To offer or not to offer: the role of price in employers' health insurance decisions.

OBJECTIVE: To estimate the effect of changes in price on employers' decisions to offer health insurance. DATA SOURCES/STUDY SETTING: A 1993 survey of 22,347 private employers in ten states was used. STUDY DESIGN: Probit regression was used to estimate the probability of offering insurance as a function of the price and employer characteristics. For employers who did not offer insurance, a price cannot be directly observed. We estimated price for nonofferors using reported quotes received by recent shoppers and a selection model to correct for differences between recent shoppers and nonshoppers. PRINCIPAL FINDINGS: Changes in price affect decisions to offer insurance; however, even a 40 percent reduction in premiums would lead to only a 2 to 3 percentage point increase in the share of employers offering insurance. Employers of low-wage workers are substantially less likely to offer health insurance than other employers. CONCLUSIONS: Policies to reduce the number of uninsured that focus on increasing the supply of employment-based insurance are unlikely to have the intended effect unless coupled with policies to help low-wage workers afford insurance.

Prevalence of selected employer health insurance purchasing strategies in 1997.

This paper provides information about the nationwide prevalence of selected employer health insurance purchasing strategies. These strategies include raising the share of medical costs borne by employees; the use of quality information in choosing which plans to offer; and direct contracting with provider systems. The data are primarily from the 1997 Robert Wood Johnson Foundation Employer Health Insurance Survey.

Health insurance: tradeoffs revisited.

In two recent papers, [Journal of Health Economics 18(2), 141-152, Journal of Health Economics 18(6), 811-824] Nyman raised some questions about the welfare calculations and conclusions in our earlier paper [Manning and Marquis, Health insurance: the tradeoff between risk pooling and moral hazard, Vol. 15, 1996]. This note discusses the erroneous criticisms in his papers. First, although, we estimated a Marshallian demand curve, our calculations are based on compensating variations that incorporate the gains from risk pooling. Second, our estimates of second best insurance plans indicate that some cost sharing is optimal, in contradiction to his assertion that our results raise questions about the desirability of insurance coverage. The comment also deals with other issues raised by Nyman.

Have small-group health insurance purchasing alliances increased coverage?

We use data from 1993 and 1997 employer surveys to assess whether the three largest statewide small-group health insurance purchasing alliances--in California, Connecticut, and Florida--increased coverage in small business. They did not. Specifically, they did not reduce small-group market health insurance premiums, and they did not raise small-business health insurance offer rates. We explore and discuss some reasons why. Alliances do permit employers to offer much greater choice in the number and types of plans; employees are found to take advantage of this wider choice.

Effects of "second generation" small group health insurance market reforms, 1993 to 1997.

In the mid-1990s, several state legislatures enacted a "second generation" of small group health insurance reforms that required guaranteed issue of all products and prohibited the use of health as a rating factor. We use data from two large employer surveys to compare the behavior of small business in nine states that adopted these reforms between 1993 and 1997 to the behavior of small business in 11 states and the District of Columbia, where neither of these small group health insurance market reforms existed prior to 1997 (N = 8,465 in 1993; N = 12,219 in 1997). Our analyses focus on several outcomes: health insurance offer and enrollment rates in any employer plan, and in an HMO plan; turnover in offer decisions; and premiums, variability in premiums, and the rate of change in premiums. Overall, we find no effect of small group reform on any of the outcomes; the sign of the effect is not consistent across reform states, the estimates rarely attain statistical significance, and they show no consistent pattern across the outcomes within each state. Therefore, predictions of the harm these regulations might cause to the market have not come to pass. On the other hand, proponents' hopes for a solution to low coverage rates among small businesses have not materialized either.

Employer health insurance and local labor market conditions.

Theory suggests that an employer's decisions about the amount of health insurance included in the compensation package may be influenced by the practices of other employers in the market. We test the role of local market conditions on decisions of small employers to offer insurance and their dollar contribution to premiums using data from two large national surveys of employers. These employers are more likely to offer insurance and to make greater contributions in communities with tighter labor markets, less concentrated labor purchasers, greater union penetration, and a greater share of workers in big business and a small share in regulated industries. However, our data do not support the notion that marginal tax rates affect employers' offer decision or contributions.

Low-wage workers and health insurance coverage: can policymakers target them through their employers?

Many policy initiatives to increase health insurance coverage would subsidize employers to offer coverage or subsidize employees to participate in their employers' health plans. Using data from the 1997 Robert Wood Johnson Foundation Employer Health Insurance Survey, we contrast "low-wage employers" with all other employers. Employees in low-wage businesses have significantly worse access to employment-based insurance than other employees do; they are less likely to work for an employer that offers insurance, less likely to be eligible if working in a business that offers insurance, and less likely to be enrolled if eligible. Low-wage employers contribute lower shares of premiums and offer less generous benefits than other employers do. Policies that would target subsidies to selected employers to increase insurance offers to low-wage workers are difficult to design, however, because several commonly mentioned employer characteristics (including firm size) are found to be poor indicators of low-wage worker concentration. Programs that would set minimum standards for employer plans to be eligible for "buy-ins" need to base these standards on the less generous terms offered by low-wage employers in order to effectively reach low-wage workers and their dependents.

HMO market penetration and costs of employer-sponsored health plans.

Using two employer surveys, we evaluate the role of increased health maintenance organization (HMO) market share in containing costs of employer-sponsored coverage. Total costs for employer health plans are about 10 percent lower in markets in which HMOs' market share is above 45 percent than they are in markets with HMO enrollments of below 25 percent. This is the result of lower premiums for HMOs than for non-HMO plans, as well as the competitive effect of HMOs that leads to lower non-HMO premiums for employers that continue to offer these benefits. Slower growth in premiums in areas with high HMO enrollments suggests that expanded HMO market share may also lower the long-run growth in costs.

Lifetime costs and compensation for injuries.

Little is known about how well individuals are compensated for injuries. This study uses data from a 1989 survey to estimate both the lifetime costs and compensation for injuries. Our findings show that about 55% of the cost is compensated by public or private programs. Compensation rates are lower for disabling injuries and those of long duration. The results also suggest that compensation system reforms that would place stricter limits on maximum compensation might not be a distributionally fair solution. The reasons are that costs are highly skewed, and the share of costs recovered by compensation programs is currently lowest for injuries that are long term, disabling, and the most expensive.

Effects of changing Medicaid fees on physician participation and enrollee access.

This paper assesses the effects of Medicaid fee changes on physician participation, enrollee access, and shifts in the site of ambulatory care using several natural experiments in Maine and Michigan. We use Medicaid claims and enrollment data to measure these outcomes. The reimbursement changes included substantial percentage changes in fees, however the value of the Medicaid fee improvements relative to the private market eroded very rapidly in the months following the interventions. Although the fee increases did not improve the outcome measures, they might have prevented conditions from worsening.

Simulating the effects of employer contributions on adverse selection and health plan choice.

OBJECTIVE: To investigate the effect of employer contribution policy and adverse selection on employees' health plan choices. STUDY DESIGN: Microsimulation methods to predict employees' choices between two health plan options and to track changes in those choices over time. The simulation predicts choice given premiums, healthcare spending by enrollees in each plan, and premiums for the next period. DATA SOURCES: The simulation model is based on behavioral relationships originally estimated from the RAND Health Insurance Experiment (HIE). The model has been updated and recalibrated. The data processed in the simulation are from the 1993 Current Population Employee Benefits Supplement sample. PRINCIPAL FINDINGS: A higher fraction of employees choose a high-cost, high-benefit plan if employers contribute a proportional share of the premium or adjust their contribution for risk selection than if employees pay the full cost difference out-of-pocket. When employees pay the full cost difference, the extent of adverse selection can be substantial, which leads to a collapse in the market for the high-cost plan. CONCLUSIONS: Adverse selection can undermine the managed competition strategy, indicating the importance of good risk adjusters. A fixed employer contribution policy can encourage selection of more efficient plans. Ironically, however, it can also further adverse selection in the absence of risk adjusters.

The intensity of physicians' work in patient visits--implications for the coding of patient evaluation and management services.

BACKGROUND: Clinicians use visit codes to bill for services involving the evaluation of patients and the management of their care. The existing guidelines for coding and documenting these services, as well as proposed revisions, have been criticized as complex, clinically irrelevant, and costly. We investigated whether easily measured characteristics of physician-patient visits accurately reflect differences in the amount of work performed. Such characteristics might provide the basis for a simple and equitable physician-payment scheme. METHODS: We collected information about the amount of physicians' work, the time spent in encounters with patients, and characteristics of patients and visits for 19,143 physician-patient visits in the practices of 339 urologists, rheumatologists, and general internists. Physicians recorded the actual time involved in evaluating the patient and managing his or her care during each visit and estimated the work involved in relation to a standardized, hypothetical visit. We used multivariate linear regression to identify factors related to differences in the total amount of work and to calculate work and work intensity (work per minute) for different types of visits. RESULTS: The duration of the face-to-face encounter with the patient or family (encounter time) was strongly predictive of the total amount of work. Total work, however, did not increase in direct proportion to encounter time. Visits with shorter encounter times were more intense than longer ones, in part because the work involved in providing fixed services, such as review of records and entry of information, did not vary in direct proportion to the length of the face-to-face encounter. Work intensity was greater for new patients than for established patients, for patients referred by other physicians than for those who were not, and for patients with new rather than previously existing problems. CONCLUSIONS: A simple coding scheme based on time spent by the physician in the face-to-face encounter and a limited set of characteristics of the visit would accurately reflect total work in actual practice. A fee structure based on these factors and the inverse relation between work per minute and the encounter time would provide equitable payment while encouraging efficiency and discouraging "upcoding" of services.

Pooled purchasing: who are the players?

Data from the 1997 Robert Wood Johnson Foundation Employer Health Insurance Survey provide the first national estimates of the prevalence of pooled purchasing under all major arrangements. About one-quarter of all businesses participate in a pool; smaller businesses are more likely to participate, and there is substantial geographic variation in the prevalence of pool participation. Pooling appears to have modest positive effects on the availability of employee choice among plans (especially health maintenance organizations) and on the availability of information about plan quality. On the other hand, pooling as now construed does not seem to have enhanced the accessibility or affordability of insurance to employers.

Geographic variation in physician visits for uninsured children: the role of the safety net.

CONTEXT: Although an extensive literature exists comparing national access to health care for uninsured vs insured children, few data exist regarding differences in access across states. OBJECTIVE: To examine variation in access to physician services for uninsured children in 10 states, the safety net's role in explaining this variation, and the potential effects of the State Children's Health Insurance Program (CHIP) on insurance coverage and access. DESIGN AND SETTING: The population-based Robert Wood Johnson Foundation Family Health Insurance Survey, conducted between summer 1993 and spring 1994 in 10 states (Colorado, Florida, Minnesota, New Mexico, New York, North Dakota, Oklahoma, Oregon, Vermont, and Washington), with a response rate of families by state ranging from 61% to 83%. PARTICIPANTS: A total of 8565 children who were uninsured (1586), covered by Medicaid (2723), or covered by employer-sponsored private insurance (4256) for 1 full year prior to the survey. MAIN OUTCOME MEASURES: Percentage of low-income children who are uninsured and predicted annual physician visits by state if insurance was provided to uninsured children in families with incomes of less than 200% of poverty level. RESULTS: In the 10 study states, low-income children ranged from 61% to 86% of all uninsured children and the uninsured rate for low-income children varied from 9% to 31%. On average, providing public coverage would increase annual physician visits from 2.3 to 4.6 (a 105% increase), but the increase would range from 41% to 189% across states. The annual physician visit rate in the 3 states with the highest access for the uninsured was 160% of that in the 3 lowest-access states. Safety net capacity in the high-access states ranged from 120% to 220% of that in the low-access states. CONCLUSIONS: Our data suggest that the potential effects of CHIP vary substantially across states. Notably, improvements in access to health care by uninsured low-income children should be greater in states with the fewest safety net resources.

Medicaid eligibility expansion in Florida: effects on maternity care financing and the delivery system.

CONTEXT: In July 1989, the income limit on Medicaid eligibility for pregnant women in Florida was increased from 100% to 150% of the poverty level. This change may have led to substantial shifts in the financing of pregnancy-related care, and also may have had distinct effects on different providers in the health care delivery system. METHODS: Matched birth and death certificates, hospital discharge abstracts, Medicaid eligibility records and encounter records from county public health departments were used to estimate changes in the flows of funds and services by major payer groups during the period preceding the expansion (July 1988-June 1989) and for calendar year 1991. A total of 188,793 births in the first period and 193,292 in the second were examined. RESULTS: The number of births financed annually by Medicaid in Florida increased by 47% following the eligibility expansion, from 47,400 in 1988-1989 to 69,600 in 1991. This increase stemmed largely from covered births to women who otherwise would have been uninsured. Seventy-three percent of the additional 22,200 deliveries funded through Medicaid in 1991 are attributed to women who were eligible as a result of the expansions. The additional prenatal care financed by Medicaid was delivered almost entirely by county public health departments, which increased their capacity by more than 100%, from 177,000 visits in 1988-1989 to 433,000 in 1991. Medicaid payments for maternity care increased 39%, from $135 million to $187 million, while payments made by the uninsured dropped by 29%. These changes resulted in a 5% rise in hospital revenues, despite little change in the number of admissions. CONCLUSIONS: The Medicaid expansion benefited low-income pregnant women and hospitals in Florida. It is unknown whether the private delivery system would have accommodated the increased demand in the absence of the public health system response.

Who gains and who loses with community rating for small business?

This paper compares community rating with experience rating for small businesses using a microsimulation model to determine what firms offer and who within these firms purchases insurance. We generate four years of data and find that our results are remarkably stable through time. Both offer and purchase rates are about five percentage points higher under experience rating, but community rating leads to more stable offerings. Under community rating, high-risk firms and families purchase insurance, whereas under experience rating, it is the low-risk firms and families who are the purchasers. Young families and poor families have the lowest purchase rates, with these rates being disproportionately low under community rating.

State health expenditure accounts: purposes, priorities, and procedures.

This article reports on the State Health Expenditure Account (SHEA) project which developed procedures States can use in tracking their health care expenditures. The purposes, priorities, and concepts of SHEAs were designed to meet the needs of State policymakers. The resulting methods are discussed and illustrated using calculations of SHEAs for California. Contrasts with the National Health Expenditure (NHE) framework are provided. Recommendations for cooperation between the Health Care Financing Administration (HCFA) and the States that would facilitate the adoption and estimation of SHEAs are offered. Details of the methods used for the California estimates can be found in the Technical Note of this article.

Trends in managed care and managed competition, 1993-1997.

According to the recent literature, we are experiencing a managed care "revolution," and managed competition is increasingly being embraced by private- and public-sector policymakers. Using two large employer health insurance surveys, this paper presents new estimates that both confirm and add to our understanding of changes taking place in employment-based health plans. The dramatic shifts in enrollment from indemnity to managed care largely reflect employers' choices about the types of plans to offer. Employees are limited in the number and types of plans from which they can choose. When choice is available, it is generally not governed by managed competition principles.