A View From A Blue: Reform Through Uninsured, Individual & Small Group Innovation New York State Health Foundation Reforming New York’s Individual Health Insurance Market November 17, 2008 Mark Wagar, President & CEO Empire BlueCross BlueShield (NY) Sr. VP, East Region, WellPoint, Inc. Company Confidential: Do Not Copy
Who are the uninsured in New York State? U.S. Uninsured New York Uninsured *Dollar figures based on family of four, using Federal Poverty Levels >~$63,600: <$21,200: 18% >$63,600: <$21,200: 24% (300% of FPL) 37% 33% (100% of FPL) (100% of FPL) (300% of FPL) $21,200-$63,600: $21,200-$63,600: 45% 43% (100-300% of FPL) (100-300% of FPL) The state of New York has done relatively well to insure lower income individuals compared with the rest of the country, but not as well for middle class people earning 300% of the Federal Poverty Level Data compiled from U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement, 2007; 2007-2008 Poverty Threshold, Federal Register, Vol. 73, No. 15, January 23, 2008, pp. 3971–3972. 2 Company Confidential: Do Not Copy
The growing burden of health care cost ������� Avg. Health Insurance Premiums and Worker Contributions for Family ����� Coverage, 1999-2008 �� ��!"� ������ ������ ����� ������ �� ��!"� ������ ������ ���� ���� ��������������������������������������������������������������� ��������������������������������������������������������������������� ��������������������� ������������������ ����������!� �������"�����������������#���!���$� ������������������� %&&&"'(()� 3 Company Confidential: Do Not Copy
Health care premiums – cost vs. administration Total health plan costs = 14% Admin, Tax & Consumer Compliance Plan Profits Servs 6% 3% 5% Outpatient Cost Other Medical 22% Services 6% Rx Drug Physician 16% Services Hospital Costs 24% 18% Payment for health care to providers 86% Source: AHIP, “The Factors Fueling Rising Healthcare Costs 2006” 4 Company Confidential: Do Not Copy
Treating the symptoms, not the disease As Prices Rise, Private Coverage Decreases 80% 70% 60% Percentage of Americans in private coverage 50% 40% Percent of family policies costing 30% over $12,000 per year 20% 10% 0% 2002 2003 2004 2005 2006 2007 5 Company Confidential: Do Not Copy
What, me pay for your coverage? • Small group policies in New York are among the most expensive in U.S. • 50% of NY small businesses do not provide coverage • 54% of employed uninsured work for firms with less than 25 employees Source: HealthConnect, Q4 2008, Downstate Small Group Rates 6 Company Confidential: Do Not Copy
Individual Market: If you build it – wrong – they may leave 120,000 110,432 100,000 72,822 80,000 In Thousands 1998 60,000 2008 41,298 37,610 31,152 40,000 20,000 10,146 0 HMO POS Total *2008 membership through June 30 7 Company Confidential: Do Not Copy
Revising Public Policy • Enact reforms which reduce the cost of coverage for both individuals and small businesses • Balance between private & government coverage • Create solutions for key uninsured • Individuals • small businesses • working poor 8 Company Confidential: Do Not Copy
Let’s expand coverage for the two most vulnerable markets Goal: Reduce the cost of coverage by at least 20% and increase the choice of products & policies for consumers. Summary: All reforms should be taken together to attain desired reductions in premiums. • Merge the small group, individual & Healthy NY markets • Community rate by product class with a fixed number of standard products • Create stop loss subsidy ($20,000) • Reduce 8.95% discharge tax on this population (to 4.48%) • Secure insurers commitment to reduce administrative expenses through an increase in the minimum medical loss ratio (80%) Company Confidential: Do Not Copy
Estimated premium rate impact of proposals ( state verification needed ) Change Individual Direct Small Group Pay 1. Merge Markets -29% +9% 0-10% 0% to +4% 2. Community rate by…(Net of 1 and 2) 3. Stop loss (Net -28% -18% of 1, 2 and 3 -30% -20% 4. Discount half of 8.95% tax Estimated Net -30% -20% Impact These savings are likely to be on the low side because… 10 Company Confidential: Do Not Copy
What Next? Start with individual market • With the State facing economic hardship, reform will need to come in stages • Allow affordable options in the individual market; fully fund DP stop loss • E.g., cigarette tax increase • Permit unique products for target populations • e.g., young invincibles • near seniors • temporary coverage • Target enrollment of the 1.1 million Medicaid eligible uninsured. • Look at other sources of revenue before moving to small group reform. 11 Company Confidential: Do Not Copy
Changes that improve care, health and affordability Quality and Safety Cost of Clinical Outcomes Pharmaceutical of Health Care Health Care Research Safety INTEGRATED RESEARCH NETWORK TRANSFORM HEALTH CARE DRIVE CHANGE IN THE DELIVERY SYSTEM COLLABORATIVE OUTCOMES ARCHITECTURE Health Care Insurance Market Comparative Complex Clinical Financing Reform Effectiveness Cost-of-Care • Antiquated, paper-based systems lead to inefficient and unnecessary care and expose patients to undue risk. • Reducing the cost of health care will make health insurance more affordable for those in the system and increase access for the uninsured. 12 Company Confidential: Do Not Copy
Reform: Focus on the delivery system • Need to address both cost and quality • Promote evidence-based quality medicine • Focus on prevention and manage chronic disease – pay primary care before it disappears • Improve effective use of drug therapies to prevent and manage illness • Reduce medical errors and adverse drug events • Pay those who deliver what we want – best practices • Provide information on variation – to all stakeholders • Benefits to provide consumer engagement • Expose fraud and abuse 13 Company Confidential: Do Not Copy
What is in the way of helpful reform? • Realism • Accountability • Expectance of share of change • Will to act • Articulation of complex problem • Everyone in this room 14 Company Confidential: Do Not Copy
Thank you. Company Confidential: Do Not Copy
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