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Profile of Washington Health Plans April 2008

Profile of Washington Health Plans April 2008. The following slides illustrate key findings from 2007 for Washington health plans. The data are from annual statements filed with the Office of the Insurance Commissioner and the National Association of Insurance Commissioners.

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Profile of Washington Health Plans April 2008

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  1. Profile of Washington Health Plans April 2008 • The following slides illustrate key findings from 2007 for Washington health plans. • 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 Megan MacSparran (MeganM@wsha.org)

  2. 2007 Medical Plan Financial Performance • Overall, health plans experienced declining margins in 2007 compared to 2006, resulting from higher increases in claims costs than in premiums. • This raised the actuarial experience ratio up to a more reasonable rate of 85 percent. Plans continued to build their months of premiums in reserves, which was already higher than the two months needed for financial security. Note: Table includes medical plans only.

  3. 2007 - A Solid Year for Health Plans • Five plans had negative underwriting margins and 10 plans, including Premera BlueCross and Regence BlueShield, experienced declines in their underwriting margins from 2006 to 2007. • Three plans had a claims expense to premium ratio greater than 90 percent (Group Health Cooperative, Columbia United Providers and Kaiser Foundation Health Plan). • Despite a financial downturn, only three plans experienced decreases in their months of premiums in reserve (Columbia United Providers, Community Health Plan of WA and Regence BlueShield).

  4. Medical Enrollment Compared to Washington Population: Year-end enrollment in insured plans per population has trended down since early 2000.* *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.

  5. Year-End Enrollment in Medical Plans: In 2007, 5 of 16 medical plans experienced declines in enrollment. Medical plan combined enrollment dropped 1.2 percent • Regence BlueShield, the largest medical plan based on enrollment, had a 6.5 percent decline in enrollment from 2006 to 2007. • Arcadian Health Plan, a relatively new health plan serving eastern Washington Medicare Advantage customers, increased enrollment more than 55 percent from 2006 to 2007. Positive changes are in black and negative changes are in orange. This convention is used throughout the presentation.

  6. Medical Premiums: In 2007, Premera, Regence, Group Health and their subsidiaries 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: Average premium per enrollee per month varies considerably, due to benefit designs and enrollee demographics. • Two plans, Group Health Cooperative and LifeWise Health Plan of WA, experienced decreases in annual premiums per enrollee per month from 2006 to 2007 despite increases in claims costs. Annual Premiums: Premiums/(Total Member Months/12).

  8. Medical Claims Expense Compared to Premiums: After four years of low claims to premiums ratios, this ratio rose to a more reasonable level of 85 percent in 2007. Reasonable Ratio = 85% Actuarial Experience Ratio: Claims / Premiums.

  9. Medical Claims Expense Compared to Premiums: Although 2007’s 85 percent claims to premiums ratio is reasonable, the ratio increased due to a 10 percent increase in claims costs. • Only three plans experienced a decrease in their actuarial experience ratio in 2007 (Regence BCBS of OR, Asuris Northwest Health and Community Health Plan of WA). • LifeWise Plan of WA and Group Health Cooperative experienced the largest increases. Actuarial Experience Ratio: Claims / Premiums.

  10. Medical Plan Administrative Expense Ratio: Administrative expense as a percent of premiums has trended down slightly since 2001. Administrative Expense Ratio: Administrative Expense / Premiums.

  11. Medical Plan Underwriting and Net Margins: Underwriting and net margins dropped significantly in 2007 after rising from 2003 to 2006. Most plans are still doing well. 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)

  12. Medical Plan Underwriting Margins: The underwriting margins for all medical plans combined declined 53 percent from 2006 to 2007 ( from 4.7 percent to 2.2 percent). • Five plans had negative underwriting margins in 2007 while 10 had declines in their underwriting margins from 2006 to 2007. • For all plans with declining margins, increases in claims outpaced increases in premiums, while half of the plans also had growth in administrative expenses that outpaced premiums. Underwriting Margin: (Premiums – Claims – Administrative Expenses)/Premiums.

  13. Medical Plan Net Income Per Member Per Month: Plans with higher enrollment all had positive net income, while two smaller plans experienced a loss in 2007. • Of the 13 Washington based medical plans, the nine with the highest enrollment numbers had positive net income per member per month in 2007. • One plan, KPS Health Plans, went from positive net income in 2006 to negative in 2007. Three plans went from negative in 2006 to positive in 2007. Enrollment: 51,465 Enrollment: 6,655 Enrollment: 19,157 Enrollment: 283,485 Enrollment: 402,011 Enrollment: 729,843 Enrollment: 884,409 Enrollment: 91,092 Enrollment: 231,673 Enrollment: 90,500 Enrollment: 105,769 Enrollment: 44,846 Enrollment: 35,684 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. • With the exception of two plans, Regence BlueShield and Community Health Plan of WA, every plan that had more than two months of premiums in reserve in 2006 increased their months of premiums in reserve by the end of 2007. • On average, months of premiums in reserve grew 10 percent, from 3.39 to 3.73 months, in 2007.  Average Note: Includes health plans based in Washington only.

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