Overview

Health insurance rates for individual and small-group policies are significantly higher than rates for larger groups, placing coverage out of reach for many low-income workers and small businesses. This is a problem in New York State, where one of six residents lacks health coverage. Prompted by these numbers, the state legislature passed the Health Care Reform Act of 2000. One of its provisions led to the creation of Healthy New York, a managed care plan for low-income small businesses, self-employed people, and individuals. (The legislation's other insurance expansion initiative is Family Health Plus.) Healthy New York started enrolling people in January 2001. Though enrollment has been slower than anticipated, with about 29,000 enrollees by June 2003, this number nearly doubled to 55,000 enrollees by April 2004. The state has made changes to reduce premiums and expand eligibility in order to encourage further enrollment. The HMO program offers insurance to businesses with 50 or fewer employees; low-income workers who lack insurance; and sole proprietors, that is independent contractors and self-employed individuals. Eligible firms must have at least 30 percent of their employees earning less than $32,000 annually and at least one of these employees must enroll in the program. Employers who offer Healthy New York coverage to their employees must cover at least 50 percent of the premiums and contribute the same amount for all employees.

Organization: New York State Insurance Department

Date of Implementation: January 1, 2001

Target Population: Uninsured workers

The issue: Health insurance rates for individual and small-group policies are significantly higher than rates for larger groups, placing coverage out of reach for many low-income workers and small businesses. This is a problem in New York State, where one of six residents lacks health coverage. According to recent figures, 2.3 million of the 8.2 million working adults in the state—about one-quarter—are employed by firms that do not offer health insurance. About 43 percent of those workers are unable to buy insurance elsewhere and are therefore left uninsured. More than 415,000 of the 770,000 uninsured children in New York have at least one parent working full time. Prompted by these numbers, the state legislature passed the Health Care Reform Act of 2000. One of its provisions led to the creation of Healthy New York, a managed care plan for low-income small businesses, self-employed people, and individuals. (The legislation's other insurance expansion initiative is Family Health Plus.)

The intervention: Healthy New York started enrolling people in January 2001. Though enrollment has been slower than anticipated, with about 29,000 enrollees by June 2003, this number nearly doubled to 55,000 enrollees by April 2004. The state has made changes to reduce premiums and expand eligibility in order to encourage further enrollment. The HMO program offers insurance to businesses with 50 or fewer employees; low-income workers who lack insurance; and sole proprietors, that is independent contractors and self-employed individuals.

Eligible firms must have at least 30 percent of their employees earning less than $32,000 annually and at least one of these employees must enroll in the program. Further, at least half of all the employees eligible for coverage must enroll. Individuals and sole proprietors must have household incomes below 250 percent of the poverty level, have been uninsured for the previous 12 months, be ineligible for Medicare or employer-provided group insurance, and be employed on a full-time, part-time, or episodic basis. Employers who offer Healthy New York coverage to their employees must cover at least 50 percent of the premiums and contribute the same amount for all employees. All HMOs in the state must participate and offer the standard Healthy New York policy.

Lower premiums are possible due to three features of the program: the benefit package does not include the full range of services and requires higher copayments and deductibles; care must be obtained from network providers who have agreed to negotiated fees that are below market reimbursement rates; and the state assumes the role of a reinsurance company so that carriers can purchase less reinsurance. The scaled-back benefits package, unlike typical policies sold in the state's small group and individual market, is not mandated to cover mental health care, home health care, chiropractic care, and outpatient treatment for alcoholism and substance abuse.

There is a $3,000 cap on total prescription drug expenditures; recently, the program began to offer plans with and without a prescription drug benefit. Cost-sharing at the point-of-service has been scaled back in an effort to encourage enrollment. The stop-loss provision was created to cover up to 90 percent of claims between $30,000 and $100,000 for any individual, thus greatly reducing the HMOs' risk. As a result of the healthier-than-expected risk pool, the state has changed this provision and now covers 90 percent of claims between $5,000 and $75,000. Carriers would still be responsible for claims that exceed the allocated state funds. Healthy New York has been able to offer significantly lower premiums to its enrollees than are available in the self-pay and small-group HMO markets. As of October 2003, the average monthly cost for individuals enrolled in Healthy New York was $194, compared with $496 for individuals who purchase insurance on their own and $270 for small-group HMO coverage.

Many of the recent changes to the program, such as broadening the choice of benefit packages and changing the reinsurance structure, were recommended in a November 2001 Commonwealth Fund report, Healthy New York: Making Insurance More Affordable for Low-Income Workers. Further growth in program enrollment might hinge on another recommendation that has yet to be addressed.

Author Katherine Swartz, Ph.D., professor of health policy and management at the Harvard School of Public Health, argues for direct subsidies to help individuals and sole proprietors purchase coverage. Studies have shown that most uninsured workers with low incomes have limited ability to respond to a 10 or 20 percent reduction in health insurance premiums.

For more information Contact: Eileen Hayes, New York State Insurance Department E-mail: ehayes@ins.state.ny.us Web site: http://www.ins.state.ny.us/website2/hny/english/hny.htm