Actuarial Value and Employer-Sponsored Insurance. Hybrid Approach

11/15/2011

Using the set of services covered by the FEHBP-PPO plan, our preliminary results suggest that an estimated 1.6 to 2.0 percent of individuals — approximately 2.6 to 3.2 million people — are enrolled in ESI with a benchmark AV below 60 percent in today’s marketplace (Figure 3).


Figure 3.
Cumulative percentage and estimated number of individuals enrolled in
employer-sponsored insurance under age 65
by actuarial value of the plans, estimated values for 2010*

Actuarial value (%) Cumulative percentage of individuals
enrolled in ESI plans (%)
Number of enrolled individuals
(millions)
 
60 2 3
70 4 6 }98%
80 20 32
90 60 96
100 100 160

Key:  ESI = employer-sponsored insurance
* Note:  Cost of covered services was calculated using the set of covered services of the Federal Employees Health Benefits Program Blue Cross/Blue Shield Preferred Provider Organization plan as an external benchmark and the cost-sharing structure of the plan whose AV is being estimated.
Source:  Composite of ARC analysis of Bureau of Labor Statistics National Compensation Survey plan provision data (2005), HRET/KFF Employer Survey data (2006-2010), adjusted for estimated buy-down in the small group market, induction, and mini-med plan enrollment.

Cumulative percentage enrolled in employer-sponsored insurance under age 65 by actuarial value of the plans, estimated values for 2010


Actuarial value (%)Cumulative percentage of individuals enrolled in ESI plans (%)Number of enrolled individuals (millions)
Actuarial value - 60%23
Actuarial value - 70%46
Actuarial value - 80%2032
Actuarial value - 90%6096
Actuarial value - 100%100160
Estimated number of individuals enrolled in employer-sponsored insurance under age 65 by actuarial value of the plans, estimated values for 2010


Actuarial value (%)Cumulative percentage of individuals enrolled in ESI plans (%)Number of enrolled individuals (millions)
Actuarial value - 60%23
Actuarial value - 70%46
Actuarial value - 80%2032
Actuarial value - 90%6096
Actuarial value - 100%100160

We re-analyzed the data using the “narrower benchmark” plan described above.  Using the “narrower benchmark” to define the external benchmark set of services, the AVs of ESI plans increased minimally — in most plans by less than 2 percentage points.  Because few people are enrolled in ESI plans with AVs between 58 and 60 percent when assessed relative to the services in the broader benchmark, the shift in external benchmark to a plan which covers fewer services has little impact on the percentage of individuals enrolled in plans with AVs below 60 percent.  Approximately 1.4 to 1.8 percent of individuals with ESI — about 2.2 to 2.9 million people — are estimated to be enrolled in plans with AVs less than 60 percent when the “narrower benchmark” is used to estimate AVs (Figure 4).
 


Figure 4.
Percentage of individuals enrolled in employer-sponsored insurance plans
with actuarial values less than 60 percent, by external benchmark for services covered^

Benchmark for services covered Estimated percentage enrolled in ESI plans with AVs <60 percent (%)
FEHBP-PPO plan 1.6 - 2.0
Narrower benchmark* 1.4 - 1.8

Key:  ESI = employer-sponsored insurance; FEHBP-PPO = Federal Employees Health Benefits Program Blue Cross/Blue Shield Preferred Provider Organization
^ Note:  Cost of covered services was calculated using the set of covered services of the Federal Employees Health Benefits Program Blue Cross/Blue Shield Preferred Provider Organization plan as an external benchmark and the cost-sharing structure of the plan whose AV is being estimated.
* The narrower package of services includes only coverage for physician and mid-level practitioner (e.g., nurse practitioners and physician assistants) services, hospital and emergency room services, pharmacy benefits, and laboratory and imaging services.
Source:  Composite of ARC analysis of Bureau of Labor Statistics National Compensation Survey plan provision data (2005), HRET/KFF Employer Survey data (2006-2010), and estimated mini-med total enrollments.


This analysis demonstrates that the choice of a broader or narrower benchmark has little impact on the number of enrollees in plans with AV below 60 percent.

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