اصلاحات بازار بیمه سلامتی دولتی و دسترسی به بیمه برای کارکنان در معرض خطر

A specific focus for state regulations of the small group insurance market was to increase offers and stabilize premiums for firms with high-risk workers. We examine the effect of reforms implemented from 1993 through 1996 on the likelihood of employer sponsored insurance coverage. We find that packages of reforms that included both guaranteed issue of some products and some form of rate variance restriction had significant positive effects (4.5 percentage points) on ESI coverage for high-risk compared with low-risk workers within small firms and a small negative effect (−1.7 percentage points) on low-risk workers in small compared with large firms. The mechanism for these effects was an increase in take-up, rather than offer. Reform packages that included both guaranteed issue of all products and rate variance restrictions had similar effects overall, although they did not meet criteria for significance. These effects seemed to act through increased offer rather than take-up.

Employment based health insurance is the largest source of insurance coverage for Americans. In 2002, 64.2% of non-elderly Americans had insurance through their own employer, or received coverage as a dependent through the employer of their spouse or parent (Fronstin, 2003). However, many Americans who are workers or linked to workers lack insurance coverage, suggesting that the system of employer sponsored insurance (ESI) has important gaps. Overall, 43.3 million Americans lacked health insurance coverage in 2002, and 83% of the uninsured were in a family with a worker (Fronstin, 2003). Workers in small firms are particularly disadvantaged in their ability to obtain ESI. For example, only 54% of workers in the smallest firms (fewer than 10 employees) work for employers that sponsor ESI coverage, compared with 95% for workers in firms with 100 or more employees. Although only 34% of workers are employed at firms with fewer than 100 workers, 62% of uninsured workers are at these smaller firms (Garrett, 2004). In the late 1980s and early 1990s, concerns were raised about insurer practices with respect to small firms that were thought to affect access to coverage. Small firms faced higher premium rates because fixed administrative costs were spread over a small number of persons. However, in the absence of regulation, small firms were also subject to other differences. Many insurers refused to offer insurance to small firms due to the size of the potential risk group and the inherent instability within the risk group over time. When insurance was offered, detailed medical underwriting for small firms was often used to identify workers and dependents with high expected costs. The presence of such workers increased premiums for the firm relative to the average. These elevated premiums discouraged employers from offering coverage and could reduce take-up by employees in small firms that did offer. In addition to relatively high premium rates, small firms were subject to very steep increases in premiums after one or two years, once pre-existing condition restrictions expired. Thus, even when small firms offered coverage, it was common for them to change insurers frequently, and employees may have dropped coverage as premiums increased. In an effort to improve the climate of access to insurance for small firms and their workers, states implemented a variety of regulatory reforms starting in the early 1990s. In most states, firms with fewer than 50 employees were the target for these reforms. A specific focus of the reforms was to improve the ability of firms with high-risk workers to get offers of coverage with relatively stable premiums by broadening the risk pool. By high-risk workers, we mean workers in a family where some member has a chronic health condition likely to result in high health care expenditures. These reforms preceded the small group market reforms that were mandated by the federal Health Insurance Portability and Accountability Act (HIPAA) in 1996, and in many states they continue to be more restrictive than the reforms mandated by HIPAA, and hence are still relevant to current policy. The reforms generally fall into one of two main categories: issue reforms, which affect which firms must be offered insurance and what packages must be offered by insurers, and premium variance restrictions, which affect the prices insurers may charge. Issue reforms are designed to make insurance coverage easier to obtain for small groups. Four major types of issue reforms were implemented during the early 1990s: • Guaranteed issue requires insurers to issue some or all health insurance plans to any small employer group willing to purchase, regardless of the medical history or claims experience of the group. During the study period, most states required plans to offer only two health plans, a basic plan (with high deductibles and/or stringent coverage limits) and a standard plan, whereas other states required insurers operating in the small group market to offer all products. The HIPAA legislation passed in 1996 mandated the latter policy. • Guaranteed renewal requires insurers to renew all insurance policies, regardless of the claims experience, as long as premiums are paid in a timely manner. • Limits on pre-existing condition restrictions. Insurers prefer to limit coverage of conditions that were diagnosed prior to purchase of the policy. Policies generally specify a window of time prior to purchase (a “look back” period), and also specify a period of time during which treatment of the identified condition is excluded (a waiting period). Reforms generally limit the length of both the look back and the waiting periods. • Portability reforms allow continuously insured individuals to change group insurance plans without incurring a new period of exclusion for pre-existing conditions. The goal of premium variance restrictions is to achieve more affordable and predictable premiums, particularly for higher risk groups, by limiting the degree to which insurers can vary premiums across groups. Within the industry, the process of setting a premium is called “rating,” and so the terms for specific premium reforms include that term. There are two major types of rating restrictions: • Community rating is the most stringent and requires insurers to offer the same rate to all groups, regardless of demographic composition or medical history. Modified community rating, much more common, permits variation in rates using some demographic characteristics (e.g. age and gender), but not health status or claims experience. • Rate bands allow insurers to set rates on the basis of demographics, health status, or claims history, but limit the ex post amount of variance among premiums within each allowed rating category or overall, for the same product. For example, states might require that policies for a particular product vary by no more than 25% above or below an index rate. States differ in the amount of variation that is permitted, but also in how the index rate is defined, and whether rating is done for the entire insured group or for a subset “book of business” (Hall, 2000). For this reason, it is difficult to compare how binding these rating bands are across states. All of these insurance market reforms have the effect of forcing more risk pooling than the unregulated market would accomplish. Furthermore, reforms, especially premium variance restrictions, are basically symmetric, meaning that they limit equally the degree to which premiums can vary above or below a designated standard, yet actual and expected expenditures are highly skewed, with a small number of high cost persons accounting for a disproportionate share of spending. This has the practical effect of increasing the average premium for plans offered, as it increases access. Premiums are lowered for the relatively few firms with many high-risk workers while premiums are raised for the many low-risk groups and individuals (Nichols, 2000). Thus, reforms naturally produce a tradeoff, about which policy value judgments differ, and the net coverage effects are unpredictable a priori. Relatively little is known about the impact on insurance coverage of the reforms passed during the early 1990s. Understanding their impact remains highly relevant, particularly for high-risk workers in small firms, as states still vary with respect to the total packages of reforms despite the HIPAA mandates. Early studies, such as the study by Marstellar et al. (1998), Sloan and Conover (1998), and Zuckerman and Rajan (1999) examined effects on insurance coverage specifically for workers or uninsurance rates overall. These studies found little to no effect of reforms overall. However, more recent studies have begun to examine whether there are differential effects on groups with different risk status. We review them in detail in Section 2.3 below. In this study we examine the effect of insurance market reforms on the likelihood that high-risk workers in small firms are offered and are covered by ESI. We pool data from the National Health Interview Survey (NHIS) from 1993 through 1996 to obtain data on health status, insurance coverage, demographic and employment related information for over 100,000 workers. We designate high-risk workers using unique information on the presence of chronic health conditions for the worker and family members. We isolate the effects of market reforms on insurance coverage using a difference-in-differences-in-differences approach, based on the technique used by Gruber (1994). This allows us to estimate the effects of reform on high-risk workers in small firms, using low-risk workers in small firms and workers in large firms as comparison groups. We find that packages of reforms that included both guaranteed issue of some products and some form of rate variance restriction had significant positive effects (4.5 percentage points) on ESI coverage for high-risk compared with low-risk workers within small firms and a small negative effect (−1.7 percentage points) on low-risk workers in small compared with large firms. The mechanism for these effects was an increase in take-up, rather than offer. Reform packages that included both guaranteed issue of all products and rate variance restrictions had similar effects overall, but seemed to act through effects on offer rather than take-up. The remainder of the paper is organized as follows: in Section 2 we provide background, discuss the hypothesized effects of insurance market reforms and summarize findings from the most recent literature; in Section 3 we discuss the estimation approach; Section 4 describes data sources and measurement; Section 5 presents results; Section 6 includes discussion and conclusions.

In this analysis, we test whether state private insurance market reforms had a differential effect on coverage for workers with high-risk families in small firms. Our findings suggest that reforms had small positive effects on ESI coverage for the target group of high-risk small firm workers, but had unintended negative side effects for low-risk workers in small firms. Reform packages that combined guaranteed issue of some products with premium variance restrictions had positive effects on high-risk workers in small firms, relative to low-risk workers. However, reforms also had an unintended negative effect on coverage for low-risk workers in small firms, particularly relative to workers in large firms. Reform packages that combined guaranteed issue of all products with premium variance restrictions had effects that were in the same direction, but smaller in magnitude and were not significant. In general, the magnitude of the effects was quite small. Reform packages that include premium variance restrictions and guaranteed issue of some products tended to have significant effects on take-up of ESI. In contrast, the strong reform package, with guaranteed issue of all products, results in significant effects on offer. This pattern is consistent with the expectation that strong reforms force insurers to raise premiums more than medium reforms, and this reduces take-up. Our findings are roughly consistent with Simon (2002) and Monehit and Schone (2003). In addition, our findings on the protective effects of high-risk pools for low-risk small firm workers are consistent with results from the Marstellar et al. (1998) study. The results suggest that the high-risk pool acts as a safety valve for insurers, reducing the number of very high cost individuals in the private market. These results have implications for the impact of HIPAA on access to insurance for small employers. HIPAA required states to mandate that insurers offer all insurance products to small employers. This requirement would have resulted in a shift from medium to strong reforms for 27 states, according to our hierarchy; eight states would have shifted from having only weak or no reforms to having strong reforms, and four states would shift from weak or no reforms to medium reforms. Since our results suggest that strong reforms have smaller effects than medium reforms, HIPAA may actually have resulted in some loss of coverage for small firm workers. Offer likely increased, but take-up likely suffered. Chollet et al. (2000) come to a similar conclusion about HIPAA's effects. A limitation to our analysis is that we use discrete groupings for the reform measures. Since states vary dramatically with respect to how they specify the permitted width of rating bands, our estimates represent an average effect of the reform packages actually implemented by states. With a more continuous measure of rate band widths, we might be able to draw some conclusions about the relationship between this aspect of risk pooling and coverage. Creating a meaningful index of rating restrictions is exceedingly difficult to do well, however, since allowable rating factors as well as the width of bands vary considerably by state. Another potential limitation is that our analysis presumes that state policies are exogenous; failure of this assumption would result in biased estimates of the effects of reforms. Simon (2002) addresses this issue explicitly, finding no correlation between state specific levels of ESI coverage for small firm workers and the likelihood that various regulations would be implemented. A related limitation is that we measure policy implementation by the states, but do not qualify with information on enforcement of policies. If enforcement of policies is randomly allocated across states that have implemented policies, measurement error is introduced, and the estimated effects of reforms will be biased downwards. However, if states with greater concern about access to ESI for high-risk workers are more likely to enforce regulations, then Simon's analysis concerning endogeneity of state policy does not adequately address the issue. One of the difficulties faced in attempting to conceptualize and evaluate the effects of insurance market reforms is the absence of information on how high-risk workers are distributed across individual small firms. High-risk workers may be distributed randomly across firms, or there may be some sorting of workers by risk type, so that high-risk workers are clustered in a subset of firms. Firms might attract (or discourage) high-risk workers through various benefit policies, such as flexible leave, or through informal policies that make a work environment more or less supportive. Furthermore, workers may sort themselves based on preferences for ESI. This issue of homogeneity of workers within firms is important because the degree of sorting may determine how disadvantaged high-risk workers are in the absence of reforms, and the effect of reforms on the likelihood of ESI coverage. To the extent that risk is distributed randomly, then the number of high-risk workers will be very limited in most small firms, and these workers may not be at a particular disadvantage relative to low-risk workers in the same firms. To the extent that reforms increase premiums for small firms generally, then these isolated high-risk workers will be hurt to the same extent as low-risk workers. However, if high-risk workers are clustered within firms, then they are more likely to be disadvantaged in the absence of reforms, and reforms are more likely to have a positive effect on offers and reduce premiums relative to the pre-reform state. In this analysis, we have information on worker risk status and firm size, but we do not know whether that worker is in a firm with many other high-risk workers, or may be the isolated high-risk worker, and no data set contains such information. Since one can imagine opposite effects of reforms depending on how the high-risk workers are distributed, this may explain why we do not find larger effects on high-risk workers. This analysis may also indicate that while small group insurance market reforms forced additional pooling across small firms, the degree of pooling remained insufficient to protect the insurance opportunities for high-risk workers. It may be that expanded pooling across a broader population, i.e., including small firms in the large firm rating pool, would have been more successful at increasing access for the high-risk worker while imposing more modest premium increases on the healthy. Based on the results for low-risk workers in small firms, it seems that a fundamental failing of the reforms is that they did not address the higher premiums faced by all small firms relative to large firms. Increasing risk pooling across small firms does not address the higher administrative costs, nor the risk associated with insuring a particular firm. The development of alternative strategies for more broadly spreading risk across the full population of insured workers and dependents could be useful in addressing these problems and should be a focus for policy related research in the future.