than subscribers who did not purchase the rider 282% higher in FY08 188% higher in FY09 Plan Cost Comparison Among Short Term Subscribers Subject to Preexisting Condition Exclusion $35,000 $30,000 $29,882 $25,000 $20,000 $19,980 $15,000 $10,000 $5,000 $7,823 $6,949 $0 FY08 Purchased Rider FY09 Did Not Purchase Rider 9

11 Findings Plan Cost Comparison Among Subscribers Purchasing "Buy Down" Rider Among subscribers purchasing the buy down rider, plan costs were higher for short term subscribers than for long term subscribers Plan costs 60% higher for short term subscribers than for long term subscribers in FY08 $35,000 $30,000 $25,000 $20,000 $15,000 $29,882 $18,706 $19,980 $15,860 Plan costs 26% higher for short term subscribers than for long term subscribers in FY09 $10,000 $5,000 $0 FY08 FY09 Short Term Subscribers Long Term Subscribers However, large differences were also observed among short term and long term subscribers who were not subject to the preexisting condition exclusion (without buying the rider) Plan costs 38% higher for short term subscribers than for long term subscribers in FY08 Plan costs 116% higher for short term subscribers than for long term subscribers in FY09 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Plan Cost Comparison Among Subscribers Not Subject to Preexisting Condition Exclusion $13,910 FY08 $10,065 $20,398 FY09 $9,433 Short Term Subscribers Long Term Subscribers 10

12 Findings Among subscribers who purchased the buy down rider, long term subscribers greatly out-number short-term subscribers Approximately 5:1 in FY08 Approximately 10:1 in FY09 Suggests there was not extensive enrollment cycling abuse among those who purchased the rider More evident in FY09 than in FY08 Among subscribers entering MHIP in the first three months of FY09, 77% of subscribers who purchased the buy down rider remained in the plan at the end of FY09 Compares favorably to the 75% rate for the entire MHIP population Supports idea that there was not extensive enrollment cycling abuse among those who purchased the rider 11

13 Findings Among the short term and long term subscribers considered in these studies, take-up of the buy down rider increased significantly in FY09 5% of those subject to the preexisting condition exclusion purchased the option in FY08 26% purchased the option in FY09 Due to the extended exclusion period in FY09 (changed from two months to six months), and improved communication of the exclusion period in plan enrollment materials In FY09 plan cost for short term subscribers who purchased the buy down rider was nearly the same as for short term HIPAA eligibles who had prior continuous health coverage 12

14 Summary As expected, subscribers who choose to purchase a preexisting condition exclusion buy down rider are more expensive they create higher plan costs as both short term and long term subscribers However, the findings in this study suggest that perhaps contrary to intuition these subscribers are not more likely to exhibit gamesmanship in their plan enrollment Costs for long term subscribers who initially purchased the rider do not drop off any more significantly than for long term subscribers who were not subject to the preexisting condition exclusion On average, they remain enrolled in the plan as long as other subscribers 13

15 Technical Appendix: FY08 Analysis 2 month preexisting condition exclusion, 6 month premium buy down Annualized Plan Costs Per Subscriber* Short Term Subscriber** Long Term Subscriber*** Total Group $11,299 $10,440 Not Subject to Preexisting Condition Exclusion $13,910 $10,065 Subject to Preexisting Condition Exclusion $9,859 $10,736 Subject to Preexisting Condition Exclusion and Bought Rider $29,882 $18,706 Subject to Preexisting Condition Exclusion and Did Not Buy Rider $7,823 $10,465 Did Not Buy Rider - Regardless of Whether Subject to Preexisting Condition Exclusion $10,124 $10,285 *Plan costs are defined as plan-paid claims after subscriber cost sharing **Short term subscribers entered and left the plan during FY08 (July 2007 through June 2008) ***Long term subscribers entered the plan on 1/1/08 or prior and were present in the plan at the end of FY08 Short Term Subscriber* Long Term Subscriber** Total Group 670 8,753 Not Subject to Preexisting Condition Exclusion 234 3,837 Subject to Preexisting Condition Exclusion 436 4,916 Subject to Preexisting Condition Exclusion and Bought Rider Subject to Preexisting Condition Exclusion and Did Not Buy Rider 388 4,671 Did Not Buy Rider - Regardless of Whether Subject to Preexisting Condition Exclusion 622 8,508 *Short term subscribers entered and left the plan during FY08 (July 2007 through June 2008) **Long term subscribers entered the plan on 1/1/08 or prior and were present in the plan at the end of FY08 Subscriber Counts 14

16 Technical Appendix: FY08 Analysis Subject to Preexisting Condition Exclusion and Bought Rider / Not Subject to Preexisting Condition Exclusion Subject to Preexisting Condition Exclusion and Bought Rider / Subject to Preexisting Condition Exclusion and Did Not Buy Rider Subject to Preexisting Condition Exclusion and Bought Rider / Did Not Buy Rider - Regardless of Whether Subject to Preexisting Condition Exclusion Subject to Preexisting Condition Exclusion / Not Subject to Preexisting Condition Exclusion Comparison Ratios of Plan Costs Per Subscriber Short Term Subscriber* Long Term Subscriber** *Short term subscribers entered and left the plan during FY08 (July 2007 through June 2008) **Long term subscribers entered the plan on 1/1/08 or prior and were present in the plan at the end of FY08 15

17 Technical Appendix: FY09 Analysis 6 month preexisting condition exclusion, 1 year premium buy down Annualized Plan Costs Per Subscriber* Short Term Subscriber** Long Term Subscriber*** Total Group $16,006 $10,399 Not Subject to Preexisting Condition Exclusion $20,398 $9,433 Subject to Preexisting Condition Exclusion $13,019 $11,188 Subject to Preexisting Condition Exclusion and Bought Rider $19,980 $15,860 Subject to Preexisting Condition Exclusion and Did Not Buy Rider $6,949 $9,955 Did Not Buy Rider - Regardless of Whether Subject to Preexisting Condition Exclusion $14,482 $9,690 *Plan costs are defined as plan-paid claims after subscriber cost sharing **Short term subscribers entered and left the plan during the first nine months of FY09 (July 2008 through March 2009) ***Long term subscribers entered the plan on 1/1/09 or prior and were present in the plan at the end of FY09 Short Term Subscriber* Long Term Subscriber** Total Group ,676 Not Subject to Preexisting Condition Exclusion 185 4,753 Subject to Preexisting Condition Exclusion 304 5,923 Subject to Preexisting Condition Exclusion and Bought Rider 148 1,463 Subject to Preexisting Condition Exclusion and Did Not Buy Rider 156 4,460 Did Not Buy Rider - Regardless of Whether Subject to Preexisting Condition Exclusion 341 9,213 *Short term subscribers entered and left the plan during the first nine months of FY09 (July 2008 through March 2009) **Long term subscribers entered the plan on 1/1/09 or prior and were present in the plan at the end of FY09 Subscriber Counts 16

18 Technical Appendix: FY09 Analysis Subject to Preexisting Condition Exclusion and Bought Rider / Not Subject to Preexisting Condition Exclusion Subject to Preexisting Condition Exclusion and Bought Rider / Subject to Preexisting Condition Exclusion and Did Not Buy Rider Subject to Preexisting Condition Exclusion and Bought Rider / Did Not Buy Rider - Regardless of Whether Subject to Preexisting Condition Exclusion Subject to Preexisting Condition Exclusion / Not Subject to Preexisting Condition Exclusion Comparison Ratios of Plan Costs Per Subscriber Short Term Subscriber* Long Term Subscriber** *Short term subscribers entered and left the plan during the first nine months of FY09 (July 2008 through March 2009) **Long term subscribers entered the plan on 1/1/09 or prior and were present in the plan at the end of FY09 17