Curtis Florence, Ph.D

August 1, 2006

Curtis Florence, Ph.D., is assistant professor in the Department of Health Policy Management at the Rollins School of Public Health at Emory University. An economist who specializes in health and labor economics, Dr. Florence's research interests include health insurance coverage, competition in health insurance markets, and government health insurance for low-income populations. More specifically, he has examined the impact of increased Medicaid eligibility on private insurance coverage, factors underlying the likelihood of workers being covered by employer-based health insurance, and the effect of the Federal Employees Health Benefits program on plan premiums and employee enrollment choice. Florence received his B.A. from the University of Alabama and his Ph.D. from the University of North Carolina.

Florence and colleagues conducted a HCFO-funded project, Health Plan Selection for Medicare Eligible Enrollees in the Federal Employees Health Benefits Program (FEHBP). This study examined how factors such as premiums, benefits offered, and local health care costs affected enrollee decision making. Research questions posed included: (1) How sensitive is the health plan choice of Medicare eligible persons to variation in premiums? (2) How sensitive is the health plan choices of Medicare eligible persons to variation in plan benefits? (3) Do the plan choice of Medicare eligible enrollees reflect adverse selection for plans with greater benefits? (4) How strong is the preference for fee-for-service plans among Medicare eligible enrollees? How much must fee-for-service premiums increase to induce them to pick managed care plans? (5) How would different subsidy schemes affect health plan enrollment for Medicare eligible enrollees?

The research examined the health plan choices of federal employees and retirees, who are similar to the Medicare eligible population, who chose FEHBP coverage as their primary payer for health care services. The findings show that these persons are quite sensitive to the level of out-of-pocket premiums in choosing their health plan. In fact, this older group of enrollees had a "premium elasticity" that was very similar to younger enrollees in the system. The average enrollee was also willing to pay a substantial amount out-of-pocket for preferred-provider organization plans as opposed to health maintenance organizations, and for plans with an open choice of prescription drugs, as opposed to a formulary.

Florence explains, "there are two overarching themes of our results. First, the average enrollee placed a high value on being in a health plan that allowed a wide choice of providers and did not require referrals for specialist visits." Enrollees were willing to pay substantially more for a health plan that charged a uniform co-payment for prescription drugs and had no tiering or formulary. Second, the study found that enrollees, even in older populations, were cost conscious. When older groups in the FEHBP were compared to the younger employee population, the degree of premium sensitivity was quite similar. Florence states, "this implies, at least from the consumer side of the equation, that we can expect Medicare enrollees to make cost conscious decisions about their health plans. But it also shows the need for a variety of different types of plans, such as PPO, POS and HMO, to satisfy different preferences for how care is organized."

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