Small Group Risk Rates Results: The First Year of AB 1672
Limited Access: Health Insurance in California
The indemnity health market is a $2.1 billion industry that seems to be slowly losing market share to HMOs. About 40 percent of the total, about $851 million, is for groups in the size range 3 - 50, the small group market. During the period from June 30, 1993 to June 30, 1994, the first year of the reforms of AB 1672, there was a loss of about 10 percent of the groups enrolled at the beginning and 5 percent of the lives. The losses were especially pronounced in the south state. Los Angeles County accounted for over half. Gains were made, however, in the more rural counties where HMOs had less presence. There was no discernible pattern of losses except that the younger males and smaller families seemed to be more likely to have left. The losses were not present for every carrier, but they were found regardless of size of carrier. When compared to all employees in the labor market in the small group size, only about one in eighteen is covered by these carriers.
The standard group risk rates are a complex blend of methodologies and give little clue to the final premium paid by a given employer. Regionally, a given product for a similar employee was much higher in LA than in other parts of the state. The statewide average premium was $252, of which the employee paid about $87, about 4 percent of average wage. While premium costs were shared with the employee throughout every employer size, there was some tendency for the smallest employers, size 1-2, to share less and to have somewhat higher per employee costs. Larger groups, 51-100, tended to share more and get better rates. The carriers reported the feared problems with adverse selection had not yet materialized, predatory pricing was not a problem and, for the short term, competition may have increased. The claims experience, on the average, is actually a little better for small group than the non-small group market.
There is concern, though, that with the limits on risk adjustment, only the larger carriers will be able to have enough enrollment base to spread risk. The smaller carriers will drop out and competition will be reduced. These same limited risk adjustment and base rate problems may drive out younger healthier employees and leave only a pool of high claims employees because of the modified community rating. The general response is that for sicker employees, insurance is more available and affordable, but at the expense of higher premiums for the healthy male employee.
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This report examines the health care insurance status of Californians in 1989 and 1991. The data used are from the March 1989 and March 1991 Current Population Surveys (CPS). The CPS is conducted monthly by the U.S. Census Bureau. The survey in March of each year since 1980 asks people to identify their health insurance coverage for the previous year. Many respondents seem to answer the questions based on their current status and not that of the previous year.These are excellent discussions of the reasons for different estimates of the number of uninsured that four major surveys produce based on sampling, how the questions are formulated and asked, the time periods about which the questions ask and, in the case of the Current Populations Survey, the effect of the change in how the health coverage questions were asked starting in 1988. We date our tables with the year of the survey although the data may refer to the previous calendar year. In addition to the CPS, we have drawn widely from published reports and data from other surveys.
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