Health Insurance Partnership Board Studies: Enrollment, Cost, and Implementation of a Preliminary Expanded Partnership

Engrossed Second Substitute House Bill (E2SHB) 1569, enacted in 2007, charged the Board of the Health Insurance Partnership (HIP) with reporting to the Legislature and the Governor by December 1, 2008 on a Preliminary Study of the risks and benefits of incorporating the individual and small group markets into the (HIP) under existing small group market rules. The Health Insurance Partnership Board (HIP Board) will produce a Final Study to the Legislature and the Governor by September 1, 2009.

To assist in completing the Preliminary Study, the HIP Board contracted with Mathematica Policy Research to estimate the coverage and cost impacts of combining the individual and small group markets into the HIP, and to comment on any implementation or legal issues related to this change. This report, submitted as a discussion draft, constitutes Mathematica’s analysis of a “Preliminary Expanded Health Insurance Partnership” or PHIP.

This report offers estimates of coverage and cost in the PHIP, projected to FY2010. To understand the change that the PHIP would represent, especially for the population that is now uninsured, it was necessary also to estimate the “base case”—that is, projected coverage in the HIP and from all other sources in FY2010, including self-insured coverage, other small group and association coverage, individual coverage, and coverage in public programs. We report these base case projections also.

The HIP Board approved the organization and operating rules for the PHIP for the purposes of this study, as summarized below:

• The PHIP would be simply a market organizer: it would not negotiate rates for any product, nor would it restrict available products or rates.
• The PHIP would serve all small groups as well as individuals. Small groups could still buy association coverage outside of the PHIP or self-insure, but the PHIP would become the exclusive commercial source for individual coverage.
• Carriers in the PHIP could continue to deny individuals, referring them to Washington State Health Insurance Pool (WSHIP) for coverage.
• The PHIP would attempt to coordinate coverage of dependent children with Medicaid and the State Children’s Health Insurance Program (SCHIP), but adults and children who are eligible to enroll in Basic Health (BH) could enroll instead in the PHIP and qualify for a subsidy.
• All plans that are currently offered in either the small group or individual market would become available in the PHIP, and any plan available in the PHIP would be eligible for subsidy.
• Employees would have unrestricted choice among all available plans in the PHIP, and employers would adjust to unrestricted employee choice by transitioning to defined contribution benefits.
• The PHIP would require small employers to contribute at least 40 percent of the single premium for the plan they select, and at least 75 percent of eligible employees must participate in some PHIP plan for the small group to qualify for coverage.
• Small group workers and individuals alike would have the same plan choices and pay the same premiums in the PHIP, differing only by the amount that employers would contribute for small group enrollees. Current small group rating rules would apply to both small group and individual coverage in the PHIP.
• Carriers would “list rate” small groups in the PHIP. In combination with employers paying defined contributions to coverage, list rating would result in employee contributions that vary by the employee’s age, as well as their choice of plan and coverage of dependents.
• All employers would offer Section 125 plans to help finance employee contributions to coverage (if the employer offers and the employee is eligible) or individual purchase of coverage through the PHIP. Estimates of enrollment in the PHIP assume that Washington’s current individual market would qualify under federal rules for use of Section 125 funds to purchase individual coverage. However, because Washington guarantees access through WSHIP but does not require guarantee issue in the market, making it questionable whether Section 125 funds could be used to purchase individual coverage.
• The subsidies available to both individuals and small group enrollees in the PHIP would be based on the same schedule as those available to small group enrollees in the HIP.
• Finally, the PHIP would deeply subsidize coverage for enrollees below 200 percent FPL, but coverage would continue to be voluntary, as would employer offer of coverage.

Estimates for the HIP Board studies were produced by microsimulation. Two sets of microsimulation estimates were produced: first simulating enrollment and cost in the HIP projected to FY2010, and then simulating FY2010 enrollment and cost in the PHIP. Both sets of estimates should be regarded as full-equilibrium estimates, not projections of actual FY2010 enrollment.