Outline of Presentation

1. “New Jersey’s Experiments With Limited Benefit Plans: Half A Loaf May Be Better Than None At All - - But Most Folks Won’t Spend the Dough” Wardell Sanders, Esq. Executive Director New Jersey Individual Health Coverage (“IHC”) Program & New Jersey Small Employer Health Benefits (“SEH”) Program wsanders@dobi.state.nj.us SCI Conference June 28, 2004

2. Outline of Presentation • Background: Features of New Jersey’s 1992 Individual/Small Employer Market Reforms • Experiment #1 in Limited Benefits Plans - - “Plan A” • Plan A Summary of Benefits • Rates and Enrollment • Observations and Lessons • Experiment #2 in Limited Benefits plans - - “Basic and Essential Plan” or “B&E Plan” • B&E Plan Summary of Benefits • Rates and Enrollment • Observations and Lessons

3. BACKGROUND: Features of New Jersey’s 1992 Individual/Small Employer Market Reforms • Guaranteed issuance for all small employers and for all individual residents not eligible for group coverage or Medicare • Guaranteed renewability of all plans • Portability and limitations on pre-x waiting periods • Rating restrictions: individual market - full community rating; small employer market - phase in to 2:1 rate band based on age, gender and geography • 75 percent minimum loss ratio: Refunds totaling $85 million since 1994 • Regulatory oversight by volunteer Board of interested parties • 5 Standardized plans including “Plan A”, a bare bones plan

4. Experiment #1: “Plan A” • P.L.1991, c.187 - enacted prior to the 1992 individual and small employer market reforms • Among other things, the law required carriers to issue a basic health benefits plan with statutorily defined benefits; chiefly a hospitalization-only plan with internal limits; to be sold in both individual and small employer markets • Legislative response at a time of heightened anxiety about the cost of coverage • Small business community wanted a “benefit-lite” plan • The plan design from the 1991 law was incorporated in the 1992 individual/small employer market reforms as one of the 5 standard plans

5. New Jersey Individual Health Coverage ProgramLowest Monthly Single Rates: Comparison of Plan A (bare bones) and Plan B (comprehensive)

6. Enrollment in Plan A - IHC

7. Plan A Enrollment - SEH Plan A covered lives v. total covered lives

8. Observations and Lessons - - Plan A • Plan A was targeted to those with lower income, and therefore had low cost-sharing, but low cost-sharing increased rates • Benefits that are popular are those that drive rates • What’s affordable, people don’t want; what people want, is often not affordable • Carriers are often reluctant to issue these plans; relative pricing often reflects this fact • Consumer appetite for limited benefit plans was modest in the individual market, and nearly non-existent in the small employer market • In employer market, both the employer and the employee (due to participation requirements) must choose to buy • Without proper warnings, consumers may not understand the limits in the plan

9. Experiment #2: B&E Plan • In 2001 a new wave of concern about affordability and accessibility of coverage • P.L.2001, c.368 requires individual market carriers to offer a new limited benefits plan • Benefits based on 1973 Blue Cross Blue Shield Plan • Rating flexibility of 3.5:1 permitted for this product only - - Legislature was targeting younger residents

10. Detailed Summary of B&E Plan

11. Enrollment in B&E Plan

12. Comparison of B&E to 3 Standard Plans/B&E Rates

13. Observations and Lessons - - B&E Plan • Too early to draw firm conclusions, but many of the lessons from Plan A appear to apply to B&E • Despite a statutory good faith marketing requirement for B&E Plan, many carriers have little or no enrollment • Carriers eager for individual market rating flexibility choose to use a community rate for B&E • Marketing may play a large role in the success of these plans