Markets for individual health insurance: can we make them work with incentives to purchase insurance?

Rural and Urban Differences in Insurance Coverage at Prepregnancy, Birth, and Postpartum

OBJECTIVE

To measure insurance coverage at prepregnancy, birth, and postpartum, and insurance coverage continuity across these periods among rural and urban U.S. residents.

METHODS

We performed a pooled, cross-sectional analysis of survey data from 154,992 postpartum individuals in 43 states and two jurisdictions that participated in the 2016-2019 PRAMS (Pregnancy Risk Assessment Monitoring System). We calculated unadjusted estimates of insurance coverage (Medicaid, commercial, or uninsured) during three periods (prepregnancy, birth, and postpartum), as well as insurance continuity across these periods among rural and urban U.S. residents. We conducted subgroup analyses to compare uninsurance rates among rural and urban residents by sociodemographic and clinical characteristics. We used logistic regression models to generate adjusted odds ratios (aORs) for each comparison.

RESULTS

Rural residents experienced greater odds of uninsurance in each period and continuous uninsurance across all three periods, compared with their urban counterparts. Uninsurance was higher among rural residents compared with urban residents during prepregnancy (15.4% vs 12.1%; aOR 1.19, 95% CI 1.11-1.28], at birth (4.6% vs 2.8%; aOR 1.60, 95% CI 1.41-1.82), and postpartum (12.7% vs 9.8%, aOR 1.27, 95% CI 1.17-1.38]. In each period, rural residents who were non-Hispanic White, married, and with intended pregnancies experienced greater adjusted odds of uninsurance compared with their urban counterparts. Rural-urban differences in uninsurance persisted across both Medicaid expansion and non-expansion states, and among those with varying levels of education and income. Rural inequities in perinatal coverage were experienced by Hispanic, English-speaking, and Indigenous individuals during prepregnancy and at birth.

CONCLUSION

Perinatal uninsurance disproportionately affects rural residents, compared with urban residents, in the 43 states examined. Differential insurance coverage may have important implications for addressing rural-urban inequities in maternity care access and maternal health.

A randomized experiment of issue framing and voter support of tax increases for health insurance expansion

OBJECTIVE

To assess the effect of issue framing on voter support of tax increases for health insurance expansion.

METHODS

During October 2008, a random sample of registered voters (n=1203) were randomized to a control and two different 'framing' groups prior to being asked about their support for tax increases. The 'framing' groups listened to one of two statements: one emphasized the externalities or negative effects of the uninsured on the insured, and the other raised racial and ethnic disparities in health insurance coverage as a problem. All groups were asked the same questions: would they support tax increases to provide adequate and reliable health insurance for three groups, (1) all American citizens, (2) all children, irrespective of citizenship, and (3) all military veterans.

RESULTS

Support for tax increases varied substantially depending on which group benefited from the expansion. Consensus on coverage for military veterans was highest (83.3%), followed by all children, irrespective of citizenship (64.7%), and all American citizens (60.1%). There was no statistically significant difference between voter support in the 'framing' and control groups or between the two frames. In multivariable analyses, political party affiliation was the strongest predictor of support.

CONCLUSIONS

Voters agree on the need for coverage of military veterans, but are less united on the coverage of all children and American citizens. Framing was less important than party affiliation, suggesting that voters consider coverage expansions and related tax increases in terms of the characteristics of the targeted group, and their own personal political views and values rather than the broader impact of maintaining the status quo.

How much risk pooling is there in the individual insurance market?

OBJECTIVE

To examine how much pooling of risks occurs among potential purchasers in the individual market, how much pooling occurs among those who purchase coverage, and whether there is greater pooling among longer-term enrollees.

DATA SOURCES

The data are administrative records for enrollees in individual insurance plans in California in 2001, and from a survey of Californians enrolled in the individual insurance market and the uninsured.

STUDY DESIGN

Logit models were estimated for 5 health outcome measures to compare the insured and uninsured after adjusting for other factors that affect insurance status and health. Multivariate models were also estimated to explore the relationship between health and three measures of pooling in the market: plan type, pricing tier, and the actuarially adjusted premium paid by the enrollee.

PRINCIPAL FINDINGS

Those who purchase individual health insurance are in better health than those who remain uninsured. On the other hand, a large share of people with health problems does obtain individual insurance. The distribution of subscribers across plan type and pricing tier varies with their health status. Those in poor health are less likely to purchase low benefit plans. There is less separation of risks for those who become sick after enrollment based on the measure of pricing tier. The distribution of subscribers across plan type for those who have health problems at enrollment and those who become sick differs, but so does the distribution of those who become sick and those who remain healthy.

CONCLUSIONS

Despite small differences among the healthy and sick, our results support the conclusion that there is considerable risk pooling in the individual market. To some extent, this pooling occurs because underwriting happens at the time people enroll and there is greater pooling among those who become sick than those who enroll sick. Our results however suggest that health savings accounts may further fragment the market.

Insurance coverage and health care use among near-elderly women

OBJECTIVES

Data on near-elderly (ages 55-64) women's access to and use of health care have been limited. In this study, we sought to examine the status of near-elderly women's health insurance coverage in the United States and how it may influence their use of health care services.

METHODS

A nationwide random sample of women aged 55-64 was drawn from the 2002 wave of the Health and Retirement Study. Descriptive statistics were calculated and multivariable regression analyses were performed to quantify the impact of insurance coverage on near-elderly women's use of outpatient services, inpatient services, and prescription medication over a 2-year period.

RESULTS

In 2002, 9.4% of near-elderly women in the United States were uninsured and 15.4% had public coverage. Those who had coverage for a particular service were significantly more likely to use that service compared to women without coverage, with odds ratios ranging from 2.0-6.7 for services such as a physician visit, hospital stay, dental visit, and use of prescription medication. Among those who had at least one physician visit, near-elderly women who had some of the cost covered by insurance reported significantly more visits than women without coverage. Likewise, for near-elderly women regularly taking prescription medications, having more extensive coverage significantly increased their likelihood of medication adherence. The frequency of hospitalization was also higher for women who had complete coverage for the cost.

CONCLUSIONS

The nature of a near-elderly woman's insurance coverage significantly affects her use of health care services. More attention is needed to improve the health care of near-elderly women with inadequate insurance coverage.

The effects of reinsurance in financing children's health care

This paper examines the effects of reinsurance on the financial performance of health plans serving enrollees in a State Children's Health Insurance Program (SCHIP). We demonstrate that simple reinsurance policies can reduce substantially the variation in the financial performance of plans with different case mixes, even when the plans bear the cost of the reinsurance and are not fully insured against large expenditures on individual enrollees.

Responsible health insurance revisited: pouring liberal wine into a conservative bottle

In 1991, an article appeared proposing a plan for "Responsible National Health Insurance" (RHI) that contained three crucial elements supported by economists affiliated with two conservative policy institutions (the American Enterprise Institute and the Heritage Foundation). The central purpose of this article is to revisit RHI in light of developments over the past decade, and to make the case that liberals, rather than reject RHI, now should support it, provided conservatives agree to sufficient funding. In this article, I recommend "pouring liberal wine into this conservative bottle."

Health and the cost of nongroup insurance

This analysis estimates a selection-adjusted model of the premium for nongroup insurance to measure the effect of health status on the cost of nongroup insurance. Using data from two recent national surveys, the probability of buying nongroup insurance is about 50% lower for people in fair or poor health compared to similar people in excellent health. Correcting for selection, premiums are about 15% higher for people with modest health problems, and 43% to 50% higher for people with major health problems compared to those in excellent health. We use the selection-corrected premiums to simulate the effects on the price and affordability of nongroup insurance for the uninsured under two recent tax credit proposals.

The nongroup health insurance market: short on facts, long on opinions and policy disputes

Individual health insurance is more administratively costly and more prone to adverse selection (especially in the presence of community rating) than group health coverage is. In this paper we show that the individual market has been shrinking over time but that it might be stimulated if tax credits for such insurance were made available. The primary areas of factual disagreement have to do with the frequency with which individual insurers charge some applicants higher premiums than others (based on health risk), and the effect that premiums related to risk have on the likelihood of insurance purchase at different income levels. The primary area of policy disagreement concerns the value of offering insurance at lower premiums to higher risks relative to the value of making voluntary insurance attractive to lower risks. We argue that a major market failure for individual coverage may be caused by insurers' inability to distinguish some truly low risks. We conclude that the individual market works acceptably well for about 80 percent of potential buyers, but its performance for the remaining 20 percent of low-income or high-risk persons is controversial.

Government as reinsurer for very-high-cost persons in nongroup health insurance markets

Fear of adverse selection drives carriers in nongroup insurance markets to compete in their use of selection mechanisms to screen out high-risk applicants. This contributes to economic inefficiency. Government could assume the role of reinsurer, by assuming responsibility for most of the costs of people who are in the highest 2-3 percent of the national spending distribution. This would spread the burden of costs of very-high-cost persons to the broad population base and could cause premiums to fall as carriers spend less on efforts to avoid adverse selection.

Expanding coverage: maintain a role for the individual market

When most Americans think about health insurance, their frame of reference is employer- or government-sponsored health plans. But individual health insurance differs from these models. Most importantly, while individual insurance provides protection against unexpected medical expenses, it is limited in its ability to subsidize the expenses of people who already have serious health conditions when they enter the market. Nevertheless, it remains a vital part of our health care system, protecting millions of Americans against unexpected expenses at lower premium levels than many might assume.

Competitive markets for individual health insurance

A more dynamic individual insurance market could match benefits with individual preferences, provide more portable and permanent coverage, and stimulate consumer-focused service. Necessary reforms, such as tax parity and targeted assistance to high-risk pools, would enable individual coverage to expand efficiently. In contrast, requirements for guaranteed issue and community rating drive low-risk persons out of voluntary individual markets and raise overall premiums. Guaranteed renewability and switching costs would stabilize individual-market risk pools. As the individual market becomes more representative of the overall population, insurers' perceived needs to underwrite and market selectively will lessen, making administrative loading factors less significant.

Challenges and options for increasing the number of Americans with health insurance

This paper provides an overview of the issues confronting policymakers who want to develop programs to help working Americans obtain health insurance. It sets the stage for the following 10 articles, which detail a variety of proposals to offer subsidies and financial incentives to people so they will purchase health coverage. This paper examines challenges to covering the uninsured, describes principles that should be used in assessing policy proposals aimed at this purpose, and evaluates the main strategies for coverage expansions. The evaluation of proposal categories also provides estimates of the costs and consequences of specific proposals described in the other papers.

Private purchasing pools to harness individual tax credits for consumers

While health insurance tax credits could help people who otherwise could not afford to purchase coverage, many might still find individual coverage too expensive and its marketplace dynamics bewildering. As an alternative, this paper outlines an approach using private purchasing pools for tax-credit recipients. The objective is to offer these individuals and families a choice among competing health plans, and provide many of the same advantages enjoyed by workers in large employer groups, such as relatively low administrative costs, no health rating, and an effective "sponsor." Some express optimism that private pools will emerge naturally and thrive as an option for individual tax-credit recipients. However, adverse selection and other individual health insurance market forces make this a dubious prospect. The approach presented here gives purchasing pools the same tool employer groups use to maintain stability and cohesion--a significant contribution that cannot be used elsewhere. The ability to offer health plans exclusive access to a sizable new, previously uninsured clientele--tax-credit recipients-would enable purchasing pools to attract health plan participation and thus overcome one major reason several state-directed pools for small employers have failed. To avoid other pitfalls, the paper also suggests private pool structures, as well as federal and state roles that seek to balance objectives for market innovation and choice with those for coverage-source stability and efficiency.