Small Group Insurance Market Gets Informed
Just in time for the end of the Legislative Session debate, DOI has released three reports dealing with the small-group health insurance market and exploring possible solutions to the unsustainable premium rates currently suffered by the market. All of the reports are available at www.mass.gov/doi.
Report #1: “Analysis of Individual Health Coverage In Massachusetts Before and After the July 1, 2007 Merger of the Small Group and Nongroup Health Insurance Markets,” evaluates the merger of our two markets. The report, referred to as the ‘short-term use report’ by some, highlights an unanticipated effect of the merger: carriers’ tendency not to use waiting periods for merged market coverage. The report focuses on whether, as a result of this trend, consumer behavior has changed such that claims costs have increased. It concludes that there are more “high-cost” individuals buying and then canceling coverage within 12 months (often after having expensive medical procedures) in 2008 than there were in 2006.
Before 2007, carriers consistently imposed either a waiting period or a pre-exiting condition limitation on new individual enrollees, rarely did so for small employers. After the merger, however, carriers stopped applying the limitations entirely. This has resulted in an increase in “churning” among individuals in the merged market.
The report recommends (1) “either establishing separate preexisting condition limitation/waiting periods or creating an open enrollment period specific to individuals” and (2) “strengthening the penalties in place now to increase the impact of the individual mandate”. Both the Governor’s and the Senate President’s Small Business health insurance bills recommend establishing an annual open enrollment period to decrease the churn.
While the data is helpful, there are still some unanswered questions specifically around where the individuals go when they leave a given carrier.
Report #2: The “Small Group Health Purchasing Cooperatives” report summarizes three months of discussions, hosted at the DOI between November 2009 and January 2010, about open-access purchasing cooperatives for insured coverage (also known as Association Health Plans; check out our blog here). Not surprisingly, the DOI’s report notes that “there continue to be wide differences of opinion about whether cooperatives should be permitted in Massachusetts”. Some representatives of small employers (like the Cape Cod Chamber of Commerce and the Retailers Association of Massachusetts) apparently voiced support for the creation of group purchasing cooperatives—contending that the integrity of the small group market could be protected and members would benefit from lower premiums. However, many employer groups, health plans, and health advocacy groups—including Health Care For All—argued against the creation of cooperatives out of concern that they will raise administrative costs; unfairly divide the market between the sick and the healthy; and ultimately fail to reduce health costs overall because they do not deal with the real cost drivers.
The report does not set forth a definitive recommendation on the creation of cooperatives and cooperatives are not a provision in the Governor’s Small Business Health Insurance bill. The report does list eight protections that “would be important” if group purchasing cooperatives were permitted.
Report #3: The “Small Group Health Premiums in Massachusetts” report proposes and critiques a wide variety of policy options to address rising health insurance costs for the small group market. The report presents numerous specific proposals, raised during the hearings, as possible ways of pursuing ten broad policy options: (1) creating more affordable small group products; (2) making adjustments to small group rating rules; (3) controlling small group market over-utilization; (4) eliminating anti-competitive forces; (5) improving claims handling; (6) increasing transparency; (7) standardizing authorization processes across HMOs; (8) standardizing billing and coding processes across HMOs; (9) standardizing HMO administrative processes; and (10) reducing burdensome administrative processes.
Under these categories are many ideas. Some are more beneficial to the market, and Massachusetts’ residents, than other. For example, there is a recommendation to eliminate anti-competitive forces by limiting profits of insurance and pharmacy companies; one to improve the claims handling process by encouraging providers filing claims on paper to file electronically; and one to standardize authorization processes and billing and coding practices.
These reports provide us with more of the information we all need to determine the best way to control small business and individual health insurance costs.