Healthy New York, a new health insurance program for workers in small firms and low-income adults who lack access to group health coverage, has so far been able to offer premiums that are substantially less than those charged in the private individual insurance market. According to Harvard University researcher Katherine Swartz, author of the Commonwealth Fund report Healthy New York: Making Insurance More Affordable for Low-Income Workers,
premiums for qualified individuals were mostly 30 to 50 percent less than premiums charged by insurers, and 15 to 30 percent less than those available in the small-group market, as of February 2001.
Healthy New York, which began enrolling people in January 2001, has three parts: one for businesses with 50 or fewer employees, one-third of whom must earn $30,000 or less annually; one for low-income sole proprietors; and one for low-income uninsured workers. Its most important feature is a state fund to pay up to 90 percent of the costs of enrollees' annual claims between $30,000 and $100,000. In effect, the state takes on the role of reinsurer-implicitly subsidizing the premium by removing much of insurers' risk of high-cost claims.
Swartz says that while the program indeed offers lower premiums, these still account for more than 5 percent of before-tax income for most individuals and many eligible low-income workers in small firms. Consequently, it is not clear that Healthy New York's target beneficiaries will purchase coverage through the program in large numbers.
New York can reduce premiums further and increase program participation in several ways, the author argues. One option is to provide direct subsidies to help individuals purchase coverage. An alternative approach is to adjust the program's reinsurance mechanism so that insurance carriers are not crippled by a disproportionate share of high-cost claims above $100,000. The author suggests a graduated reinsurance structure whereby carriers pay diminishing portions of claims as total costs increase. Removing insurers' risk of very high-cost claims would help stabilize premiums.
Broadening the choice of benefit packages available to firms and enrollees is a third option. Some small firms and business groups want a wider selection of policies with a variety of benefits, such as those available in the regular small-group market. If a second benefits package is added to the standard one, then all insurers should be required to offer both packages, the author says.Facts and Figures
- Of the 8.2 million working adults in New York State in 1999, one-quarter (2.3 million people) worked in firms that did not offer health insurance.
- In addition to its stop-loss fund for paying high-cost claims, Healthy New York achieves its lower premiums by covering only services obtained from network providers and by offering a scaled-back benefits package with higher copayments and deductibles than those found in the small-group and individual markets.
- As examples, monthly Healthy New York HMO individual premiums range from $183 to $224, compared with $319 to $355 for individual market premiums.