AGRIP Pool HEALTH BENEFITS SUMMIT

October 28, 2007Hyatt Regency, Savannah, GA

Why did AGRIP Plan the Summit?

Numerous requests for officials to meet and share knowledge and experience on starting and managing health pools

Intended to be focused discussion among participants with limited presentations

Focus for the Summit

Why are we all talking about health pools?

Reasons for considering starting a pool

State of the market and legislative initiatives

Key factors for successful pools

Focus for the Summit

Survivability factors facing existing pools

Why and how pools have terminated plans

How do you move forward?

Why All the Talk About Pool Health Plans?

$776 billion in expenditures on private health insurance for this year

(Center for Budget and Policy Priorities)

45.8 million Americans have no health insurance; nearly 9 million uninsured children

(U.S. Census Bureau)

Why All the Talk About Pool Health Plans?

Workers’ health insurance premiums have increased 84 percent since 2000, while wages have increased only 20 percent.

(Boston Globe study)

The increased cost is pushing many employers to drop traditional employee coverage or shift more costs to workers.

Loss of Competition Is Seen in Health Insurance Industry

The largest insurer had 43 percent of the market for small group coverage in a typical state, up from 33 percent in 2002. In nine states, the largest carrier — a

Blue Cross and Blue Shield company — has more than 50 percent. (Government Accountability Office)

Where do you classify yourself?

Considering starting a health plan Have a plan and it is successful Have a plan that is struggling Had one but terminated it Able to offer technical assistance Just interested

Reasons to Consider Offering a Health Plan

FROM THOSE CONSIDERING STARTING A PLAN Successful P&C program so will it work for

health – NJ 8000 lives Nevada legislature: retirees 300 active lives

– 11 month time frame to get into state plan or forced into local government coverage

CCAP rural counties have no options – one carrier – Blues – regionally divided

Michigan Road pool – P&C plan very successful – members pushing for health

Reasons to Consider Offering a Health Plan

FROM THOSE WHO HAVE A PLAN OMAG - privates wouldn’t cover local

governments back in 1977 Vermont - 1980’s health premiums were

going up too fast Washington Counties Insurance Fund – 1958

started cooperative purchasing program. Stopped working price wise in 1980’s so the self funded pool was started

Reasons to Consider Offering a Health Plan

FROM THOSE WHO HAVE A PLAN Ohio - 6 years in successful P&C plan so

members pushed into health. Seeded the start up with Association and P&C money – sold as a start up loan – mostly paid back. Plan was rolled out 1/1/2004 .

Health more labor intensive than P&C – hire professionals with good health care knowledge

Key Factors for Success DELAWARE VALLEY INSURANCE TRUST (Rick Lee)

Focus on cost Insurance Buyers Council – control the rate of cost

increases. All factors are local – small employers/municipalities SE Penn market

Increase for this year less than 5% - rate stabilization fund intact – union employees and good cooperation. Initial savings of 5% for new joiners. Contract with Aetna as our TPA – 3,500 employees 10K covered lives. Increases for last 3 years single digits.

What we do won’t apply to your market – don’t rely on normal distribution channels.

Key Factors for Success Vendors are limited. Getting good data. Every

month we know where each member is on cost. $40 million in premium annually. Member chooses

when to take a credit. Keep first $350K of any claim – was $150K at start

and built up the retention. Pharmacy is self insured as well. Reinsurance cost

specific or aggregate – specific for now per individual. Aggregate was 125% of expected claims at start.

Actuary? Yes. Actuary does same work as for other lines of coverage.

MEWA – a trust that is tax exempt

Key Factors for Success Do it on a plan specific basis. 42 municipalities with

90 different plans. Point of service plans. Other consultants – underwriting, administrative cost

overview. Choice for plans is on the municipal level – most

employees are under the union plan. Point of service plan is like a hybrid HMO/PPO.

How much of experience matters – actuary doesn’t look at the individual municipality - they look at the trust as a whole. How much the trust needs is what the actuary looks at. Doesn’t look at shock claims.

Don’t cancel municipalities – but don’t allow some small ones in.

Key Factors for Success ARIZONA POOL

Started in 1994 - 64% increases since inception. Blues are willing to work with pool. Legislature in

state allows public employers to access the Medicare network.

Targeted breast cancer, cardio, diabetic 2,100 employers. Blues will average 55% discount on bills.

Key Factors for Success VERMONT SCHOOL BOARDS INSURANCE TRUST

(John Gutman) Vermont pool started in 1980’s. 17 years ago state teachers being insured – formed

an association with the union and they work cooperatively.

Single best strategy to lower claims is for covereds to be healthier. Best ROI is to prevent health problems and not have chronically ill.

Key Factors for Success TEXAS ASSOCIATION OF COUNTIES (Bill Norwood)

Most important part is the individual member card – folks act in their own self interest.

Credibility important - takes large numbers to make this work - 5K lives are the entry point; 20K lives is much better. Credibility effects financing – with reinsurers and underwriters. Helps identifies pockets of margins.

5 year average of 3.467% increase in premiums. Biggest challenge – stay ahead of trends.

Key Factors for Success MONTANA UNIFIED SCHOOL TRUST (Bob Robinson)

1987 started in a hard market. 203 school districts and related groups - 18K covered

lives. 5 main plans – 29 options for the districts – can use

more than one option depending on the number of employees.

Claim cost year to year increasing 3% to 5% over the past four years. Loss ratios lately 88% to 90% over the past four years. Administrative costs staying under 8% of premium. Excess reserves at $18m. Investment income used to decrease premiums.

Key Factors for Success Average claim cost is increasing 3% to 5% per year.

Downward trend last four years. Wellness program in place for three years.

Biometrics, blood chemistry workup and health risk assessment provided to one-third of members each year at not cost to member work Keeping healthy people healthy. Trying to prevent or delay health issues from arising.. .

Plan design – provided benefit summary that showed comprehensive major medical and other plans. People select the plans based on their individual situation. Basic plan now cover about 9% of our members.

Key Factors for Success Plan choice is made at the district level and

once the district approves a plan then the employees can choose from the district authorized plan. Must have 20% of the employees in the plan or they won’t offer.

Basic plan pays the first $250 of cost. Assists with immunizations and preventative work.

They use a TPA which has their own networks and 6 or 7 other regionally supplied networks based on geographic areas.

Key Factors for Success ASSOCIATION OF COUNTY COMMISSIONERS OF GEORGIA

(David Paulk)

Sponsored program instead of a self-insured pool. Do have a rate stabilization fund – negotiate with the

Blues for rate increases. They use an actuary to review the price increases that Blue brings each year. Rate increases have been similar to the national trends.

2/3 market penetration. Blues have agreed that there is no current cross marketing against the pool.

Key Factors for Success Ownership of data is an issue – comes into play if you

want to leave. (Vermont experience) ACCG gets claims data.

Georgia has a lot of legislative mandates for coverage.

Use a “pool” concept for pricing and loss experience. Their members understand and support the pooling concept.

They have the resources to hire qualified folks to negotiate with the fully insured.

Survivability Factors NORTH CAROLINA ASSOCIATION OF COUNTY

COMMISSIONERS (Patrice Roesler) Pool started in 1995. Rate increases led to a

unbundling of services – especially pharmacy cost. Non-compete issues came into play as well caused a

problem with members. Biggest challenge is the change in the market place

with individual employees. Non-renew counties came from pressure from employees.

Market share is a problem 9K covered lives and $55m in premiums. They are trying to charge “true” rates but the larger insurers buy the business.

Survivability Factors OKLAHOMA MUNICIPAL ASSURANCE GROUP

(Chuck Smith) OMAG gone from 64 members at a low to 160

members. We don’t have a partnership with a TPA that is also a

broker. Been told that every 7 years you have 2 bad years.

We are having our 3rd bad year. Self insured to $250K and have dropped to $150K

have had a series of shock claims – but now utilization issues

Survivability Factors Pool going from fully insured to self insured – challenges are

funding, competition, legislative changes. Choice level now employee going maybe to the employer.

Wellness identifies sick folk who go to the doctor and raises our cost at least in the short term.

Early retiree costs – not eligible for Medicare yet – seeing large increases in utilization.

Competition is a threat. Legislative changes are possible to combine local governments with state plans.

Fooled by Randomness and Black Swan a financial trader two books by the same author. Need to plan for randomness not the average.

North Dakota has regional and geographic challenges. Blues control market share.

Why Pools Terminated Plans None of these Pools were represented at the

summit. Feedback previously shared: Ability for local governments to participate in state

employees program at subsidized premiums Pools found that they couldn’t impact cost since large

carriers drive the market Carriers can buy business for longer than pools can

survive

Why Pools Terminated Plans Members want pools to impact costs they can’t

control, like medical inflation Regulation that pools may not be able to afford to

comply with, such as HIPAA Large members can afford to be on their own and

don’t feel that pools offer anything unique Carriers offer lots of bells and whistles that pools

can’t afford and employees are vocal about wanting these

Other Considerations? ANCILLARY COVERAGES (life, dental, vision, EAP)

They work and usually make some money over time but mostly value-added.

Some examples of adverse selection Offer the ancillary programs without offering health.

Build credibility to transition into a health plan. “One stop shop” - Want to be the place that the

member calls.

Other Considerations? GASB 45 Nevada: sponsored a flat rate to members to do the

required study. Most members don’t have to comply until 2009. Sample studies show that liabilities are huge depending on benefits – not size.

NCACC: joint agreement with the League of Municipalities to do the study for members. Perhaps pooling for outstanding liabilities.

TAC: GASB doesn’t apply in Texas according to the legislature

Other Considerations? DEPENDENT AUDITS

Important to make sure this happens but TPAs may do it automatically

Common law verses legally married status - Arizona doesn’t recognize common law but employees still try to cover common law spouses

NH legs – civil unions equates the same status under the law. Dependents – in school can continue coverage. Divorced or legally separated your ex-spouse stays on the plan for up to 6 years – 3 years due to state law and then COBRA – if the ex-spouse remains unmarried.

Other Considerations? WELLNESS

Newsletter – co-partnered with the American Cancer Society to produce wellness publications.

Use county health departments for immunizations, etc.