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

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Attachment for Request for I'age 4 October ll, 1979 Action The annual experience data format is relatively unsophisticated and difficult to follow, compared to data ordinarily submitted by insurance companies and service organizations. It had been hoped that improvements would have been made over the past year as requested during our mid 1978 meetings. 2. PROBLEMS IN RATE CALCULATIONS When the January 1979 rate adjustments were obtained, the County's consultant requested a breakdown between single and family rates and stated: "It is our intent in asking for more data to make certain that the rates are based on actual experience (to the extent possible within an HMO framework) and not on the marketing strategies of the various HMOs". In response, PHP stated: "Regarding your concerns about not passing along the full amount of our required rate increase to our enrolled families .... admittedly, an additional increase should have been passed along to those people who have elected family coverage .... Though I can understand your desire to assure that the plans you offer properly load their rates, I doubt that 'purity' as such will ever be possible. There are financial, actuarial and marketing con- siderations which go into rating and re-rating of our enrolled groups." The County's concern was that PHP had overloaded employee rates at the expense of family rates, and thus charged the County excessively for single contracts during 1979 in order to preserve its own marketing base. Within the rate calculations for January l, 1980, PHP did adjust its rates to reflect the better experience data on single contracts. Desiring a 7.4% aggregate increase, PHP increased the single rate 4.0% compared to 9.4% on family contracts. Several problems were deemed significant by the County in analyzing the rate structure for 1980. The base figure represented the first seven months of the year rather than she traditional most recent twelve months of recorded claims as noted above. A 10.5% factor for inflation was used compared to the previous year's 8.5% A margin factor' of 5% was added, but no margin had been included the previous year. A margin factor is a deliberate overstatement intended to minimize fluctuations in rates. Already in 1979, PHP's adjustments for maternity changes had been substantial and well above those added by the other HMOs. Some of these additions should be non-recurring after the need to extend benefits ends after November 1, 1979. We see no evidence that this non-recurring aspect is reflected in the 1980 rates. At this point, our assesment is that the PHP rates-for 1980 will be more than adequate. 3. PROBLEMS IN COMMUNICATIONS PtIP has grown tremendously since the County became it's major client in 1976. For the year ending 12/31/76, PHP had 17 clients and 9,708 plan members. For the period ending 6/31/79, PHP had 127 clients and 41,500 estimated plan members. This growth has led to problems in con~munications. It has been difficult to reach PHP representatives when needed and response to written and oral communication has'been slow and unsatisfactory. After some persuasion, PHP has assigned a primary contact for the County and hopefully this will improve communications.