Studies in Minnesota and Pennsylvania: Strengths and weaknesses of Minnesota and Pennsylvania studie

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• SLIDE 2
• Studies in Minnesota and Pennsylvania Strengths
  and weaknesses of Minnesota and Pennsylvania
  studies. The actuary believes that the Minnesota
  study is more plausible for Oregon because it
  received an 85 response from school districts
  and also considered start-up costs. Pennsylvania
  had only a 23 response rate. Both studies
  recommend a mandatory pool for the best
  opportunity for savings. Minnesota considered
  only fixed administrative costs in its estimate
  of savings and did not include variable costs in
  its study (which would provide additional savings
  from pooling). The 5.2 savings on fixed costs
  from pooling in the Minnesota study is a
  percentage reduction of total premium cost.

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• SLIDE 3
• Comparing the States Side-by-side comparison of
  Minnesota and Pennsylvania with Oregon on key
  demographics about each state. "Fully Insured"
  means that claims are paid and administered
  through an insurance company as compared to
  "Self-Insured" which means that the district pays
  and administers its claims up to a certain point
  before it reaches a "Stop-Loss" level. Oregon
  and Minnesota have similar populations with
  Minnesota slightly larger. Pennsylvania is much
  larger than either Oregon or Minnesota.

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• SLIDE 4
• Definitions - Common fixed costs in insurance
  contracts
• - Claims administration cost The cost for the
  insurance company to handle, process, and make a
  payment determination on a member benefit claim.
• - Stop loss premium The premium paid to an
  insurance company to accept the risk of payment
  on individual benefit claims which are larger
  than a certain agreed-upon threshold (e.g.
  250,000)
• - Broker commission The fee paid to an agent to
  obtain, service, and renew an insurance contract
  on behalf of an insurance policyholder.
• - Voluntary Pool Voluntary health insurance
  pools are opt-in. Right now, most school
  districts participate in voluntary health
  insurance pools through OEA Choice Trust and the
  Oregon School Boards Association (OSBA). School
  districts can opt-in whether their employees
  incur a high-level of utilization or incur a
  low-level of utilization. Voluntary pools save
  money on variable costs like Managed care
  networks, provider contracting, plan design,
  disease/health management, consumer directed
  approaches, prescription contracts, and
  demographic differences.
• - Mandatory Pool Mandatory pools save on all of
  the same costs that voluntary pools, but save
  additional money on fixed (administrative) costs.

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• SLIDE 5
• Why other States are Relevant What pooling
  characteristics does Oregon have in common with
  other states? Pooling characteristics that
  Oregon has similar to other states include
  Claims administration costs stop loss premiums,
  and broker commissions. These affect the fixed
  (administrative) costs of running a pool.
  Potential differences include managed care
  networks, provider contracting, and demographic
  issues (age, gender, morbidity, rural, or urban).
  These differences impact variable (claims)
  costs. All states share the same types of fixed
  (administrative) costs and this is why we can
  learn lessons from the studies conducted in other
  states.

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• SLIDE 6
• Health Insurance Cost Elements Comparison of
  Today versus the Future. Even self-insured
  school districts can save money on fixed costs
  through the economies of scale that would happen
  in a mandatory pool. Administrative costs can be
  reduced through the economies of scale of a large
  pool and reduce expenses. State pooling would
  also reduce or eliminate retention charges paid
  by fully insured plans (risk/profit charges
  pooling charges or stop loss premiums and
  broker/agent commissions). State pooling would
  reduce or eliminate the cost of stop loss
  insurance that most self funded plans must carry.
  Claims costs may remain constant but can be
  reduced by plan design changes, disease /
  health management, consumer directed approaches,
  efficient provider network discounts, and
  efficient prescription contracts.

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• SLIDE 7
• Expected Costs in Oregon - Projected growth in
  health care costs for education employees over
  the next five years This slide shows the trend
  of medical inflation in Oregon if no further
  steps are taken to reduce the cost of health care
  for school employees. Assuming 85,000 enrollees
  with a base cost in 2003 of 710 million and
  annual trend of 10, health insurance per
  employee is approximately 859. Five years from
  now it will be 1,384.

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• SLIDE 8
• Potential Savings in Oregon - If Oregon achieved
  savings similar to those projected in the
  Minnesota study Potential for savings is 182
  million in five years on administrative costs
  alone once the plan is fully in place, if Oregon
  implemented a mandatory health insurance
  purchasing pool as outlined in the Minnesota
  study. This does not include opportunities to
  save even more from plan design changes
  disease/health management consumer directed
  approaches provider network discounts and
  prescription contracts. The projection is based
  on 85,000 enrollees and includes all school
  employees, community college employees, and their
  families.

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