Harris County Healthcare Alliance and Texas Department of Insurance Houston Small Employer

1. Texas Department of Insurance Harris County Healthcare Alliance and Texas Department of Insurance Houston Small Employer Pilot Project February 9, 2007 Karen Love

2. HRSA State Planning Grants • Overall Goal: To analyze the uninsured and evaluate options for coverage • Texas Phase 1: $1.3M in 2001 for an in-depth phone survey of uninsured, small employer survey, health insurance fairs, and focus groups in 15 cities

3. HRSA State Planning Grants(cont.) • Texas Phase 2: $175K in 2003 for follow-up small employer survey and study risk pools • Texas Phase 3: $398K in 2005 to design a product for Houston small employers, develop a marketing plan, conduct focus groups with employers and employees and assist in implementation of product

4. Research Results

5. Why Does Texas Have Such a High Uninsured Rate? • Lower average wages • A higher proportion of small businesses • Lower participation in public programs • A higher proportion of non-legal citizens • A large Hispanic population • Low union participation • Lower participation in employer-sponsored programs

6. Government-based Insurance

7. Employment-based Insurance

8. 18% 10% 72% Family member(s) working full-time Family member(s) working part-time Non-working Who Are The Uninsured by Employment Status?

9. 25% 75% Ages 0 - 18 Ages 18 - 64 Who Are The Uninsuredby Age?

10. 29% 71% Who Are The Uninsured by Income Level? 0 - 199% of FPL 200+% of FPL

11. Other 3% White 29% Hispanic 57% Black 11% Who Are The Uninsured by Race/Ethnicity?

12. Not a U.S. Citizen 27% Naturalized U.S. Citizen 5% Native U.S. Citizen 68% Who Are The Uninsured by Citizenship?

13. Working Uninsured Facts • 23% of uninsured work for firms with 500 or more employees • Nearly 50% of uninsured adults work in firms with 24 or fewer employees • Approximately 80% of uninsured live with one adult working for a small business • Fewer than 20% of the uninsured had access to employer-sponsored coverage

14. It’s the Cost Stupid!

15. Average Small Employer Insurance Costs in Texas Sources: Medical Expenditure Panel Survey – AHRQ and Employer Health Benefits Annual Survey – Kaiser and HRET

16. How Much Can Small Employers Afford?

17. Houston Pilot Product

18. Plan Objectives • Develop an affordable benefit plan that will appeal to both employers and employees • Use TDI grant data and research to guide plan design • Engage a locally based steering committee of broad representation

19. Plan Objectives (cont.) • Target cost: Average $150 PMPM • Simple rate chart with no “added costs” • Easy enrollment process • Benefits for typical expenses

20. Plan Development Process • Plan design and pricing goals discussed with Milliman actuaries • Reviewed surveys and focus groups to identify benefit preferences • Steering Committee vetting • Plan prototypes presented to employers and employees throughout Houston

21. Plan Features ****Modified Community Rating*** • Simplifies application and underwriting • Uses Age and Gender case characteristics • No medical underwriting or screening • No Group Size rating factor • No Industry rating factor

22. Benefit Plan Design • Two options: • Basic and Preventive Care • Catastrophic Care

23. Plan Design Assumptions • Loosely managed PPO network with very low out-of-network utilization • Aggressive provider discounts • No load for adverse selection • 85% loss ratio

24. Other Plan Design Features • 75% eligible employee participation requirement • 50% employer premium contribution • 12 month pre-existing condition exclusion • Assumed they are previously uninsured in the last 12 months

25. Other Plan Provisions • Must be issued through a cooperative to avoid small group market restrictions • Cannot restrict eligibility to uninsured groups only • Alliance to form the cooperative

26. Focus Group Employers • All but 3 employers (88%) said they would purchase the plan if it was available • Employers stressed importance of offering both plan options to maximize employee participation • Employers particularly supportive of simplified “community rating” and enrollment process

27. Focus Group Employees • Affordability is the deciding factor • Demand benefits they value • Low-cost office visits • Prescription drug coverage • Low deductibles • Having a plan they don’t expect to use is of no value to many

28. Next Steps • RFP to be issued in February 2007 • Alliance will work with selected carrier to create a purchasing cooperative for small employers • Targeted date for product availability – Fall 2007

29. Contact Information: karen_love@hctx.net (713) 368-3285