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Health Plan Actuarial Value Variation Among Employers. Actuarial Research Corporation Sarah Yi Jim Mays Middle Atlantic Actuarial Club 2009 Annual Meeting Session 6A. Outline of Presentation. Background EBSA Project Data Methodology Results Policy Applications Questions and Comments.

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health plan actuarial value variation among employers

Health Plan Actuarial Value Variation Among Employers

Actuarial Research Corporation

Sarah Yi

Jim Mays

Middle Atlantic Actuarial Club

2009 Annual Meeting

Session 6A

18 September 2009

outline of presentation
Outline of Presentation
  • Background
  • EBSA Project
  • Data
  • Methodology
  • Results
  • Policy Applications
  • Questions and Comments

18 September 2009

background

Background

18 September 2009

ebsa project
EBSA Project
  • Research was funded by the Employee Benefits Security Administration (DoL/EBSA)
  • The views and opinions contained in this report are solely those of the authors and do not necessarily reflect the official policy or position of the Department of Labor or the Employee Benefits Security Administration.

18 September 2009

background1
Background
  • Context
    • Health finance reform design
    • Minimum coverage rules
    • Modification of tax exclusion

18 September 2009

background2
Background
  • Definition of Actuarial Value:

the fraction of average recognized medical charges which a health plan would have paid, had it been covering a standardized population with standardized medical spending levels

  • Actuarial Value is a single statistic that captures the effect of deductibles, copayments/coinsurance, and out-of-pocket maximums

18 September 2009

ebsa project1

EBSA Project

18 September 2009

research questions hypotheses
Research Questions/ Hypotheses
  • How dispersed are employer-sponsored health insurance average actuarial values?
  • To what degree does actuarial value predict plan cost?

18 September 2009

goals
Goals
  • Actuarial values for each health insurance plan in the NCS
  • Percentile distributions of actuarial value
  • Summary distributions of plan costs within actuarial value deciles

18 September 2009

slide10

Data

18 September 2009

national compensation survey
National Compensation Survey
  • Produced by Bureau of Labor Statistics
  • Data not available for public use
  • Three stage survey design
    • Selection of areas
    • Selection of establishments (from private industry)
    • Selection of occupations within establishments
  • Plans remain in sample for 5 years

18 September 2009

uniqueness of ncs data
Uniqueness of NCS Data
  • Definitive source for information on ESI parameters
  • Well-established process
  • Detailed specifications
  • Large sample
  • More reliable than other datasets

18 September 2009

use of ncs data overview
Use of NCS Data: Overview
  • Plan provisions
  • Premiums
  • Plan characteristics
  • Worker characteristics
  • Establishment characteristics

18 September 2009

use of ncs data plan provisions
Use of NCS Data: Plan Provisions
  • From Summary Plan Description documents abstracted by BLS analysts
  • Consistent with National Compensation Survey: Employee Benefits in Private Industry in the United States, 2005

18 September 2009

use of ncs data plan provisions1
Use of NCS Data: Plan Provisions
  • Covered services (inpatient hospital, outpatient hospital, physician visits, mental health, prescription drugs)
  • Cost-sharing parameters
    • Deductibles
    • Copayments
    • Coinsurance
    • Out-of-pocket maximums
    • Presence of benefit maximums

18 September 2009

use of ncs data premiums
Use of NCS Data: Premiums
  • Collected in person or on phone by field economists
  • Potential mismatch in plan types (medical, prescription, dental, vision) between provision and premium data

18 September 2009

use of ncs data premiums1
Use of NCS Data: Premiums
  • Premiums
    • Total premiums
    • Employer premiums
    • Employee premiums

18 September 2009

use of ncs data plan characteristics
Use of NCS Data: Plan Characteristics
  • Plan characteristics
    • Plan type (FFS, PPO/POS, HMO)
    • Financing (insured, self-insured or combined)

18 September 2009

use of ncs data worker and establishment characteristics
Use of NCS Data: Worker and Establishment Characteristics
  • Worker characteristics
    • Average wages
    • Union status
  • Establishment size

18 September 2009

use of ncs data
Use of NCS Data
  • Kept plans with medical and drug provisions
  • Kept plans with a known plan type

18 September 2009

methodology

Methodology

18 September 2009

methodology1
Methodology
  • Run a claims payment program on each plan to calculate actuarial value
  • Sort plans into deciles of actuarial value
  • Sort plans into deciles of premium
  • Make two-way tables

18 September 2009

standardized population data for claims program
Standardized Population Data for Claims Program
  • Based on the MEPS public use files
  • Controlled to National Health Accounts totals
  • Adjusted to 2005 levels
  • Over 16,000 individual records
  • Representative of under 65 active ESI enrollees

18 September 2009

simplified cost sharing provisions for plan a
Simplified Cost-Sharing Provisions for Plan A
  • $20 copay for each physician visit
  • $450 deductible for each hospital confinement

18 September 2009

person 1 s utilization and covered charges
Person 1’s Utilization and Covered Charges
  • Total covered charges = $5,000
  • Physician office visits = 5
  • Physician office visit covered charges = $1,000
  • Hospital confinements = 2
  • Inpatient hospital covered charges = $4,000

18 September 2009

person 1 s cost sharing for plan a
Person 1’s Cost-Sharing for Plan A
  • Physician ($1,000, 5 visits, subject to $20 copay per visit)

Cost-sharing collected is 5*$20 = $100

  • Hospital (2 confinements at $2,000 each, subject to $450 deductible per confinement)

Cost-sharing collected is 2*$450 = $900

  • Total cost-sharing = physician cost-sharing + hospital cost-sharing = $100 + $900 = $1000

18 September 2009

plan share for plan a with person 1 s utilization and covered charges
Plan Share for Plan A with Person 1’s Utilization and Covered Charges
  • Plan payment = total covered charges – cost-sharing
  • For Person 1, plan payment = $5,000 - $1,000 = $4,000
  • Plan share = plan payment/ total covered charges
  • Plan share for Plan A for Person 1 = $4,000/$5,000 = .8

18 September 2009

actuarial value for plan a
Actuarial Value for Plan A
  • Weighted average plan shares for each of the 16,000 people

18 September 2009

summary of methodology
Summary of Methodology
  • Run a claims payment program on each plan to calculate actuarial value
  • Sort plans into deciles of actuarial value
  • Sort plans into deciles of premium
  • Make two-way tables

18 September 2009

results

Results

18 September 2009

table 1 deciles of actuarial value for single coverage for enrollees under age 65
Table 1. Deciles of Actuarial Value for Single Coverage for Enrollees Under Age 65

18 September 2009

slide32
Table 2. Average Total Premium within Each Decile of Actuarial Value for Single Coverage for Enrollees Under Age 65

18 September 2009

slide33
Table 3. Average Actuarial Value within Each Decile of Total Premium for Single Coverage for Enrollees Under Age 65

18 September 2009

slide34
Table 4. Average Actuarial Value by Plan Characteristics for Single Coverage for Enrollees Under Age 65

18 September 2009

slide35
Table 5. Average Actuarial Value by Worker Characteristics for Single Coverage for Enrollees Under Age 65

18 September 2009

slide36
Table 6. Average Actuarial Value by Establishment Characteristics for Single Coverage for Enrollees Under Age 65

18 September 2009

policy applications

Policy Applications

18 September 2009

policy applications1
Policy Applications
  • Minimum standards design
  • Actuarial Value-based changes to tax exclusion (e.g., taxing of “Cadillac Plans”)

18 September 2009

questions and comments

Questions and Comments

18 September 2009