Session 34 PD, Healthcare Exchanges: Case Studies in the ACA. Moderator: William James Swacker II, FSA, MAAA

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1 Session 34 PD, Healthcare Exchanges: Case Studies in the ACA Moderator: William James Swacker II, FSA, MAAA Presenters: David G. Hayes, FSA, MAAA Michael N. Muldoon, ASA, FCA, MAAA William James Swacker II, FSA, MAAA SOA Antitrust Disclaimer SOA Presentation Disclaimer

2 David G. Hayes, FSA, MAAA Principal and Consulting Actuary Milliman - Atlanta Session 34 Panel Discussion: Healthcare Exchanges: Case Studies in the ACA October 24, 2016

3 Presentation Disclaimer Presentations are intended for educational purposes only and do not replace independent professional judgment. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of the Society of Actuaries, its cosponsors or its committees. The Society of Actuaries does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented. Attendees should note that the sessions are audio-recorded and may be published in various media, including print, audio and video formats without further notice. 2

4 General Overview Multiple Markets 3

5 Number of Insurers, Grouped by Parent Company, Participating in Marketplaces, State California Colorado Connecticut DC Indiana Maine Maryland Michigan Nevada New Mexico New York Oregon Rhode Island Tennessee Vermont Virginia Washington Average Source: Kaiser Family Foundation 4

6 Monthly Lowest-Cost Silver Premium - 40 YO, Non-Smoker (before tax credits) State Major City (Rating Area #) % Change % Change Average Annual Change California Los Angeles (15) $251 $243 3% 5% 4% Colorado Denver (3) $304 $266 14% 29% 7% Connecticut Hartford (2) $358 $316 13% -1% 4% DC Washington (1) $275 $228 21% -4% 5% Indiana Indianapolis (10) $284 $286-1% -10% -6% Maine Portland (1) $307 $285 8% 4% 3% Maryland Baltimore (1) $267 $243 10% 8% 8% Michigan Detroit (1) $233 $210 11% -4% 7% Nevada Las Vegas (1) $279 $256 9% 8% 6% New Mexico Albuquerque (1) $192 $181 6% 8% 1% New York New York City (4) $425 $366 16% -2% 6% Oregon Portland (1) $302 $240 26% 13% 16% Rhode Island Providence (1) $224 $259-14% 6% -6% Tennessee Nashville (4) $333 $262 27% 19% 23% Vermont Burlington (1) $482 $465 4% 9% 7% Virginia Richmond (7) $296 $264 12% 9% 9% Washington Seattle (1) $232 $224 4% -5% -6% Weighted Average $281 $257 9% 5% 7% Source: Kaiser Family Foundation 5

7 A Step Back in Time Major Considerations for 2014 Rate Development Demographics Basis for rate development Risk adjustment Reinsurance Transitional business (depending on the State) On or off-exchange Competitive position Member subsidies Understanding the rating templates Actuarial value (AV) calculator 6

8 Year 2 Major Considerations for 2015 Rate Development Knowledge gained from 2014 Initial enrollment Initial experience indications Competitive position Pent-up demand Allowable rating parameters (e.g., child load) Area factors and inclusion of risk Benefit design Narrow networks Elimination of platinum and gold plans 7

9 First Year of Experience - Major Considerations for 2016 Rate Development 2014 claims and demographic experience Risk adjustment 2014 results Change in coefficients Changes to the AV calculator Supreme Court ruling (Burwell) Increased regulatory oversite Rate adequacy 8

10 Major Considerations for 2017 Rate Development Risk corridor all but eliminated Risk adjustment Rate adequacy Financial stability Make up of the marketplace Carriers leaving market CO-OP failures Market consolidation Competitive position Economic value of members 9

11 What Keeps Carriers Up at Night? Financial performance and stability Timing of obligations and receivables Elimination of reinsurance Redesign of risk adjustment Shifting risk to providers 10

12 Trey Swacker, FSA, MAAA Actuarial Sr. Director Aetna Session 34 Panel Discussion Healthcare Exchanges: Case Studies in the ACA October 24, 2016

13 Ohio Individual Marketplace 2

14 Ohio Individual Market 2013 $877M earned premium 331K covered lives 82.4% Federal MLR $222 Premium PMPM Aultman 2% Assurant Aetna 3% 4% United 12% Health Span 2% Summa 1% Humana 1% Other 2% Anthem 38% Medical Mutual of Ohio 35% 2013 Supplemental Health Care Exhibit Part 1 Geography: Ohio LOB: Comp Health: Individual 3

15 Ohio Exchange Participants Commercial Government Regional National 4

16 Ohio Individual Market 2014 $1.3B earned premium +48% 378K covered lives +14% 100.5% Federal MLR -18.1% $285 Premium PMPM +28.3% HealthSpan 2% Aultman Assurant 2% 2% Aetna 3% Humana 3% CareSource 6% United 8% Summa 2% Other 3% Medical Mutual of Ohio 40% Anthem 29% 2014 Supplemental Health Care Exhibit Part 1 Geography: Ohio LOB: Comp Health: Individual 5

17 Ohio Individual Market 2015 $1.6B earned premium +19% Aultman 2% 378K covered lives +0% 102.6% Federal MLR -18.1% Assurant 2% Humana 3% HealthSpan 2% Aetna 5% Co-Op 5% Other 5% Anthem 21% $324 Premium PMPM +14% CareSource 9% United 7% Medical Mutual of Ohio 39% 2015 Supplemental Health Care Exhibit Part 1 Geography: Ohio LOB: Comp Health: Individual 6

18 Ohio Exchange Facts Year Participating Carriers Covered Lives Average Approved Rate Increase Average Premium (before subsidies) ,000 N/A $382 PMPM ,000 12% $381 PMPM ,000 13% $405 PMPM TBD 13% TBD 46% market share in % market share in

19 Columbus, Ohio 8

20 Columbus, Ohio Caresource filed five networks per product; slotted providers in based on agreed reimbursment level vs Medicare. Narrow network (6 out of 15 facilities in metro area) HMO product Molina priced based on Medicaid experience; commercial rates with providers ~60% higher. Anthem / MMO had PPO products only Paramount network coverage minimal 9

21 Columbus, Ohio Molina trued up pricing (revisited assumptions applied to baseline data) Caresource used same credibility manual, low pricing trend assumption Assurant trued up rate (aligned with broad network PPO product) Aetna enters market with narrower PPO network (vs other PPOs), centered around Mt. Carmel system United enters market with PPO plans MMO added plans 10

22 Columbus, Ohio United and Anthem introduce HMO products for the first time on-exchange. Molina s experience base (2014 Medicaid) improved vs assumptions; ACA experience not credible Other increases reflective of ACA experience, trend, reduction in reinsurance program Healthspan geographic expansion into Columbus 11

23 Columbus, Ohio Several carriers dropped exchange offerings. Only narrow-network HMOs left. MMO introduces narrow network HMO options (centered around Mercy and Ohio Health systems) Caresource experience driving more of a true-up vs prior years. (risk adjustment insights) 12

24 Columbus, Ohio - Summary Carriers playing in focused geographies Narrow network HMO products Product offering centered around Silver / Bronze tiers Some erosion of unit cost advantages initially built with reimbursement rates relative to Medicare Risk adjustment program continues to drive uncertainty 13

26 Colorado Division of Insurance Presented by Chief Actuary - Michael Muldoon, ASA, MAAA, FCA

33 Number of Individual Market On-Exchange Carriers, by County

34 Kaiser Foundation Health Plan of CO Rocky Mountain HMO, Inc. Colorado Health Insurance Cooperative (COOP) Humana Insurance Company Time Insurance Company Anthem - HMO Colorado, Inc. Humana Health Plan, Inc. Colorado Choice Health Plans Cigna Health and Life Insurance Denver Health Medical Plan, Inc. All Savers Insurance Company New Health Ventures, Inc.

36 Entering Anthem - Rocky Mountain H&MS BCBS PPO Plans (Off-Exchange only) UnitedHealthcare Life Insurance Company PPO (Off-Exchange only) National Foundation Life Insurance Company PPO (Off-Exchange only) Freedom Life Insurance Company of America PPO (Off-Exchange only) Leaving N/A Anthem entered the Individual ACA market in January 2015 with PPO plans, however they continued to maintain a large block of closed Transitional NGF plan members who were not transitioned into ACA plans until January 2016 when the State of Colorado required all transitional plans to be terminated

38 Entering UnitedHealthcare of Colorado HMO (On-Exchange) Golden Rule Insurance Company PPO (Off-Exchange Only) Anthem - Rocky Mountain H&MS BCBS PPO Plans (On-Exchange) Leaving Colorado Health Insurance Cooperative, Inc. (On-Exchange) Assurant - Time Insurance Company PPO (Off-Exchange) New Health Ventures, Inc. (On-Exchange)

40 Entering Bright Health Plan EPO (On-Exchange) Leaving Percent of On-Exchange Market Anthem Rocky Mountain H&MS PPO (On-Exchange)* 15.23% Rocky Mountain HMO (On-Exchange)** 5.01% Humana Health Plan HMO (On-Exchange) 5.00% UnitedHealthcare of Colorado HMO (On-Exchange) 3.70% All Savers Insurance Company (On-Exchange) 0.16% Humana Insurance Company (Off-Exchange) N/A UnitedHealthcare Life Insurance Company N/A TOTAL 29.10% *Anthem PPO only offering off-exchange catastrophic plan in 2017 **Rocky Mountain HMO pulled out of the market statewide, except for one product (both on/off exchange) in Area 5 (Mesa County)

42 HMO Colorado, Inc. (Anthem) Bright Health Plan Cigna Health and Life Insurance Company Denver Health Medical Plan, Inc. Kaiser Foundation Health Plan of Colorado Only carrier that is statewide on-exchange New carrier in 2017, EPO plans in 4 areas along Front Range EPO plans in 6 areas along Front Range HMO plans in limited counties in Denver MSA HMO plans in 7 areas Rocky Mountain H&MS (Anthem) Only offering off-exchange catastrophic plan in 2017 Rocky Mountain HMO Offer one product (both on/off exchange) in Area 5 (Mesa County) Golden Rule Insurance Company National Foundation Life Insurance Company Freedom Life Insurance Company Statewide PPO plans Less than 10 members enrolled Less than 10 members enrolled

45 2014 Area Factors: 7 MSA + 4 Non-MSA

48 2015 Area Factors: 7 MSA + 2 Non-MSA

49 On-Exchange HMO Colorado (Anthem) -5.10% COOP -9.63% Kaiser 7.00% Humana Health Plan -3.00% Cigna 6.07% Colorado Choice 2.10% Rocky Mountain HMO 3.10% All Savers 0.00% Denver Health 17.50% New Health Ventures % Off-Exchange Only Humana Insurance Company -8.50% Time Insurance Company 35.00% Weighted Individual Market Average Rate Change: 0.71%

70% All Savers** 0.00% Off-Exchange Only Humana Insurance 14.90% UnitedHealthcare Life -2.

51 On-Exchange Kaiser 4.00% Rocky Mountain HMO 30.80% Humana Health Plan 20.10% HMO Colorado, Inc. (Anthem) 8.20% COOP 25.20% Colorado Choice 9.40% Cigna** 0.00% Rocky Mountain H&MS (Anthem) 7.40% New Health Ventures 26.80% Denver Health 12.70% All Savers** 0.00% Off-Exchange Only Humana Insurance 14.90% UnitedHealthcare Life -2.30% *based on Issuers with 50+ members enrolled ** Cigna and All Savers had all new network plans for 2016 Weighted Individual Market Average Rate Change: 9.84%

53 On-Exchange Kaiser 18.00% HMO Colorado (Anthem) 25.80% Cigna 9.50% Off-Exchange Only Golden Rule 46.20% *based on Issuers with 50+ members enrolled Colorado Choice 42.90% Rocky Mountain H&MS (Anthem) 20.60% Rocky Mountain HMO 34.90% Denver Health -0.46% Weighted Individual Market Average Rate Change: 20.54%

55 Rate Changes for Subsidized and Non Subsidized Members With Plans Continuing in the Individual Exchange Market Study by Wakely Consulting Group Data Provided by the Colorado Exchange (C4HCO) and Colorado DOI

56 155,754 With Premium Subsidies 61%* Without Premium Subsidies 39% 132,235 With Premium Subsidies 0% Without Premium Subsidies 100% 287,989 With Premium Subsidies 33% Without Premium Subsidies 67% *Approximately 68% are eligible to receive premium subsidies

57 Metal Tier Enrollees Not Eligible for Subsidies 2016 PMPM Premium 2017 PMPM Premium Auto Renew % Change Over 2016 Gold 3,907 $359 $443 23% Silver 8,308 $329 $403 22% Bronze 20,579 $301 $378 25% Catastrophic 1,222 $170 $207 22% Total 34,016 $310 $385 24%

58 Rating Area Description Enrollees Not Eligible for Subsidies 2016 PMPM Premium 2017 PMPM Premium Auto Renew % Change 1 Boulder 3,839 $300 $367 22% 2 Colorado Springs 3,068 $299 $386 29% 3 Denver 19,373 $296 $355 20% 4 Fort Collins (Larimer) 2,917 $319 $408 28% 5 Grand Junction (Mesa) 325 $414 $592 43% 6 Greeley (Weld) 1,443 $321 $407 27% 7 Pueblo 320 $374 $452 21% 8 East 1,084 $384 $560 46% 9 West 1,647 $414 $551 33%

59 Metal Tier Enrollees Eligible for Subsidies 2016 PMPM Premium 2017 PMPM Premium Auto Renew % Change Over 2016 Gold 3,598 $260 $270 4% Silver 34,048 $143 $136-5% Bronze 33,654 $128 $100-22% Catastrophic* 718 $177 $215 21% Total 72,018 $142 $126-11%

60 Rating Area Description Enrollees Eligible for Subsidies 2016 PMPM Premium After Subsidy 2017 PMPM Premium After Subsidy Auto Renew % Change 1 Boulder 6,233 $143 $125-12% 2 Colorado Springs 5,910 $147 $130-11% 3 Denver 36,557 $142 $129-9% 4 Fort Collins (Larimer) 6,690 $147 $123-17% 5 Grand Junction (Mesa) 2,077 $141 $115-18% 6 Greeley (Weld) 3,418 $152 $123-19% 7 Pueblo 1,228 $138 $99-28% 8 East 4,130 $133 $129-3% 9 West 5,775 $136 $121-11%

Changes in Marketplace Premiums, 2017 to 2018

U.S. Health Reform Monitoring and Impact Changes in Marketplace Premiums, 2017 to 2018 March 2018 By John Holahan, Linda J. Blumberg, and Erik Wengle Support for this research was provided by the Robert