No exit? The effect of health status on dissatisfaction and disenrollment from health plans.

OBJECTIVE: To examine the implications of serious and chronic health problems on the willingness of enrollees to switch health plans if they are dissatisfied with their current arrangements. DATA SOURCE: A large (20,283 respondents) survey of employees of three national corporations committed to the model of managed competition, with substantial enrollment in four types of health plans: fee-for-service, prepaid group practice, independent practice associations, and point-of-service plans. STUDY DESIGN: A set of logistic regression models are estimated to determine the probability of disenrollment, if dissatisfied, controlling for the influence on satisfaction and disenrollment of age, race, education, family income and size, gender, marital status, mental health status, pregnancy, duration of employment and enrollment in the plan, number of alternative plans, and HMO penetration in the local market. Separate coefficients are estimated for enrollees with and without significant physical health problems. Additional models are estimated to test for the influence of selection effects as well as alternative measures of dissatisfaction and health problems. DATA COLLECTION: Data were collected through a mailed survey with a response rate of 63.5 percent; comparisons to a subsample administered by telephone showed few differences. PRINCIPAL FINDINGS: In group/staff model HMOs and point-of-service plans, only 12-17 percent of the chronically ill enrollees who were so dissatisfied when surveyed that they intended to disenroll actually left their plan in the next open enrollment period. This compared to 25-29 percent of the healthy enrollees in these same plans, who reported this level of dissatisfaction and 58-63 percent of the enrollees under fee-for-service insurance. CONCLUSIONS: Switching plans appears to be significantly limited for enrollees with serious health problems, the very enrollees who will be best informed about the ability of their health plan to provide adequate medical care. These effects are most pronounced in plans that have exclusive contracts with providers. We conclude that disenrollment provides only weak safeguards on quality for the sickest enrollees and that reported levels of dissatisfaction and disenrollment represent inaccurate signals of plan performance.     

Insurers’ response to selection risk: Evidence from Medicare enrollment reforms

Evidence on insurers’ behavior in environments with both risk selection and market power is largely missing. We fill this gap by providing one of the first empirical accounts of how insurers adjust plan features when faced with potential changes in selection. Our strategy exploits a 2012 reform allowing Medicare enrollees to switch to 5-star contracts at anytime. This policy increased enrollment into 5-star contracts, but without risk selection worsening. Our findings show that this is due to 5-star plans lowering both premiums and generosity, thus becoming more appealing for most beneficiaries, but less so for those in worse health conditions.     

Evaluating selection out of health plans for Medicaid beneficiaries with substance abuse

In the absence of adequate risk adjustment, capitation for enrollees creates incentives for health plans to enroll and retain good risks and to avoid bad risks. This article examines whether Maryland Medicaid beneficiaries with histories of substance abuse disenroll from health plans more frequently than those without such histories. The findings indicate that enrollees with a history of substance abuse were more likely to switch plans than other enrollees, regardless of whether they chose the health plan or were randomly assigned to the plan. These results suggest that current risk-adjustment systems may fail to offset selection incentives in modern capitated health plans.     

Risk Selection into Consumer‐Directed Health Plans: An Analysis of Family Choices within Large Employers

Objective

To identify the degree of selection into consumer-directed health plans (CDHPs) versus traditional plans over time, and factors that influence choice and temper risk selection.

Data Sources/Study Setting

Sixteen large employers offering both CDHP and traditional plans during the 2004–2007 period, more than 200,000 families.

Study Design

We model CDHP choice with logistic regression; predictors include risk scores, in addition to family, choice setting, and plan characteristics. Additional models stratify by account type or single enrollee versus family.

Data Collection/Extraction Methods

Risk scores, family characteristics, and enrollment decisions are derived from medical claims and enrollment files. Interviews with human resources executives provide additional data.

Principal Findings

CDHP risk scores were 74 percent of traditional plan scores in the first year, and this difference declined over time. Employer contributions to accounts and employee premium savings fostered CDHP enrollment and reduced risk selection. Having to make an active choice of plan increased CDHP enrollment but also increased risk selection. Risk selection was greater for singles than families and did not differ between HRA and HSA-based CDHPs.

Conclusions

Risk selection was not severe and it was well managed. Employers have effective methods to encourage CDHP enrollment and temper selection against traditional plans.     

How free care improved vision in the health insurance experiment.

We studied reasons for the improvement in the functional vision of enrollees receiving free care in the Rand Health Insurance Experiment. Among low income enrollees, 78 per cent on the free plan and 59 per cent on the cost-sharing plans had an eye examination; the proportions of those obtaining lenses were 30 per cent and 20 per cent, respectively. Visual acuity outcomes of low income vs non-poor enrollees were more adversely affected by enrollment in cost-sharing plans. Free care resulted in improved vision by increasing the frequency of eye examinations and lens purchases.     

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.     

Selection experiences in Medicare HMOs: pre-enrollment expenditures

Using 1993 and 1994 data, the authors examine whether beneficiaries who enroll in a Medicare health maintenance organization (HMO), including those enrolling for only a short period of time, have lower expenditures than continuous fee-for-service (FFS) beneficiaries the year prior to enrollment. We also test whether biased selection varies by the level of HMO market penetration and the rate of market-share growth. We find favorable selection associated with enrollment into Medicare HMOs, which declines as market share increases but does not disappear. Among short-term enrollees, we find unfavorable selection, however, selection bias was not sensitive to market characteristics.     

Who Switches from Medigap to Medicare HMOs?

OBJECTIVE: To determine the factors affecting whether Medigap owners switch to Medicare managed care plans. DATA SOURCES: The primary data were the 1993-1996 Medicare Current Beneficiary Survey (MCBS) Cost and Use Files. These were supplemented by data available from the Centers for Medicare & Medicaid Services (CMS) website. STUDY DESIGN: Individuals on the MCBS files with Medigap coverage in the period 1993-1996 were included in the study. The person-year was the unit of analysis. We used multivariate logistic regression analysis to determine whether or not a Medigap owner switched to a Medicare-managed care plan during a particular year. Independent variables included measures of affordability, need for services, health insurance benefits, sociodemographics, and supply of managed care plans. PRINCIPAL FINDINGS: We did not detect strong evidence that beneficiaries in poorer health were more likely than others to switch from Medigap coverage to Medicare-managed care. In addition, higher Medigap premiums did not appear to induce beneficiaries to switch into managed care. CONCLUSIONS: We examined selection bias in joining managed care plans among the subset of Medicare beneficiaries who have Medigap policies. No strong evidence of selection bias was found in this population. We conclude that there was no evidence that the Medigap market is becoming prohibitively expensive as a result of unfavorable selection.     

The effect of three-tier formulary adoption on medication continuation and spending among elderly retirees

OBJECTIVE: To assess the effect of three-tier formulary adoption on medication continuation and spending among elderly members of retiree health plans. DATA SOURCES: Pharmacy claims and enrollment data on elderly members of four retiree plans that adopted a three-tier formulary over the period July 1999 through December 2002 and two comparison plans that maintained a two-tier formulary during this period. STUDY DESIGN: We used a quasi-experimental design to compare the experience of enrollees in intervention and comparison plans. We used propensity score methods to match intervention and comparison users of each drug class and plan. We estimated repeated measures regression models for each class/plan combination for medication continuation and monthly plan, enrollee, and total spending. We estimated logit models of the probability of nonpersistent use, medication discontinuation, and medication changes. DATA COLLECTION/EXTRACTION METHODS: We used pharmacy claims to create person-level drug utilization and spending files for the year before and year after three-tier adoption. PRINCIPAL FINDINGS: Three-tier formulary adoption resulted in shifting of costs from plan to enrollee, with relatively small effects on medication continuation. Although implementation had little effect on continuation on average, a small minority of patients were more likely to have gaps in use and discontinue use relative to comparison patients. CONCLUSIONS: Moderate cost sharing increases from three-tier formulary adoption had little effect on medication continuation among elderly enrolled in retiree health plans with relatively generous drug coverage.     

Medicaid program choice,inertia and adverse selection

In 2012, Kentucky implemented Medicaid managed care statewide, auto-assigned enrollees to three plans, and allowed switching. Using administrative data, we find that the state’s auto-assignment algorithm most heavily weighted cost-minimization and plan balancing, and placed little weight on the quality of the enrollee-plan match. Immobility − apparently driven by health plan inertia − contributed to the success of the cost-minimization strategy, as more than half of enrollees auto-assigned to even the lowest quality plans did not opt-out. High-cost enrollees were more likely to opt-out of their auto-assigned plan, creating adverse selection. The plan with arguably the highest quality incurred the largest initial profit margin reduction due to adverse selection prior to risk adjustment, as it attracted a disproportionate share of high-cost enrollees. The presence of such selection, caused by differential degrees of mobility, raises concerns about the long run viability of the Medicaid managed care market without such risk adjustment.     

Restrictions on provider access in health plans and socioeconomic status

OBJECTIVE: To model the socioeconomic determinants of restrictions on provider access and choices in health plans. DATA SOURCES: Data from the 1996-97 Community Tracking Study are used. Publicly available enrollee data including enrollee reports of health care plan characteristics are linked with restricted use data with insurer reports of health plan characteristics. STUDY DESIGN: This is an observational study. A mixed multinomial logit model is used to model the enrollees' choice between health plans, each plan being treated as a bundle of attributes formed from restrictions on provider access. PRINCIPAL FINDINGS: There are important differences between the enrollee responses and the insurer reports, which may be due to poor information dissemination on the part of health plans and/or lack of attention on the part of enrollees. There is no evidence of selection into plans with restrictive attributes on the basis of observed health status but there is evidence of selection on the basis of race, ethnicity, gender and other socioeconomic characteristics. Determinants of plan supply, i.e., employment characteristics, are the most important determinants of plan attribute choices. CONCLUSION: The finding suggests that plan designs optimized using "objective" knowledge and with the best intentions may not receive favorable reviews from enrollees because enrollees have different perceptions of these plans.     

The costs of decedents in the Medicare program: implications for payments to Medicare + Choice plans

OBJECTIVE: To discuss and quantify the incentives that Medicare managed care plans have to avoid (through selective enrollment or disenrollment) people who are at risk for very high costs, focusing on Medicare beneficiaries in the last year of life-a group that accounts for more than one-quarter of Medicare's annual expenditures. DATA SOURCE: Medicare administrative claims for 1994 and 1995. STUDY DESIGN: We calculated the payment a plan would have received under three risk-adjustment systems for each beneficiary in our 1995 sample based on his or her age, gender, county of residence, original reason for Medicare entitlement, and principal inpatient diagnoses received during any hospital stays in 1994. We compared these amounts to the actual costs incurred by those beneficiaries. We then looked for clinical categories that were predictive of costs, including costs in a beneficiary's last year of life, not accounted for by the risk adjusters. DATA EXTRACTION METHODS: The analyses were conducted using claims for a 5 percent random sample of Medicare beneficiaries who died in 1995 and a matched group of survivors. PRINCIPAL FINDINGS: Medicare is currently implementing the Principal Inpatient Diagnostic Cost Groups (PIP-DCG) risk adjustment payment system to address the problem of risk selection in the Medicare+Choice program. We quantify the strong financial disincentives to enroll terminally ill beneficiaries that plans still have under this risk adjustment system. We also show that up to one-third of the selection observed between Medicare HMOs and the traditional fee-for-service system could be due to differential enrollment of decedents. A risk adjustment system that incorporated more of the available diagnostic information would attenuate this disincentive; however, plans could still use clinical information (not included in the risk adjustment scheme) to identify beneficiaries whose expected costs exceed expected payments. CONCLUSIONS: More disaggregated prospective risk adjustment methods and alternative payment systems that compensate plans for delivering care to certain classes of patients should be considered to ensure access to high-quality managed care for all beneficiaries.     

Consumer Experiences in a Consumer-Driven Health Plan

Objective. To assess the experience of enrollees in a consumer-driven health plan (CDHP).
Data Sources/Study Setting. Survey of University of Minnesota employees regarding their 2002 health benefits.
Study Design. Comparison of regression-adjusted mean values for CDHP and other plan enrollees: customer service, plan paperwork, overall satisfaction, and plan switching. For CDHP enrollees only, use of plan features, willingness to recommend the plan to others, and reports of particularly negative or positive experiences.
Principal Findings. There were significant differences in experiences of CDHP enrollees versus enrollees in other plans with customer service and paperwork, but similar levels of satisfaction (on a 10-point scale) with health plans. Eight percent of CDHP enrollees left their plan after one year, compared to 5 percent of enrollees leaving other plans. A minority of CDHP enrollees used online plan features, but enrollees generally were satisfied with the amount and quality of the information provided by the CDHP. Almost half reported a particularly positive experience, compared to a quarter reporting a particularly negative experience. Thirty percent said they would recommend the plan to others, while an additional 57 percent said they would recommend it depending on the situation.
Conclusions. Much more work is needed to determine how consumer experience varies with the number and type of plan options available, the design of the CDHP, and the length of time in the CDHP. Research also is needed on the factors that affect consumer decisions to leave CDHPs.     

Will Choice‐Based Reform Work for Medicare? Evidence from the Federal Employees Health Benefits Program

OBJECTIVE:. To examine the effect of premiums and benefits on the health plan choices of older enrollees who choose Federal Employees Health Benefits Program (FEHBP) health plans as their primary payer. DATA SOURCES: Administrative enrollment data from the Office of Personnel Management (OPM) and plan premiums and benefits data taken from the Checkbook Guide to health plans. STUDY DESIGN: We estimate individual plan choice models where the choice of health plan is a function of out-of-pocket premium, actuarial value, plan attributes, and individual characteristics. Plan attributes include plan structure (fee-for-service/preferred provider organization, point-of-service, or health maintenance organization), drug benefit structure, and whether or not the plan covers other types of spending such as dental services and diabetic supplies. The models are estimated by conditional logit. Our study focuses on three populations that currently choose FEHBP as their primary health care coverage and are similar to the Medicare population: current employees and retirees who are approaching the age of Medicare eligibility (ages 60-64) and current federal employees age 65+. Current employees age 65+ are eligible for Medicare, but their FEHBP plan is their primary payer. Retirees and employees 60-64 are not yet eligible for Medicare but are similar in many respects to recently age-eligible Medicare beneficiaries. We also estimate our model for current employees age 55 and younger as a comparison group. DATA COLLECTION METHODS: We select a random sample of retirees and employees age 60-64, as well as all current employees age 65+, from the OPM administrative database for the calendar year 2001. The plan choices available to each person are determined by the plans participating in their metropolitan statistical area. We match plan premium and attribute information from the Checkbook Guide to each plan in the enrollee's list of choices. PRINCIPAL FINDINGS: We find that current workers 65+, 60-64, and non-Medicare eligible retirees are sensitive to variation in plan premiums. The premium elasticities for these groups are similar in magnitude to those of the age 55 and under employee group. Older workers and retirees not yet eligible for Medicare are willing to pay a substantial amount for plans with open provider networks. The willingness to pay for open networks is significantly greater for these groups than for younger employees. Willingness to pay for open network plans varies significantly by income, but varies little by age within group. CONCLUSIONS: Our finding that older workers and non-Medicare eligible retirees are sensitive to plan premiums suggests that choice-based reform of Medicare would lead to cost-conscious choices by Medicare beneficiaries. However, our finding that these groups are willing to pay more for open network plans than younger employees suggest that higher risk individuals may migrate toward higher benefit, higher cost plans. Our findings on the relationship between income and willingness to pay for open network plans suggest that means testing is a viable reform for lowering Medicare program costs.     

Persistence of HMO performance measures

Objective. To simplify the decision‐making process, we propose and implement an approach to assess the stability of health plan performance over time when multiple indicators of performance exist. Data Source. National Committee for Quality Assurance Health Care Effectiveness Data and Information Set data for childhood immunization for both publicly and nonpublicly reporting health plans between 1998 and 2002. Data/Study Design. We use longitudinal data to examine whether plan quality ratings are stable from year to year. We estimate a parametric Multiple Indicator Multiple Cause Model, a model which allows us to aggregate the multiple measures of performance. The model controls for observed characteristics of the plan and market, allowing for unmeasured heterogeneity. Principal Findings. We find moderate persistence in plan performance over time. A plan in the upper tier of performance in the year 1999 has only a 0.47 probability of remaining in the upper tier in the year 2001. Multiple years of good performance increase the probability of good performance in the future. For example, from the subset of plans in the upper tier of performance in 1999, 63 percent continued to perform in the upper tier in 2000. However, from the subset of plans in the upper tier in both 1998 and 1999, about three‐fourths of the plans continued to perform in the upper tier in the year 2000. Finally, better performance in the more recent past is more indicative of better performance in the future than better performance in the more distant past. Conclusions. Although there is some persistence in health plan ratings over time, it is not uncommon for ratings of plans to change between when the data are generated and when actions based on that data, such as employers' contracting decisions or consumers' enrollment decisions, may take effect. Decision makers should be cognizant of this issue and methods should be developed to mitigate its consequences.     

Commercial plans in Medicaid managed care: understanding who stays and who leaves

Although the rapid increase in Medicaid managed care during the early 1990s attracted commercial plans to the program, by the late 1990s commercial plan participation in Medicaid had begun to decline. This study examines the role of Medicaid policies, plan characteristics, and local health care market conditions in a commercial plan's decision to exit. We find that many of the factors that influence commercial plans' decisions to exit Medicaid are within the control of state policymakers and program administrators, including capitation rates, service carve-outs, mandatory enrollment policies, and the number of Medicaid enrollees and areas served by the plan.     

Data Envelopment Analysis to determine efficiencies of health maintenance organizations

We use Data Envelopment Analysis (DEA) to measure the relative technical efficiencies of 164 HMOs licensed to practice in the United States in 1995 with data collected from the American Association of Health Plans. Health care output measures used in the analysis are the number of commercial, Medicare and Medicaid lives covered in each plan. Inputs to the model are health care utilization measures such as the number of medical and surgical inpatient days, number of maternity and newborn stays in days, number of outpatient and emergency room visits and the number of non‐invasive and invasive procedures performed on patients in an ambulatory setting. Mean efficiency of health plans was 40% (of the most efficient). We use multivariate analysis to try and explain variations in efficiency. Enrollment influences efficiency, with larger HMOs being more efficient than those with fewer enrollees. Plans with a more even distribution of Commercial, Medicare and Medicaid patients were more efficient on average than plans with heterogeneous mixes in enrollment. HMOs with Medicare patients are significantly less efficient, with efficiency decreasing with increasing Medicare participation in plan membership. Health plans in operation for longer periods of time had greater outputs with the same inputs. Health plans that had a majority of their enrollees in network or IPA type arrangements were more efficient as were for‐profit plans compared to not‐for‐profits. Policy implications are discussed. This revised version was published online in July 2006 with corrections to the Cover Date.