Florida Health Insurance Plan High Risk Pool

Karen BenderMilwaukee

Florida Health Insurance PlanHigh Risk Pool

October 2006

Mercer Oliver Wyman Actuarial Consulting, Inc.

Mercer Oliver Wyman Actuarial Consulting, Inc. 2

Florida Health Insurance Plan (FHIP)

2003 Legislation – start a new high risk program

Engaged Mercer Oliver Wyman U.S. Actuarial Consulting (MOW) to perform feasibility study

One aspect of the feasibility study was to analyze the impact the high risk pool will have on the market (if any)


Background

Florida Comprehensive Health Association (FCHA) Formerly known as State Comprehensive Health Association

High Risk Pool

Closed to new enrollment in October 1990

1990 Data

– Premium $15 million

– Claims $47 million

– Assessment $34 million


Background

Unique Circumstances in Florida that

Facilitated Impact Analysis HIPAA Requirements

Florida DOI issued data request

Florida requires rates be filed and approved before using

Florida has certain routine reporting requirements


Florida HIPAA Compliance

3 Prong Approach

Individual Carriers

Small Group Carriers

Group Carriers



Carriers in Individual (Nongroup) Market

– Applicable only to HIPAA-qualified Individuals leaving Self-funded Plans

– Must guarantee issue their two most popular currently marketed plans




– Required to guarantee issue to self-employed each

August

– Premiums cannot exceed 150% of Standard Risk

Rates

– DOI determines Standard Risk Rates

Based upon average rate charged by nongroup

carriers representing 80% of the nongroup market



Group Carriers

– Must issue conversion contracts

– Benefits determined by Florida regulators

– Premiums cannot exceed 200% of Standard Risk

Rates

– Same Standard Risk Rates (adj. for benefits) as used

for G.I. for one-life groups by small group carriers



Individual Carriers


Group Carriers

High Risk Pool Would Eliminate These HIPAA Compliance Requirements

What will impact be on rates (if any)?


Florida DOI Data Request

Issued to Individual (Nongroup) and Small Group

Carriers

– Experience for one-life and HIPAA-qualified individuals

vs. small group and medically underwritten groups

– Impact of removing several requirements

– 19 carriers (including HMOs) participated


Results

Segregated by HIPAA Compliance

– Individual Carriers

– Small Group Carriers

– Group Carriers

Impact Segregated between Claim Cost and

Administrative Costs


Results

HIPAA Experience for

Individual Carriers

YearHIPAA-Members Loss Ratio

Underwritten Nongroup Members Loss Ratio

2001 4,489 109.8% 448,151 70.5%

2002 5,796 106.2% 507,936 67.6%

2003 7,338 106.5% 676,143 64.4%

Loss Ratio Comparison

0%

50%

100%

150%

2001 2002 2003

HIPAA Underwritten Nongroup


Results

HIPAA Experience for Individual Carriers

Nongroup Carrier Losses Attributable to HIPAA

Year

$ Losses(Rounded to nearest

$100,000)

Losses per HIPAA Member per Year

(Rounded to nearest $100)

2001 $7,800,000 $1,700

2002 $9,700,000 $1,700

2003 $14,400,000 $2,000

Cumulative $31,900,000 $1,800


HIPAA Experience for Individual Carriers

Losses as a % of 2003 Premium

– Range 1.2% to 2.2%

– Carriers will still incur losses on existing HIPAA

individuals unless they would be allowed to

immediately transfer them to the high risk pool

– Over long run, premiums decrease 1.2% to 2.2%


Results

Responses from Carriers

# of Carriers % of Nongroup Lives

Did know 5 54%

No Impact 3 4%

0.5% 3 7%

Up to 3% 4 24%

5.0% to 7.5% 2 9%

If we ignore the carriers that did not provide an estimate, the weighted average (based upon lives) is about a 3% reduction in nongroup premiums.


Individual Carrier Responses

Administrative Savings

– Carriers indicated would be minimal, 0.0% to 0.5% of premium

– Appeared conservative

– MOW estimated 1.0% savings



GI One-Life Groups Experience vs. Groups 2-50 EEs

Members Loss Ratio

1-Life Groups 2-50 Groups 1-Life Groups

2-50 Groups

2001 35,210 147,079 111.4% 78.3%

2002 29,591 152,687 112.1% 78.2%

2003 25,657 154,641 103.3% 74.6%

Loss Ratio Comparison

0%

50%

100%

150%

2001 2002 2003

1-Life Groups 2-50 Groups


Small Group Carriers Incurred Losses Attributable to One-Life Groups

Year

$ Losses(Rounded to

nearest $100,000)

Losses per One-Life Member per Year

(Rounded to nearest $100)

Losses as % of Total 2003

Small Group Market

Premium

2001 $76,400,000 $2,200 2.5%

2002 $77,000,000 $2,600 2.5%

2003 $45,700,000 $1,800 1.5%

Cumulative $199,100,000 $2,200 2.2%*

Reason losses decreased in 2003, companies allowed to increase rates from 115% to 150% of Standard Risk Rates



One-Life Groups

– Losses on previous slide understated

Expressed as a % of 2003 Premium Levels for

technical reasons

Removing GI for one-life group could reduce small

group premiums by 2.0% to 3.0% in the long run



Responses from Carriers

– Mixed

– 9 carriers indicated no change in premiums if G.I.

of one-life groups removed

– Several indicated they could not determine impact

– Some carriers indicated they had insufficient

membership to generate credible results

– Missed opportunity




– Elimination of open enrollment

– Reduced marketing costs resulting from elimination of open enrollment forms, etc.

– More streamlined regulatory reporting requirements

– Higher administrative costs associated with billing, accounting, customer service of one-life groups




– Carrier’s responses mixed; no numerical

estimates

– MOW estimated 1% premium savings in the long

run


Group Carriers

Current HIPAA Compliance Requirement

– Conversion Plans

– State defined benefits

– 200% Standard Risk Rate

Florida DOI has 2002 Group Conversions Statistics:

– Actual loss ratio for 8 largest insurance companies – 211%

– $58.4 million losses (Assumes 85% breakdown loss ratio)

– Losses represent 0.5% of group premium


Group Carriers

Segment Source of Savings

Elimination of: Improved Claims Administrative Total

$ Amount (Millions)

Market Impacted

GI One-Life2% to 3% 1%

3% to 4% $92 to $123 Small Group

G.I.HIPAA-Eligibles 2% to 3% 1%

3% to 4% $35 to $46 Nongroup

Conversion 0.5% - 0.5% $55* All Groups

Potential Premium Savings

*The reason that Elimination of Group Conversion (0.5% of premium) has what appears to be a greater dollar amount of impact proportionally than the elimination of one-life groups is that elimination of groupconversion impacts the premium for all fully insured group sizes, whereas the elimination of one-life groups impacts the premium for only small groups.


Conclusions

Impact on Previous Slide

– Does not consider impact of assessments

– Critical to create broadest base possible for

assessments

Self-funded

Provider

– Small base for assessments could negate savings


FHIP Analysis

Most comprehensive impact analysis MOW has

observed

Sources of data critical

Legislation failed

– Critical issue was funding

Florida Health Insurance Plan High Risk Pool

Documents

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