Using NAIC Data to estimate the net cost of insurance
The impact of coverage expansion on health care costs is a matter of great interest. Much attention has focused on the way in which coverage expansion may affect utilization and prices for health care. However it is also important to measure the extent to which coverage expansion increases the net cost of insurance, as this is a component of health care costs as measured by the National Health Expenditure accounts. Currently the net cost of health insurance accounts for approximately 7% of national health care costs.
This study uses data available from the National Association of Insurance Commissioners (NAIC) to construct an estimate of the net cost of insurance for the non-group and group markets. The NAIC publishes quarterly and annual statistical reports known as the “Exhibit of Premiums, Enrollment and Utilization.” These reports contain data on enrollment, expenditures on claims, revenues from premiums, and utilization in the non-group and group markets. Self-insured products are not included in the NAIC reporting. Data from the last three years of the NAIC were analyzed to construct a per member measure of the net cost of insurance for the individual and group markets. A weighted average was calculated to create a national number which adjusted for the absence of the self-insured market. This national composite is compared to annual National Health Expenditure Account statistics on the net cost of insurance between 2011 and 2013 years.
The population studied includes health insurance carriers in the group and individual market who reported data to this NAIC exhibit.
The composite measure calculated from the NAIC tracks the net cost of insurance figures calculated by the NHE quite closely. Between 2011 and 2014 the two national numbers differed by less than 5%, with the NAIC being somewhat lower than the NHE estimate. The NAIC estimate is sensitive to assumptions about the net cost of insurance in the self-insured market. An additional utility of the NAIC is that it permits the comparison of the net cost of insurance for different categories of carriers and for different geographical areas. We can also see that the net cost of insurance is significantly higher in non-group as compared with group coverage. Additionally, preliminary analysis suggests that national carriers in general, and specifically with significant amounts of group coverage have lower net cost of insurance for non-group coverage, which may mean that there are economies of scale.
These findings suggest that the NAIC allow us to proxy the net cost of insurance in a timely manner. Additionally these results show that there are variations in this cost across carriers and types of coverage.
Given the coverage expansion which has occurred, interest in the cost of health insurance and how it affects overall health care costs is likely to continue to grow. The NAIC data is a useful and timely data source that can contribute to the measurement of this important dimension of health care costs.