Benefit Trends in Minnesota’s Small Group and Individual Health Insurance Markets State Health...

Benefit Trends in Minnesota’s Small Group and Individual Health Insurance

Markets

State Health Research and Policy Interest Group MeetingJune 24, 2006

Elizabeth Lukanen

Senior Research Economist

Health Economics Program

Minnesota Department of Health

Outline

• Why Monitor Benefit Structures in the Private Insurance Market?

• Data Source• Changes in the Benefit Structures of the Small

Group and Individual Markets• Evaluating Coverage Adequacy:

• Method 1: Benchmark System• Method 2: Weighted Points System

Why Monitor Benefit Structures in the Private Insurance Market?

• In 2004, the growth in per person premiums in Minnesota and in the Nation was 11.2%

• Cost pressures may lead to a shift in enrollment to plans with higher levels of enrollee cost sharing

• Higher cost sharing may discourage people from seeking care when they need it and disproportionately affects high users of care such as the elderly and chronically ill

Source: MDH Health Economics Program and The Kaiser Family Foundation and Health Research andEducational Trust, “Employer Health Benefits: 2004 Annual Survey,” September 2004.

Data Source

• Survey of health plans in the Minnesota’s small group and individual market with an earned premium of greater than $5 Million

• Information was collected on each plan offered by the company

• Surveys were conducted in 2002 and 2005

• Small group and individual markets were targeted because of historic concerns about adequacy

• Mandatory rate filing in the small group and individual market acts to limit the number of plans offered

• Use of administrative data to assess adequacy of benefits is unique and different from other studies

Changes in the Structure of Cost Sharing and Benefit Levels in Minnesota’s Small Group and Individual Health Insurance Markets, 2002 to 2005

Per Person Annual Deductibles in the Small Group Market, 2002 to 2005 (by share of total enrollment)

Source: MDH, Health Economics Program* For plans with separate deductibles for drugs, the limits are combined. Median calculation excludes enrollees with no deductible

2002 2005

Range: $100 to $2,500 Range $100 to $5,000

Median: $500 Median: $500

No Deductible 65.6% 52.1%

Less than $500

16.1% 16.5%

$500 to $999 11.9% 16.9%

$1,000 to $1,999 6.2% 10.3%

$2,000 or More 0.2% 4.2%

100.0% 100.0%

Office Visit Cost Sharing Requirements in the Small Group Market, 2002 and 2005 (by share of total enrollment)

Source: MDH, Health Economics Program

2002 2005

None 2.0% 4.2%

Copayment 68.9% 89.0%

Tiered Copayment 0.0% 0.3%

20% Coinsurance 27.3% 5.7%

Other Coinsurance 0.1% 0.5%

Copayment and Coinsurance 1.7% 0.4%

100.0% 100.1%

Distribution of Office Visit Copayments in the Small Group Market, 2002 and 2005 (by share of total enrollment)

Source: MDH, Health Economics Program*Includes only enrollees who have an office visit copayment.

75.5%

4.2% 1.9%2.9%

55.5%

30.0%

7.2%11.2%

4.6%7.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

$10 $15 $20 $25 Greaterthan $25

20022005

Cost Sharing Requirements for Hospitalizations in the Small Group Market, 2002 and 2005 (by share of total enrollment)


2002 2005

None 41.4% 30.2%


Other Coinsurance 2.5% 5.5%

Copayment and Coinsurance 5.3% 1.1%

Other 1.0% 0.1%

100.0% 100.0%

Per Person Annual Deductibles in the Individual Market, 2002 to 2005 (by share of total enrollment)

Source: MDH, Health Economics Program* For plans with separate deductibles for drugs, the limits are combined. Median calculation excludes enrollees with no deductible

2002 2005

Range $50 to $10,000 Range $50 to $10,000

Median $1,000 Median $1,700

None 2.0% 2.4%

Less than $500 4.4% 2.9%

$500 to $999 19.0% 12.2%

$1,000 to $1,999 39.3% 40.8%

$2,000 to $2,999 19.0% 24.8%

$3,000 to $3,999 2.9% 5.6%

$4,000 to $5,999 6.2% 8.8%

$6,000 or More 1.2% 2.2%

Per Illness 6.0% 0.4%

100.0% 100.0%

Office Visit Cost Sharing Requirements in the Individual Market, 2002 and 2005 (by share of total enrollment)


2002 2005

None 25.8% 37.6%

Copayment 5.5% 0.9%



Coinsurance Greater than 20% 0.8% 0.8%

Other 1.5% 0.0%

100.0% 100.0%

Cost Sharing Requirements for Hospitalizations in the Individual Market, 2002 and 2005 (by share of total enrollment)


2002 2005

None 8.0% 26.1%

Copayment 0.8% 0.4%



Coinsurance Greater than 20% 1.0% 10.1%

Other 4.0% 0.4%

100.0% 100.0%

Methods for Assessing Adequacy of Health Care Coverage

• Method 1: Benchmark System

• Method 2: Weighted Point System

Method I: Benchmark System

• 4 measures were chosen to evaluate the plans• deductible, cost sharing for hospitalization, out-of-pocket

(OOP) maximum and lifetime limit

• 5 standards of adequacy were constructed using combinations of the 4 measures

• To meet a standard, plans had to meet or exceed all measures within that standard

Benchmark System

Standard

A

Standard

B

Standard

C

Standard

D

Standard

E

Deductible None < $500 <$1,000 <$2,000 <$3,000

Coinsurance for Hospitalization

None None <=10% <=20% <=20%

OOP Maximum <=

$1,000

<=

$1,500

<=

$2,000

<=

$3,000

<=

$4,000

Lifetime Limit None >= $3 Million

>= $3 Million

> $2 Million

= $2 Million

Method II: Weighted Points System

• 4 measures were chosen to evaluate the plans• deductible, cost sharing for hospitalization,

out-of-pocket (OOP) maximum and lifetime limit

• 5 standards of adequacy were constructed using combinations of the 4 measures

• Measures and standards were assigned weights• Plans were awarded points based on each

measure • Points were summed across all measures for a

final score

Weighted Points System

Standard

A

Standard

B

Standard

C

Standard

D

Standard

E

WEIGHT 5 4 3 2 1

Deductible 3 None < $500 <$1,000 <$2,000 <$3,000

Coinsurance for Hospitalization

2 None None <=10% <=20% <=20%

OOP Maximum 4 <=

$1,000

<=

$1,500

<=

$2,000

<=

$3,000

<=

$4,000

Lifetime Limit 1 None >= $3 Million

>= $3 Million

> $2 Million

= $2 Million

Small Group Market Coverage Adequacy Evaluated Using Benchmark Alternatives, 2002 and 2005

2%

17%

28%

93% 96%

1%

17% 20%

92% 96%

0%

25%

50%

75%

100%

Standard A Standard B Standard C Standard D Standard E

% o

f en

rollm

ent t

hat m

eets

or

exce

ed s

tand

ard

2002 2005

Source: MDH Health Economics Program

more adequate ---------------------------------------------less adequate

Small Group Market Coverage Adequacy Evaluated Using the Points System, 2002 and 2005

36%

48%

0%1%

16%

0%3%

19%

49%

29%

0%

25%

50%

75%

100%

40+ 30 to 39 20 to 29 10 to 19 0 to 9

2002 2005



Individual Market Coverage Adequacy Evaluated Using Benchmark Alternatives, 2002 and 2005

0% 0% 0%

63%

85%

0% 0% 0%

47%

69%

0%

25%

50%

75%

100%

Standard A Standard B Standard C Standard D Standard E

% o

f en

rollm

ent t

hat m

eets

or

exce

ed s

tand

ard

2002 2005



Individual Market Coverage Adequacy Evaluated Using the Points System, 2002 and 2005

0%

28%

4%

29%

39%

6%

32%41%

21%

1%0%

25%

50%

75%

100%

40+ 30 to 39 20 to 29 10 to 19 0 to 9

2002 2005



Conclusions

• In Minnesota, enrollees in the small group market have more generous health care coverage than those in the individual market

• Both markets have seen enrollment shift to plans with higher deductibles and higher out-of-pocket limits

• Surveying health plans yields more complete and reliable results and is relatively inexpensive

• The methods used to measure adequacy are subjective, but allow a comparison of plans across multiple benefit criteria simultaneously

• More research needs to be done to assess the impact of increased cost sharing on enrollees

Contact Information

Elizabeth LukanenSenior Research EconomistHealth Economics ProgramMinnesota Department of Health

Email: [email protected]: (651) 201-3557

Health Economics Program website:http://www.health.state.mn.us/healtheconomics

Benefit Trends in Minnesota’s Small Group and Individual Health Insurance Markets State Health...

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