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Welcome to Rate Review Training for Advocates Sponsored by Consumers Union and Robert Wood Johnson Foundation. If you haven’t done so already, to hear audio please dial: (805) 399-1200 Code: 275255#. Agenda. Housekeeping Rules. - PowerPoint PPT Presentation
Citation preview
Welcome to
Rate Review Training for AdvocatesSponsored by Consumers Union and Robert Wood Johnson Foundation
If you haven’t done so already, to hear audio please dial:
(805) 399-1200 Code:275255#
AgendaWelcome
Lynn Quincy Consumers Union
Why 2015 Health Insurance Rates Need Scrutiny Jay Angoff Mehri & Skalet
What is a Rate? What is a Rate filing? Key Parts of the Filing: Medical Claims and Trend Administrative Expenses Profit and SurplusHow Consumer Groups Can Participate
Jay Angoff
Real Stories from State Advocates Various
Why CMS Need to Hear From Us Jay Angoff
Q&A Jay Angoff and others
Wrap Up & Next Steps Betsy ImholzConsumers Union
Housekeeping Rules
• During Q&A, phones will be unmuted but please personally mute your phone unless you are speaking.
• Please queue up your questions in the chat feature-we will try to get to as many as possible
• Please do NOT put us on hold – everyone will hear your hold music.
4
Rate Review for Non-Actuaries
Taking the Mystery out of Actuarial Analysis and the Insurance Rate-
setting Process
Jay AngoffMehri & Skalet, PLLC April 9 and 10,
2014
5
Taking the Mystery out of the Rate Making Process: Structure of the
WebinarI. What a rate filing is and what’s in it
• Elements of the rate filing and the issues they raise
II. Consumer Participation in the rate review process• Making rate-filings public• Seeking hearings• Participating in process to the maximum extent
state allows
6
A rate filing is a series of documentscontaining
the information justifying, or purporting to justify, the rates the insurer seeks to charge.
What is a rate filing?
7
• Pre-ACA Rate Filings:No mandated format
butKey document: Actuarial Memorandum
• ACA Rate Filings:3 Parts, but stillKey document: Actuarial Memorandum
8
What is the Actuarial Memorandum? •Narrative explaining the different steps that go into calculating the rate •Lots of Exhibits showing the data, assumptions, and calculations at each step •A summary sheet showing how the steps fit together
9
10
Rate vs. Premium
Base Rate(justification
applies to this) X
Rating factors(if allowed by State):
Age
Geography
Tobacco
# of covered family members
= Final Premium
11
What Goes Into a Rate?
12
Key elements of the rate filing--Trend •What is it? Rate of increase in medical costs •What is it applied to? Amount paid out in past years •How is it determined? Hard data, assumptions, estimates, predictions, “actuarial judgment” •What are its different elements?
• Unit cost trend• Change in utilization• Deductible leveraging• New benefits
13
Deductible Leveraging Example: Provider Payment Increases from $2,500 to
$3,000
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2013 2015Insurer PaysDeductible
Total increase is 16.7%
…but insurer’s share is higher – 20%
14
How to challenge trend--traditional methods•Make sure starting point is reasonable•Make sure data is not cherry-picked. E.g., what is most reasonable trend for 2014 based on the following:
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
6.6 8.4 9.7 8.6 7.2 6.8 6.5 6.3 4.7 3.8 3.8 3.6 3.7
• Make sure no double counting
Source: National Health Expenditure Data
Table: Average Annual Change In Personal Health Expenditures
15
How to challenge trend--based on ACA •Has actuary considered provisions that could reduce rates in 2015? E.g.,
• Delivery system reforms, e.g., ACOs, VBP, EHR, PFP
• Lower payment to providers
• Healthier 2015 pool
• Weak enforcement
16
Key elements of the rate filing--Administrative expenses
What are they?
• General administrative expenses
• Commissions
• Taxes, licenses and fees
17
How to challenge administrative expenses •Challenge their accuracy--compare to previous years’ and Annual Statement data •Has actuary considered ACA expense-reducing provisions?
• Nature of selling through the Exchange, and individual mandate
• Elimination of underwriting
• Taxpayer-funded marketing
• Likely decline in commissions •Prevent pass-through of certain types of expenses
18
Key elements of the rate filing--Underwriting profit •Underwriting profit may not be necessary, because of investment income •“Contingencies” or similar provision not necessary
• Effect of “3 Rs”--Risk-adjustment, reinsurance, risk-corridors
19
Special consideration re non-profit--mainly Blue Cross--plans • Surplus : The amount insurers hold
over and above what they project they need to pay claims
• Surplus is good
• But there can be too much of a good
thing • For-profit v. non-profit plans: different
standards may apply
20
“Surplus” versus “Reserves”• Reserves: a category of funds set aside
for projected claims.
• Surplus: the amount insurers hold over and above what they project they need to pay claims.
21
How surplus is measured: the RBC ratio • What is it? Ratio of an insurer’s
actual surplus to the legal minimum it must hold to do business
• 200% is practical minimum • 375% is Blue Cross Association
minimum • 500% is informal Blue Cross
standard for “strong” Blue plan
22
Carrier Surplus RBC RatioCareFirst (MD, DC) $2.1 billion 977%
Regence (OR, ID, UT) $2.0 billion 978%TN $1.2 billion 1,023%
HCSC (IL, TX, OK, NM) $7.9 billion 1,083%
NC $1.8 billion 1,098%LA $1.1 billion 1,099%FL $3.1 billion 1,335%AZ $.8 billion 1,493%
CA Blue Shield $3.3 billion 1,512%MS $.5 billion 1,683%
2010 RBC Ratios of Selected Non-profit Blue Cross plans
23
The 3 Rs--Risk-Adjustment, Risk Corridors and Reinsurance
• Concept underlying all three: If an insurer has bad experience, it gets paid
• Risk-Adjustment: If an insurer’s experience is
worse than its competitors it gets paid by its competitors
• Risk Corridors: If an insurer’s experience is
worse than it predicted it gets paid by the government
• Reinsurance: If an insurer has high cost claims
it gets paid from a pool funded by small and large group insurers, administrators of self-insured plans, and other individual insurers
24
How Consumer Groups Can
Participate in the Rate Review
Process
25
Effective Rate Review Programs
• States with Effective Rate Review Programs, as found by HHS, review proposed rate increases ≥ 10%; in states without Effective Rate Review Programs HHS reviews rates proposed rate increases ≥ 10%.
• Most states review their own rates
26
What Does it Mean to Have an “Effective” Rate Review
Program?
• Under the ACA, having an “effective” rate review process only means the state satisfies HHS’s requisite process for receiving and evaluating rate filings.
• “Effective” rate review does not mean that the state or the Federal government will probe deeply on rates or has the capacity to block an unreasonable rate increase.
27
ACA authorizes rate review, not rate disapproval
The federal rules do not authorize HHS to disapprove unreasonable
rates, nor do they authorize any state to do so that does not already have
such authority.
28
How consumer groups can participate in the rate review process • Try to make rate filings public
•That are filed with HHS•That are filed with state DOI’s
• How?
• Letters• FOIA request• In-person meetings• Press• Direct action
• See Trade Secret Memo
29
HHS has the power to make rate filings in all
states public
30
How consumer groups can participate in the rate review process • Try to get the DOI or HHS to hold a
hearing
• In many states person aggrieved has right to a hearing
• In essentially all states Commissioner
has discretion to hold a hearing
31
Type Rate Justification
Public ?
Holds Hearings?
1 No No2 Yes No3 No Yes4 Yes Yes
What Type of State Are You In?
32
How consumer groups can participate in the rate review processEven in least consumer-friendly states (Type 1 states):• File comments• If justified, challenge whatever in the
rate filing is public based on publicly-available data. E.g.,
• To challenge trend--use public data on trend
• To challenge expenses--use Annual Statement data on
expenses• To challenge underwriting profit--
calculate total rate of return based on Annual Statement data
33
How consumer groups can participate in the rate review process Even in least consumer-friendly states (Type 1 states):
• Ask for description/explanation of non-public information
• Ask AG or ICA to intervene
• Press
34
Lemons into Lemonade
• Even in the most recalcitrant states, advocates should urge:• 3Rs be considered as mitigating• Accurate trend for 2015 (with no double
counting).• No underwriting profit for non-profit plans
with excess surplus
35
How consumer groups can participate in the rate review process Where the state has made the rate filing public, but declines to hold a hearing (Type 2 states):
• Consumer groups can take same steps as in least consumer friendly states
and
• Do their own analysis of the filing and submit
it to the Department
36
How consumer groups can participate in the rate review process
Where the state has declined to make the rate filing public, but holds a hearing (Type 3 states): •Petition to participate in the hearing, and in particular
• To send out information requests• To submit evidence and argument
• To question witnesses
•Participate to maximum extent permitted by the Department
37
How consumer groups can participate in the rate review process
Where the state both makes the rate filing public, and holds a hearing (Type 4 states): •Consumer groups can do everything they can do in the three less consumer-friendly types of states
plus•Question the actuary based on data disclosed in the Actuarial Memorandum•Recommend that the rate be reduced based on data disclosed in the Actuarial Memorandum
Additional Materials to Help:
On: consumersunion.org/ratereview • Exhibit A: 50 State Overview: Statutes, Type of Rate
Review and Public Participation • Exhibit B: 50 State Overview: Conditions under which
Rate Review Hearings Held• Exhibit C: 50 State Overview: Public Access to Rate Filing• Exhibit D: 50 State Overview: Opportunity to Comment
per DOI• Exhibit E: State Decisions Renewing Non-Compliant Plans• Exhibit F: Trade Secret Legal MemoAnd more to come…
39
Acknowledgements
• Extensive review by Consumers Union• Sponsored by Consumers Union and the
Robert Wood Johnson Foundation
State Advocates Share Their Stories
Q&A
Wrap Up & Next Steps