Agenda

1. Commonwealth Health Insurance Connector AuthorityFY 2010 & FY 2011 Administrative Operating BudgetBoard of Directors MeetingJune 10, 2010

2. Agenda • FY 2010 Health Connector Administrative Operating Budget – Year-End Update • FY 2011 Health Connector Administrative Operating Budget – Recommendation

3. FY 2010 CCA Administrative Operating Budget – Year-End Update

4. FY10 CCA Administrative Operating Budget Update • In December 2009, the A&F subcommittee was presented with a FY10 year-end expense estimate of $32.8 million and a corresponding net loss of ($1.2 million) • A&F subcommittee asked CCA management to find solutions to get to breakeven by year-end • Current estimate reflects a reduction of the FY10 expense by $3.7 million • Result is revised year-end expense estimate of $29.1 million resulting in a net gain of $3.3 million

5. FY10 CCA Administrative Operating Budget Update (con’t)

6. FY10 CCA Administrative Operating Budget Update (con’t) • Commonwealth Choice Revenue – $700,953 favorable variance • Variance due to a projected 12% increase in member months and 7% increase in composite average premium yield • Appeals Program– $163,692 favorable variance • Variance due to a lower than budgeted cost per appeal of 25% • CommCare Customer Service & Premium Billing – ($344,205) unfavorable variance • Variance due to a higher than estimated PMPM rate, additional costs for manual enrollment activities, and postage expenses • CommChoice Customer Service & Premium Billing – ($286,498) unfavorable variance • Variance due to increased SBSB and broker payments as a result of higher than expected membership growth

7. FY10 CCA Administrative Operating Budget Update (con’t) • Consulting & Professional Support - $762,334 favorable variance • Variance due to a lower than expected financial obligation for the Xcelys premium billing system implementation • Infrastructure Improvement - $1,406,999 – favorable variance • Variance due to a lower than expected financial obligation for Xcelys and a delay in the CommChoice provider search tool project until FY11 • OPEB Obligation - $545,300 favorable variance • Variance due to an overestimate of the FY10 accrual for OPEB (other post-employment benefits) liability • FY09 Premium Billing System Accrual Reversal - $700,000 favorable variance • Variance due to reversal of FY09 funds not needed in FY10

8. FY 2011 CCA Administrative Operating Budget – Recommendation

9. FY11 CCA Administrative Operating Budget Recommendation • FY11 administrative budget challenges: • Revenue is flat due to reductions in the CommCare and CommChoice administrative fee from 3.75% to 3.2% and from 4.5% to 3.5%, respectively • Combined membership is projected to increase 18% resulting in higher vendor payments for member support • No specific revenue received to offset administrative expenses of $1.5 million and $75K for the Bridge program & Student Health Plan, respectively • Uncertainty in projecting CommChoice enrollment

10. FY11 CCA Administrative Operating Budget Recommendation (con’t) • FY11 administrative budget recommendation is $3.2 million or 11% higher than the FY10 year-end estimate • Does not include $2.5 million for outreach and enrollment grants that are legislatively mandated • Significant projected expense increases: • CommCare Customer Service & Premium Billing (volume) • CommChoice Customer Service & Premium Billing (volume) • Infrastructure Improvement (discretionary)

11. FY11 CCA Administrative Operating Budget Recommendation (con’t)

12. FY11 CCA Administrative Operating Budget Recommendation (con’t) • Commonwealth Care Revenue – ($810,992) decrease • Planned reduction in the administrative fee from 3.75% to 3.2% • Commonwealth Choice Revenue – $1,036,347 increase • Projected 63% increase in member months, offset by a planned reduction in the administrative fee from 4.5% to 3.5% of health premiums • Salary & Benefits – $166,069 increase • Increase due to replacing three backfills • No salary increases • Communications – ($988,428) decrease • Planned reduction in the value of broad-based and digital advertising contracts

13. FY11 CCA Administrative Operating Budget Recommendation (con’t) • CommCare Customer Service & Premium Billing - $1,128,599 increase • Due to a projected 12% increase in combined CommCare and Bridge MMs • Includes $400K Xcelys annual license and infrastructure fee • CommCare Enrollment & Eligibility Services - $408,266 increase • Increase in MassHealth ISA due to projected membership growth (if funds become available will provide an additional $176K for publication expenses) • CommChoice Customer Service & Premium Billing - $1,874,040 increase • Increases in SBSB and broker payments due to projected membership growth

14. FY11 CCA Administrative Operating Budget Recommendation (con’t) • Consulting & Professional Support – ($259,060) decrease • Decreased utilization of independent consultants • Infrastructure Improvement - $906,999 increase • Currently evaluating and prioritizing various projects for FY11 including: • Small group enhancements • CommChoice provider search tool • Student health plan

15. FY11 CCA Administrative Operating Budget Recommendation (con’t) • FY11 CCA administrative expense recommendation is fluid and allows for flexibility: • Recommendation will be updated and refined based on further information regarding enrollment, revenue and expense • Recommendation contains modest discretionary spending (e.g., infrastructure improvement)