Oxfrd Health Insurance, Inc. New Yrk Small Grup EPO Plans Narrative Summary f Requested Rate Changes Effective 1 st quarter 2013 We have prepared this Narrative Summary as further explanatin f the letter yu recently received frm us utlining ur annual prpsed premium rate adjustment filing(s) with the New Yrk State Department f Financial Services (DFS). This Narrative Summary will remain psted here, n ur website, fr a minimum f 30 calendar days frm the date f ur letter t yu, ur plicyhlder, r subscriber. Please review this infrmatin carefully and cntact us r DFS, as indicated in ur letter, with questins within 30 days. Rate Cmpnent Overview The main cmpnents f an insurer s annual premium are the medical csts and administrative expenses we incur fr prviding health care benefits cverage. A small percentage f the premium is als prjected t be prfit, which helps us t sustain and grw ur business. Medical csts are the main prtin f the premium and are accunted fr in the minimum lss rati (MLR) the percentage f the premiums paid tward medical csts. Under New Yrk state law, the MLR must be at least 82% f the premium charged fr the prduct during the calendar year. This means that at least 82 cents f each premium dllar is t be paid tward medical csts. Medical csts include items that are typically thught f as medical csts, such as physician ffice visits, inpatient and utpatient care, cvered prescriptin drugs and new mandated benefits. Medical csts als include taxes and assessments assciated with medical services. These items are smetimes referred t as HCRA r GME. HCRA stands fr the Health Care Refrm Act and is a surcharge n hspital-related services. GME stands fr Graduate Medical Expense and is als knwn as the cvered lives assessment. This is an annual surcharge/tax n every persn wh has insurance cverage in the state. Certain administrative expenses are reclassified as medical csts when calculating the MLR. Such csts include activities that imprve health care; fr example, wellness prgrams. Sme f the key administrative expenses are: Taxes and fees nt assciated with medical csts such as the Sectin 332 assessment and premium tax; maintenance and upgrading f systems t cmply with legal requirements (e.g., HIPAA, federal health care refrm mandates); csts fr cnsumer educatin and decisin supprt tls/prcesses, prmtin f wellness, prgrams fr managing chrnic and cmplex medical cnditins, maintaining the prvider netwrk as well as measuring quality and efficiency f prviders, and perating csts f cnsumer, emplyer, brker and prvider web prtals; and emplyee csts fr items such as prcessing requests fr services, claims, crrespndence and appeals, cnducting medical reviews, and prviding custmer service. Additinally, there are fees and assessments assciated with the Patient Prtectin and Affrdable Care Act (PPACA). These include the Insurer s Fee and Reinsurance Assessment. The Insurer s Fee is a permanent fee that applies t fully insured cverage. The Reinsurance Assessment is a temprary fee that applies t all cmmercial grups (bth fully insured and self-funded) frm 2014 t 2016. United Healthcare Nrtheast, Page 1 f 5 NY-12-622-a 6/13/2012
Current Rate Increase Cmpnents When deciding whether t seek a premium increase r decrease, we review claims data and expenses t determine what the expected csts and expenses will be fr a future perid. Fllwing this review prcess, we are requesting premium increases related t medical cst trends fr the health benefits prducts that appear in Chart 1. If apprved, the increases will be added t the 2012 premium. Chart 1 shws the requested increases by prduct. The new premiums will apply t all grups that renew r enrll during the first quarter f 2013. Belw Chart 1 is an verview f the reasns fr the increase. CHART 1: Impact f Premium Request Requested Estimated Medical Increase Over 2012 Medical Requested Estimated Pharmacy Increase Over 2012 Pharmacy Estimated Ttal Trend Increase (Medical and Pharmacy) Over 2012 Premium (%) Prduct Renewal Date Number f Impacted Subscribers Premium (% ) Premium (%) EPO January 2013 - March 2013 52,636 16.9% 16.9% 16.9% The rate filing we have made is seeking an increase mainly related t rising medical csts. As previusly mentined, medical csts are the single largest cmpnent f the premium dllar and a cmpnent that has been rising significantly year ver year. There are many different medical, r health care, cst trends that cntribute t increases in the verall U.S. health care spending each year. These trend factrs affect health insurance premiums, which will mean a premium increase t cver csts. Sme f the key health care cst trends that have affected this year s rate actins include: Increasing Cst f Medical Services Annual increases in reimbursement rates t health care prviders, such as hspitals, dctrs and pharmaceutical cmpanies. We estimate that this cmpnent increases csts by apprximately 5.6% per year. Increased Utilizatin The number f ffice visits and ther services cntinues t grw. We estimate that this cmpnent increases csts by apprximately 5.5% per year. Higher Csts frm Deductible Leveraging Health care csts cntinue t rise every year, while the pricing fr the prducts is based n deductibles and cpayments that generally remain the same. As a result, when grups cntinue with the same member cst shares, a greater percentage f health care csts need t be cvered by health insurance premiums each year. We estimate that this cmpnent increases csts by apprximately 1.1% per year. Cst shifting frm the public t the private sectr Reimbursements frm the Center fr Medicare and Medicaid Services (CMS) t hspitals is n lnger cvering all the cst f care. The cst difference is being shifted t private health plans. Additinally, Medicare and Medicaid rates t hspitals are expected t decline due t the impact f PPACA n Medicare and the affect f the recessin n Medicaid. A rate increase paid by Medicaid t hspitals is ften belw the actual United Healthcare Nrtheast, Page 2 f 5 NY-12-622-a 6/13/2012
cst increase hspitals will experience. The cst impact fr this cmpnent is included in the estimate fr increasing cst f medical services shwn abve. Impact f New Technlgy - Imprvements t medical technlgy and clinical practice require use f mre expensive services, leading t increased health care spending and utilizatin. The cst impact fr this cmpnent is included in the estimates fr increasing cst f medical services and increased utilizatin shwn abve. The medical cst cmpnent may als be impacted by changes t the ppulatin cvered under the prduct. Migratin Between Oxfrd Prducts At times, grups and members mve between prducts. This mvement has an impact n the csts in bth the ld and new prducts. We estimate that this cmpnent increases csts by apprximately 0.9% per year. Regulatin 146 - A part f the medical csts include a pling technique established under New Yrk Insurance Regulatin 146, which attempts t equalize risk within the New Yrk small grup and individual markets. This requires carriers with fewer high-cst claimants t pay int the pl, while carriers with mre high-cst claimants receive funds frm the pl. We are prjecting a slight change in ur Regulatin 146 amunt fr Oxfrd Health Insurance, Inc.'s small grup prducts in 2013 due t a prjected increase in high cst claimants fr the individuals cvered under this entity, relative t estimated industry averages. As nted abve, there are als fees and assessment related t PPACA. These amunts apply t all business starting January 1, 2014. The requested premium increases fr 2013 include prtins f these full amunts depending upn the number f cntract mnths extending int 2014. These fees and assessments accunt fr 0.3% f the verall requested rate increase. The table belw summarizes the drivers f the requested rate increase. United Healthcare Nrtheast, Page 3 f 5 NY-12-622-a 6/13/2012
CHART 2: Drivers f Requested Rate Increase United Healthcare Nrtheast, Page 4 f 5 NY-12-622-a 6/13/2012
Additinal Benefit Changes fr 2013 Plans We have als submitted benefit change filings t the New Yrk State DFS assciated with state mandated autism cverage and federal refrm changes t wmen s preventive cverage. Premium increases apprved by DFS fr these items will impact yur final premium, in additin t the requested premium increases listed in Chart 1. In the event that additinal benefit changes (e.g., benefit mandate r change) are made t ur EPO prduct prir t yur 2013 renewal, thse changes may als impact yur final premium. Final Rate Increase Please be aware that yur grup s final renewal premium increase fr 2013 may be different than the percentages listed in Chart 1. The Superintendent f Financial Services may apprve (as requested), mdify r deny the prpsed rate adjustment. Yur final premium will accunt fr the rate adjustment apprved by the New Yrk State DFS, as well as any changes resulting frm the benefit plan design chsen and yur grup s census upn renewal. If yu are a subscriber f a grup plan, please cntact yur emplyer fr infrmatin abut hw this infrmatin affects yur premium cntributin. United Healthcare Nrtheast, Page 5 f 5 NY-12-622-a 6/13/2012