1515 Arapahoe Street Tower 1, Suite 530 Denver, CO Phone Fax MEMORANDUM. Date: July 9, 2014

Transcription

1 1515 Arapahoe Street Tower 1, Suite 530 Denver, CO Phone Fax MEMORANDUM Date: July 9, 2014 To: Re: From: WSHIP Board of Directors Preliminary Calculation of 2015 WSHIP Rates Liz Leif The purpose of this memorandum is to provide information regarding the preliminary calculation of 2015 rates for the WSHIP plans. These rates are preliminary because they are based on 2012 carrier membership counts. Once the 2013 counts are available, the rates will be revised. In addition, the non- Medicare rates are based on individual carrier 2015 rates which have been filed but are not yet approved. The WSHIP 2015 rates cannot be finalized until later in the summer when all necessary information has been made available. Summary of Proposed Rate s The preliminary rate analysis shows the following: The preliminary 2015 rate changes for non-medicare plans average 8.1%. The change does not vary by age and varies only slightly by plan design, geographic area, and smoker status. The preliminary rate change for the Medicare plans both over and under age 65 is an increase of 11% for Basic and 7% for Basic Plus. Calculation Methodology for Non-Medicare Plans Sixteen carriers have submitted individual health insurance rates to the OIC for 2015 sales. They include the top five carriers from last year s rate analysis (Community Health Plan of WA, Group Health Cooperative, Group Health Options, Lifewise, and Regence) plus these additional carriers: Asuris, BridgeSpan, Columbia United Providers, Coordinated Care Corporation, Health Alliance Northwest Health Plan, Kaiser, MODA, Molina, Premera, Time, and United Healthcare. The preliminary rates were calculated in accordance with the requirements of RCW and the Board s Rate-Setting Principles, using the following methodology: We used the same five carriers that were used in last year s rate development. Two of the five carriers will offer products both on and off the Exchange. Two will offer products only off of the Exchange. One will offer products only on the Exchange. We believe this provides a good mix of products and rates available in the market. We accessed the OIC website to secure the proposed rates and benefits of the five companies. All five of the carriers have filed Bronze, Silver, and Gold plans. One has filed a Catastrophic Plan, and one has filed a Platinum Plan. Four of the five have filed an HSA plan. The benefits of the WSHIP plans were modeled to determine their 2015 actuarial value, based on a common set of utilization and cost factors for a standard population. The Area 1 (King County) rates for each of the carriers were adjusted to reflect the difference between the carrier and WSHIP plan values. They were also adjusted to reflect the actuarial value of differences in managed care approach between the carrier plans and the corresponding non-managed care WSHIP deductible options. The actuarially adjusted rates for the five companies were averaged for each deductible 1

2 option, using a weighted average based on December 2012 membership. This calculation resulted in the preliminary 2015 standard risk rate for each plan design for Area 1 (King County). The geographic rate factors were calculated based on the weighted average of the 2015 factors proposed by the five carriers. The five geographic areas, their 2014 and 2015 factors, the percent change, and WSHIP s enrollment distribution by area as of May 2014 are shown in the table below. Based on the geographic distribution of WSHIP s members, the overall impact of the changed factors is revenue neutral, although Area 4 will experience a 2.3% increase due to revised geographic factors Percent WSHIP Area Counties Factor Factor Distribution 1 King % 47.6% 2 Clallam, Cowlitz, Grays Harbor, Island, Jefferson, Kitsap, Lewis, Mason, Pacific, Pierce, San Juan, Skagit, Snohomish, Thurston, Wahkiakum, Whatcom % 30.0% 3 Clark, Klickitat, Skamania % 4.2% 4 Ferry, Lincoln, Pend Oreille, Spokane, Stevens 5 Adams, Asotin, Benton, Chelan, Columbia, Douglas, Franklin, Garfield, Grant, Kittitas, Okanogan, Walla Walla, Whitman, Yakima % 2.8% % 15.4% Average % 100.0% All five of the carriers have smoker and non-smoker rates. These were used to create separate standard risk rates for smokers and non-smokers. The preliminary 2015 smoker rates are 12.7% higher than the non-smoker rates. This is up slightly from the 12.3% differential in the 2014 rates. Approximately 9% of the members are smokers. The standard risk rates were multiplied by 1.50 for the Standard Plan and 1.10 for the Preferred Provider Plans to arrive at the preliminary 2015 WSHIP rates. The preliminary 2015 rates were compared to the 2014 rates to determine the rate change. The average rate change for each deductible option was determined based on the May 2014 membership in each rate cell. The discounted rates for low income members and those who were enrolled in a prior medical benefit during the 63-day period prior to application with continuous enrollment for 18 months in the prior plan or who have been enrolled in WSHIP for more than 36 months were calculated according to statutory requirements. The resulting rate changes are shown in the following table. The rate changes shown are for Area 1 (King County). The rate changes for the other areas will include the differences shown in the geographic rate table shown above. Plan Smoker Status Average Rate WSHIP Members May 2014 Standard $500 deductible Non-Smoker 8.0% 54 Smoker 8.5% 2 Standard $1,000 deductible Non-Smoker 8.2% 4 Smoker 8.8% 1 Standard $1,500 deductible Non-Smoker 8.4% 23 Smoker 8.9% 1 Preferred $500 deductible Non-Smoker 8.0% 373 Smoker 8.5% 28 Preferred $1,000 deductible Non-Smoker 8.2% 41 Smoker 8.8% 2 Preferred $2,500 deductible Non-Smoker 7.7% 107 Smoker 8.2% 22 2

3 Plan Smoker Status Average Rate WSHIP Members May 2014 Preferred $5,000 deductible Non-Smoker 7.9% 56 Smoker 8.4% 11 HSA $3,000 deductible Non-Smoker 9.9% 32 Smoker 10.1% 4 Limited Preferred A Non-Smoker 8.1% 3 Smoker 8.7% 0 Limited Preferred B Non-Smoker 7.6% 0 Smoker 8.3% 0 Overall 8.1% 764 An exhibit showing the preliminary Preferred standard risk rates, multiplier, 2015 rates, and rate increases for King County is attached as Exhibit I. Non-Medicare Plan Design Issues Although a decision has not yet been made about implementation of an ACA-compliant plan design, we calculated rates for the $3,000 deductible plan that has been proposed. The rates would be approximately 5% less than the current HSA $3,000 deductible plan. WSHIP maintains two Limited Benefit Plans, known as Preferred A and Preferred B. There are currently only 3 members enrolled in the plans, all in Limited A. This might be the right time to close Limited B to future enrollment, since there are no members covered. Calculation Methodology for Medicare Plans Over Age 65 The preliminary rates were calculated as described below: We used the largest Medicare Supplement carriers membership for The companies used for the 2014 rates were: United Healthcare (AARP), Premera Blue Cross, Regence Blue Shield, Mutual of Omaha, State Farm, and Sterling Life Insurance Company. The July 2014 Medicare Supplement rates for Plan F were secured from the OIC website. All five of the companies offer Plan F, which is closest to the WSHIP Basic benefit design. The carrier rates were trended one year to the midpoint of the WSHIP rating period beginning January 1, The trend was estimated based on the 2013 to 2014 rate changes in the Medicare Supplement rates of these carriers. The trend averaged 6.0%. The preliminary trended rates for the five companies were averaged, using a weighted average based on December 2012 membership. The trended average Plan F rate was adjusted to reflect the actuarial value of differences in benefit design between Plan F and the WSHIP Basic and Basic Plus plans. The modifications included prescription drug benefits as well as a few other minor plan differences. The gradual closing of the coverage gap for prescription drug coverage has a downward effect on trend for the Basic Plus standard risk rates. The adjusted standard risk rates were multiplied by 1.50 to arrive at the preliminary 2015 WSHIP over age 65 Medicare Plan rates. A rate comparison with 2014 rates is shown in the following table. Plan 2014 Rate 2015 Rate % Basic $267 $ % Basic Plus $462 $ % BP LI Level 1 $215 $ % 3

4 Plan 2014 Rate 2015 Rate % BP LI Level 2 $251 $ % Last year, we assumed that the trend in rates from 2013 to 2014 would be 1.2%, mirroring the prior year. In fact, the trend was approximately 6%. The rates for 2015 reflect a 6% trend assumption for 2014 to 2015, compounded by the 5% shortfall in last year s trend assumption. Calculation Methodology for Medicare Plans Under Age 65 Five years ago we identified three insurance companies who were selling Medicare Supplement policies to Medicare-eligible individuals under age 65 from the OIC website. The companies were United Healthcare (AARP), Premera Blue Cross, and Sterling Life Insurance Company. These companies are no longer selling to Medicare-eligible individuals under age 65. For the past four years, we have been trending these carrier rates forward, as no usable newer rates were available. At the five year mark, we think it is time to reassess this approach. There are currently two companies (United American and HCA Premera) selling individual coverage to Medicare-eligible persons under age 65 in Washington. Both of these companies also sell to over age 65 individuals. While we are not comfortable basing the WSHIP rates on the under age 65 rates of these two carriers (since one of them is very small and the two rates are quite different), we do think that the ratio of rates over and under 65 is a useful metric. We found that using the weighted average of the ratios and multiplying it by the WSHIP over age 65 rate produces a rate change very close to the over age 65 WSHIP rate change. We propose using this approach for the 2015 rates. The adjusted standard risk rates were multiplied by 1.10 to arrive at the preliminary 2014 WSHIP under age 65 Medicare Plan rates. A rate comparison with 2014 rates is shown in the following table. Plan 2014 Rate 2015 Rate % Basic $336 $ % Basic Plus $581 $ % BP LI Level 1 $369 $ % BP LI Level 2 $430 $ % Exhibits Exhibit I Preliminary Non-Medicare Standard Risk Rates and Multipliers (King County, Preferred 500) Exhibit II Preliminary Medicare Rates Development Detail 4

5 Exhibit I WSHIP Non-Medicare Plans Preliminary 2015 Rate Development Standard Risk Rates and Multipliers King County PPO 500 Non-Smoker Age SRR Multiplier 2015 Rate 2014 Rate Increase Members 0-20 $ $480 $ % $ $757 $ % 0 22 $ $757 $ % 2 23 $ $757 $ % 2 24 $ $757 $ % 4 25 $ $760 $ % 6 26 $ $775 $ % 2 27 $ $793 $ % 3 28 $ $822 $ % 7 29 $ $847 $ % 7 30 $ $859 $ % 8 31 $ $877 $ % $ $895 $ % $ $906 $ % $ $919 $ % $ $925 $ % $ $931 $ % $ $937 $ % $ $943 $ % $ $955 $ % $ $967 $ % $ $985 $ % $ $1,003 $ % $ $1,027 $ % $ $1,057 $ % 6 45 $ $1,093 $1, % $1, $1,135 $1, % $1, $1,183 $1, % $1, $1,237 $1, % 5 49 $1, $1,291 $1, % $1, $1,351 $1, % 8 51 $1, $1,411 $1, % $1, $1,477 $1, % 4 53 $1, $1,544 $1, % 7 54 $1, $1,615 $1, % 6 55 $1, $1,687 $1, % 1 56 $1, $1,765 $1, % 7 57 $1, $1,844 $1, % 2 58 $1, $1,928 $1, % 4 59 $1, $1,970 $1, % 3 60 $1, $2,054 $1, % 4 61 $1, $2,126 $1, % 6 62 $1, $2,174 $2, % 2 63 $2, $2,234 $2, % 1 64 $2, $2,270 $2, % $2, $2,270 $2, % 6 Total $ $1,098 $1, % 373 max 8.0% min 8.0% 6/30/2014 Leif Associates

6 WSHIP Medicare Plans 2015 Rate Development Exhibit II Over Age Plan F Rate Plan F Rate Annual Trend To Trended Plan Adj Rate Carrier Plan Avg Mems 7/13 7/14 Trend 7/15 Rate Plan Factor SRR Multiplier Rate Rate Chg UHC AARP F 100,722 $175 $ % Basic $ $298 $ % Premera F 37,106 $171 $ % Basic Plus $ $496 $ % Regence F 18,324 $171 $ % BP LI Level $ $238 $ % Sterling F 13,025 $198 $ % BP LI Level $ $278 $ % State Farm F 3,567 $216 $ % Wtd Avg 172,745 $176 $ % $199 Under Age Over 65 Under 65 Over 65 Under 65 Plan Adj Rate Carrier Plan Avg Mems 7/14 Rate 7/14 Rate Ratio 7/15 Rate 7/15 Rate Plan Factor SRR Multiplier Rate Rate Chg United American B 235 $198 $ Basic $ $373 $ % HCA Premera F 37,106 $200 $ Basic Plus $ $621 $ % Wtd Avg 37,341 $200 $ $199 $340 BP LI Level $ $407 $ % BP LI Level $ $475 $ % 6/30/2014 Leif Associates