Heavy health insurance increase feared for Region 8

By Melanie Savage - Staff Writer
Hebron - posted Tue., Jan. 8, 2013

Hebron Board of Education members received a look at the way different factors might combine to result in a heavy health insurance increase for the district at their budget workshop meeeting on Jan. 3.  Bob Devito, an account manager from Lockton Companies, the district’s insurance broker, said that the Affordable Care Act would contribute to the district's increase. After the re-election of President Barack Obama, “This law is most likely not going to be revoked," said Devito.

Devito’s preliminary estimate for Hebron’s insurance increase was a whopping 23 percent, only a small portion of which was attributable to the ACA, or "Obamacare." The biggest factor driving the increase “is your claims experience,” said Devito. An 85-percent claims ratio is a typical average, said Devito, meaning that for every $1 spent, 85 cents are paid out in claims. Hebron’s claims rate is currently hovering at about 101.1 percent, meaning that $1.01 is being paid out for every $1 paid in. At a claims rate of 85 percent, a district can expect an increase of between 8 and 10 percent, according to Devito. “Based on the information that I have and our emerging experience,” he said, “I can’t imagine that the projected increase is going to be less than 23 percent; it could be more.”

Driving the elevated claims rate is “an unusually high number of high-cost claims” over the past 12 to 18 months, said Devito.

Of the 23 percent projected increase for the region, Devito said the high claims rate accounted for about 10 to 11 percent, insurance industry trends account for another 8 to 10 percent, and that Obamacare accounted for approximately 2 to 3 percent. Costs arising from the healthcare bill include Women’s Preventative Care, intended to provide enhanced, low-cost healthcare services for women. Among the 1,287 members within Region 8, Women’s Preventative Care would amount to approximately a $1.43 increase per member per month, according to Devito.

Implementation of the comparative effectiveness research institute (CER), described by Devito as intended to “evaluate the effectiveness of different treatments for different types of conditions and diseases,” would add approximately $1 per member per year in 2013, and $2 per member the following year.

The Insurance Excise Fee amounts to approximately 2.46 percent of total premium, or about $200,000 for the district for the year. The reinsurance fee associated with Obamacare is related to the healthcare exchanges which will be set up for each state either by the state or the federal government. The cost is $5.35 per member per month. A Connecticut vaccine bank charge associated with Obamacare will add an additional 71 cents per member per month. Devito said that the total added cost arising from Obamacare for Region 8 for 2013-14 amounted to approximately $180,000.

“I put this out here hopefully as a worst-case scenario,” said Devito, adding that he hoped to see the district’s increase come in at under the projected 23 percent. He also introduced the idea of going out to market with the district’s plan in the hope of identifying a lower-cost option.

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