Transcript HRSA Uninsured Actuarial Rate Estimate State of New Mexico

November 22, 2004
HRSA Uninsured Actuarial Rate
Estimate
State of New Mexico
Stephen Chreist
Jared Nason
Phoenix, Arizona
Agenda

Uninsured Rate Estimate Background

Rate Estimate Methodology

Calendar Year 2005 Rate Estimates

Other Considerations
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Uninsured Rate Estimate Background
Uninsured Rate Estimate Background

There are an estimated 414,000 uninsured individuals in New
Mexico.

Mercer developed per member per month (PMPM) rate estimates
for Individual, Individual Plus One, and Family rate tiers for three
different benefit package offerings:
– Benefit Package A (Major Medical)
– Benefit Package B (HMO)
– Benefit Package C (Point of Service)
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Rate Estimate Methodology
Rate Estimate Methodology
Rate Estimate Overview

Base Data

Adjustment of Base Data

Adjustment for the Uninsured

Trend

Benefit Package Adjustment

Population Health Factors

Demographic Risk Variances

Administrative Loading

Rate Tiers
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Rate Estimate Methodology

Base Data
– Mercer used membership, expenditure, and utilization data from
the New Mexico State Employee Plan (SEP) as the basis for
developing the rate estimates for the uninsured population.

Base Data Adjustments (Normalize SEP Data)
– Mercer used MedPrice, its proprietary benefit valuation tool, to
calculate relative value factors that were used to adjust SEP data
for differences in cost sharing provisions between SEP providers.
– After normalizing all of the data received from the vendors to the
Point of Service (POS) benefit package offered to the state
employees, Mercer aggregated the data to create the starting point
for the rate estimates.
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MedPrice
Mercer’s proprietary benefit valuation tool

MedPrice is a model used for estimating the relative value of one
medical plan to another

It is based on Ingenix data

MedPrice is used to:
– Calculate the impact of medical plan changes in areas such as
deductibles, coinsurance, and other plan design features
– Evaluate the impact of negotiated fees and utilization management
– Compute the impact of vendor changes
– Calculate adjustments to claim cost projections
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Rate Estimate Methodology

Adjustments for the Uninsured Population
– Utilization Adjustment

Mercer adjusted the normalized base data upward to account
for the increased acuity of the uninsured population.
– Unit Cost Adjustment

Mercer adjusted the average unit cost to account for the more
acute and expensive services likely necessary to treat the
uninsured.
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Rate Estimate Methodology

Prospective Trend Factor Development
– Trend factors are applied over a finite period of time in order to
estimate the expenses of health care services in a defined contract
period.
– Mercer derived trends based on SEP data as well as national and
regional sources.

Benefit Package Adjustments
– Using MedPrice, Mercer calculated relative values for each of the
benefit package offerings.
– These relative value adjustments are applied to the normalized,
adjusted, and trended data.
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Rate Estimate Methodology

Population Health Factors
– Pent-Up Demand Adjustment

Typically individuals will delay non-emergent health care needs
until they are enrolled in a health insurance program

Mercer developed and applied a factor to account for this in
regards to the uninsured population

Expected Demographic Risk Variances
– The demographic mix of those with coverage under the SEP is
different than the mix of the uninsured population
– Mercer adjusted the rates to account for the difference in the
demographic characteristics
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Rate Estimate Methodology

Administration, Risk, Profit, and Tax Loading
– Mercer utilized loadings consistent with commercial health care
insurance offerings in the State of New Mexico. The administrative
loading includes the following components:

administration

risk, contingencies, and profit

commissions and broker fees

premium tax
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Rate Estimate Methodology

Rate Estimate Tier Development
– Mercer calculated the rates for Individual, Individual Plus One, and
Family from a base PMPM cost
– This adjustment assures that the costs for everyone enrolled in the
program will be covered by the payments
– Mercer utilized similar tier ratios from the SEP plan premiums
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Calendar Year 2005 Rate Estimates
Calendar Year 2005 Rate Estimates
Benefit Package A (Major Medical)
Rate Tier
Rate Estimate (PMPM)
Individual
$ 289.55
Individual Plus One
$ 668.86
Family
$ 796.26
Base PMPM
$ 273.25
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Calendar Year 2005 Rate Estimates
Benefit Package B (HMO)
Rate Tier
Rate Estimate (PMPM)
Individual
$ 341.94
Individual Plus One
$ 789.88
Family
$ 940.34
Base PMPM
$ 322.69
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Calendar Year 2005 Rate Estimates
Benefit Package C (POS)
Rate Tier
Rate Estimate (PMPM)
Individual
$ 364.52
Individual Plus One
$ 842.04
Family
$ 1,002.43
Base PMPM
$ 344.00
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Other Considerations
Other Considerations

Decisions that Impact Rate Estimates
– Access versus Coverage

Four Determinants of Risk
– Program Design (Hassle)
– Covered Population
– Covered Benefits/Plan Design
– Service Delivery System

FPL Levels
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Questions?
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