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

01/21/2007

In Tables 5 through 7 we consider the independent effects of each of the proposed policy changes listed above.  Table 5 shows the results of providing favorable tax treatment of HDHP premiums.  The HDHP market grows to 7.2 million, a 4.0 million person increase.  The total subsidy cost, after netting out ESI subsidy savings, is $5.14 billion.  Also, the subsidy cost per newly insured person in the individual market is the lowest of any of the simulations at $1,779.

The results of more favorable tax treatment of HSA contributions are displayed in Table 6.  This policy change is the least effective of the three: an increase of 136,020 new HDHP contracts and a small reduction in the uninsured of 90,979.  Also, the cost per newly uninsured is the highest of all of three options at $4,412. The impact on the group market is small, though proportionately more people opt out of ESI and into HDHP under this proposed policy.

As seen in Table 7, a tax credit for high deductible health insurance coupled with an HSA has the largest impact with a net increase in HDHP participation in the individual market of 8.6 million lives.  The total individual HDHP market enrollment would be 11.7 million.  This projection is higher than our original model and reflects many of the changes made in this refinement.  In particular, premiums of the alternative PPOs are now higher and make the HDHP more attractive.  This premium difference, coupled with greater price sensitivity to premiums and cost sharing in our new plan choice model, produce this result.  This policy change has an individual market subsidy of $14.8 billion and a cost per newly insured estimate of $2,276.  This estimate is very similar to the combined SOTU policy.

  New MMA Population Round 1 Population Round 4 Population Round 5 Population SOTU Round 5 Subsidy SOTU-MMA Delta
Table 5 - Baseline MMA HSA take-up compared to 2006 SOTU Policy Estimate HSA Premium Tax Deductible Option Only
Interated SOTU Populations
Indivdual Market
HSA 3,156,133 7,203,862 7,203,862 7,203,862 $5,134,257,739 4,047,729
PPO High 37,591 32,679 32,679 32,679 $0 -4,912
PPO Low 6,046,777 4,922,203 4,922,203 4,922,203 $0 -1,124,573
PPO Medium 232,105 195,701 195,701 195,701 $0 -36,404
Uninsured 27,305,770 24,384,952 24,384,952 24,384,952 $0 -2,920,818
Group Market
HMO 19,667,935 19,704,840 19,651,237 19,651,575 -$21,181,329 -16,360
HRA 2,745,496 2,814,116 2,741,134 2,741,275 -$2,916,262 -4,220
Employer-sponsored HSA 77,465 77,461 77,414 77,413 -$33,059 -52
Opt - out HSA 38,923 170,176 171,814 171,811 $139,498,077 132,888
PPO High 7,761,708 7,747,223 7,756,719 7,756,667 -$15,798,254 -5,041
PPO Low 1,117,420 1,073,171 1,077,268 1,077,248 -$2,475,173 -40,172
PPO Medium 40,877,293 40,829,008 40,783,752 40,783,743 -$111,077,327 -93,550
Turned Down 12,471,072 12,303,590 12,460,245 12,459,853   -11,219
  Total Subsidy $5,120,274,412

 

  New MMA Population Round 1 Population Round 4 Population Round 5 Population SOTU Round 5 Subsidy SOTU-MMA Delta
Table 6 - Baseline MMA HSA take-up compared to 2006 SOTU Policy Estimate Lift Account Tax Deductible Ceiling Only
Interated SOTU Populations
Indivdual Market
HSA 3,156,133 3,292,152 3,292,152 3,292,152 $401,358,806 136,020
PPO High 37,591 37,478 37,478 37,478 $0 -113
PPO Low 6,046,777 6,002,906 6,002,906 6,002,906 $0 -43,871
PPO Medium 232,105 231,048 231,048 231,048 $0 -1,057
Uninsured 27,305,770 27,175,814 27,175,814 27,175,814 $0 -129,957
Group Market
HMO 19,667,935 19,722,471 19,668,132 19,668,468 -$4,294,438 533
HRA 2,745,496 2,818,471 2,745,374 2,745,516 -$619,013 20
Employer-sponsored HSA 77,465 77,518 77,454 77,453 -$10,976 -13
Opt - out HSA 38,923 58,064 58,743 58,741 $22,542,298 19,818
PPO High 7,761,708 7,751,747 7,762,298 7,762,246 -$4,217,737 538
PPO Low 1,117,420 1,074,742 1,078,609 1,078,589 -$202,858 -38,831
PPO Medium 40,877,293 40,899,936 40,859,657 40,859,642 -$21,831,754 -17,650
Turned Down 12,471,072 12,316,635 12,469,318 12,468,930 $0 -2,142
  Total Subsidy $392,724,328

 

  New MMA Population Round 1 Population Round 4 Population Round 5 Population SOTU Round 5 Subsidy SOTU-MMA Delta
Table 7 - Baseline MMA HSA take-up compared to 2006 SOTU Policy Estimate
HSA Premium Tax Credit Only Interated SOTU Populations
Individual Market
HSA 3,156,133 11,714,785 11,714,785 11,714,785 $14,696,676,908 8,558,652
PPO High 37,591 23,069 23,069 23,069 $0 -14522
PPO Low 6,046,777 4,049,678 4,049,678 4,049,678 $0 -1,997,098
PPO Medium 232,105 137,397 137,397 137,397 $0 -94,708
Uninsured 27,305,770 20,814,468 20,814,468 20,814,468 $0 -6,491,303
Group Market
HMO 19,667,935 19,717,183 19,717,183 19,663,410 -$9,221,841 -4525
HRA 2,745,496 2,817,714 2,817,714 2,744,644 -$943,624 -852
Employer-sponsored HSA 77,465 77,484 77,484 77,424 -$18,334 -42
Opt - out HSA 38,923 122,306 122,306 123,795 $159,724,415 84,871
PPO High 7,761,708 7,750,024 7,750,024 7,760,701 -$5,527,275 -1007
PPO Low 1,117,420 1,074,496 1,074,496 1,078,411 -$820,756 -39,009
PPO Medium 40,877,293 40,856,724 40,856,724 40,811,157 -$62,405,042 -66,135
Turned Down 12,471,072 12,303,651 12,303,651 12,460,042 $0 11,030
  Total Subsidy $14,777,464,451

The comparison of the impact of the total 2006 SOTU proposals is presented in Table 8, which shows the results of the three policy changes combined, as well as individual impacts.  The numbers reflect only the individual market since the group market is offered insurance. Likewise, the uninsured total reflects results from only the individual market.  Subsidy costs are tallied for the individual market to give a national presentation of the cost per newly-insured person resulting from the SOTU policies.  The least expensive option, per capita, is a tax- deductible HDHP premium. The most expensive is increasing the tax-deductible threshold for the HSA.  Interestingly, the per capita cost of the tax credit proposal and entire SOTU are nearly identical.

  HSA Enrollees Uninsured New Insured Annual Subsidy Cost (millions) Subsidy Cost Per New Insured
Table 8 – Summary of SOTU Proposal Impacts
2003 Medicare Modernization Act 3,272,521 27,305,770 0 $0 $0.00
State of the Union 2006 16,194,845 17,802,877 9,502,893 $21,829 $2,297.12
Tax deductions HSA Premium 7,474,963 24,420,419 2,885,351 $5,136 $1,780.09
More deductible HSA Contribution 3,433,760 27,214,791 90,979 $393 $4,316.63
Low Income Subsidy of HSA Premium 11,929,312 20,848,203 6,457,568 $14,792 $2,290.66

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