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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 . Uninsured Rate Estimate Background.

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HRSA Uninsured Actuarial Rate Estimate State of New Mexico

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  1. November 22, 2004 HRSA Uninsured Actuarial Rate EstimateState of New Mexico Stephen Chreist Jared Nason Phoenix, Arizona

  2. Agenda • Uninsured Rate Estimate Background • Rate Estimate Methodology • Calendar Year 2005 Rate Estimates • Other Considerations

  3. Uninsured Rate Estimate Background

  4. 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) Uninsured Rate Estimate Background

  5. Rate Estimate Methodology

  6. Rate Estimate MethodologyRate 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

  7. 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.

  8. MedPriceMercer’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

  9. 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.

  10. 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.

  11. 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

  12. 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

  13. 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

  14. Calendar Year 2005 Rate Estimates

  15. Calendar Year 2005 Rate EstimatesBenefit Package A (Major Medical)

  16. Calendar Year 2005 Rate EstimatesBenefit Package B (HMO)

  17. Calendar Year 2005 Rate EstimatesBenefit Package C (POS)

  18. Other Considerations

  19. 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

  20. Questions?

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