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Massachusetts Health Care Cost Trends: Premium Trends in Private Comprehensive Health Insurance. Dianna K. Welch, F.S.A., M.A.A.A., Oliver Wyman Actuarial Consulting, Inc. June 27, 2011. Premium Levels and Trends in Private Health Plans: 2007-2009. Analysis covers:

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massachusetts health care cost trends premium trends in private comprehensive health insurance

Massachusetts Health Care Cost Trends: Premium Trends in PrivateComprehensive Health Insurance

Dianna K. Welch, F.S.A., M.A.A.A.,Oliver Wyman Actuarial Consulting, Inc.June 27, 2011

premium levels and trends in private health plans 2007 2009
Premium Levels and Trends in PrivateHealth Plans: 2007-2009

Analysis covers:

  • Enrollee demographics in the Massachusetts commercial markets
  • Trends in premiums paid by employers and consumers for health insurance
  • Medical expenses and retention included in those premiums
  • Supplemented with results from 2010
adjusted premiums increased 5 to 10 actual premium increases were lower after benefit buy down
Adjusted premiums increased 5 to 10%; actual premium increases were lower after benefit buy-down
  • From 2007 to 2009, private group health insurance premiums in MA increased roughly 5 to 10 percent annually, when adjusted for benefits.
  • This compares to CPI-U increases of 1.7 percent annually nationwide and 2.0 percent in the Northeast.
significant small group buy downs in 2009
Significant small group buy-downs in 2009

Percent of Small Group Members by Actuarial Value

  • On average, the level of benefits covered by private group health insurance has declined and member cost-sharing has increased.
  • Among small groups, average benefits decreased 3.6 percent from 2007 to 2008 and 6.6 percent from 2008 to 2009.
small group premiums were higher than mid size and large group premiums
Small group premiums were higher than mid-sizeand large group premiums
  • Smaller groups paid higher premiums from 2007 to 2009 than mid-size and large groups, when adjusted for demographics, geographic area, and benefits.
  • It is important to note that premium increases for specific employers may vary significantly from the average.
slide6

Small group premiums were higher than mid-sizeand large group premiums (continued)

Decomposition of Premium PMPM Adjusted for All Rating Factors, 2009

  • The higher small group premiums were due primarily to higher claims costs.
  • The portion of premium retained by the carrier for administrative expenses and contribution to surplus or profit was also higher for smaller size groups.
  • In 2007 and 2008, small groups paid 120% of what large groups did on a pmpm basis towards non-medical spending. In 2009, that figure rose to 141%.
greater premium volatility for small groups more members affected by large increases in 2009
Greater premium volatility for small groups; more members affected by large increases in 2009

Quoted Rate Increases by Group Size, 2009 Renewals

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Medical loss ratios increased to 91% in 2009

  • From 2007 to 2009, the medical loss ratio calculated across all group sizes increased from 88% to 91%. MLRs are greatest for individual business and generally lowest forsmall group business.
  • Contribution to surplus (for not-for-profit companies) or profit (for “for-profit” companies) accounted for roughly 25% of retention charges built into pricing in all insured market sectorsin April 2010.
slide9

Preliminary 2010 data show a decrease in MLR,in part due to slowdown in claims expenditures

  • Medical loss ratios across all market segments combined, as reportedin carrier financial statements, decreased from 90.5% in 2009 to89.4% in 2010.
  • The decrease in medical loss ratio from 2009 to 2010 appears to be the result of a slowing trend in medical expenditures, both locally and nationally. Claims expenditures do not take into account increasing member cost-sharing.
many small groups received large increases in 1 st quarter 2010
Many small groups received large increasesin 1st quarter 2010

Quoted Rate Increases by Group Size, First Quarter 2010 Renewals

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for more information

For more information:

www.mass.gov/dhcfp/costtrends