A recent report comparing the claims experience of Blue Cross Blue Shield (BCBS) customers in individual plans before and after the Affordable Care Act (ACA) is creating significant interest. The analysis also compared the experience of post-ACA individual customers with their contemporaries in employer-sponsored plans.
A component of the Blue Cross Blue Shield Association (BCBSA) analysis that did not receive much attention, but is perhaps more important, is that utilization of health care services by post-ACA individual customers was higher than those with employer-sponsored coverage. Interestingly, the report showed that disease prevalence did not differ greatly for individual and group members in 2015. Individual members had slightly higher rates of diabetes, depression and coronary artery disease, and slightly lower prevalence of hypertension when compared to group members. When comparing utilization, rates of outpatient visits and medical professional services were approximately 10 percent higher in the individual market versus the group market in the first nine months of 2015. Rates of prescription drug and emergency room use were also higher in the individual market, but only modestly so. However, in the case of inpatient admissions, the difference between the two groups was far greater. The individual rate was 38 percent higher than the group rate. The BCBS report does not dwell on this anomaly, but soberly notes, “To manage this transition to a new system in which everyone can obtain coverage, BCBS companies are advising consumers on the importance of primary care and medication adherence.”
To further investigate the utilization differences between individual and group plans, we looked at some of the individual Blues plans using the National Association of Insurance Commissioners Annual Exhibit on Enrollment, Premiums, and Utilization (NAIC). The NAIC data are submitted at the issuer level, and limitations have been noted elsewhere. Yet despite these limitations, they do provide some perspective on differences between individual and group plans in particular markets.
Comparing the individual and group plans on the hospital utilization variables, admissions and patient days, one sees that the overall distributions are similar. A listing of large plans shows mixed results. There are clearly some markets where the utilization in the individual market is higher, particularly for plans in the South. But there are also markets where rates are similar, and even a few where hospital use is higher in the group plans. For ambulatory visits, utilization is mostly higher in the group plans. So while the NAIC data cannot be directly compared to the BCBSA calculations, they do not show the same levels of utilization, or the same magnitude of differences, between individual and group members. However, like the BCBSA analysis, the NAIC data find that the largest utilization differences between individual and group plans pertain to hospital use rather than outpatient services.
It’s not immediately clear why there would be a larger difference in hospital utilization. One possibility is that this represents “pent up demand” and reflects long standing needs for hospital services, in particular among those who are newly enrolled in health insurance. Another thought is that the discrepancy reflects differences in rates of childbirth in the individual and group populations, since labor and delivery is the leading reason for inpatient hospitalization. Without knowing more about the leading reasons for hospitalization, one can only speculate about these differences.
Another possibility is that the difference in hospital utilization may be related to enrollment dynamics that have been noted in the individual market. Carriers have complained about selective entry and exit that they believe is associated with increased use of expensive services. Enrollment during the Special Enrollment Periods have come under particular scrutiny, along with high rates of disenrollment in the third and fourth quarters. In fact, a number of carriers are eliminating commissions for brokers during Special Enrollment Periods in an attempt to discourage sales of plans. Inpatient hospital care may exemplify the kind of utilization that is related to enrollment behavior. Other kinds of health care service use, such as prescription drug use, require ongoing payment of premiums to continue receiving services.
Comparing the ratio of third quarter to first quarter enrollment trends in individual and group Blues plans, the differences are striking. Overall, the median ratio of third quarter to first quarter enrollment is .95 for the individual market versus .99 for the group market. For all of the individual plans, attrition is considerably greater in the individual segment. It is unlikely that this trend is limited to Blues plans, although the dynamics of enrollment may play out differently for other carrier types.
It may well be the case that increased attrition in the individual market affects comparative claims experience. This suggests that the differences in the individual and group markets may not necessarily mean that individual enrollees are sicker, but instead it may be the case that selective entry and exit is affecting the collection of sufficient premiums. The fact that the hospitalization differential reported in the BCBSA report and seen in NAIC data exceeds differentials in utilization of other services, and in disease prevalence itself, suggests that selective entry and exit may be at play. The BCBSA clearly believes this may be a factor, and offers this concluding caution: “It is also important for members to be continually enrolled in order to maintain access to primary and preventive care, and fill prescriptions in a timely manner.”
Better understanding the cause of these differences is important, so that problems in the market can best be remedied. Further analysis of enrollment dynamics and health care utilization by duration is needed to advance our understanding of these challenges, and allow stakeholders to develop strategies that will increase stability in the individual market.