Small Group Health Insurance Reform in Rhode Island: Promises and Pitfalls of the HEALTHpact Plan

Employer-based health insurance coverage has eroded substantially, particularly in the small group market. This has been especially acute in Rhode Island (RI) where 94 percent of employers are firms with 50 workers) has remained steady at 98 percent, it declined from 70 to 53 percent among smaller employers between 1997 and 2008 (Office of the Health Insurance Commissioner [OHIC] 2007; Kaiser Family Foundation 2009;). Offer rates have been especially low in the fastest growing segments of the economy—low wage sectors such as retail and services (Maxwell et al. 2006). Overall, the average commercial premium more than doubled between 1997 and 2008, to U.S.$13,363 for family coverage (OHIC 2007; Kaiser Family Foundation 2009;). This study evaluates RI's primary policy innovation used to bolster coverage among small employees—the HEALTHpact plan. The 2006 legislation authorizing HEALTHpact capped the price of the premium at 10 percent of the average annual RI wage. It also authorized the OHIC to convene a Wellness Advisory Committee, which included 16 representatives of small employers, local chambers of commerce, insurance brokers, and direct pay consumers. RI's two major insurers—United Healthcare of New England and Blue Cross Blue Shield of RI—were present as nonvoting members. The WAC was charged with developing and enforcing guidelines for insurers, which, in turn were required to develop products satisfying those guidelines. HEALTHpact became open for enrollment in October 2007. It creates incentives for healthy behaviors by offering two coverage levels, “advantage” and “basic” (Table 1). The premiums and covered services are the same. However, “basic” plan members are subject to a substantially higher deductible of U.S.$5,000 for an individual and U.S.$10,000 for a family as compared with U.S.$750 and U.S.$1,500, respectively, in “advantage.” Each HEALTHpact enrollee begins in “advantage,” with continuing enrollment contingent upon selecting a primary care physician, completing a health risk appraisal, and pledging to participate in disease management, smoking cessation, and weight loss programs if applicable (Figure 1). Those who do not meet these criteria may remain in HEALTHpact but are eligible only for “basic.” Table 1 HEALTHpact: Advantage Versus Basic Figure 1 Initial and Ongoing Requirements for Advantage-Level Benefits1 As of October 2008, average monthly individual premiums for HEALTHpact were U.S.$362 and U.S.$372 for United and Blue Cross, respectively (Koller 2008). These rates are 15–20 percent lower than the premiums charged for products with comparable “advantage”-level benefits. Insurers are required to provide employers with 50 or fewer workers the option of offering HEALTHpact. Furthermore, if an employer chooses, HEALTHpact may be offered alongside other plans. At the insistence of insurers, enrollment was capped at 10,000—5,000 for each carrier. Take up has been low (Table 2). Most enrollment (81.0 percent) has taken place in Blue Cross; relatively little (19.0 percent) in United. No United and just 8.3 percent of Blue Cross enrollees are in “basic.” This study identifies what design elements inhibited enrollment in HEALTHpact. Table 2 HEALTHpact Participation and Enrollment, January 2009