State insurance program containing health costs

April 6, 2009

If it weren't for Doug Stratton, Michelle Rice would be paying a lot more than just $500 a month to insure her two sons, who need $1 million a year in hemophilia medications.

Stratton runs the state organization that subsidizes insurance for people who can't get it elsewhere, the Indiana Comprehensive Health Insurance Association.

Since becoming executive director in 2002, Stratton has wrestled skyrocketing health care costs to the ground, thus making insurance more affordable for Hoosiers who use the pool.

Not only did Stratton gain control of costs, but he also hogtied them. Claims have leveled off and premiums are barely budging.

State Insurance Commissioner Jim Atterholt says Stratton is the best in the nation at running high-risk insurance pools and calls him "one of the most innovative, thoughtful leaders the state has on health care issues."

How did the 60-year-old lawyer do it?

By slashing waste, unloading some of the cost onto the federal government, and forcing people to learn how to manage their diseases.

"A lot of people talk about disease management, but they don't follow through," said Rice, who is executive director of the not-for-profit Hemophilia of Indiana Inc. "I think that's huge, and it's huge for the program in general."

Most of the 7,000 Hoosiers in the program are jobless or have been denied coverage by a carrier due to pre-existing or catastrophic conditions.

Created by the Legislature in 1981, the pool allows the uninsured to receive coverage from a comprehensive insurance policy administered by the association.

The program is funded by member premiums and supported by the state and insurers licensed in the state. If, for instance, the program ends a year $60 million in the red, the state pays 75 percent, or $45 million, and insurers, 25 percent, or $15 million.

Rates the state charges cannot be more than 150 percent of what the five largest insurers in the state charge for similar coverage. Eligibility ranges from children to seniors.

In Marion County, the most popular of four available plans features a $1,000 deductible with monthly premiums ranging from $218 for a child to $1,243 for recipients 65 years old and older. The plan with a $2,500 deductible operates like a healthsavings account and reduces monthly premiums to $143 for children and $949 for seniors.

Overcoming a mess

Stratton said he took over a mess.

"It had all kinds of problems," he said. "But it had issues that I thought were solvable."

Waste was attacked by convincing the General Assembly to mandate participation in disease-management initiatives in order for participants to receive coverage.

Of 35 states with high-risk-pool programs, only Indiana requires participation, although others soon may follow its lead. Stratton said he gets monthly inquiries from legislators and policymakers.

High on Stratton's list of targets were hemophiliacs and the HIV/AIDS population, which drove up costs when they became eligible to enroll in the mid-1990s. The 54 hemophiliacs, alone, accounted for $19 million in claims.

Stratton has cut that cost in half largely through risk-management initiatives and negotiating with the Indiana Hemophilia & Thrombosis Center to obtain blood-factor products at the federal price—the manufacturers' cost.

"We've taken small numbers of people in the program," he said, "and the cost reductions have been significant."

Federal grants teach HIV and AIDS patients to be more aware of their clinical needs, and pay nearly half the premiums for participants whose incomes are twice the poverty level or below.

Disease-management programs are available for people suffering from congestive heart failure, as well.

(Next on Stratton's hit list are obesity and depression. Both will be approached with a similar strategy of helping people manage their lives.)

Stratton also forced applicants to first determine if they were eligible for Medicaid, thus shifting hundreds of people from the state program to federal assistance. Stratton's own overhead is minimal. He's the only employee of the association and keeps an office at The Precedent Office Park at East 96th Street and Keystone Avenue. The association is governed by a nine-member board appointed by the state insurance commissioner. The changes accumulate to quite an impact. Total claims leveled off at $90 million a year for the past three years. And premium costs were unchanged this year after climbing an average of only 3 percent in 2008.

By contrast, premiums for American workers jumped 5 percent last year after leaping 6.1 percent in 2007, according to an employer benefit survey from the Kaiser Family Foundation and Health Research & Educational Trust. Rising employee costs and shrinking benefits contributed to the modest growth, the study said.

Stratton's aim is to make the high-risk insurance pool more affordable so more people can enroll. Interest is growing, he said, but many still cannot afford the rates. More than 11 percent of Hoosiers are uninsured, according to 2007 census figures.

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