Executive Director’s Report January 3, 2013

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Washington State Government Washington State Office of the Insurance Commissioner Reinsurance, Risk Corridors, and Risk Adjustment Workgroup

The most recent meeting of this group took place on Wednesday, December 12, 2012. The agenda included a review of the proposed reinsurance and risk adjustment rules, the Commissioner’s decision on operational level and discussion and beginning of state level rule making.

Proposal in Response to OIC RFQQ After review of December 7, 2012 proposed federal rules for state operation of reinsurance and risk adjuster programs, the Commissioner has decided that it does not make sense for Washington to operate either program in 2014 or 2015. Consequently, we were officially notified on December 18, 2012 that the RFQQ was being withdrawn and if at a future date the OIC determines that these services are necessary a new procurement would be issued.

WSHIP 2014 Product filing deadlines The OIC has informed us that WSHIP will be exempt from the April 1 / May 1 filing deadlines that apply to carriers in and out of the Exchange. WSHIP will be defined as a “grandfathered” product and will be required to file in the fall of 2013. They will notify us when they have set definite due dates for WSHIP rate and form filings.

Washington State Senate Health and Long Term Care Committee Rob Kuecker in his capacity as an officer of the WSHIP Board, and I attended a work session of the Senate Health and Long Term Care Committee on Thursday, November 29, 2012 and reported on the Legislative Study approved by the Board on November 20, 2012. There was not time to report on the status of WSHIP’s work related to Section 18 of ESSHB 2319 as originally anticipated.

Health and Human Services Affordable Care Act (ACA) proposed rules

Two sets of PPACA proposed rules were released recently: HHS Notice of Benefit and Payment Parameters for 2014 on December 7, 2012 and Health Insurance Market Rules; Rate Review on November 26, 2012. The rules with respect to reinsurance were significantly different from the guidance that had been supplied prior to the November election in that they specified that the federal government would operate the basic program using standard parameters and state operated programs were only to be supplemental. HHS will collect all contribution funds and make payments based upon state need, not on where funds were collected. An interesting aspect of both sets of rules is reference to the fact that HHS is examining ways in which a State could continue its high risk pool program beyond 2014 to complement Exchange coverage and as a means of minimizing disruption of rates in the current market and easing the transition.

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Washington State Health Benefit Exchange (HBE) Health Benefit Exchange contract status

As reported earlier, WSHIP consummated a contract with the HBE for the study mandated by Section 17 of ESSHB 2319 in September. We have been working with HBE staff to amend that contract to include the work permitted or required by Section 18 of the act.

Conferences, Meetings and Speaking Engagements Washington Health Benefit Exchange (HBE) Board Meetings

I attended the November16 and December 19, 2012 meetings of the HBE Board. Action items included approval of a SHOP Technical Advisory Committee (TAC) member and the self-sustainability recommendations to the Legislature in November and Conflict of Interest and Ethics Policy, Navigator TAC membership and the 2013 Operating Plan and Budget (attached) in December. The self-sustainability budgets are $51.0 million for 2015, $53.6 million for 2016 and $55.7 million for 2017. The monthly quality assurance report on areas of exchange implementation that were at extreme risk in November included scope and design specifications and schedule – project timeline both due to lack of specifications from CMS. The December report indicated no project areas at extreme risk. Other presentations and discussions included network adequacy (Beth Berendt) and marketing and stakeholder engagement plan (HBE staff) in November and sustainability, federal regulations, navigator and marketing updates (HBE staff) and SHOP business entity (Keith Bell, SHOP Director) in December. The January HBE Board meeting conflicts with the WSHIP Board meeting. I will plan to attend the February 21, 2013 meeting.

State of Reform Conference Unfortunately, this yearly event coincides with the January WSHIP Board and Governance Committee meetings. In light of this, WSHIP Board members were offered a special rate for attendance at afternoon sessions. At least two board members plan to leave the board meeting at the break in order to participate in the conference.

NASCHIP Mid-year Board meeting The NASCHIP Board will meet in San Francisco on January 10 and 11. I will be attending in my capacity as a former board chair. The agenda for the meetings includes legislative strategy, operation of state high risk pools beyond 2013, planning for mid-year and annual NASCHIP meetings, the 2013 NASCHIP Book, an update on reinsurance and the role of NASCHIP in 2013 and beyond.

2013 Washington Association of Health Underwriters (WAHU) Spring Symposium WSHIP and PCIP-WA will host a table as usual at these annual meetings to be held in Seattle and Spokane on March 19 and 20, 2013. Donna Dorris of the Office of the Insurance Commissioner will attend on behalf of PCIP-WA.

Washington Health Benefit Exchange

2013 Operating Plan and Budget

Richard Onizuka, CEO Robert Nakahara, CFO

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2013 OPERATING PLAN OBJECTIVES AND PRINCIPLES (METHODS FOR ACHIEVING OBJECTIVE)

Combined L1 & L2 Budgets and Projections ($000’s)

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2011-2014

Total Budget Actual at Budget Projected Budget Forecast Budget Forecast

Budget 2011 Dec-11 2012 Dec-12 2013 2013 2014 2014

GROSS REVENUES

Grant Revenue: Level 1 24,187 1,036 1,036 13,705 14,139 9,446 9,012

Grant Revenue: Level 2 149,822 40,269 13,178 61,536 63,229 48,017 73,416

TOTAL GROSS REVENUES 174,009 1,036 1,036 53,975 27,317 70,982 72,241 48,017 73,416

OPERATING EXPENSES

Salaries & Benefits 30,080 127 127 5,008 1,215 13,400 12,223 11,544 16,515

Marketing & Advertising 9,379 1,407 4,220 5,260 3,751 4,118

Consulting & Professional Service 23,409 7,928 230 8,724 10,017 6,757 13,162

IT Infrastructure & Communications 1,543 802 449 549 293 994

General & Administrative 2,315 8 8 645 226 710 1,399 951 900

Facilities Related 3,566 1,035 461 1,837 3,063 694 700

Appeals Related 450 450 1,150

Systems Related 103,268 900 900 37,150 25,186 41,641 39,730 23,576 35,876

TOTAL OPERATING EXPENSE 174,009 1,036 1,036 53,975 27,317 70,982 72,241 48,017 73,416

FUNDING SOURCE

Medicaid Allocation 23,214 10,138 595 11,164 11,310 1,912 11,310

Federal Grant 150,795 1,036 1,036 43,836 26,722 59,818 60,931 46,105 62,106

TOTAL FUNDING SOURCE 174,009 1,036 1,036 53,975 27,317 70,982 72,241 48,017 73,416

DOLLARS SPENT 1,036 28,353 100,594 174,009

1% 16% 58% 100%

DOLLARS REMAINING 172,973 145,656 73,416

99% 84% 42% 0%

2011 2012 2013 2014

2011 – 2014 L1 & L2 Budget Vs. Spend ($000’s)

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QUICK SUMMARY (000's) TOTAL SPEND

2011 2012 2013 2014 2011 - 2014

BUDGET 1,036 53,975 70,982 48,017 174,009

SPEND PROJECTION 1,036 27,317 72,241 73,416 174,009

OVER (UNDER) -26,657 1,259 25,399

(UNDER) OVER OVER

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2011 2012 2013 2014

GRANT BUDGET VS. SPEND (000's)

BUDGET

SPEND PROJECTION

2013 Functional Expense by Department (000’s) (Cash Basis)

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Percent of

EXEC. OFFICE IT COMM. OPS (NG) POLICY ADMIN & FIN. OPS (SHOP) LEGAL 2013 TOTAL Total

OPERATING EXPENSE

Salaries & Benefits 695$ 3,817$ 1,369$ 2,084$ 915$ 1,864$ 877$ 602$ 12,223$ 17%

Marketing & Advertising - - 5,260 - - - - - 5,260 7%

Consulting & Professional Service 150 4,996 324 470 2,979 413 - 685 10,017 14%

IT Infrastructure & Communications - 549 - - - - - - 549 1%

General & Administrative 44 302 320 357 75 181 74 47 1,399 2%

Facilities Related 80 551 219 324 138 1,530 134 86 3,063 4%

Systems Related - 35,742 - 3,987 - - - - 39,730 55%

TOTAL OPERATING EXPENSE 968$ 45,957$ 7,492$ 7,222$ 4,108$ 3,987$ 1,085$ 1,420$ 72,241$

Percent of Total: 1% 64% 10% 10% 6% 6% 2% 2% 100%

2013 Budgeted Vs. Projected New Hires (all budgets and projections are as of year-end)

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Number of

Employees Additions Additions

2012 2013 2014

Executive Office 2

IT 47

Operations (NG) 14 4

Communications 11

Policy 5 1

Admin & Finance 18 1

Operations (SHOP) 5

Legal 3 5

105 10 1

Cumulative: 105 115 116

Actual Projected

Employees Employees Additions Additions

Nov-12 2012 2013 2014

Executive Office 3 3 1

IT 15 21 14 1

Operations (NG) 4 6 12

Communications 7 10 1

Policy 7 7

Admin & Finance 8 11 7 1

Operations (SHOP) 1 3 4

Legal 1 3 4

46 64 43 2

Cumulative: 64 107 109

Budgeted Employees

Actual/Projected Employees

Projected 2013 Hires by Department (all budgets and projections are as of year-end)

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Projected New Percent of

FTE 2012 FTE 2013 Hires 2013 Total

Executive Office 3 4 1 2%

IT 21 35 14 33%

Operations (NG) 6 18 12 28%

Communications 10 11 1 2%

Policy 7 7 0 0%

Admin & Finance 11 18 7 16%

Operations (SHOP) 3 7 4 9%

Legal 3 7 4 9%

Total FTE's 64 107 43 100%

2013 Functional Expense by Quarter (000’s)

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Percent of

Q1 Q2 Q3 Q4 TOTAL Total

OPERATING EXPENSES

Salaries & Benefits 3,056$ 3,056$ 3,056$ 3,056$ 12,223$ 17%

Marketing & Advertising 98 1,734 1,694 1,734 5,260 7%

Consulting & Professional Service 2,504 2,504 2,504 2,504 10,017 14%

IT Infrastructure & Communications 125 149 137 137 549 1%

General & Administrative 350 350 350 350 1,399 2%

Facilities Related 1,666 466 466 466 3,063 4%

Systems Related 15,654 5,670 13,514 4,893 39,730 55%

TOTAL OPERATING EXPENSES 23,452$ 13,929$ 21,720$ 13,140$ 72,241$

Percent of Total: 32% 19% 30% 18% 100%