Agenda - Council - 11/26/1979 - Laserfiche WebLink

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.,I nCllllll'll t for .'age 3 Dctobc, r ll, 1979 experience data. We had requested that employee and dependent rates reflect relative experience. The decrease in the Low Plan rate and the negotiated reduction in the deductible from $500 to $300 is a result of the favorable claim experience. GENERAL CONCERNS RELATED TO THE COUNTY'S PURCIIASE OF MEDICAL BENEFIT PLANS The County, as with most political subdivisions in Minnesota, works under substantial handicaps with respect to purchasing services of insurance companies, service organi- zations, or third party administrators and HMOs. The state law which insists on competitive bidding each four years or when a 50% rate increase is received has encouraged many major commercial insurers to ignore opportunities to bid on govern- mental business. In addition, legislation would be required should the County want to establish any form of self-insurance to improve cash flow in the medical area. At present, the County has extremely high penetration of HMOs into its employee group which limits its funding options. Despite the general potential for cost control of the HMOs, they are either community rating the County; loading on top of standard community rates; or experience rating the County and using questionable back up data. The relative immaturity and rapid growth of the HMOs has not yet allowed for sophisticated management information systems---thus-even in the experience rating situations, data is not complete enough to justify the rate increases. The County shall review the overall funding options each year to determine if any improvements can be made, but will be limited in its ability to make any changes given current state laws. PROBLEMS WITH CURRENT PROVIDERS PHP The problems with PHP relate to the matter of data, rate calculation,-communications, and lack of flexibility. 1. DATA PROBLEMS The rate increase proposed for January l, 1980 was based on an annualized level of incurred claims. By this we mean that PHP took the claims for the first seven months of 1979 and projected them through 1979. This technique is not consistent with the more generally accepted actuarial/underwriting practice of utilizing the most recent actual 12 months of paid claims experience as a basis for calculation. Further, the County has no means of verification of this data. A total claims number is presented but there is no back up data to be used for audit purposes. In short, we are being asked to accept the claim figure upon which rates are based, with a great deal of faith. During 1978 and again in 1979, PHP reacted to short-term trends with a certain degree of panic which later proved to be unfounded. In 1978, PHP alleged county employ- ee over utilization of chemical dependency and alcoholism benefits; Their support- ing data was not totally convincing based upon a short evaluation period and the issue seemed to disappear without meaningful follow-up. In July of 1979, PHP suggested that County employees utilized benefits much more than employees from instrumentalities. This was not confirmed in the data provided--in fact at the time of this writing the County has not received a requested breakdown of experience data between the County and the instrumentalities.