Covering the Uninsured: Blue Plan Initiatives NGA Governors’ Health Policy Advisors Retreat September 4, 2003

1 Overview Blue initiatives to keep health care affordable and reduce the uninsured Research and efforts to slow healthcare cost drivers Specialized, innovative products Legislative solutions

2 Growth in health insurance premiums Source: Kaiser Family Foundation/Health Research and Educational Trust, Employer Health Benefits Survey, 1999 and 2001; Abelson, t., “Hard Decisions for Employers as Cost Soar in HealthCare,” The New York Times, Healthcare Costs Are Rising

3 Blue Research on Cost Drivers Blue research assessed the primary healthcare cost drivers Contributions to Private Insurance Spending Growth, 2002 Physician Prescription Drugs Hospital Outpatient 27% 22% Source: Center for Studying Health System Change, “Tracking Health Care Costs,” % 14% Hospital Inpatient

4 Efforts to Slow Drivers: Examples Encourage use of generic drugs Consumer education campaigns to increase confidence in generics –One Plan reports $17M saved from 1% increase in generics use Provider outreach, including free samples of generics

5 Efforts to Slow Cost Drivers: Examples National Launch: June 26

6 Specialized Blue Products Low cost uninsured products Consumer-driven products Special coverage for low-income children TAA tax credit products

7 Low Cost Uninsured Products Many Blue Plans developing new low cost products Shaped by local market conditions MontanaLouisiana Designed For Uninsured (6 months) low-income individuals Small groups not offering coverage Benefit Design No deductible, normal co- payment Major medical coverage including Rx Maximum annual benefit limit PPO or traditional indemnity Higher/separate deductibles for services (in/outpatient) and Rx Normal co-insurance Comprehensive coverage including Rx Community Partnership Deep discounts with providers Reduced broker commissions Reduced Plan revenues Leverage existing provider network Premiums Approximately 40% lower Up to 45% lower

8 Consumer-Driven Products Many Plans introducing consumer-driven products -- wide range of approaches Example Designed For Small Employers Benefit Design Employer selects group of products for employees to choose (HMOs, PPOs, with choice of deductibles/ co-payments) Online decision tool helps employees to evaluate options Funding Employer contributes fixed amount per employee Employee can contribute pre-tax dollars towards coverage or uncovered costs Advantages Employee has greater choice over coverage Employee gets tax advantage

9 Special Coverage for Low-Income Children Some Blue Plans provide subsidized coverage for low-income children ineligible for SCHIP Blue Coverage for Low Income Children Designed For Low-income children ineligible for SCHIP Income threshold typically % FPL Benefit Design Benefits vary based on local needs First dollar coverage (no deductible) with some cost sharing (co-payments) to control utilization Partnerships Funded with business and community donations Providers accept lower fees to reduce uncompensated care costs

10 TAA Tax Credit Products Blue Plans also developing products qualified for purchase with new TAA tax credit TAA Tax Credit Products Designed For Individuals eligible for new TAA tax credit Partnership Involves close cooperation between Plan and states Availability Special Blue product offered in 9 states (2 pending) Advantages Utilize 65% credit for health coverage premium for eligible individuals and dependents Unique advance payment system uses credit to pay premiums as they are due

11 Legislative Solutions: BCBSA Supports Tax credits for low-wage workers in small firms –About half are uninsured in very small firms –Several bipartisan bills include these credits Revisions to McCain-Schumer to speed access to generic drugs –Included in Medicare reform bills Medical malpractice reform

12 Legislative Solutions: BCBSA Opposes Exempting AHPs from state law/oversight –Increase premiums by 23% (Mercer) –Increase uninsured by 1 million (Mercer) –High-risk pool funding evaporates (Groom Law) –Results in widespread MEWA-like fraud and abuse (Eleanor Hill) Increasing cost of health coverage with additional mandates

13 Wrap-Up Keys to ensuring access and affordability Targeted, innovative products Partnerships with other stakeholders Consumer information/incentives to promote cost- conscious decisions Subsidies/incentives for key segments of uninsured Avoid problematic solutions and costly new mandates