Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . B. SOTU Results (Combined)

01/21/2007

Table 4 shows our estimate of HSA take-up from the 2006 SOTU compared with the 2003 MMA baseline.  We predict that an additional 12,420,002 people would take up individual HSAs, of whom 9,502,893 (approximately 77 percent) were previously uninsured.  Those who were already insured, but who switched in individual HAS, would be drawn from other individual policies as well as from the group market.

The cost of the 2006 SOTU policy would consist of three parts: (1) a subsidy of $21.570 billion for individuals not eligible for group insurance who purchased individual HSAs; (2) a subsidy of $770 million for 502,515 workers who opted out of group insurance to purchase a tax-subsidized individual HSA; (3) and an offsetting savings of $511 million for these same workers who opted out of group insurance.  This savings occurs because the federal government was providing a tax subsidy for at least the employer's portion of the group health insurance premium; because these workers dropped group insurance, that subsidy would decrease.  The net tax cost of the SOTU policy change (not counting state taxes, which we cannot identify) is $21.829 billion.  On a per capita basis, this amounts to $2,297.12 per newly-insured person.

  New MMA Population Round 1 Population Round 4 Population Round 5 Population SOTU Round 5 Subsidy SOTU-MMA Delta
Table 4 - Baseline MMA HSA take-up compared to 2006 SOTU Policy Estimate All Three SOTU Options
Interated SOTU Populations
Indivdual Market
HSA 3,156,133 15,579,134 15,576,134 15,576,134 $21,570,458,388 12,420,002
PPO High 37,591 21,422 21,422 21,422 $0 -16,169
PPO Low 6,046,777 3,244,913 3,244,913 3,244,913 $0 -2,801,864
PPO Medium 232,105 124,532 124,532 124,532 $0 -107,573
Uninsured 27,305,770 17,772,396 17,772,396 17,772,396 $0 -9,533,374
Group Market
HMO 19,667,935 19,650,914 19,597,365 19,597,703 -$78,002,980 -70,232
HRA 2,745,496 2,802,404 2,730,702 2,730,843 -$9,479,392 -14,653
Employer-sponsored HSA 77,465 77,258 77,276 77,275 -$113,557 -191
Opt - out HSA 38,923 507,741 512,147 512,138 $739,233,242 473,215
PPO High 7,761,708 7,733,252 7,739,343 7,739,290 -$58,180,511 -22,418
PPO Low 1,117,420 1,068,500 1,073,134 1,073,114 -$4,882,640 -44,306
PPO Medium 40,877,293 40,618,639 40,566,428 40,566,437 -$360,804,761 -310,855
Turned Down 12,471,072 12,260,877 12,423,189 12,422,784 $0 -48,288
  Total Subsidy $21,798,227,789

Tables 5 through 7 present the same information in Table 4, with specific impact simulations of each of the three components of the SOTU proposal.

The combined effect of the three SOTU proposals leads to 15.6 million HDHP enrollees in the individual market, an increase of 12.4 million people.  The decrease in the uninsured population would be 9.5 million at a subsidy cost of $21.8 billion annually.  The subsidy cost is nearly three times larger than the original simulations, but more than three times as many people would gain coverage.  Consequently, the cost of the subsidy per person newly insured drops from $2,761 to $2,270.  The one significant change in the individual market is a net potential migration of 2.8 million people out of low option PPOs.  Given no other plan choice received new enrollees, we believe this low option PPO population migration went to HDHPs.  Unfortunately, we can not easily count the migration effects because of the methods used.  Each person counted is actually the 'added up' probability of a choice from the plan choice model.  With further refinement of the model we could build additional coding to track how individual probabilities change from different simulations to approximate migration.  That is beyond the scope of the current model.

In the group market we see a fairly large population (541,438) opting out of their employer coverage and taking a HDHP compared with baseline (38,923).   The subsidy cost of this change is $770 million, which is less than the $1 billion we projected from our earlier work.  However, this cost is largely offset by tax savings from other employees leaving their employee sponsored coverage and opting for HDHP coverage.  Thus, the net tax impact is a cost of $259 million.  The final subsidy cost in both the individual and group markets is $21.8 billion per year to yield a total reduction in the uninsured of 9.5 million people.

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