Overview of CY 2007 HealthChoice Rates

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Overview of CY 2007 HealthChoice Rates Medicaid Advisory Committee Meeting October 26, 2006

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Overview of CY 2007 HealthChoice Rates. Medicaid Advisory Committee Meeting October 26, 2006. Development of Rates. CY07 HealthChoice rates were developed based upon the CY04 audited financial reports submitted by the plans as well as reported diagnosis & utilization encounter data. - PowerPoint PPT Presentation

Transcript of Overview of CY 2007 HealthChoice Rates

Page 1: Overview of CY 2007  HealthChoice Rates

Overview of CY 2007 HealthChoice Rates

Medicaid Advisory Committee MeetingOctober 26, 2006

Page 2: Overview of CY 2007  HealthChoice Rates

Development of Rates CY07 HealthChoice rates were developed

based upon the CY04 audited financial reports submitted by the plans as well as reported diagnosis & utilization encounter data.

The actuary, Mercer, developed trend factors to project the CY04 historical costs to the payment period, and applied a series of actuarial adjustments as necessary.

Page 3: Overview of CY 2007  HealthChoice Rates

Components of Rate Increase The level of the CY07 rate increase

will be influenced by the following factors: Changes in the financial base Medical expense trend Administrative cost allowance Modest Profit / Contingency Actuarial adjustments State-designated incentive payments

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Financial Base –Medical Expenses

The 2007 HealthChoice rates are based upon CY04 financial experience of the Plans:

$ PMPM CY04

Families & Children $120.17

Disabled $669.00

Deliveries $9,081.58

Total $226.23

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Medical Trend

The actuary developed their trend estimates evaluating plan financial reports, HSCRC datasets, and HealthChoice encounter data.

Trend factors recognize changes in cost and utilization from the base period to the payment period.

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Summary of Average Annual Trends (CY04–CY07)

F&CDisable

SOBRA AIDS HIV Birth Total

Inpatient Hospital

7.3% 6.8% 7.3% 7.0% 6.8% 5.8% 6.6%

Outpatient 10.5% 11.4% 10.5% 10.7% 10.7% 10.5% 10.8%

Physician 4.4% 4.2% 4.4% 5.3% 5.3% 4.3% 4.4%

Dental 6.7% 5.4% 6.7% 5.4% 5.4% 0.0% 6.7%

Pharmacy 6.9% 7.6% 6.9% 9.1% 9.1% 6.9% 7.6%

All Other -1.0% -0.6% -1.0% -0.6% -0.5% -1.0% -0.8%

Total 6.7% 6.8% 7.2% 7.5% 7.7% 5.6% 6.6%

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Administrative Costs

The CY07 rates include administrative costs that were based upon independently reviewed CY04 MCO reported costs trended using CPI.

Aggregate administrative costs are “capped” at CY06 rate levels.

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Administrative Costs PMPM

Components CY06 CY07

General $21.32 $22.85

Medical Management

$6.27 $6.39

Total $27.59 $29.24

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Profit and Contingency The CY07 rates include a fixed profit

percentage of 1.5% of medical expense.

The CY07 rates include a fixed contingency margin percentage of 0.39% of medical expense.

An additional $2.4 million was included to reflect the administrative component of reinsurance premium costs.

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Actuarial Adjustments

The actuaries applied a series of adjustments in finalizing the rates.

These adjustments recognize the impact of benefit or eligibility changes that took place after the beginning of the base year (CY04).

Some adjustments increase and some adjustments decrease the rates.

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Actuarial Adjustments

Adjustments applied having the impact of increasing the rates were as follows:

FY 05 physician fee increase FY 06 physician fee increase

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Actuarial Adjustments

Adjustments applied having the impact of decreasing the rates were as follows:

Adult dental carve out Adult drug co-pays Lower than anticipated MCO savings

for third party liability Improve RAC assignments due to

better encounter data submissions

Page 13: Overview of CY 2007  HealthChoice Rates

Incentive Payments CY07 rates included $7.6 million for

statewide incentive payments to plans that operated in at least 20 counties. This is approximately 75% of the statewide incentive pool in 2006.

New for CY07 was the implementation of a quality incentive pool of $2.53 million. This is approximately 25% of the statewide incentive pool in 2006.

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Changes in 2007 Rate Setting

In addition to the change in methodology for the Statewide Incentive Payout, theProgram also expanded diagnosis fields for RAC assignments.

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Final Rates

Effective January 2007: Families & Children 5.8% Disabled 4.7% AIDS 8.4% Deliveries 4.3% Total including incentives 5.2%