Baltimore Health Insurance Market Primed for National Health Reform
May 23, 2013
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, DCWith a history of aggressive state oversight of health care and Medicaid coverage expansions, the Baltimore metropolitan area likely faces a smoother transition to national health reform than many other markets across the country, according to a new Community Report released today by the Center for Studying Health System Change (HSC).
Funded by the Robert Wood Johnson Foundation (RWJF) and based on interviews with local health care leaders in 2012-13, the study examined the Baltimore region’s commercial and Medicaid insurance markets.
Maryland’s health reform path may be easier in part because the state previously enacted requirements similar to the 2010 Patient Protection and Affordable Care Act, including small-group insurance market reforms and Medicaid coverage expansions for low-income people without children. State leaders have embraced other reform goals, including creation of a state health insurance exchange. Key findings of the report, Baltimore: Health Insurance Market Primed for National Health Reform, which is available here, include:
- Hospital rate regulation effects on market dynamics.For several decades, Maryland has regulated hospital payment rates for Medicare, Medicaid and private payers. Because of this rate-setting system, hospital spending on average has grown more slowly historically than the nation as a whole. However, similar to many other markets, Baltimore-area hospital systems are acquiring independent hospitals and employing physicians to gain patients and higher revenues.
- Little innovation to control employer-based insurance costs.While commercial coverage is considered relatively generous overall, employersparticularly small firmshave placed more cost-sharing responsibility on employees and increasingly adopted lower-cost, high-deductible health plans. Employers reportedly have been slow to innovate in terms of insurance product design.
- CareFirst BlueCross BlueShield dominance of the commercial market.CareFirst BlueCross BlueShield is the largest commercial insurerparticularly in the individual and small-group marketswith remaining market share divided among national carriers, including UnitedHealth Group, Aetna, CIGNA and Kaiser Permanente.
- Significant insurer interest in Medicaid.Health plan competition for the growing Medicaid population is robust, with several carriers participating and more poised to enter the market for the 2014 Medicaid expansion.
- Trepidation over pricing in insurance exchange.While most large commercial health plans will participate in the state insurance exchange for individuals and small businesses, they face considerable uncertainty. Their anxiety stems from the timeline to meet requirements, the potential for adverse selection in the exchange, and their ability to design products and set premiums while remaining financially viable.
- Medicaid plans’ caution about entering exchanges.Medicaid-only plans are uncertain about entering the exchange because the expertise and growth needed to serve the commercial population could cause financial challenges and detract from providing Medicaid patients with good access to care. Many people are likely to move between Medicaid and subsidized private coverage as their income fluctuates, and if Medicaid plans offer products in the exchange, they may be able to offer more seamless coverage as people move between the two programs.
- Broker uncertainty about continued role in the market.Although insurance brokers in the Baltimore region now perform many of the functions needed to assist people buying insurance under reform, their role may shrink because of competition from the exchanges and Medicaid outreach organizations seeking to serve as navigators.
As health reform unfolds in the coming years, there will be ongoing issues to track in the Baltimore-area health care market, including:
- How will Maryland’s hospital rate-setting system change under a new federal waiver?
- How will insurance products change as payers seek ways to hold down premium increases?
- To what extent will pent-up demand from newly covered people occur, and will there be sufficient provider capacity to meet those needs?
- How will premiums change in the small-group and individual insurance markets? Will “rate shock” discourage people from enrolling?
- Will more small employers start self-funding workers’ health benefits to avoid new regulations under reform?
- How will the role of insurance brokers change, and what impact will there be on how employers and individuals shop for health insurance?
- How will Medicaid health plans fare under reform? To what extent will they participate in the exchange?
Baltimore is one of eight metropolitan areas, HSC researchers are studying on behalf of RWJF’s State Health Reform Assistance Network initiativethe others are Portland, Ore.; Denver; Long Island, N.Y.; Minneapolis/St. Paul; Birmingham, Ala.; Richmond, Va.; and Albuquerque, N.M.
The Center for Studying Health System Change is a nonpartisan policy research
organization committed to providing objective and timely research on the nation's
changing health system to help inform policy makers and contribute to better
health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.