North Dakota Health Care: AC i S fAff iA Challenging State ... · • Noridian Mutual began offering products in Minnesota • Noridian Administrative Services formed • Employs

Blue Cross Blue Shield of North Dakota

North Dakota Health Care:A C i S f Aff iA Challenging State of AffairsFor Providers and Insurers

Presented by: Rod St. AubynDirector of Government Relations

For Providers and Insurers Director of Government Relations

Blue Cross Blue Shield of NDAugust 6, 2009

Today’s DiscussionToday’s DiscussionToday’s Discussion

Evolution of BCBSNDHealth Insurance PremiumsHealth Insurance PremiumsFinancial StateHealth Insurance ReservesImmediate Challenges

Evolution of BCBSNDEvolution of BCBSNDEvolution of BCBSND

• Created in 1929• Blue Cross

• Justin Ford Kimbal• 1,300 teachers in

Dallas• Baylor University y y

Hospital• Blue Shield

P ifi N th t• Pacific Northwest• Lumber & mining

campsp


• On March 22, 1940 Bl C b ithBlue Cross began with a staff of 3

• Blue Shield began in 19461946.

• Combined enrollment of 15,000.196 fi• 1964 – first computer system installed.

• 1966 – BCBSND b d i i t ibegan administering Medicare Part A & B.

• 1970 - Enrollment eaches 300 000reaches 300,000.


980• 1980’s – BCBSND expands its contracts forcontracts for Medicare A & B

• 1986 – Blue Cross and Blue Shieldand Blue Shield merge into one company.p y


• 1988 – 4,161,000 , ,claims processed – an 86% increase in 8 years.y

• 1989 – Customer Service responds to 471 000 calls and471,000 calls and letters – a 485% increase in 15 years.

• 1990’s Enrollment• 1990 s – Enrollment reaches 375,000 and pays $300 million in claims each yearclaims each year.


• 1995 – BlueCard1995 BlueCard program emerges

• 1998 – Corporate 8 o po astructure changes to become a non-profit mutual insurance company

• Began processing Medicare claims for 8 additional states8 additional states

Evolution of BCBSND Evolution of BCBSND Evolution of BCBSND

• Noridian Mutual began offering products in Minnesota

• NoridianNoridian Administrative Services formed

• Employs 1900 people• Employs 1900 people• Pays out more than

$770 million in l i !claims!

• Remodeling project to consolidate operations.


• 2008 - BCBSND pays out more than $1 Billion in claims!

• Nationwide enrollment surpasses 100 Million members

• 2009 – CoreLink established

• Board terminates CEO• Establishes 7 point plan for p p

Board’s oversight strategy• New CEO to start by 9/1/09• Paul von Ebers• Paul von Ebers

Board of DirectorsBoard of DirectorsBoard of Directors

• As a nonprofit mutual, we are owned by our membersowned by our members.

• Member (consumer) Majority on the BoardBoard• 13 Board members – 8 member

directors and 5 provider directorsdirectors and 5 provider directors• 3-year terms• Can serve up to 4 termsCan serve up to 4 terms • Terms are staggered- 1/3 expire each

year.

Board of DirectorsBoard of DirectorsBoard of Directors

• Provider Directors• Jodi Atkinson, St. Andrew’s Health

Center, Bottineaul l h l• Dr. Julie Blehm, MeritCare Hospital,

FargoD R b t G R ti d Ph i i• Dr. Robert Grossman, Retired Physician

• Gary Miller, St. Alexius, Bismarck• Currently Vacant Position

Board of DirectorsBoard of DirectorsBoard of Directors• Member Directors

• Laura Carley, Industrial Buildersy,• Dennis Elbert, PhD, U.N.D.• Richard Espeland, Consultantp ,• Roger Kenner, Kenner Seed & Ranch• Robert Lamp, Association Services, Inc.• Mark Sanford, EdD, Retired GF Public

SchoolsA M C Al Fi i l• Ann McConn, Alerus Financial

• Peter Zimmerman, Constant Angel, LLC

Nonprofit MutualNonprofit MutualNonprofit MutualTax MisconceptionsTax MisconceptionsTax Misconceptionsppp

• Perception - Nonprofit mutuals do not pay ttaxes.

• Fact – Noridian pays significant taxes each year.

Nonprofit MutualNonprofit MutualNonprofit MutualTax MisconceptionsTax MisconceptionsTax Misconceptionsppp

• Real Estate Tax (Net):• 2007 - $281,143• 2008 - $299,123

• Premium Tax:• 2007 - $9,884,867• 2008 - $10,554,855• Noridian pays premium taxes in lieu of State Income taxes. If Noridian were to pay state income tax p y p p y

rather than premium taxes, the tax amount paid would be significantly lower.

• Sales and Use tax:• Noridian pays sales and use tax at a rate of 6.5% (for purchases in Fargo,

the amount will vary based on the city tax rate) on all purchases deemed taxable by the State.taxable by the State.

• Federal Income taxes:

• 2007 - $655,997• 2008 - ($455 331)• 2008 - ($455,331)• Noridian has a negative tax expense in 2008 do to a large number of items that are deductible for tax

purposes but are not considered expenses for accounting purposes. For accounting purposes these payments would reduce liabilities or increase assets.

• The numbers above for Federal income tax expense is not actually what was paid in taxes due to carryovers, carrybacks and adjustments for other items such as K-1 income we were unaware of until after the books were closed but which is still taxable in the current yearafter the books were closed but which is still taxable in the current year.

Health Insurance Premiums-Where Do They All Go?Where Do They All Go?

North DakotaNorth DakotaNorth DakotaHealth Insurance PremiumsHealth Insurance PremiumsHealth Insurance Premiums

Comparison of 2008 Fully Insured Premiums

2008 PMPM2008 PMPM

State AVG Prem Rel to US Rel to ND

ND $288.82 89.5% 100.0%

MN $342.44 106.1% 118.6%

SD $305.65 94.7% 105.8%

MT $308.68 95.6% 106.9%$

Data from the Dept of Health & Human Services – Medical Expenditure Panel Surveyp p y

Agency for Healthcare Research and Quality

The 2008 ND Premium DollarThe 2008 ND Premium DollarThe 2008 ND Premium Dollar

44.1% 36.1% 13.4% -.7% 7.1%

Top 10 DRGs Utilized byTop 10 DRGs Utilized byTop 10 DRGs Utilized byBCBSND MembershipBCBSND MembershipBCBSND Membership

Rural Membership:

Admits to Rural

Admits to Urban

ppp

DRG # Descriptionp

Total Admits Hospital Hospital1 391 Normal Newborn 780 78 7022 373 Vaginal Delivery w/o complications 643 56 5873 544 M j J i t & Li b R tt h t 289 0 2893 544 Major Joint & Limb Reattachment 289 0 2894 359 Uterine & Adnexa Procedures 256 13 2435 371 Cesarean Section w/o CC 241 33 2086 430 Psychoses 205 2 2036 430 Psychoses 205 2 2037 89 Simple Pneumonia & Pleurisy 132 87 458 288 O.R. Proc for Obesity 121 0 1219 558 Percutaneous Cardiovascular Procedu 100 0 100

10 167 Appendectomy w/o complications 87 13 74500 Back & Neck Proc Exc Spinal Fusion 87 0 87

All Other 3,934 840 3,094Total 6 875 1 122 5 753Total 6,875 1,122 5,753

The Rural BoostThe Rural BoostThe Rural Boost

25% additional reimbursement for outpatient servicesAdditional $6,566,000 to Rural Providers

15% additional reimbursement for Mid-tier providers

• Rural Criteria

Additional $2,813,000 to Mid-tier Providers

• Mid tier Criteria• Rural Criteria• Outpatient dollars

paid of $0 - $3mm

• Mid-tier Criteria• Outpatient dollars

paid of $3mm -p $ $• OP paid > 50% of

total paid

p $$7.5mm

• OP paid > 55% of total paidtotal paid

Factors Affecting RatesFactors Affecting RatesFactors Affecting Rates

• Inflation/Cost Trend• Utilization & Aging• Medical Technologygy• Leveraging of Deductible

InflationInflationInflation

Claims TrendClaims TrendClaims Trend

Aging PopulationAging PopulationAging Population

Mega ClaimsMega ClaimsMega Claims

Cost Control EffortsCost Control EffortsCost Control Efforts

• Case Management• Utilization Management• Disease Managementg• Pharmacy Management• Tobacco Cessation• Tobacco Cessation• Wellness Programs

Financial StateFinancial StateFinancial State

The Financial Stateof

ND Health Care

ND Hospital Operating MarginND Hospital Operating MarginND Hospital Operating MarginSource: ahd.com Source: ahd.com Source: ahd.com

10ND Hospitals

00

%-2

0-1

0tin

g M

argi

n %

-40

-30

Ope

rat

-50

-

R l Mid ti U bRural Mid-tier Urban

Based on latest as submitted, unaudited cost report

ND Hospital Excess MarginND Hospital Excess MarginND Hospital Excess MarginSource: ahd.com Source: ahd.com Source: ahd.com

30

ND Hospitals10

203

%-1

00

ss M

argi

n %

-30

-20

Exc

es-4

0

Rural Mid-tier UrbanRural Mid-tier Urban


Rural Hospitals0

10-1

0M

argi

n-2

0O

pera

ting

40-3

0-4

ND MN SD MTState

NW-

S hdSource: ahd.com


40

Rural Hospitals

202M

argi

n %

0E

xces

s M

-20

-40

ND MN SD MTState

NW-

Source: ahd.com


BCBSND Payer Mix PercentageBCBSND Payer Mix PercentageBCBSND Payer Mix Percentage

ND HospitalsSource:Patient Revenue:

30ve

nue

Patient Revenue:AHD.comAmerican Hospital Directory

20%

of T

otal

Rev

BCBSND Revenue:2007 Claims Data

10BC

BS

ND

%

Note: Total revenue is based on the latest cost reporting year

0

R l Mid ti U b

cost reporting year and BCBSND revenue is based on 2007 calendar year. Rural Mid-tier Urban2007 calendar year.

Medicare Payer Mix PercentageMedicare Payer Mix PercentageMedicare Payer Mix Percentage

Medicare Inpatient Payer Mix By State%

90%

70%

80%

60%

50%

ALL OTHERND SD MT MN ALL OTHER ND SD, MT, MN

Source: CAH Financial Indicators Report, August 2007, Flex Monitoring Team

Medicare Payer Mix PercentageMedicare Payer Mix PercentageMedicare Payer Mix Percentage

0%Medicare Outpatient Payer Mix By State

40%

530

%20

%10

%

ND SD MT MN ALL OTHER

Source: CAH Financial Indicators Report, August 2007, Flex Monitoring Team

ND SD, MT, MN ALL OTHER

Health Insurance Reserves

ReservesReservesReserves

250,000,000

200,000,000

100,000,000

150,000,000

50,000,000

0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1 2 2 2 2 2 2 2 2 2

Months of ReservesMonths of ReservesMonths of Reserves

4 50

3.73.9

4.13.8

3.64.00

4.50

2.93.2 3.3

2.92.73.00

3.50

2.00

2.50

1999 2000 2001 2002 2003 2004 200 2006 200 20081999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Months of Reserves

Risk Based CapitalRisk Based CapitalRisk Based Capital

RBC Reporting LevelsRBC Reporting LevelsRBC Reporting Levels

BCBSND Risk Based Capital Reporting

800

PercentNORIDIANRBC

623

566

705 692722

666629639

614

600

700

800

BCBSAEarlyWarning

BCBSA

496

400

500

ConcernLevel

StateCompanyAction/BluesSymbols

200

300

y

StateRegulatoryAction

StateAuthorized

0

100

Dec-99

Dec-00

Dec-01

Dec-02

Dec-03

Dec-04

Dec-05

Dec-06

Dec-07

Dec-08

Control

StateMandatoryControl

99 00 01 02 03 04 05 06 07 08

Immediate ChallengesImmediate ChallengesImmediate Challenges

Immediate ChallengesImmediate Challengestoto

North DakotaNorth DakotaHealth CareHealth Care


1 An Underfunded1. An Underfunded State Health Care SSystem

1. Low Medicare Payments2. Low Medicaid Payments3. Relatively low commercial

payer payments


2 Health Care Reform2. Health Care Reform

P bli I O tiPublic Insurance Option- Estimated Reduction to

North Dakota ProvidersNorth Dakota Providers- If 1/3 of BCBSND members move to

Medicare ------ ($131 Million)If 1/2 of BCBSND members move to- If 1/2 of BCBSND members move to Medicare – ($197 Million)


3 Balancing3. Balancing Affordability with SustainabilitySusta ab ty

Milliman StudyBCBSND as a percent ofBCBSND as a percent of

Comparison StatesPremiums ---------- 83%

Reimbursement -- 81%(does not include payments to

out of state providers)

Questions ????Questions ????

Documents

North Dakota Health Care: AC i S fAff iA Challenging State ... · • Noridian Mutual began offering products in Minnesota • Noridian Administrative Services formed • Employs