Reasons for Recent Declines in Utah Health Insurance Coverage

The reasons for the general decline in membership from 1999 to 2003 are complex. Various market forces are in operation. To begin with, the decline in the number of comprehensive health insurers could have contributed to the decline, but this is unlikely. It more likely that the recent increases in the cost of health care and insurance premiums may have led some policyholders to seek less expensive kinds of coverage and this may show up as restructuring in the market place (i.e., shifting membership). Some of this restructuring is evident among the different plan types in the market and can be observed somewhat in the available data.

First, there has been a steady increase in the number of residents with individual plans. Premiums for individual policies have remained low compared to other options in the market. This may be a significant incentive to switch from more costly types of coverage. However, these lower rates are really only available to those with good health, because individual policies have stricter underwriting requirements than group plans.

Second, there has been a decline in the number of residents with individual conversion policies. This is primarily due to changes in the number of conversion policies in two large managed care insurers. Conversion policies are the result of a person in a group policy who "converts" their group plan into an individual conversion policy. They are intended to act as a temporary bridge between employer group coverage and some other kind of coverage. As a result, one would not expect the number of conversion policies to become very large in the market.

Third, there has also been a steady increase in the number of residents covered by policies in the small group market. This suggests that small employers are maintaining insurance coverage despite the rising premiums in Utah's comprehensive market, which is a positive sign for Utah's small group market.

Fourth, the largest change in the market over this period has been a significant decrease in the number of residents within large group policies. This is largely explained by declines in HMO membership within four managed care insurers and changes to a large group student plan. Large group plans are typically sold to large employers. Large employers are the most likely to provide health insurance benefits to their employees and the most likely to provide these benefits through a self-funded health benefit plan. So a decline in this sector could be due to a shift from commercial health insurance to self-funded health benefit plans, rather than an increase in the uninsured or in government sponsored-health benefit plans. This is difficult to confirm with the available data, but when the five insurers most effected were asked, some were able to confirm that a shift from commercial to self-funded had occurred, while others did not provide a specific reason for the change other than their clients had non-renewed their contracts and that this was simply restructuring in the market.

Additional support for a shift by large employers from the commercial health insurance market to self-funded health benefit plans can be found in the available data on the uninsured and government sponsored health benefit plans. A review of the available data suggests that there has been a relatively small increase in the uninsured and government sponsored health benefit plans from 1999 and 2003.

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