Pennsylvania’s eight-year-old AdultBasic health insurance program is raising premiums and reducing benefits in the face of rising costs — offering important lessons about the nation’s broken individual insurance market, the need for comprehensive healthcare reform and the structure and limitations of state-administered health insurance programs. (Hat tip: Jaan Sidorov of Disease Management Care Blog)
As the name implies, AdultBasic provides a subsidized basic individual health insurance package to adults who are poor, but not poor enough to be eligible for Medicaid. The program provides subsidized benefits to about 40,000 adults. Effective March 1, these people will get hit with a 3% premium contribution increase to $36 per month, jacked up copays and a new 10% co-insurance with a $1000 annual out-of-pocket max. Another 3500 people who buy into the program will see their monthly premiums rise to $600 from $330.
So what have we learned?
1. Despite huge and growing demand, the program is significantly underfunded. There are 380,000 people on the waiting list to receive the subsidized AdultBasic benefit and the wait time is currently two years. The size of the waiting list has more than doubled since January 2009. Funding — amounting to $171.8 million in 2008 — comes from tobacco settlement dollars and a premium tax on the state’s four not-for-profit Blue Cross Blue Shield plans.
2. In addition to serving people who can’t afford insurance, the program also attracts those who can’t get coverage because of pre-existing conditions — suggesting a degree of adverse selection in the program’s risk pool. This parallels the experience of other health plans that have recently jacked up individual premiums – most notably WellPoint, igniting a national firestorm.
3. While the state administers the program, coverage is currently contracted out (following competitive bids) to four health plans on a fully funded basis: Highmark (serving 20,000 AdultBasic members), Independence Blue Cross/Keystone (11,500), Blue Cross of Northeastern Pennsylvania/First Priority (4000), and UnitedHealth/Unison (4000). There is no government option. Like in the broader individual market cost-control is largely the job of private health plans; unfortunately, this is an industry that has proven unable (some would say unwilling) to meaningfully bend the cost curve.
4. Rising costs (and subsequent rising premiums) are a symptom of a broader problem. Or to quote Pennsylvania insurance commissioner Joel Ario in announcing the changes last month:
States are facing a daunting healthcare challenge, as evidenced by the problems our AdultBasic insurance program is facing. The bottom line is that Pennsylvania cannot solve the healthcare crisis without federal health reform.