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Profile of Washington Health Plans April 2009

Profile of Washington Health Plans April 2009. The following slides illustrate key findings from the 2008 financial statements of Washington medical plans. Data on dental and vision plans are also available in the Excel tables, but are not summarized in the following slides.

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Profile of Washington Health Plans April 2009

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  1. Profile of Washington Health Plans April 2009 • The following slides illustrate key findings from the 2008 financial statements of Washington medical plans. Data on dental and vision plans are also available in the Excel tables, but are not summarized in the following slides. • The data are from annual statements filed with the Office of the Insurance Commissioner and the National Association of Insurance Commissioners. • For more information, contact Suzie Burton (SuzieB@wsha.org)

  2. Medical Enrollment Compared to Washington Population: Year-end enrollment per population has trended downward since early 2000 as the percent of uninsured increases.* *Note: Does not include enrollment in self insured plans; that data is not available from OIC plan filings. Source: Population and uninsured data from the Office of Financial Management.

  3. Year-End Enrollment in Medical Plans: In 2008, 11 of 16 medical plans experienced declines in enrollment. Medical plan combined enrollment dropped 8 percent from 2007. • Regence BlueShield, the largest medical plan based on enrollment, had an 11.6 percent decline in enrollment from 2007 to 2008. • Arcadian Health Plan, a relatively new health plan serving eastern Washington Medicare Advantage customers, decreased enrollment more than 80 percent from 2007 to 2008. Red numbers represent decreases in enrollment.

  4. 2008 Medical Plan Financial Performance: Overall, medical plans experienced decreases in most areas, including enrollment, premiums, claims, administrative expenses and net income. • Medical plans on average continue to have more than the two months reserve needed for financial security to withstand the current economic downturn. • Two medical plans, Columbia United Providers and Community Health Plan of Washington, ended 2008 with net worth less than two months of premium and without a parent organization to support them. Average Months of Premiums in Reserves: Net Worth / (Premiums / 12). Net Income Per Member Per Month: (Net Income / Enrollment) / 12. Note: Out-of-state plans not included in these two calculations.

  5. 2008 - A Tough Year for Health Plans • Nine plans had negative underwriting margins and eleven plans experienced declines in underwriting margins from 2007 to 2008. • Overall net margin went down 73.6% from 2007, mainly due to investment income decreases, with both Regence BlueShield and Group Health Cooperative closing the year with a significant negative net income. • During the financial downturn, eight plans experienced decreases in their months of premiums in reserve, including all three of the largest plans in Washington, Group Health, Regence BlueShield and Premera BlueCross.

  6. Medical Premiums: In 2008, Premera, Regence, Group Health and their subsidiaries continue to represent 77 percent of total medical plan premiums. Group Health Cooperative-owned plans are indicated in blue. Premera-owned plans are indicated in green. Regence-owned plans are indicated in orange.

  7. Annual Premiums for Medical Plans: Even as enrollment and underwriting margin decrease, the cost per member per month continues to rise. • Only two plans, Group Health Cooperative and Regence BlueCross BlueShield of Oregon, experienced decreases in annual premiums per enrollee per month from 2007 to 2008. • Premium dollars decreased 5.1% for all medical plans, whereas premiums per 12 member months increased 2.2%. Red numbers represent decreases in premiums. Annual Premiums: Premiums / (Total Member Months / 12).

  8. Medical Claims Expense Compared to Premiums: As both premiums and claims decreased in 2008, the ratio of claims to premiums remain at around 85%. Reasonable Ratio = 85% Actuarial Experience Ratio: Claims / Premiums.

  9. Medical Claims Expense Compared to Premiums: Although 2008’s 85 percent claims to premiums ratio is reasonable, there was a decrease in both premiums and claims in 2008 after a steady rise. • Six plans experienced a decrease in their actuarial experience ratio in 2008, including Group Health Cooperative, KPS Health Plans, Columbia United Providers, Community Health Plan of WA, LifeWise, and PacifiCare. • Kaiser continues to be the consistently most efficient plan. Red numbers represent decreases. Actuarial Experience Ratio: Claims / Premiums.

  10. Medical Plan Administrative Expense Ratio: Administrative expense as a percent of premiums has trended down slightly since 2001, while total administrative expense dollars declined 5% last year. Administrative Expense Ratio: Administrative Expense / Premiums.

  11. Medical Plan Underwriting and Net Margins: Net margins dropped significantly in 2008 as investment income decreased due to the economic downturn. Underwriting Margin: (Premiums - Claims - Administrative Expenses) / Premiums. Net Margin: Net Income / Premiums (Net Income adds investment income and investment gains and deducts investment losses and taxes) Note: Includes medical plans based in Washington state only.

  12. Medical Plan Underwriting Margins: The underwriting margins for all medical plans combined declined 53 percent from 2007 to 2008 (from 4.7 percent to 2.2 percent). • Nine plans had negative underwriting margins in 2008 while 10 had declines in their underwriting margins from 2007 to 2008. • Premiums, claims, and administrative expenses have all decreased since 2007. Red numbers represent decreases. Underwriting Margin: (Premiums – Claims – Administrative Expenses) / Premiums.

  13. Medical Plan Net Income Per Member Per Month: Net income declined 71.5 percent from 2007 to 2008 as the economy affected medical plans. • Of the 13 Washington based medical plans, ten decreased net income per member per month. • Arcadian Health Plan had extreme growth in net income per member due to their drastic decrease in enrollment (down 80%) in 2008. Red numbers represent decreases. Note: Includes health plans based in Washington only.

  14. Medical Plan Months of Premiums in Reserve: A rule of thumb is that health plans should have approximately two months of premium in reserves to be financially secure. • On average, months of premiums in reserve decreased 9% from 3.73 to 3.37 months from 2007 to 2008. • Two plans are below the two months of reserves without a parent company behind them: Community Health Plan of Washington and Columbia United Providers. Red numbers represent decreases.  Average Months of Premiums in Reserve: Net Worth / (Premiums / 12 Months). Note: Includes health plans based in Washington only.

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