Recent trends in self-insured employer health plans

The impact of mental health insurance laws on state suicide rates

In the 1990s and early 2000s, a number of states passed laws requiring mental health benefits to be included in health insurance coverage. The variation in the characteristics and enactment date of the laws provides an opportunity to measure the impact of increasing access to mental health care on mental health outcomes, as evidenced by state suicide rates. In contrast with previous research, results show that when states enact laws requiring insurance coverage to include mental health benefits at parity with physical health benefits, the suicide rate decreases significantly by 5%. The findings are robust to a number of specifications and falsification tests.

The relative importance of worker, firm, and market characteristics for racial/ethnic disparities in employer-sponsored health Insurance

The characteristics of an individual, the local labor market, and the firm where an individual is employed each may be associated with racial and ethnic disparities in employer-sponsored insurance (ESI). This study estimates two models to determine the relative effects of each of these three sets of characteristics on the likelihood a worker has a job with ESI. One model has two outcomes: the job comes with ESI or not. The other model has five possible outcomes: the individual is not offered ESI and is uninsured, the individual is not offered ESI and is insured; the individual is offered ESI but turns it down and is uninsured; the individual is offered ESI but turns it down and is insured; and the individual is offered ESI and accepts. Findings indicate that individual characteristics and firm characteristics are more likely to have significant and substantial effects on the probability that a person has ESI, while the effects of market characteristics appear to be conveyed through firm characteristics. Being African American or Hispanic is not significantly associated with having ESI in the two-outcomes model, but in the five-outcomes model each is associated significantly with being uninsured, either because the person has not been offered ESI or has declined offered coverage. Clearly, examining more nuanced outcomes is more informative about the role of race and ethnicity in why working people are uninsured.

Modeling and detecting potentially ruinous streaks in health expenditures

The mean of a distribution of medical expenditures in an insured population can be affected significantly by the occurrence of a few high cost cases. This fact leads some organizations that hold the primary risk for the population (e.g., health plans or self-insured employers) to seek reinsurance arrangements that spread the risk of high cost cases across a broader pool. Recently, the private reinsurance market has experienced some difficulties, attributable to information asymmetries between primary risk holders and reinsurers. The disproportionate effect of a few high cost cases also has generated interest in the development of "risk-adjustment" systems that attempt to reduce the difference in health plans' unreimbursed costs either to endogenous management decisions or random chance. We discuss these issues in light of a well-known statistical result regarding the probability of "streaks" in random data. We illustrate problems that can arise and suggest methods to distinguish random streaks from systematic trends.

Solving the problem of the uninsured

Reform of the United States health care system is less complicated than at first might appear. The building blocks of an ideal system are already in place. The federal government already generously subsidizes private health insurance and safety net care. What is wrong with the current system is that there are too many perverse incentives. One could reasonably argue that government is doing more harm than good, and that a laissez faire policy is better than what is now in place. Nonetheless, if government is going to be involved in a major way in the health care system, perverse incentives should be replaced with neutral ones. At a minimum, government policy should be neutral between private insurance and the social safety net, never spending more on free care for the uninsured than it spends to encourage the purchase of private insurance. Careful application of this principle would go a long way toward creating an ideal health care system.

Pricing health benefits: a cost-minimization approach

We study the role of health benefits in an employer's compensation strategy, given the overall goal of minimizing total compensation cost (wages plus health-insurance cost). When employees' health status is private information, the employer's basic benefit package consists of a base wage and a moderate health plan, with a generous plan available for an additional charge. We show that in setting the charge for the generous plan, a cost-minimizing employer should act as a monopolist who sells "health plan upgrades" to its workers, and we discuss ways tax policy can encourage efficiency under cost-minimization and alternative pricing rules.

Self-insurance in times of growing and retreating managed care

This paper examines trends in self-insurance and in the content of self-insured plans from 1993 to 2001. The percentage of employees enrolled in self-insured plans fell during these years. Much of the decrease was attributable to the decline of indemnity insurance and the rise of HMO and point-of-service plan enrollment. If the product mix had remained constant throughout these years, self-insured enrollment would have grown between 1993 and 1996 and then declined to its current 50 percent level. As a result of the Health Insurance Portability and Accountability Act (HIPAA), the use of preexisting condition clauses declined dramatically in self-insured plans. Self-insured and purchased plans cost similar amounts and provide similar benefits. Cost sharing is somewhat lower in self-insured PPO plans. During periods of rapid inflation, premiums increase more slowly for self-insured than for fully insured plans.

Health plans and selection: formal risk adjustment vs. market design and contracts

In this paper, we explore the demand for risk adjustment by health plans that contract with private employers by considering the conditions under which plans might value risk adjustment. Three factors reduce the value of risk adjustment from the plans' point of view. First, only a relatively small segment of privately insured Americans face a choice of competing health plans. Second, health plans share much of their insurance risk with payers, providers, and reinsurers. Third, de facto experience rating that occurs during the premium negotiation process and management of coverage appear to substitute for risk adjustment. While the current environment has not generated much demand for risk adjustment, we reflect on its future potential.

Assessing state parity legislation*

The temptation is great, but premature, to conclude from the Sturm study that parity mandates had no effect on access and insurance coverage for the mentally ill. The study lacks statistical power for those directly covered by the mandates, and it is unlikely adequate power exists for those only indirectly affected. The inclusion of the uninsured, Medicaid enrollees, and privately covered individuals not subject to the mandates, and the imprecise outcome measures, increase the likelihood that other factors dominate parity. The timing of implementation in some states is also problematic. But Sturm asks the right questions and future waves of the Healthcare for Communities survey and other data will be better able to address them.arkets and policies.

Prevalence of employer self-insured health benefits: national and state variation

Many large employers prefer to self-insure health plans offered to employees rather than purchase them from insurance companies to save costs and to avoid the burden of complying with varying state mandates. This concerns state governments because they cannot directly regulate self-insured plans. This article describes the prevalence of employer self-insurance for the nation and by state in 1993 and examines what factors, especially state policies, contribute to the national and state variation in the prevalence of self-insurance. Data from the National Employer Health Insurance Survey on 34,604 private sector establishments are analyzed. Variation in the prevalence of self-insurance was largely explained by the firm size of the establishments. After all other factors were examined, very little was added to predict the rate of self-insurance for each state. While state premium taxation and benefits mandates were not associated with self-insurance, small-group reforms were significantly and positively associated with the probability of self-insurance.

The geography of health insurance regulation

The health insurance market consists of three distinct segments--individual, small group, and large group--each governed by different economic and regulatory structures. A number of border-crossing techniques have arisen for avoiding the burdens of one segment and capitalizing on the benefits of others. Drawing from extensive qualitative research into the functioning of existing market structures, this paper describes these techniques and their purposes and effects. This road map helps to identify which reform proposals seek to produce true economic efficiencies and which have the potential to undermine previous reform objectives.