Until There’s a Federal Law…

1. Until There’s a Federal Law… State Regulation for Insurance Markets and Medical Cost Control Christopher F. Koller Health Insurance Commissioner – State Of RI

2. Presentation Overview • State Perspectives on Underwriting Rules • Efforts in RI for Insurance Affordability: • Rate Regulation • Primary Care System Investment

3. Underwriting Factors (or on what basis can you vary insurance rates?) • Risk (think Rumsfeld…) • - “known knowns” (things that drive costs - underwriting factors) and “known unknowns” (random events) • Underwriting Interest – Predict risk as accurately as possible and charge appropriate cost. • Insurers/Employers have multiple interests: • - Price risk accurately • - Limit/shift risk if you can • Public Interest: • - Fairness, Equity • - Don’t confuse risk with systemic cost drivers.

4. Underwriting Efforts to Price and Limit Risk • Pricing Risk: • - Age, Gender, Family Size, Medical History, Smoking Status, Group experience, industry, geography (Genetics, BMI…) • Limiting Risk • - Exclusions for Pre-existing Conditions, Delayed eligibility, Proof of continuous coverage/ enrollment periods, Refusal to Quote. • Policy Conflict: • - Who pays: what is fair and what is equitable (within and between groups)? • - What will create more uninsurance?

5. Commercial Underwriting in RI

6. Effect of Federal Underwriting Reforms • Highly State-Dependent • - Enormous variation exists (due mostly to local politics) See NAIC Chart • - Length of ramp-up period • - “Federal floor” • Lessons from RI (did this in 2000): • - Clarify the rules. • - Audit the plans vigorously. • - Expect market push-back.

7. II. What About the Costs? • Efforts in RI to Address Underlying Cost Trend: • 1. Health Plan Rate Review • 2. Primary Care Affordability Standards

8. Health Plan Rate Factor Review • Idea: • - Health Plans in RI have unique standard (“Policies to promote affordability”) • - Synch up rate factor review to educate public and align interests of health plans to get at underlying cost drivers. • Elements: • - Annual review of large and small group rate factors. • - Public disclosure of information.

10. Contributions by Cost Category to Proposed Small Group Premium Increase: 2009 Net Increase: 13.9% Net Increase: 13.2% Source: OHIC analysis of 2009 health plan rate factor filings. Comparison is 2008 approved factors. Tufts omitted because no 2008 submission available.

11. Rate Factor Review: So Far • Mid May – Factors filed • Late May – Increased Business awareness. Governor and Candidates weigh in: “Withdraw rates”, “Proceed right to hearing (AG)”, “Negotiate a deal (LG)”. Front pages. • Early June – Second “Public Forum” • Late June – OHIC calls on insurers to withdraw rates or face rate hearing. • July 3 – All three insurers withdraw filings; announce plans to refile in six months.

12. Rate Factor Review: Assessment • Effect of withdrawal – Reprieve only • Pro: • - More scrutiny of insurers • - More public education. • - Good way to get the attention of Insurers: • Opportunity to squeeze administrative costs and profits (cost shift back to self-insured) • Opportunity to push harder on payment reform. • Con: • - Greater politicization of process. Potential for unpredictable, non-rational decisions. • - Low rate factors now may mean big jumps later.

13. II. OHIC Affordability Standards • Question: What can health plans in RI uniquely do to address underlying cost trends? • Process Elements • - OHIC’s Health Insurance Advisory Council. • - Grant-funded consulting staff, Expert opinion and health services research. • - Off line work with health insurers • - Consequences tied to rate factor review • - Result: “Affordability Standards”

15. Final Recommended System Affordability Priorities Health plans will improve the affordability of health care in Rhode Island by focusing their efforts upon provider payment reform, beginning with primary care. Achievement of this goal will not add to overall medical spend in the short-term, and is expected to produce savings thereafter. Specific areas of focus in support of this goal are as follows: 1. - Expand and improve the primary care infrastructure in the state -- with limitations on ability to pass on in premiums 2.      - Spread Adoption of the Chronic Care Model-Style Medical Home 3.      - Standardize EMR incentives 4.      - Work toward comprehensive payment reform across the delivery system • Final Recommended Affordability Standards • vHealth plans are to be held accountable for increasing the proportion of their medical expenses spent on primary care by five percentage points over the next five years. This money is an investment in improved care coordination, not a simple shift in fee schedules. • vAs part of that, health plans will promote the expansion of the CSI-Rhode Island project by at least 15 physicians in the coming year and promote EMR incentive programs that meet or exceed a minimum value. • vv Health plans commit to participation in a broader payment reform initiative as convened by public officials in the future

16. Value of Primary Care Spend Target Incremental Value of Increase (beyond inflation): >$150 million over five years (plus other lines of business)

17. But these $ are for system goals – not just PCP payments…..

18. Next Steps • How do the health plans invest the money? • Work with Health Plans on options • Use Department of Health’s Primary Care leadership group to vet ideas, drive alignment (among PCPs as well as plans…) • 2. Monitoring • System Outcomes (Inpatient Readmissions, ER visits, Primary Care Supply and System Costs) • Process– Health Insurance Advisory Council

19. For More Information • www.ohic.ri.gov • Rate factor review: http://www.ohic.ri.gov/2009%20RateFactorReview.php • Affordability Standards: • http://www.ohic.ri.gov/Committees_HealthInsuranceAdvisoryCouncil_%20Materials%202009.php