2008 Health Coverage Legislation Expected to Increase State Health Insurance Trust Fund Costs

The Florida Office of Economic & Demographic Research recently held a Self-Insurance Estimating Conference for the State Employees’ Health Insurance Trust Fund (“Trust Fund”).

Of note, two coverage changes due to legislation passed during the 2008 Legislative Session are projected to affect costs:

• SB 2534 requires the extension of coverage to certain dependents through age 30, and is effective January 1, 2009. The projected annual PPO cost to implement SB 2534 is approximately $1.5- $2 million.

• SB 2654 requires the coverage of eligible individuals with autism spectrum disorder, and is effective January 1, 2010. The projected annual PPO cost to implement SB 2654 is approximately $3.0-$3.5 million.

For Trust Fund costs, the most recent negotiations with HMOs resulted in much lower-than-expected contract rates beginning January 1, 2009, which will result in a significant cost savings beginning in 2009-10. There was no change in the projected 10.5 percent increase for contracts effective January 1, 2010, January 1, 2011, and January 1, 2012.  The lowered rates were offset to some extent by the increased costs of offering the coverage extensions mentioned above.

The projected Trust Fund ending balance for 2008-09 has improved from $77.1 million to $169.2 million, while for 2009-2010, the projected ending balance has improved from -$223.2 million to $112.4 million.

There were no changes in projected enrollment or in the underlying cost trends for medical or prescription drug claims.

The Trust Fund ended 2007-2008 with a higher-than-projected balance.  There was an early bi-weekly payroll receipt of $28.4 million (which will be made up in 2008-2009), and medical claims were lower than expected.  The net result of these and other less significant differences from the forecast is that the Fund ended the fiscal year at $237.7 million–$46.7 million higher than expected.

For the forecast period, on the income side there is an 11 percent premium increase (for active employees, all paid by the State) effective May 1, 2009.

In 2008-2009, the increase is almost exactly offset by the loss of the bi-weekly payroll payment made in 2007-2008.  Beginning in 2009-2010, the premium increase is projected to produce increased annual revenues of approximately $170 million.

On the PPO expense side, reductions result from the lower base for PPO medical claims in 2007-2008, partially offset by a higher base for PPO prescription drug claims.

To view the Trust Fund financial outlook, click here.

 

If you have any questions or comments, please do not hesitate to contact Colodny Fass.

 

To unsubscribe from this newsletter, please send an e-mail to ccochran@cftlaw.com