Baseline Information for Evaluating the Implementation of the Health Insurance Portability and Accountability Act of 1996: Final Report. Question D. What are the access effects of HIPAA in the individual market?


We have identified three important sub-components of this question that we suggest HCFA(now known as CMS) incorporate in its evaluation design:

  • How many HIPAA eligible individuals are there and who are they?
  • How many HIPAA eligibles benefit from the reforms and what are the access effects?
  • What are the implementation issues in adopting risk pools as the alternative mechanism?

How many HIPAA eligible individuals are there. Who are they? Estimates of the number of persons who are HIPAA-eligible differ widely. For example, HIAA estimated potentially 3 million additional insured lives in the individual market annually, whereas Klerman put this estimate at only 0.6 million. The estimates differ because of different assumptions about the rate of job turnover, and different assumptions about the percent who are eligible among job leavers. The latter depends on length of prior coverage; eligibility, take-up, and exhaustion of COBRA coverage or continuation policies required by state law; eligibility for other employment based health insurance; and eligibility for public insurance. Accurately estimating these transitions is essential for knowing how many HIPAA eligibles there are. But estimates require panel data to find job changers and then observe their destinations and choices. The only extant data base to do this is the SIPP—a 24-36 month panel survey of a nationally representative sample of the U.S. population.

We considered recommending use of SIPP data to try to model the number of HIPAA eligibles, but rejected this idea for several reasons. First, there are a number of shortcomings of the SIPP data for this purpose. The survey doesn’t ask about COBRA coverage directly, it has to be inferred. The panels aren’t long enough to observe exhaustion of COBRA coverage for most individuals, so assumptions or modeling of this is required. One needs retrospective information on prior health insurance coverage to identify whether there were 18 months of continuous coverage prior to leaving the group plan, which is not available in SIPP. Second, Klerman used the SIPP data in his modeling of the number of HIPAA eligibles, and so there aren’t likely to be significant gains from additional effort using these data.

Instead, we suggest new and better data might be obtained by drawing a sample from notifications of creditable coverage, and interviewing persons selected 2 to 3 months later to measure initial transitions and eligibility for other insurance. This would not be a nationally representative sample. However, by selecting notifications from employers in different size groups and different industries, one could represent experiences of different types of employees. National weights could be estimated from another source (such as the SIPP or CPS) to apply to the sampled experiences.

As indicated above, we suggest that the case study of the notification process would be important to help identify the source of the sampling frame. This, we expect, will vary for different types of employers. For example, large employers (or their agents) may have developed systems to do their own tracking and notification whereas small employers may rely on the insurer to do so.

A survey of recent job leavers, drawn from the notifications, would provide important information about transitions, such as the number who go to another insured job, the number who are eligible for another family member’s group insurance, the number who participate in Medicaid, the number who take up COBRA coverage and the number who decline it. This survey however would not inform the evaluation about another key transition, namely the share of those who elect COBRA coverage who exhaust the benefit and thereby become HIPAA eligible. We expect, however, that the same systems that track employees and dependents creditable coverage would be able to provide information about COBRA exhaustion rates. That is, the sources used to sample notifications must have group coverage enrollment files and could provide exhaustion rates for their covered populations. (At least this possibility should be explored). While not representative, again the sources would provide information for a variety of groups of different size and from different industries.

How many HIPAA eligibles benefit from the reforms and what are the access effects? Answering this question is difficult because there aren’t good strategies for identifying and studying those who are HIPAA eligible and, even once the are identified, there is not a baseline against which to measure change. Therefore, we offer several indirect indicators.

First, the proposed survey of notifications just described would inform about the number of persons who are HIPAA-eligible at the time of the survey who have enrolled in individual insurance plans. Absent baseline enrollment rates among persons who satisfy HIPAA eligibility requirements, the new measure might be compared to coverage rates in individual plans among the population who do not have group or public insurance. A second indirect indicator is enrollment by HIPAA eligibles in risk pools in states that have adopted this as the alternative arrangement. Three out of four states queried that have adopted risk pools as the alternative mechanism indicated that their enrollment systems distinguish HIPAA eligibles from other enrollees and would permit this measurement. This suggests that there may be promise in this approach. The National Association of State Comprehensive Health Insurance Plans (NASCHIP) is currently surveying its members on these issues in preparation for a late September 1998 meeting. The survey instrument includes questions about the number of HIPAA applicants to the risk pool, the number of HIPAA eligible individuals who have enrolled in the risk pool, and the number of HIPAA applicants who have failed to qualify. Therefore, a centralized source of information should be available to HCFA(now known as CMS)’s evaluator. Neither of these measures directly answers the question posed because we do not have a baseline measure to indicate what would have happened to these individuals absent HIPAA; but each indicator provides some measure of the scope of HIPAA.

Another approach is to look at general access effects; that is, to measure changes in insurance coverage in a defined population—such as those without group or public coverage. This measure incorporates both the rate of HIPAA eligibility among the population and access effects for the HIPAA eligible population. Thus, it understates the access effects on the target, HIPAA eligible population. This component of the evaluation would use the design shown in Table 2 and data from the CPS. Based on an analysis of sample sizes in the March 1997 CPS sample, the evaluator would have greater than 80 percent power to detect an increase of about 3 percentage points pre- and post- HIPAA in coverage under individual insurance policies among persons without employer or public insurance in state groups A, B, and C shown in Table 2. This is an increase in coverage of about 15 percent, given that individual coverage in this population is about 18 percent. To detect a change of 2 percentage points (a 10 percent change), one would have about 60 percent power for group A and 75 percent power for groups B and C. Since group D consists of only 2 small states, one pre-and post-HIPAA survey do not produce reliable estimates. By pooling two years in the pre- and post-HIPAA period, we estimate that an evaluator would have about 60 percent power to detect an increase in insurance coverage of about 3 percentage points.

Contrasting the different implementation models (that is comparing change across two of the groups shown in Table 2), is somewhat more demanding on sample size. We estimate that a single pre-and post measurement using the CPS would allow an evaluator to detect a 3 percentage point difference in the rate of change between any pair of group A, B, or C.

Policymakers will also be interested in whether HIPAA has improved access for vulnerable population groups. Therefore, we investigated whether the CPS would provide sufficient sample to measure change in coverage among persons without employer group or public insurance who are in poor or fair health. Because having poor or fair health is a relatively infrequent event, changes in coverage over time would have to be quite substantial to detect them with a single pre- and post-observation from the CPS. For groups B and C, we estimate that the evaluator would have 80 percent power to detect an increase of about 7 percentage points over time using a single CPS for the pre- and post-period; for group A, a change of about 8 percentage points could be detected with 80 percent power. Again, pooling data for multiple years would improve the power.

What are the implementation issues in adopting risk pools as the alternative mechanism? This task would focus on issues in implementing changes to risk pools needed to provide access using a state high-risk pool as the alternative mechanism. It would be accomplished through two mechanisms. First, updating the individual market database developed by IHPS would provide monitoring information on regulatory changes made in state high risk pools to qualify as an alternative mechanism. Second, we suggest that risk pool implementation be part of the case study protocol. The following topics would be covered: What changes to existing risk pools have been made by states to attract HIPAA eligibles? Do states subsidize the costs for low-income HIPAA eligibles? How has HIPAA affected rate-setting in the risk-pool arrangements? What types of products are offered through the high risk pool and how has choice and type of product changed? How do states track and measure HIPAA eligibles’ participation rates in expanded risk pools? Have states developed new information products to inform HIPAA eligibles about the risk pool? What is the application process; how easy is it to apply; has a process been established to enroll individuals within the 63 day period? In selecting sites, the evaluator would want to include states that have modified existing risk pools as an alternative mechanism as well as one or both states that have developed new risk pools for the HIPAA eligible population. The comparative study of these different cases would provide information about differences between new and existing risk pools in the number of HIPAA eligibles who are attracted and retained, the different rate-setting experiences, and other differences in implementation. Information being collected by NASCHIP, discussed above, could be used as part of the site-selection process.