New York (Healthy NY)

Background – Healthy NY, which began enrolling individuals in January 2001, has three target populations: small business employers and their employees, sole proprietors, and working individuals who cannot obtain insurance through their employers. All health maintenance organizations (HMOs) in the State of New York must participate in the program. Other carriers may also participate. The program includes a fairly comprehensive benefit package (it does not include mental health or substance abuse) and a stop-loss fund to reimburse health plans for 90 percent of claims paid between $5,000 and $75,000. The plans are fully at risk for claims under $5,000 and over $75,000. This reinsurance program allows premiums to be kept below market rates.

Healthy NY was designed for workers who are ineligible for other State insurance programs. As of November 1, 2006 Healthy NY currently serves approximately 130,850, comprised of 90,859 subscribers and 39,991 dependents. The enrollment is disproportionately higher in upstate New York, although this is gradually changing. Healthy NY does not have an official position on the number of people who could be served by the program.

The Insurance Department of New York drafted the regulations, developed the administrative procedures, obtained the cooperation of HMOs, and implemented the program within an aggressive one year timeframe. Unlike previous programs in New York and unlike many of the other programs in this study, Healthy NY does not directly provide subsidies to small businesses or to low-wage workers. Instead, the subsidy is directed at the insurance product through a reinsurance program that pays most of the expenses of the high-cost people who join the program. This results in lower premiums for employers and employees. The State budget contains the funds for the reinsurance subsidies.

The program builds upon the private insurance market. In addition to all the HMOs in the State offering a product under the program, there are a few plans that offer a Preferred Provider Option (PPO).

Program History – Healthy NY was initiated after the passage of New York’s Health Care Reform Act (HCRA) of 2000. Before Healthy NY was implemented, New York had implemented two small programs that provided subsidies to help low-income individuals or small employers purchase private health insurance. These programs have since ended, but their enrollees have been allowed to enroll in Healthy NY.

When creating the program, the legislature recognized that many carriers in the individual market were incurring losses. Without the stop-loss relief, it would have been difficult to pass legislation that would have required all the HMOs in the State to offer policies under Healthy NY. In addition, without the stop-loss relief, it is unlikely that the employers and individuals could have paid the premiums necessary to provide even the current benefit package.

Eligibility Requirements for Employers and Employees – Healthy NY targets three populations: small business employers and their employees, sole proprietors, and working individuals who cannot obtain insurance through their employers. Generally speaking, none of the populations can be eligible if they have been insured in the past 12 months.

Healthy NY allows small employers with 50 or fewer employees to buy into the program if at least 30 percent of their employees earn less than $35,000 annually (adjusted annually for inflation). Employers must contribute at least half of the premium for full-time employees. Further, at least 50 percent of employees within each business must participate in the program or have coverage through other means. At least one of the employees who participates in Healthy New York must earn less than $35,500 per year.

For sole proprietors (independent contractors and self-employed individuals) and working individuals who cannot obtain insurance through their employer, gross family income must not exceed 250 percent of the Federal poverty level (FPL). The sole proprietors and the individuals pay the entire premium and there is no sliding fee discount based on family income. At least one member of the family has to be employed, or if not currently employed, must have been employed at some time during the preceding 52 weeks. The applicant must have been uninsured for the past 12 months or lost their coverage under certain allowed conditions. Applicants with COBRA or public coverage may enroll directly in Healthy NY.

The proportion of individuals in each of the target groups has remained fairly consistent over time. Approximately 56 percent of enrollees are working individuals, 17 percent are sole proprietors, and 27 percent are with small businesses. Since its beginning in 2001, Healthy NY has enrolled more than 296,250 people. Enrollment for November 2006 is shown below.

Subscribers: 90,859
Dependents: 39,991
Total Enrollment: 130,850

Evaluations have shown that the working individual population and the sole proprietor population are higher-cost groups than the small business population. Therefore, the single set of premiums creates a more favorable cost/benefit ratio for the individual than for the small group participants’ market.

Because the program income guidelines are similar, Healthy NY encourages parents to enroll their children in the State’s Child Health Plus program because is provides a richer benefit package for children. This helps explain why there are few children enrolled in Healthy NY.

Program Funding – The program is funded through a reinsurance subsidy from the State of New York and employers and employees pay premiums to participating plans. In December 2005, EP&P Consulting, Inc. released a report on Healthy NY, which found that the subsidy funding was more than sufficient to support program growth through 2007 but would not sustain additional enrollment. Stop-loss spending for the program totaled $61.7 million in 2005 and EP&P estimated that it would approach $71 million by 2006. As of the date of the report, EP&P reported a $69.2 million allocation for 2005 spending, and a $109.6 million allocation for spending in 2006.

Premiums for the program are community-rated (no under-writing), do not vary by eligibility category (i.e., small employer, sole proprietor, and individual), and are divided into four tiers (one-adult, two-adult, one parent with child(ren), and family). Rates may vary by county, and since they are set by the carrier, from plan to plan. Each carrier sets its own premium for each of the four contract tiers.

The State subsidy is a reinsurance program that results in insurers charging lower premiums for the program because they must take into account the stop-loss reimbursement from the State for most of the expenses of high-cost enrollees when determining premiums. Instead of directly subsidizing the small businesses or the low-wage workers, the subsidy pays (after the fact) 90 percent of the cost of care for individuals with annual health care costs between $5,000 and $75,000. Carriers pay all claims below $5,000 and above $75,000.

Initially, the reinsurance program paid up to 90 percent of claims between $30,000 and $100,000 per year for each enrollee. However, this changed in 2003 because of lower-than-expected claims activity. This change in reinsurance resulted in significant premium reductions for Healthy NY: with most plans reducing their premiums by approximately 17 percent. In addition, Healthy NY developed an option that allows enrollees to further reduce their cost by approximately 12 percent by selecting a benefit package without prescription drug coverage.

Program Design – Healthy NY is not a Medicaid expansion and does not receive Federal Medicaid funding. Instead, it builds on the private insurance market and encourages efficient use of health care resources by requiring all HMOs in the State to participate in the program. State reinsurance dollars are used to bring down the cost of the premium so that it will be affordable to low-wage employees. The program also eliminated some mandated benefits from covered services, in order to further reduce the cost. While studies have shown that it works and Healthy NY premiums are approximately 20-30 percent lower than small group market HMO premiums and 50 percent lower than the individual market, comparisons are difficult to make due to the lack of standardization of coverage in the small group market.

The HMOs that participate in the program are responsible for:

• Processing member applications
• Collecting member premiums
• Conducting annual recertifications for member renewal
• Providing services according to the benefit package requirements
• Processing claims
• Submitting certain required data to the New York State Insurance Department, including monthly enrollment totals, quarterly expenditures incurred by members, and annual reconciliation reports in order to obtain stop-loss reimbursement

Providers are paid by the HMOs according to the specifications of their provider contracts.

Delivery of Services – Services are delivered by HMOs throughout the State. Healthy NY is administered by the New York State Insurance Department. Specific duties of the Department include:

• Tracking enrollment data
• Reviewing initial premiums and contracts proposed by health plans
• Maintaining the Healthy NY website and toll-free telephone lines
• Overseeing State-sponsored media advertising and other sources of promotion, such as health fairs, small business development centers, and presentations to chambers of commerce
• Providing technical assistance to health plans concerning programmatic matters such as eligibility and benefits
• Administering the stop-loss/reinsurance program
• Handling consumer questions, complaints, and appeals of eligibility denials

The State does not dictate which providers have to be part of the HMO panels. Each HMO has its own preferred provider panel. When members were surveyed in 2004 and 2005 concerning their satisfaction level with the program, the areas with the highest ratings were provider network and education materials. The areas with the greatest dissatisfaction were cost and benefits. Not surprisingly, members want more benefits for less cost.

Payment and Reimbursement – HMOs participating in Healthy NY pay claims for services. Payment rates are not available. However, one study of the program indicated that HMOs had negotiated payment rates for providers below market reimbursement rates by requiring enrollees to obtain services in-network. It is unclear whether safety net providers [e.g., Federally qualified health centers (FQHCs)] participate in the program.

Plan Benefits – In order to further reduce costs, the Healthy NY benefit package does not include the full range of benefits mandated for typical policies sold in the State’s small group and individual markets. For example, inpatient and outpatient mental health, chiropractic services, and outpatient treatment for alcohol and substance abuse are not covered under the program. In addition, the program offers two benefit packages, one with and one without prescription benefits. Covered services include:

• Inpatient and outpatient hospital services and emergency services
• Physician services
• Outpatient surgical facility charges related to a covered surgical procedure
• Pre-admission and diagnostic testing
• Laboratory and x-ray
• Adult preventive services, including maternity care, immunizations, mammographies, PAP smears, and periodic physical exams once every three years
• Preventive and primary health care services for dependent children, including routine well-child visits and necessary immunizations
• Equipment, supplies, and self-management education for diabetics
• Therapeutic services consisting of radiology, chemotherapy, and hemodialysis
• Blood and blood products furnished with surgery or inpatient hospital services

In order to keep the premiums at an affordable level, the benefits package requires cost sharing. Regular small group policies in New York typically have much larger co-payments. The co-payment listed in the table below is an amount that an individual must pay at the time he or she receives services. Additionally, if an individual chooses the benefit package that includes prescription drug coverage, there is an annual deductible for prescription drugs. The amounts of the co-payments and deductibles are the same for each health plan. The applicable co-payments are as shown in the following table.

The program has also controlled premiums by using HMOs that only pay for services obtained from providers within their networks.

Impact of SPG Program – Healthy NY did not apply for a State planning grant.

Lessons from Administering the Program – In order to attract small businesses and low-wage workers, there needed to be a significant community subsidy. Program design must be evaluated for effectiveness and adjusted if necessary. The stop-loss corridors in Health NY had to be adjusted downward because of low claims activity (from $30,000 - $100,000 to $5,000 - $75,000). This resulted in lower premiums for the program. Administrators need to appreciate the tension between adding benefits and keeping program costs low.

Evaluation – The Health Care Reform Act of 2000 required an annual evaluation of the program by an independent entity and an annual report to be submitted to the Legislature and the Governor by January 1st of each year. The report must address:

• Employer participation
• An income profile of enrollees
• An analysis of claims experience
• The impact of the program on decreasing the number of uninsured

The Lewin Group, in partnership with Empire Health Advisors, conducted the report in 2003. EP&P Consulting, Inc. conducted the independent evaluation in 2004 and 2005.

The evaluators have made a number of recommendations in their most recent report. These include recommendations related to increasing enrollment, such as:

• Eliminating the crowd-out provision for small business owners
• Reducing the waiting period for sole proprietors and working individuals from 12 to 6 months
• Allowing enrollees in the State’s Direct Pay insurance product to move to Healthy NY without requiring the gap in insurance coverage
• Eliminating the “working” requirement for certain populations to enable them to participate in Healthy NY
• Considering allowing individuals at higher FPLs to enroll in Healthy NY at graduated-scale premiums

All of these recommendations require legislative change.

The evaluators have also encouraged the Department of Insurance to move forward with a number of other program changes. These include:

• Exploring the opportunity to obtain Federal financing for Healthy NY
• Providing more intensive broker education
• Developing an eligibility screen tool on the Healthy NY website
• Developing a Healthy NY report card on the Healthy NY website

More information concerning the evaluations can be found on the Healthy NY website at www.healthyny.com.