We’ve blogged before about the effort to ensure young Americans have health insurance, looking to the passage of Michelle’s Law in 2008, which extends coverage to college students. (And, tangentially related, we have offered analysis of the efforts to provide “young invincible” coverage.)
Now Massachussets is considering a bill that would tax universities $1 per day for any students who lack health insurance.
We’ve blogged multiple times about the proposed “young invincible” policies. This article from a New York Times blog looks again at the issue, and also draws the connection between the proposed young invincible policies and the recent passage of Michelle’s Law:
Congress has tried to deal with this conundrum before. Michelle’s Law, passed last year and effective last week, allows college students to take up to 12 months of medical leave from school without being dropped from a parent’s health insurance plan.
For more on Michelle’s Law, check out this recent Milliman white paper.
(6) “Young invincible” policy: A separate type of catastrophic-coverage option would be made available to people aged 25 years or younger and would be less expensive than the bronze-level coverage. Preventive benefits would be exempt from the deductible. [Kansas Insurance Commissioner Sandy] Praeger says this coverage option is a good idea if the coverage costs are low enough to attract this segment of the population. [Blue Cross Blue Shield Association President Scott] Serota said BCBSA strongly supports the provision and contended that age-rating provisions in other bills “would preclude these discounts and would result in major premium increases to young people causing many to forgo coverage.” But segregating some of the healthiest members from the risk pool could cause problems, suggests Thomas Snook, a consulting actuary in Milliman’s Phoenix office. “If you take, say, the healthiest 10% [of the population] and isolate them in their own pool, the cost for the remaining 90% will be higher,” he explains. Participation by these healthy individuals, if in the same risk pool, could help minimize the cost of the standard platinum, gold, silver, and bronze benefit options, he adds.
For your perusal:
Workforce Management offers an employer perspective on Sen. Baucus’s mark, including some discussion of young invincibles from Thomas D. Snook.
“More Baucus Buzz” from Kaiser Health News (and more Snook).
A New England Journal of Medicine article (again) picks up on the soda tax concept.
A comparative tool from the Wall Street Journal.
An op-ed: “Public health reform option would hurt state budgets.”
Sen. Baucus has released his Chairman’s mark and, as predicted, it includes a proposal for “young invincible” policies. Here’s the pertinent language from page 18 of the mark:
A separate “young invincible” policy would be available for those 25 years or younger. This plan would be a catastrophic only policy in which the catastrophic coverage level would be set at the HSA current law limit, but prevention benefits would be exempt from the deductible.
The popular media is now turning its attention toward what healthcare reform might mean for young adults. For a broader perspective on what “young invincible” policies mean for the insurance market, view the new healthcare reform briefing paper by Thomas D. Snook.
What follows is a preview version of a healthcare reform briefing paper due out later this week.
An unresolved quandary under reform arising from the complexity in health plans
By Thomas D. Snook, FSA, MAAA
For the last several months, various Congressional committees have sought to categorize different benefit levels and establish certain minimum “actuarial values” for benefit plans. While the motivation for these requirements may make sense – if you’re going to mandate coverage, it should meet certain criteria – there are a number of potential unintended consequences that may ultimately defeat some of the purposes of reform.
This dynamic is documented in a June healthcare reform briefing paper, “Understanding Healthcare Plan Costs and Complexities.” That paper looks at various benchmarks of “actuarial value” put forward by the Senate Finance Committee and highlights a challenge to reform efforts; namely, that the values initially suggested as minimums were in fact higher than those for many existing plans. For example, the minimum “actuarial value” suggested for a “platinum” or “high option” benefit plan (i.e., the richest plans) had a value of .93 when in fact typical HMO-style plans carry an “actuarial value” lower than that, such as the one with a .91 value shown in our paper. The operating definition of “actuarial value” is borrowed from the Finance Committee: “the ratio of benefit costs to allowed cost (i.e., the cost of covered services, prior to member cost-sharing).”
Since releasing these initial actuarial values in May, the Senate Finance Committee has modified the ratios downward somewhat. A paper published by Sen. Max Baucus over Labor Day weekend, “Framework for Comprehensive Health Reform,” includes values that are lower than those suggested in May (e.g., the new value for “platinum” plans is .90, more in keeping with the typical HMO-style plan).
That said, the risk still exists that any minimum benchmark may in fact exceed benefits for existing plans, which may result in cost increases for payers and consumers. This is particularly true of the “bronze” level of benefits cited in the Baucus paper. At 65%, this minimum “actuarial value” would preclude high-deductible health plans, which currently constitute a preponderance of policies in the individual health insurance market. Essentially, the position in the Baucus proposal is that reform will require these individuals to buy up to a richer benefit package than they currently have.
A new wrinkle
The “Framework” paper also highlights another possible issue when it outlines an exception to the bronze, silver, gold and platinum benchmarks set forward. Quoting from the paper:
“A separate ‘young invincible’ policy would be available in addition to these benefit options. This policy would be targeted to young adults who desire a less expensive catastrophic coverage plan but with a requirement that preventive services be covered below the catastrophic amount. Cost-sharing for preventative benefits would be allowed.”
On the one hand, the creation of a “young invincible” group makes a certain amount of practical sense. Many uninsured are young people with modest income who do not see the need for insurance, and they are likely to desire the most affordable option. Indeed, their particular risk profile may warrant a less-expensive option. This same thinking may also apply to other population sub-groups.
On the other hand, creating a separate pool for these people will result in unintended consequences elsewhere. The people most likely to be attracted to “young invincible” policies—obviously the young and healthy—are people with precisely the kind of risk profile that can help offset the costs posed by older and/or less-healthy individuals under community rating.
Put another way, any insurance pool has a mix of healthy and non-healthy lives. If you take, say, the healthiest 10% and isolate them in their own pool, the cost for the remaining 90% will be higher. Might participation by these healthy individuals have otherwise helped minimize the cost of the standard platinum, gold, silver and bronze benefit options without the lure of a “young invincible” policy? Would they have been willing to pay the cost associated with any of the four standard options? These are challenging issues that need to be considered carefully. The “risk mix” is a key consideration when developing benefit options and risk pooling provisions that may be prescribed under insurance reform.
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