An Agenda for Simulating Plan Offer Choice by Establishments and Offer Price Setting by Plans∗

This note outlines a proposed development agenda that would add and test two major capabilities to the state health insurance market simulation model. The model is being developed to provide policy analysis capabilities for states considering reforms that seek to make health insurance more affordable and accessible, especially to employees of small businesses. The current version of the model implements the general design of the market simulation model developed by Holmer, Long, and Marquis in an earlier project planning paper [2] as well as specific policy simulation capabilities described by the same authors in a recent policy analysis paper [3]. The model utilizes establishment data from the Robert Wood Johnson Foundation Employer Health Insurance Survey, which was conducted in ten states during late 1993 and early 1994. The first section of the note describes the goals of the next stage of model development. The second section outlines the proposed approach to adding the capability for establishments to choose one or none out of several health insurance plan offers. The third section describes the proposed approach to adding the capability for plans to set the price of each health insurance offer based on the attributes of the establishment soliciting the offer, the nature of the rating regulatory regime, and the plan’s simulated underwriting experience in the prior year. The ideas in all three sections have benefited from discussion with Roald Euller. ∗This research is being supported by a technical assistance grant from the Robert Wood Johnson Foundation to The RAND Corporation and a RAND subcontract to HR&A. The grant is part of the Foundation’s State Initiatives in Health Care Finance Reform program. †Principal, HR&A Policy Simulation Group, 1156 15th Street, NW, Suite 1202, Washington, DC 20005 (voice: 202-986-0050, fax: 202-986-0052, email: [email protected]).