ILLINOIS ILLINOIS COVEREDCOVEREDCHOICECHOICE

Reinsurance Institute Reinsurance Institute

Washington, D.C.Washington, D.C.

July 19, 2007July 19, 2007

ILLINOIS COVERED ILLINOIS COVERED -- OVERVIEW ---- OVERVIEW --

EXPANSION OF PUBLIC PROGRAMSEXPANSION OF PUBLIC PROGRAMS– Targets Working Parents, Workers w/ Targets Working Parents, Workers w/

Disabilities, Adults Below 100% FPLDisabilities, Adults Below 100% FPL

ILLINOIS COVERED REBATEILLINOIS COVERED REBATE– Subsidize Purchase of Employer-Sponsored Subsidize Purchase of Employer-Sponsored

Insurance, Including Covered ChoiceInsurance, Including Covered Choice– Up to 400% FPL, Premium Cap (Varies Up to 400% FPL, Premium Cap (Varies

Based on Income)Based on Income)

ILLINOIS COVERED CHOICEILLINOIS COVERED CHOICE

COVERED CHOICECOVERED CHOICE

HEALTHY NY MODEL, HEALTHY NY MODEL,

ILLINOIS PLANILLINOIS PLAN

ELIGIBLE SMALL EMPLOYERELIGIBLE SMALL EMPLOYER

25 or Fewer Employees25 or Fewer Employees

Contributes 70%+ of Employee PremiumContributes 70%+ of Employee Premium

2/3 of Employees < 400% FPL2/3 of Employees < 400% FPL

50% Eligible Employee Participation50% Eligible Employee Participation

ELIGIBLE INDIVIDUALELIGIBLE INDIVIDUAL

UnemployedUnemployed

Employed But No Employer-Sponsored Employed But No Employer-Sponsored Insurance for 18 MonthsInsurance for 18 Months

Not a Covered Choice Eligible Employee Not a Covered Choice Eligible Employee (Works <25 Hrs. p/wk)(Works <25 Hrs. p/wk)

Solely Self-Employed Solely Self-Employed

FUNDING SOURCESFUNDING SOURCES

Employer Assessment Employer Assessment – 3% Gross Payroll Assessment if Employers with 3% Gross Payroll Assessment if Employers with

10+ Employees Spend Less than 4% Gross 10+ Employees Spend Less than 4% Gross Payroll on IL Employee Health CarePayroll on IL Employee Health Care

– Estimated $1.3 billionEstimated $1.3 billion

CHIP Baseline AssessmentCHIP Baseline Assessment – If Enough High Risk Pool Enrollees Take Up If Enough High Risk Pool Enrollees Take Up

Covered Choice, State Will Use Some High Risk Covered Choice, State Will Use Some High Risk Pool Assessments to Fund Covered ChoicePool Assessments to Fund Covered Choice

– Estimate UncertainEstimate Uncertain

REGULATORY DIFFERENCEREGULATORY DIFFERENCE-- INDIVIDUAL MARKET ---- INDIVIDUAL MARKET --

New YorkNew York

– Guarantee IssueGuarantee Issue

– Community Rating Community Rating

– No High Risk PoolNo High Risk Pool

IllinoisIllinois

– No Guarantee IssueNo Guarantee Issue

– No Rating StructureNo Rating Structure (NEW RULE PROPOSED JULY 2007)(NEW RULE PROPOSED JULY 2007)

– High Risk PoolHigh Risk Pool

KEY MARKET DYNAMIC

Healthy Lives in IL Can Purchase Cheaper Products

REGULATORY DIFFERENCEREGULATORY DIFFERENCE-- SMALL GROUP MARKET ---- SMALL GROUP MARKET --

New YorkNew York

– Guarantee IssueGuarantee Issue

– Community Rating Community Rating

IllinoisIllinois

– Guarantee IssueGuarantee Issue

– Liberal Rate Bands Liberal Rate Bands (+/- 25%)(+/- 25%)

KEY MARKET DYNAMIC

Healthy Lives in IL Can Purchase Cheaper Products

INDIVIDUAL MARKET INDIVIDUAL MARKET GUARANTEE ISSUEGUARANTEE ISSUE

Source: Kaiser Family Foundation

AVAILABLE RATESAVAILABLE RATES

IllinoisIllinois– 30/male/non-smoker/30/male/non-smoker/

ChicagoChicago

$135.67 BCBS PPO $135.67 BCBS PPO

($1000 deduct – 80/20)($1000 deduct – 80/20)$196.78 BCBS PPO$196.78 BCBS PPO

($1000 deduct)($1000 deduct)

$301.72 BCBS PPO$301.72 BCBS PPO

($0 deduct)($0 deduct)

(Data Collected June 2007)

AVAILABLE RATESAVAILABLE RATES

IllinoisIllinois– 59/male/non-smoker59/male/non-smoker

ChicagoChicago$409.80 BCBS PPO ($1000 $409.80 BCBS PPO ($1000 deduct – (80/20))deduct – (80/20))

$741.07 BCBS PPO$741.07 BCBS PPO

($1000 deduct)($1000 deduct)

$1136.25 BCBS PPO$1136.25 BCBS PPO

($0 deduct)($0 deduct)

(Data Collected June 2007)

RATES FOR “UNINSURABLES”RATES FOR “UNINSURABLES”-- Isolating High Risks ---- Isolating High Risks --

CHIP High Risk PoolCHIP High Risk PoolStrategy – Isolate High RisksStrategy – Isolate High Risks

Enrollment = 16,543Enrollment = 16,543

CHIP RatesCHIP Rates30/male/non-smoker/Chicago30/male/non-smoker/Chicago

– $345 CHIP PPO ($1000 deduct)$345 CHIP PPO ($1000 deduct)– $390 CHIP PPO ($0 deduct)$390 CHIP PPO ($0 deduct)

59/male/non-smoker/Chicago59/male/non-smoker/Chicago

$1,037 CHIP PPO ($1000 deduct)$1,037 CHIP PPO ($1000 deduct)

$1,134 CHIP PPO ($0 deduct)$1,134 CHIP PPO ($0 deduct)

(Data Collected June 2007)

CHALLENGE: REINSURED CHALLENGE: REINSURED PRODUCT IN NON-CR MARKETPRODUCT IN NON-CR MARKET

Diverse Risks Must Take-Up Reinsured ProductDiverse Risks Must Take-Up Reinsured ProductSignificant Reinsurance (80% of Claims Above $40k) and Significant Reinsurance (80% of Claims Above $40k) and Subsidies (Illinois Covered Rebate)Subsidies (Illinois Covered Rebate)

– Covered Choice = Cheapest Comprehensive CoverageCovered Choice = Cheapest Comprehensive CoverageLimited Rate Variation Limited Rate Variation

– (e.g., Age =+/- 25%, Minimum 5-Yr. Age Brackets) (e.g., Age =+/- 25%, Minimum 5-Yr. Age Brackets) Aggressive Marketing Aggressive Marketing

Flexibility to Adjust to Unanticipated Market DynamicsFlexibility to Adjust to Unanticipated Market DynamicsRetain Necessary Rulemaking Authority Retain Necessary Rulemaking Authority

– Adjust Eligibility, Benefits and Reinsurance CorridorAdjust Eligibility, Benefits and Reinsurance CorridorNew Health Insurance Rules = Better Market DataNew Health Insurance Rules = Better Market Data

Insurers Must Fairly Price Reinsured ProductInsurers Must Fairly Price Reinsured ProductBase Rate Review Considers Loss Ratio and SurplusBase Rate Review Considers Loss Ratio and Surplus

MANAGED CARE NETWORK MANAGED CARE NETWORK CHALLENGESCHALLENGES

Ensure Meaningful, Statewide CoverageEnsure Meaningful, Statewide Coverage– Illinois HMO Penetration Low, Particularly Downstate, Illinois HMO Penetration Low, Particularly Downstate,

So Product Delivered Through HMOs So Product Delivered Through HMOs andand PPOs PPOs

Address PPO “Network” ChallengesAddress PPO “Network” Challenges– Provide Access to All Networks Provide Access to All Networks – Providers Otherwise Contracted as Network Provider Providers Otherwise Contracted as Network Provider

Must Be A Network Provider for Covered Choice Must Be A Network Provider for Covered Choice ““Adequate Network” Burden Remains with InsurerAdequate Network” Burden Remains with Insurer

Manage Provider CostsManage Provider Costs– Regulate Provider Reimbursement RatesRegulate Provider Reimbursement Rates

BIG-PICTURE ISSUESBIG-PICTURE ISSUES

ERISA and Employer AssessmentERISA and Employer Assessment

– Retail Industry Leaders Assoc. v. FelderRetail Industry Leaders Assoc. v. Felder (4th Cir. 2007) (4th Cir. 2007)

HIPAA Group Availability RequirementHIPAA Group Availability Requirement

– 42 U.S.C. 300gg-11(a)(1)(A)42 U.S.C. 300gg-11(a)(1)(A)

Free Market RhetoricFree Market Rhetoric

Inter-Department CoordinationInter-Department Coordination