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Mercer Oliver Wyman Actuarial Consulting, Inc. October 2006. Florida Health Insurance Plan High Risk Pool. Karen Bender Milwaukee. Florida Health Insurance Plan (FHIP). 2003 Legislation – start a new high risk program

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Presentation Transcript
October 2006

Mercer Oliver Wyman

Actuarial Consulting, Inc.

October 2006

Florida Health Insurance PlanHigh Risk Pool

Karen Bender


Florida health insurance plan fhip
Florida Health Insurance Plan (FHIP)

  • 2003 Legislation – start a new high risk program

  • Engaged Mercer Oliver Wyman U.S. Actuarial Consulting (MOW) to perform feasibility study

  • One aspect of the feasibility study was to analyze the impact the high risk pool will have on the market (if any)


Florida Comprehensive Health Association (FCHA)

  • Formerly known as State Comprehensive Health Association

  • High Risk Pool

  • Closed to new enrollment in October 1990

  • 1990 Data

    • Premium $15 million

    • Claims $47 million

    • Assessment $34 million


Unique Circumstances in Florida that

Facilitated Impact Analysis

  • HIPAA Requirements

  • Florida DOI issued data request

  • Florida requires rates be filed and approved before using

  • Florida has certain routine reporting requirements

Florida hipaa compliance
Florida HIPAA Compliance

3 Prong Approach

Small Group






Florida hipaa compliance1
Florida HIPAA Compliance

  • Carriers in Individual (Nongroup) Market

    • Applicable only to HIPAA-qualified Individuals leaving Self-funded Plans

    • Must guarantee issue their two most popular currently marketed plans

Florida hipaa compliance2
Florida HIPAA Compliance

  • Small Group Carriers

    • Required to guarantee issue to self-employed each August

    • Premiums cannot exceed 150% of Standard Risk Rates

    • DOI determines Standard Risk Rates

      • Based upon average rate charged by nongroup carriers representing 80% of the nongroup market

Florida hipaa compliance3
Florida HIPAA Compliance

  • Group Carriers

    • Must issue conversion contracts

    • Benefits determined by Florida regulators

    • Premiums cannot exceed 200% of Standard Risk Rates

    • Same Standard Risk Rates (adj. for benefits) as used for G.I. for one-life groups by small group carriers

Florida hipaa compliance4
Florida HIPAA Compliance

  • Individual Carriers

  • Small Group Carriers

  • Group Carriers

    High Risk Pool Would Eliminate These HIPAA Compliance Requirements

  • What will impact be on rates (if any)?

Florida doi data request
Florida DOI Data Request

  • Issued to Individual (Nongroup) and Small Group Carriers

    • Experience for one-life and HIPAA-qualified individuals vs. small group and medically underwritten groups

    • Impact of removing several requirements

    • 19 carriers (including HMOs) participated


  • Segregated by HIPAA Compliance

    • Individual Carriers

    • Small Group Carriers

    • Group Carriers

  • Impact Segregated between Claim Cost and Administrative Costs


  • HIPAA Experience for Individual Carriers


  • HIPAA Experience for Individual Carriers

    Nongroup Carrier Losses Attributable to HIPAA

Hipaa experience for individual carriers
HIPAA Experience for Individual Carriers

  • Losses as a % of 2003 Premium

    • Range 1.2% to 2.2%

    • Carriers will still incur losses on existing HIPAA individuals unless they would be allowed to immediately transfer them to the high risk pool

    • Over long run, premiums decrease 1.2% to 2.2%


  • Responses from Carriers

If we ignore the carriers that did not provide an estimate, the weighted

average (based upon lives) is about a 3% reduction in nongroup premiums.

Individual carrier responses
Individual Carrier Responses

  • Administrative Savings

    • Carriers indicated would be minimal, 0.0% to 0.5% of premium

    • Appeared conservative

    • MOW estimated 1.0% savings

Small group carriers
Small Group Carriers

  • GI One-Life Groups Experience vs. Groups 2-50 EEs

Small group carriers1
Small Group Carriers

  • Incurred Losses Attributable to One-Life Groups

Reason losses decreased in 2003, companies allowed to increase rates from

115% to 150% of Standard Risk Rates

Small group carriers2
Small Group Carriers

  • One-Life Groups

    • Losses on previous slide understated

      • Expressed as a % of 2003 Premium Levels for technical reasons

      • Removing GI for one-life group could reduce small group premiums by 2.0% to 3.0% in the long run

Small group carriers3
Small Group Carriers

  • Responses from Carriers

    • Mixed

    • 9 carriers indicated no change in premiums if G.I. of one-life groups removed

    • Several indicated they could not determine impact

    • Some carriers indicated they had insufficient membership to generate credible results

    • Missed opportunity

Small group carriers4
Small Group Carriers

  • Administrative Savings

    • Elimination of open enrollment

    • Reduced marketing costs resulting from elimination of open enrollment forms, etc.

    • More streamlined regulatory reporting requirements

    • Higher administrative costs associated with billing, accounting, customer service of one-life groups

Small group carriers5
Small Group Carriers

  • Administrative Savings

    • Carrier’s responses mixed; no numerical estimates

    • MOW estimated 1% premium savings in the long run

Group carriers
Group Carriers

  • Current HIPAA Compliance Requirement

    • Conversion Plans

    • State defined benefits

    • 200% Standard Risk Rate

  • Florida DOI has 2002 Group Conversions Statistics:

    • Actual loss ratio for 8 largest insurance companies – 211%

    • $58.4 million losses (Assumes 85% breakdown loss ratio)

    • Losses represent 0.5% of group premium

Group carriers1
Group Carriers

Potential Premium Savings

*The reason that Elimination of Group Conversion (0.5% of premium) has what appears to be a greater

dollar amount of impact proportionally than the elimination of one-life groups is that elimination of group

conversion impacts the premium for all fully insured group sizes, whereas the elimination of one-life

groups impacts the premium for only small groups.


  • Impact on Previous Slide

    • Does not consider impact of assessments

    • Critical to create broadest base possible for assessments

      • Self-funded

      • Provider

    • Small base for assessments could negate savings

Fhip analysis
FHIP Analysis

  • Most comprehensive impact analysis MOW has observed

  • Sources of data critical

  • Legislation failed

    • Critical issue was funding