The Massachusetts Health Reform IAHU Presentation April 12, 2007 Adam Brackemyre Director of State Affairs National Association of Health Underwriters

2 The Massachusetts Reform Background The reform (it’s complicated) How would this reform work in Idaho?

3 MA Insurance Pre-Reform The MA nongroup market was guaranteed issue and community rated, and suffered from adverse selection High health care costs Generous MassHealth (Medicaid) program $1 billion uncompensated care fund  Partially funded by a Medicaid waiver  The waiver drove this reform- you will understand this statement in a moment

4 Massachusetts In April 2006, Gov. Romney signed major health insurance reform The motivation behind the reform was to preserve $385 million in annual federal funding (via a Medicaid waiver)  MA had to craft a plan that would reduce the number of uninsured to renew the funding  No reform, no money

5 Politics Former Gov. Romney is a Republican The Legislature is overwhelmingly Democrat Time was an issue  CMS had a waiver application deadline The Governor, Senate President and Speaker were able to agree on some compromises, but they left many important details to the regulatory process Regulators continue to fill in the details

6 Insurance Coverage Expansion Insurance coverage was expanded in three ways: 1. Private insurance sold through the “Connector” (over 300% FPL) 2. Subsidized “Commonwealth Care” insurance (100 to 300% FPL) 3. MassHealth (Medicaid) expansion

7 The Connector The Connector is a purchasing pool that will offer nongroup insurance to groups of 1-50  Small groups can purchase from the Connector or the traditional small group market  The nongroup market is the Connector Policyholders pay for the Connector’s operations through a policy surcharge All MA employers must establish a Section 125 plan so employees have the option to buy from the Connector Enrollment begins in May 2007

8 Connector Plans The plans were recently named the Gold, Silver and Bronze plans  The Bronze plan has the highest cost-sharing and lowest premiums. It is also the most basic plan that will qualify as minimal creditable coverage.  The Gold plan is “Cadillac coverage” The next slide shows individual premiums

9 Bronze Plan Premiums- Boston 19-years old35-39 years old56+ years old Neighborhood Health Plan $173.50$175.15$ Tufts Health Plan $230.36$241.68$ Harvard Pilgrim $206.83$288.31$ Blue Cross $252.35$275.31$ Includes prescription drug coverage

10 Gold Plan Premiums- Boston 19-years old35-39 years old56+ years old Neighborhood Health Plan $300.73$303.59$ Tufts Health Plan $387.57$406.61$ Harvard Pilgrim $418.54$583.41$ Blue Cross $432.45$471.63$864.89

11 Commonwealth Care Once fully operational, cost: $20 million/yr Utilize current Medicaid HMOs Sliding-scale subsidies provided for those earning less than 300% federal poverty level No Commonwealth Care product has a deductible. Co-pays vary by income. Monthly Sample Premiums (annual salary)  Single adult ($14,000) = $18/mo  Two adults, two children ($47,000) = $180/mo

12 Federal Poverty Level Bracket 100.1% to 150% 150.1% to 200% 200.1% to 250% 250.1% to 300% Single adult$18$40$70$106 One adult, one child $18$52$90$134 Two adults$36$80$140$212 Two adults, one child $36$92$160$240 Two adults, two children $36$104$180$268 Two adults, three children $36$116$200$296 Commonwealth Care Monthly Premiums

13 MassHealth (Medicaid) Children whose guardians earn up to 300% FPL are now eligible for MassHealth The reform restores adult dental, vision and chiropractic, prosthetic benefits cut in 2002 Medicaid payments to doctors and hospitals increase by:  $90 million in FY 07  $180 million in FY 08  $270 million in FY 09

14 Connector Commissions If an agent brings group risk to the Connector, he or she shall be compensated $10 PSPM  Mass AHU worked very hard to get agent compensation put into the legislation Previous legislation eliminated commissions from nongroup products  The Connector board had the opportunity to set a commission on nongroup products, but chose not to do so Individuals can buy directly from the Connector

15 Individual and Business Mandates All individuals will be required to have insurance by July 1, 2007  First-year penalty: Loss of personal tax exemption  Penalty thereafter: A fine equal to half the cost of the lowest-priced product Businesses (11+ employees) must offer a health insurance contribution  Businesses must offer to pay 33% of premiums or have 25% of the group accept coverage  Penalty for noncompliance: $295/yr per employee

16 Insurance Regulation Changes HSA-compatible plans available for HMOs Mandate-lite plans for those ages (young adult plans, or YAPs) Dependent age increased to age 27 Two-year moratorium on new mandated benefits

17 What We Don’t Know… How many people choose to remain uninsured and pay the penalty? How well will the reform contain health care cost increases?  Health insurance premium increases will mirror health care cost increases  The reform established a Cost-Quality Council, statewide infection control program, pay for performance  Expands preventive programs How effectively will MA track the health insurance status of its 6,500,000 residents?  Most states mandate auto insurance, but coverage is not universal Health and auto uninsurance rates are similar

18 Final Questions How much will this reduce bad debt and charity care?  If uncompensated care decreases, more dollars will be available for subsidies  About 100,000 more MA residents are covered, mostly through Medicaid and the Commonwealth Care Plan 1. Plan 1 is designed for the low income. No premiums. Minimal cost-sharing. Can universal coverage be achieved with the established budget?

19 Idaho Implications Will CMS approve a Massachusetts-like Medicaid waiver?  Federal money is necessary How many state dollars would be needed? Will policymakers want to duplicate the MA results?

20 Massachusetts vs Idaho Idaho  215,000 uninsured  Moderate health care costs  Median household income $45,000  Affordable nongroup market  No uncompensated care pool Massachusetts  550,000 uninsured  Very high health care costs  Median household income $54,500  Expensive nongroup market  $1 billion uncompensated care pool

21 MA and ID Comparison ID median household income is about 17.5% lower than MA ID has over twice as many uninsured per capita MA health care and insurance costs are much higher ID much more rural ID has a vibrant individual insurance market

22 Will It Work Here? The MA reform is not one-size-fits-all MA individual and small group products were guaranteed issue and community rated (rare)  ID uses rate bands ID and MA seem to have some major differences (income and percentage of uninsured)  Will the numbers work?  ID needs to find subsidies for much larger portion of the population than MA and create a subsidization pool (MA had the uncompensated care pool)

23 Some States May Look to Add MA Reform Components Implement an individual mandate  Must define what people must buy to meet the mandate This can affect both fully and self-funded plans  Must have subsidies to help the lower income meet the mandate  Must define penalties for noncompliance  Must create some way to monitor health insurance status

24 Massachusetts Components Implementing a stand-alone Connector  Merge the small group and individual markets?  Allow a small group market outside of the Connector?  How will the products be rated? Include health status?  If the individual market is included, will this affect the high risk pool?  Who determines agent commissions?

25 Final Observations People are uninsured for different reasons  Don’t see the value in the product  Cannot afford it Nationally, about 20 percent of the uninsured could afford insurance, but do not buy it There is pressure to expand public program eligibility, but many could be covered now:  Between 25 to 33 percent of the uninsured are eligible for public programs (CHIP and Medicaid), but not enrolled

26 NAHU Supports There is no “silver-bullet” solution Medical underwriting & rate bands High-risk pools Flexible benefit designs to meet consumer choice Price transparency and wellness Targeted tax incentives and subsidies We have created a “Real Choice” Working Group to update NAHU’s solutions for the uninsured.

27 Contact information If you would like to reach me: Phone (703)