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Overview of CY 2007 HealthChoice Rates

Overview of CY 2007 HealthChoice Rates. Medicaid Advisory Committee Meeting October 26, 2006. Development of Rates. CY07 HealthChoice rates were developed based upon the CY04 audited financial reports submitted by the plans as well as reported diagnosis & utilization encounter data.

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Overview of CY 2007 HealthChoice Rates

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  1. Overview of CY 2007 HealthChoice Rates Medicaid Advisory Committee Meeting October 26, 2006

  2. Development of Rates • CY07 HealthChoice rates were developed based upon the CY04 audited financial reports submitted by the plans as well as reported diagnosis & utilization encounter data. • The actuary, Mercer, developed trend factors to project the CY04 historical costs to the payment period, and applied a series of actuarial adjustments as necessary.

  3. Components of Rate Increase • The level of the CY07 rate increase will be influenced by the following factors: • Changes in the financial base • Medical expense trend • Administrative cost allowance • Modest Profit / Contingency • Actuarial adjustments • State-designated incentive payments

  4. Financial Base –Medical Expenses • The 2007 HealthChoice rates are based upon CY04 financial experience of the Plans:

  5. Medical Trend • The actuary developed their trend estimates evaluating plan financial reports, HSCRC datasets, and HealthChoice encounter data. • Trend factors recognize changes in cost and utilization from the base period to the payment period.

  6. Summary of Average Annual Trends (CY04–CY07)

  7. Administrative Costs • The CY07 rates include administrative costs that were based upon independently reviewed CY04 MCO reported costs trended using CPI. • Aggregate administrative costs are “capped” at CY06 rate levels.

  8. Administrative Costs PMPM

  9. Profit and Contingency • The CY07 rates include a fixed profit percentage of 1.5% of medical expense. • The CY07 rates include a fixed contingency margin percentage of 0.39% of medical expense. • An additional $2.4 million was included to reflect the administrative component of reinsurance premium costs.

  10. Actuarial Adjustments • The actuaries applied a series of adjustments in finalizing the rates. • These adjustments recognize the impact of benefit or eligibility changes that took place after the beginning of the base year (CY04). • Some adjustments increase and some adjustments decrease the rates.

  11. Actuarial Adjustments Adjustments applied having the impact of increasing the rates were as follows: • FY 05 physician fee increase • FY 06 physician fee increase

  12. Actuarial Adjustments Adjustments applied having the impact of decreasing the rates were as follows: • Adult dental carve out • Adult drug co-pays • Lower than anticipated MCO savings for third party liability • Improve RAC assignments due to better encounter data submissions

  13. Incentive Payments • CY07 rates included $7.6 million for statewide incentive payments to plans that operated in at least 20 counties. This is approximately 75% of the statewide incentive pool in 2006. • New for CY07 was the implementation of a quality incentive pool of $2.53 million. This is approximately 25% of the statewide incentive pool in 2006.

  14. Changes in 2007 Rate Setting • In addition to the change in methodology for the Statewide Incentive Payout, the Program also expanded diagnosis fields for RAC assignments.

  15. Final Rates Effective January 2007: • Families & Children 5.8% • Disabled 4.7% • AIDS 8.4% • Deliveries 4.3% • Total including incentives 5.2%

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