Risk Pools Impact on Commercial Markets

1. Risk Pools Impact on Commercial Markets The Ohio Study Liz Leif, FSA NASCHIP Conference October 19, 2006

2. About The Ohio Study • Purpose: To determine whether a qualified high-risk pool is feasible for the State of Ohio • Commissioned by the Ohio Department of Insurance • Paid for with federal grant funding • Completed in June 2005

3. About Ohio • Population approximately 11 million • 10% are on Medicaid, 12% are on Medicare • Approximately 12% are uninsured, or 1.3 million people • 65% have incomes below 200% FPL • 82% are in families with at least one worker • 21% report poor or fair health status • No high-risk pool – instead, an open enrollment law

4. Ohio Open Enrollment Law • Begins January 1 of each year • Individual carriers must accept individual applicants in the order in which they apply • Basic and standard or similar plans • Can use 12-month pre-ex • Rates cannot exceed 2.5 times the highest rate charged any other individual with similar benefits • Carrier enrollment limited to 0.5% of total insured individuals in the state

5. Ohio Open Enrollment Law • Also applies to federally-eligible individuals but rules are slightly different • Pre-ex cannot be applied • Rates cannot exceed 2.0 times the midpoint rate charged to any other individual with similar benefits • Carrier enrollment limited to 0.5% of total insured individuals in the state unless all carriers have met the enrollment limit

6. Open Enrollment Results Source: 2003 Ohio DOI Annual Report of Ohio Health Insurance Business

7. Findings of the Study • A high-risk pool is a viable option for Ohio • It would not solve the problem of affordability for the uninsured • Projected enrollment: initially 2,800 growing to 17,250 • Would reduce the number of uninsured by 15,000 • Average premium at 150% SRR = $476 (2006) • Initial funding requirement of $20 million

8. Market Impacts • Individual • 1,800 open enrollment and HIPAA members would move to the high-risk pool for lower rates and better benefits • Represents less than 1% of the total individual lives insured • Small group: No impact • Large group: No impact

9. Other Impacts of a High-Risk Pool • Improved health status for 15,000 previously uninsured • New money for the provider community • $129 million to hospitals for currently uncompensated care • $164 million to hospitals, physicians, and pharmacies for new care

10. Current Status “We are not certain at this point whether the high risk pool legislation will move this year. It does not look good as we have not reached consensus on the funding issue. We will have a new legislature beginning in January, and the bill could be re-introduced again at that time, but we are not certain.” Doug Anderson, Ohio Department of Insurance 9/21/06

11. Leif Associates • Actuarial consulting firm in Denver, CO • Actuaries for high-risk pools in Colorado, Florida, Nebraska, New Mexico, Washington • For a copy of the study, go to www.ohioinsurance.gov/legal/reports/ohioriskpoolfeasibilitystudyfinal.pdf or contact: Liz Leif, FSA Leif Associates, Inc. 1515 Arapahoe Street, Tower One, Suite 410 Denver, CO 80202 Phone: (303) 294-0994 Fax: (303) 294-0979 Email: ejleif@leif.net