Welcome to the WCIF 2018 ACE Renewal Meeting September 19, 2017 The Davenport, Spokane, WA
Healthcare Trends & Medical Plan Rating Model Presented at the IAC/ACE Meeting The DoubleTree Suites, Seattle, September 14, 2017 The Davenport, Spokane, September 19, 2017 Presented by:
Agenda • Healthcare Trends – Federal, National and Local Trends – Driving Factors • New WCIF Medical Plan Rating Model – Rate Band Evolution – Maintaining WCIF’s Competitive Advantage • Comments/Questions 2
Healthcare Trends Federally, the direction is unclear: • “Repeal & Replace” the ACA still looms • Federal Insurer Tax is back for 2018; adds approx. 3.0% • Uncertainty about the Individual Mandate enforcement • Concern grows over Medicaid funding 3
Healthcare Trends Nationally, states are struggling : • Individual markets have tanked • Connecticut will have just two insurers in market • New England rate increases range from 18% - 60% • Overall, health insurers facing 3 rd year of losses 4
Healthcare Trends Locally, our markets are in flux: • Individual plans face steep increases with at least two counties without any 2018 plan options • Many Association Health Plan’s looking at double digit increases • Some private employers are seeing 25%+ increases • Small group market renewals will be in mid-to-high teens 5
Healthcare Trends Driving Factors • Healthcare System consolidation continues: − Anti-trust /competition − Access/quality concerns • Frequency of intermediate sized claims increasing • Rx Spike – Specialty medications lead the way • Insurer reaction: increasing applied Medical/Rx trends 6
Healthcare Trends Driving Factors • Medicare/Medicaid cost transfers Hospital Payor Mix (by admissions): Medicare = 51% Medicaid = 12% Charity = 4% Bad Debt = 5% Private = 28% 7
New Medical Plan Rating Model Market Reaction • Underwriting is more critical − Properly evaluating risk − Applying right rate / metrics to groups • Model Factors carriers use include: − Age/sex ratios − Geographic spread − Utilization − Persistence • The way these factors are weighted, valued and applied are unique to each carrier 8
New Medical Plan Rating Model WCIF has kept pace with these changes • WCIF philosophy historically committed to a single rate for each plan: − Market shifts have made it increasingly difficult to attract better demographic groups • WCIF needed to address these shifts to achieve positive growth − Added 2 rate bands above and below the neutral rate − The 5% spread created a 20% potential spread − Over time all groups would regress to the neutral rate 9
New Medical Plan Rating Model Rate Band Evolution - Initial 15.0% Initial RB Range 10.0% 5.0% 0.0% 1 2 3 4 5 -5.0% -10.0% -15.0% Initial RB Range 10
New Medical Plan Rating Model Rate Band Evolution • This worked well initially: − Rates remained stable − WCIF was able to attract lower risk groups and write higher risk groups at more appropriate rates • Market continued to more finely define risk and rating approaches − Added more rate factors − Tried to design models that would give them better opportunities with lower risk groups 11
New Medical Plan Rating Model Rate Band Evolution • By 2014, WCIF realized it needed to evolve as well − Transitioned to a 20 rate band rating table with 4% increments − Protected its core group (aka Legacy Groups) in the neutral rate band − Provided ALL groups with opportunities to earn wellness credits • In 2016, WCIF continued to refine its rating approach by expanding to 26 rate bands to allow for more flexibility on the top end • These changes have allowed WCIF to provide competitive rates across a broader demographic market 12
New Medical Plan Rating Model Rate Band Evolution - Effective 2014 80.0% Current RB Range 60.0% 40.0% 20.0% Initial RB Range 0.0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 -20.0% -40.0% -60.0% Current RB Range Initial RB Range 13
New Medical Plan Rating Model Rate Band Evolution • WCIF needed to continue to effectively manage risk by: − Attracting lower risk groups − Placing higher risk groups at the right rate − Continue improving the overall health of its risk pool 14
New Medical Plan Rating Model Rate Band Evolution – 2018 • Expand the number of rate bands to get more “reach” …Premera to 82 and Kaiser to 51 • Decrease the spread between rate band from 4% to 2% • To a degree, allow Legacy groups to move to their demographically correct level…although no more than 4 rate bands (approximately 8%) 15
New Medical Plan Rating Model Rate Band Evolution - Effective 2018 80.0% New Expanded RB Range Current RB Range 60.0% 40.0% 20.0% Initial RB Range 0.0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 -20.0% -40.0% -60.0% -80.0% New Expanded RB Range Current RB Range Initial RB Range 16
New Medical Plan Rating Model Rate Band Evolution – 2018 • This approach provides: – Much broader rate reach both for lower and higher risk groups – Allows us to continue addressing improvement to our overall demographic profile • WCIF will continue to be market aware, making changes as necessary to provide the best possible rates for our groups. 17
Comments / Questions Thank you! 18
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