Open enrollment periods and plan choices

Open enrollment periods are pervasively used in insurance markets to limit adverse selection risks resulting when enrollees can switch plans at will. We exploit a change in the open enrollment rules of Medicare Advantage to analyze how beneficiaries responded to the option of switching to a 5‐star‐rated plan at anytime, in a setting where insurers adjusted premiums and benefit design to counterbalance the increased selection risk. We present three findings: Within‐year switches to 5‐star plans increase by 7–16%; demand for 5‐star plans across the years does not decline; and the enrollees who switch to a 5‐star plan during the year are in better health status than those who do not switch.     

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.     

To what degree are health insurance enrollees in the Netherlands aware of the restrictive conditions attached to their policies?

BackgroundWithin the Dutch healthcare system of managed competition, health insurers can contract healthcare providers selectively. Enrollees who choose a health insurance policy with restrictive conditions will have to make a co-payment if they consult a non-contracted provider. This study aims to gain insight into enrollees' awareness of the conditions of such health insurance policies.MethodsIn August 2020, an online questionnaire was sent out via health insurers to their enrollees with restrictive health plans. In total 13,588 enrollees responded.ResultsOne fifth of the respondents appeared to be totally unfamiliar with the policy conditions. Men, younger people, people with a low level of education, a lower income, a poorer health status and non-care users were found to be less familiar with the conditions. Of those who have been in the situation that they wanted to visit a healthcare provider whose care was not fully reimbursed, 62% went to that provider. Of those who had to pay extra because hospital care was not fully reimbursed, 62% did not know this in advance and 30% indicated that paying extra was a serious problem.ConclusionsNot all enrollees who choose a policy with restrictive conditions are aware of the consequences of receiving care from non-contracted providers. Increased awareness among enrollees will benefit the functioning of the healthcare system based on managed competition.     

Paying Medicare Advantage plans: To level or tilt the playing field

Medicare beneficiaries are eligible for health insurance through the public option of traditional Medicare (TM) or may join a private Medicare Advantage (MA) plan. Both are highly subsidized but in different ways. Medicare pays for most of costs directly in TM, and subsidizes MA plans based on a “benchmark” for each beneficiary choosing a private plan. The level of this benchmark is arguably the most important policy decision Medicare makes about the MA program. Many analysts recommend equalizing Medicare’s subsidy across the options – referred to in policy circles as a “level playing field.” This paper studies the normative question of how to set the level of the benchmark, applying the versatile model developed by Einav and Finkelstein (EF) to Medicare. The EF framework implies unequal subsidies to counteract risk selection across plan types. We also study other reasons to tilt the field: the relative efficiency of MA vs. TM, market power of MA plans, and institutional features of the way Medicare determines subsidies and premiums. After review of the empirical and policy literature, we conclude that in areas where the MA market is competitive, the benchmark should be set below average costs in TM, but in areas characterized by imperfect competition in MA, it should be raised in order to offset output (enrollment) restrictions by plans with market power. We also recommend specific modifications of Medicare rules to make demand for MA more price elastic.     

Employer contribution and premium growth in health insurance

We study whether employer premium contribution schemes could impact the pricing behavior of health plans and contribute to rising premiums. Using 1991–2011 data before and after a 1999 premium subsidy policy change in the Federal Employees Health Benefits Program (FEHBP), we find that the employer premium contribution scheme has a differential impact on health plan pricing based on two market incentives: 1) consumers are less price sensitive when they only need to pay part of the premium increase, and 2) each health plan has an incentive to increase the employer's premium contribution to that plan. Both incentives are found to contribute to premium growth. Counterfactual simulation shows that average premium would have been 10% less than observed and the federal government would have saved 15% per year on its premium contribution had the subsidy policy change not occurred in the FEHBP. We discuss the potential of similar incentives in other government-subsidized insurance systems such as the Medicare Part D and the Health Insurance Marketplace under the Affordable Care Act.     

Medicare prescription drug benefit progress report: findings from a 2006 national survey of seniors

A national survey in 2006 found that Part D secured drug coverage for most seniors who were without it in 2005, prior to the Medicare drug benefit. Seniors without drug coverage in 2006 generally fell into two groups: those in relatively good health and those potentially difficult to reach. Compared with seniors covered through employer plans or the Department of Veterans Affairs, Part D enrollees had higher out-of-pocket spending and greater cost-related nonadherence. Low-income subsidies offered protection against high out-of-pocket spending; without them, one-third of Part D enrollees at or below 150 percent of poverty paid more than $100 a month for their medications.     

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.     

Integrating risk adjustment and enrollee premiums in health plan payment

In two important health policy contexts – private plans in Medicare and the new state-run “Exchanges” created as part of the Affordable Care Act (ACA) – plan payments come from two sources: risk-adjusted payments from a Regulator and premiums charged to individual enrollees. This paper derives principles for integrating risk-adjusted payments and premium policy in individual health insurance markets based on fitting total plan payments to health plan costs per person as closely as possible. A least squares regression including both health status and variables used in premiums reveals the weights a Regulator should put on risk adjusters when markets determine premiums. We apply the methods to an Exchange-eligible population drawn from the Medical Expenditure Panel Survey (MEPS).     

Ownership and average premiums for Medicare supplementary insurance policies

This article describes private supplementary health insurance holdings and average premiums paid by Medicare enrollees. Data were collected as part of the 1992 Medicare Current Beneficiary Survey (MCBS). Data show the number of persons with insurance and average premiums paid by type of insurance held--individually purchased policies, employer-sponsored policies, or both. Distributions are shown for a variety of demographic, socioeconomic, and health status variables. Primary findings include: Seventy-eight percent of Medicare beneficiaries have private supplementary insurance; 25 percent of those with private insurance hold more than one policy. The average premium paid for private insurance in 1992 was $914.     

Better methods will be needed to project incomes to estimate eligibility for subsidies in health insurance exchanges

Under the Affordable Care Act, people who meet certain income eligibility criteria will be eligible for subsidies to offset costs of premiums and cost sharing for health insurance plans purchased through new health insurance exchanges. But determining the correct level of these subsidies will not be easy, because of several factors. These include the way in which eligibility will be calculated for participation in Medicaid or for subsidies through the exchanges; possibly inaccurate income projections; the use of different income time periods to determine eligibility; and fluctuations in income. I performed a simulation that shows that under the most likely methods to be used to determine eligibility for Medicaid or for receiving subsidies through exchanges, one-third of people with incomes initially judged to be below the Medicaid threshold would actually "churn" into an exchange at the end of the year. Other people would be wrongly deemed ineligible for advance subsidy payments because their projected income was too high, while still others judged eligible for subsidies would receive advance payments on those subsidies that were too high by $208 per year, on average. To reduce these errors, I recommend the adoption of a single eligibility standard based on income data derived from prior tax returns, along with generous accommodations during a given enrollment year for people who claim a change in circumstances, such as a change in income.     

COBRA ARRA Subsidies: Was the Carrot Enticing Enough?

Objective

To help preserve continuity of health insurance coverage during the recent recession, the American Recovery and Reinvestment Act provided a 65 percent Consolidated Omnibus Budget Reconciliation Act (COBRA) premium subsidy for workers laid off in 2008–2010. We examined COBRA enrollment levels with the subsidy and the health, access, and financial consequences of enrollment decisions.

Study Design/Data Collection

Telephone interviews linked with health system databases for 561 respondents who were laid off in 2009 and eligible for the COBRA subsidy (80 percent response rate).

Principal Findings

Overall, 38 percent reported enrolling in COBRA and 54 percent reported having some gaps in insurance coverage since being laid off. After adjustments, we found that those who had higher cost-sharing, who had higher incomes, were older, or were sicker were more likely to enroll in COBRA. COBRA enrollees less frequently reported access problems or that their health suffered because of poor access, but they reported greater financial stress due to health care spending.

Conclusion

Despite the substantial subsidy, a majority of eligible individuals did not enroll in COBRA, and many reported insurance coverage gaps. Nonenrollees reported more access problems and that their health worsened. Without a mandate, subsidies may need to be widely publicized and larger to encourage health insurance enrollment among individuals who suffer a negative income shock.