Jenny Hamilton: Senior Health Policy Coordinator Governor’s Office of Financial Management

1. The Reinsurance Project:A Washington State Perspective Jenny Hamilton: Senior Health Policy Coordinator Governor’s Office of Financial Management Pete Cutler: Deputy Commissioner for Policy Office of the Insurance Commissioner SCI Reinsurance Institute Meeting: July 19, 2007

2. The conversation for today… • Context • Problem we’re trying to address • A few Washington facts • Interest in reinsurance grew over time • Relationship to 2007 Legislative action • A few lessons • Sample ongoing questions • The bottom line • Appendices – supplemental information for reference SCI Reinsurance Institute Meeting: July 19, 2007

3. The problem we’re trying to address Affordability is the primary challenge for small employers to increase their offer of coverage and employees to accept it, for high-cost and self-employed individuals, and for low-income families …parallel sustainability issue for government SCI Reinsurance Institute Meeting: July 19, 2007

4. A few Washington facts for context • Total population – 6.5 million (2007) • 3 carriers dominate private market – Premera, Regence, Group Health • Small group market (2-50) (~300K), AHPs (~250K) • Individual market (~250K), high-risk pool (~3.3K) (WSHIP) • Basic Health – state-funded program for individuals up to 200% FPL (~106K) • The uninsured* are mostly: • Poor or near-poor (~67% / 398K) • adults up to 200% FPL • children up to 250% FPL) • Members of working families • self-employed 34% /~198K • employed by large firm 14% /~80K • employed by small firm 25% ~150K; • unemployed 27% / ~162K • Young adults age 19-25 (~30% / 176K) * Based on the 2006 State Population Survey approximately 590K individuals (10.4%) of Washingtonians age 0-64 SCI Reinsurance Institute Meeting: July 19, 2007

5. Why Affordability? Because Premium Increases Continue To Outpace Annual Growth in Employee Wages & Small Business Income SCI Reinsurance Institute Meeting: July 19, 2007

6. Resulting in small employer enrollment decrease SCI Reinsurance Institute Meeting: July 19, 2007

7. Interest in Reinsurance grew over time... • Task force follow-up to individual market reform (2001) • Insurance Commissioner’s long-term interest in securing coverage for high cost individuals – modeled a reinsurance proposal in 2005 (too much too soon) • 2006 Blue Ribbon Commission (BRC) interested in equitable roles for employers, individuals, and the State; addressing affordability for high-cost individuals via reinsurance or high-risk pool (see www.insurance.wa.gov/publications/health/2118-Report_Reinsurance5.pdf) • “New” Governor’s initial commitment to helping small business provide affordable coverage – follow-up road tour • State Planning Grant work on the uninsured (began 2001) led to Small Business Assist project (Fall 2005) (reinsurance & Basic Health) (see Appendix 1) • Legislative interest in 2006 (didn’t pass) • Reinsurance Institute project = technical assistance to inform policymakers • Reinsurance debated in 2007 Legislature as one strategy to meet many goals SCI Reinsurance Institute Meeting: July 19, 2007

8. Relationship to 2007 Legislative action • BRC (SB 5930); Connector (HB 1569); Cover all children (SB 5093) • Public expansion for children • Washington Health Insurance Partnership (connector) • Phase 1 – small employers with low-income employees (Sep 08 premium assistance) • Phase 2 – add individual and remaining small group market (Dec 08 study & report) • Phase 3 – add high risk pool, Basic Health, public employees, individual mandate for adults (Sep 09 study & report) • “consider options to reduce uncertainty for carriers and provide for efficient risk management of high-cost enrollees through risk adjustment, reinsurance, or other mechanisms” • BRC key initiatives: • Support for Governor’s “Big 5” strategies to improve health care, reduce cost • Future planning - Strategic Health Planning Office • WSHIP enhancements • BRC reinsurance feasibility study / design(see appendix 2) • Debate included publicly-funded reinsurance program for small employers with at least 30% employees < $30,000

9. A few lessons • Good public policy-making takes time - people must be ready, money must be available, politics must be aligned • Engaging consultants as experts increases likelihood of being “heard” • Neutral policy positioning encouraged “well rounded” input • Carriers’ provided input to benchmarking; don’t agree on value of reinsurance • High risk pool tracking progress • Clarifying terminology makes a world of difference • This is about “public” reinsurance, i.e., new money in the system • Have you modeled what you think you’ve modeled? What you need? • Managing expectations is an ongoing struggle – tools help (seeappendix 3) • Expectations need to be realistic… some weren’t, some still may not be • What are the goals - reinsurance not a panacea for the uninsured • Modeling scenarios can easily get way out of hand (market, target population, benefits, reinsurance structure) – we’re attempting sensitivity extremes SCI Reinsurance Institute Meeting: July 19, 2007

10. Sample ongoing questions • How best to translate results to inform evolving policy-makers needs? • “Mini-model” to ball-park % costs/ % pop to potentially reinsure • Examples of “desirable” information based on modeling • Every $X invested by the State brings in $Y from employers & $Z from individuals • Every $X invested by the State lowers health premiums by $Y (or z%) • It costs the State $X to insure 1,000 previously uninsured individuals. How would this compare with other options (e.g., enrolling in Basic Health)? • It costs the State $X to increase employer offer rates by y% and individual take-up rates by z% • Guidance for decision making – how should we best prepare to answer questions about ROI in broadest sense? • Sticker shock - do we need to better target population most in need? • How should we be thinking about: the impact of reinsurance plus risk adjustment? different carrier approaches to care management? negotiation of provider rates? incentives surrounding appeals? other critical implementation, administrative, and legal issues? • What analytics gaps warrant further analysis to complete feasibility study? SCI Reinsurance Institute Meeting: July 19, 2007

11. The bottom line – don’t give up “You ain’t goin’ nowhere son. You ought to go back to drivin’ a truck.” Jim Denny, Manager of the Grand Ol’ Opry to Elvis Presley after his first performance in 1954 SCI Reinsurance Institute Meeting: July 19, 2007

12. Appendices:Supplemental information for reference 1. Environmental Scan of Options and Rankings (slides 13-15) 2. Reinsurance study authorized in E2SSB5930 – section 15 http://apps.leg.wa.gov/documents/billdocs/2007-08/Pdf/Bills/Senate%20Passed%20Legislature/5930-S2.PL.pdf 3. Reinsurance Institute project briefs – Washington State’s Participation: March 2007 – Washington State’s Participation: May 2007 SCI Reinsurance Institute Meeting: July 19, 2007

13. 3 Strategies: Drive down the cost of medical care (limited capability within small firms) Educate and facilitate small employers’ search for coverage options Mitigate the price of premiums 9 Tactics: _ Not unique to small business. To the degree it makes sense, incorporate the “Big 5” into models adopted to assist small business. Decision support & information transparency Direct employer subsidies Direct employee subsidies Group purchasing – make own option Group purchasing – buy-in option Limited benefits/ customized products Market regulation changes Shared risk and payment Tax offsets Environmental scan of options led to: SCI Reinsurance Institute Meeting: July 19, 2007

14. Relative Rankings of Nine Tactics on Cost & Impact Dimensions The Reinsurance Institute Project and 2007 Legislated Feasibility Study • To determine rankings we asked: • In comparing cost, which tactics are likely to be less costly (in new money) to develop and maintain? • In comparing impact, which tactics are more likely to increase or sustain coverage? SCI Reinsurance Institute Meeting: July 19, 2007

15. The relative rankings were a qualitative place to start. They are: • Relative to each other, not absolutes. For example, a tactic may be shown as less costly to develop and maintain than all other tactics, BUT that does not mean it will be no cost or low cost in and of itself. • “Averages”. That is, each tactic has several different ways it could be implemented (alternative design parameters) that could rank differently on cost & impact than the overall grouping. Rankings are only intended as a place to start. • Subjective based on other states’ experiences. In some cases there is no experience on which to base a ranking and in those cases the ranking is our collective best guess. • Self-contained or tactic-specific and do not reflect “blending” of tactics which could affect impact & cost. SCI Reinsurance Institute Meeting: July 19, 2007