New Hampshire Insurance Department Preliminary

Report of the 2016 Health Care Premium and Claim

Cost Drivers

NOVEMBER 3, 2017 JENN SMAGULA FSA, MAAA GORMAN ACTUARIAL, INC.

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Goal of Annual Hearing & Report

In May 2010, New Hampshire passed RSA 420-G:14-a, V-VII (Chapter 240 of the laws of 2010, an act requiring public hearings concerning health insurance cost increases). In 2014, SB 345 amended Section VI: “The commissioner shall prepare an annual report concerning premium rates in the health insurance market and the factors that have contributed to rate increases during prior years.”

The report shall be based on the analysis of information and data, including items such as medical loss ratios, cost of medical care by payment type and insurance premiums by network, among other things.

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National Comparisons

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The uninsured rate in New Hampshire has decreased from 10.7% in 2013 (pre ACA) to 5.9% in 2016.

Data Source: U.S. Census Bureau, American Community Survey 1-Year Estimate for 2013-2016

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New Hampshire ranks 9th highest in expenditures

Data Source: Centers for Medicare and Medicaid Services, State Health Expenditure Accounts, 2014

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NH trend is slightly higher than national average

Data Source: Centers for Medicare and Medicaid Services, State Health Expenditure Accounts, 2009 and 2014

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NH health care spending in line with high income

Data Source: Centers for Medicare and Medicaid Services, State Health Expenditure Accounts 2014; Median income sourced from U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements.

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New Hampshire Market Overview

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New Hampshire Commercial Fully-Insured and Self-Insured Markets continue to be dominated by three insurers, but there have been shifts over time for certain market segments

Minuteman Anthem/Matthew Thornton

Harvard Pilgrim

CIGNA Ambetter (Centene) Tufts Other (insurers less than 2%)

Community Health Options

Note: Values may not total to 100% due to rounding. Data Source: NHID 2015 and 2017 Supplemental Data Request; Commercial population including New Hampshire situs membership only. Excludes FEHBP population.

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Small Group Market membership has shifted from Anthem/Matthew Thornton to Harvard Pilgrim

Anthem/Matthew Thornton

Harvard Pilgrim Other (insurers less than 2%) Community Health Options

Note: Values may not total to 100% due to rounding. Data Source: NHID 2015 and 2017 Supplemental Data Request; Commercial population including New Hampshire situs membership only. Excludes FEHBP population.

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Individual Market distribution by insurer has changed dramatically with new insurers entering in 2015 and 2016

Minuteman

Anthem/Matthew Thornton

Harvard Pilgrim

Ambetter (Centene)

Other (insurers less than 2%) Community Health Options

Note: Values may not total to 100% due to rounding. Data Source: NHID 2015 and 2017 Supplemental Data Request; Commercial population including New Hampshire situs membership only. Excludes FEHBP population.

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Individual Market changes continue beyond 2016

2014 2015 2016 2017 2018Anthem/Matthew Thornton

Ambetter (Centene)

Assurant/Time

Harvard Pilgrim

Minuteman

Community Health Options

Off Exchange Only

On and Off Exchange

New Hampshire Individual Market

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Profit margins have decreased in the Group Markets and remain higher than the Individual Market in 2016

*Information shown prior to any federal MLR rebate payments Data Source: 2016 federal MLR reports provided by insurers. Anthem provided additional information for FEHBP to make necessary adjustments to exclude from Large Group.

Individual Small Group Large Group

Medical & Pharmacy Claims ACA Charges

Other State & Federal Taxes Profit (Positive) Admin Expenses & Fees Profit (Negative)

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Individual Market

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The Individual Market grew from 58,000 members in 2015 to 104,000 members in 2017 due to growth from the NH PAP and, to a smaller extent, the Individual Exchange Market

Data Source: NHID Annual Hearing data 2015 and 2017; Excludes FEHBP population

Individual NH PAP Individual Non-Exchange Large Group

Small Group

Individual Exchange

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The Individual Market is diverse 104K Individual Market

Members

88K Exchange 16K Non-Exchange

9K Non-Grandfathered

7K Grandfathered or Transitional*

43K NH PAP 45K non- NH PAP

13K No Cost Sharing Reduction Subsidy,

With Federal Premium Subsidy

16K No Cost Sharing Reduction Subsidy, No

Federal Premium Subsidy

16K Cost Sharing Reduction Subsidy

AND Federal Premium Subsidy

Data Source: NHID Annual Hearing data 2017; Centers for Medicare and Medicaid Services. August, 2017 Effectuated Enrollment Snapshot; Monthly NHID QHP Reports, August 2017.

*NOT PART OF SINGLE RISK POOL

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In 2017, 74% of Individual Market Single Risk Pool is subsidized

Data Source: Enrollment was estimated using the QHP Monthly Enrollment Reports, CMS’s 2017 Effectuated Enrollment Snapshot Report, and information received from the 2017 AH data.

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Non-subsidized individuals pay significantly more than subsidized individuals

These charts assume the age of the adult enrollee is 50 and that the APTC enrollees are enrolled in the 2nd lowest cost silver plan. It also assumes the enrollees in the non-subsidized market are enrolled in the plan with the median rate among silver plan offerings.

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Individual Market experienced larger increases in premium in 2016 compared to 2015, driven in part by the introduction of NH PAP

Data Source: NHID Supplemental Data Request 2015, 2016 and 2017

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Average deductible levels in the Individual Market have increased 11% from 2014 to 2016, driven by the unsubsidized Exchange population

Data Source: NHID Supplemental Data Request 2015 and 2017

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$26 million was distributed among insurers in the Individual Market through risk adjustment in 2016

Data Sources: Centers for Medicare and Medicaid Services. Summary Report on Transitional Reinsurance Payments and Permanent Risk Adjustment Transfers for the 2014, 2015 and 2016 Benefit Years

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More than half of the Individual Market trend in 2016 is driven by the introduction of PAP

Data Source: NHID Annual Hearing data 2017.

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The average PAP population’s medical costs are 24% higher than the average Non-PAP population’s

Data Source: NHID Annual Hearing data 2017.

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Inpatient costs are one of the key drivers of the differences between Non-PAP and PAP populations

Data Source: NHID Annual Hearing data 2017.

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Higher utilization in Individual Market is driven by NH PAP population

Data Source: NHID Annual Hearing data 2017.

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Utilization is generally much higher in the Individual Market compared to the Group Markets

Data Source: NHID Annual Hearing data 2017. Health Care Cost Institute Data (HCCI) based on 2015 employer sponsored insurance data.

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Group Markets

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Small Group Market experiencing lowest change in premium

Data Source: NHID Supplemental Data Request 2015, 2016 and 2017; Excludes FEHBP population.

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Average deductible levels in the Small Group Market have not changed significantly

Average Deductible: CY 2014 = $3,082 CY 2016 = $3,113

Data Source: NHID Supplemental Data Request 2015 and 2017. Single policy, in-network deductibles.

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Data Sources: Centers for Medicare and Medicaid Services. Summary Report on Transitional Reinsurance Payments and Permanent Risk Adjustment Transfers for the 2014, 2015 and 2016 Benefit Years

A much smaller amount was distributed in the Small Group Market through risk adjustment

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Uptick in allowed claims trends across all market segments

Data Source: NHID Annual Hearing data 2016 and 2017.

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Half of the allowed claims PMPM trend is due to utilization increases, which is significantly different than past years

Data Source: NHID Annual Hearing data 2016 and 2017.

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Pharmacy and Other category have the largest trends over period of 2014 to 2016, while Inpatient trends have experienced large fluctuations

Data Source: NHID Annual Hearing data 2016 and 2017.

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Pharmacy

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Data Source: NHID Annual Hearing data 2016 and 2017. Non FFS claims only.

Pharmacy increases have contributed 37% to the group market trend 2014 to 2016

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Within pharmacy, specialty drugs have the highest trend at 14%

Data Source: NHID Annual Hearing data 2017. Small Group and Large Group Only.

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Specialty drugs as a percentage of total pharmacy have grown to represent 37% in 2016

Data Source: NHID Annual Hearing data 2017. Small Group and Large Group Only.

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Individual Market specialty pharmacy growing at even higher rate than Group Markets

Data Source: NHID Annual Hearing data 2017.

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Self-Insured Market

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Within the Large Group Market, the Self-Insured Market is 2.6 times larger than the Fully-Insured Market and CIGNA has a larger presence

Data Source: NHID SDR data 2017.

Anthem/Matthew Thornton Harvard Pilgrim

CIGNA Tufts

Other (insurers less than 2%)

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Average allowed claims costs for the Large Group Self-Insured and Fully-Insured Markets are nearly the same, while cost sharing is much lower in the Self-Insured Market

Data Source: NHID SDR data 2017.

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81% of premium in the Fully-Insured Market is spent on health care claims, compared to 93% in the Self-Insured Market

Data Source: Fully-Insured loss ratio based on MLR rebate reports. Self-Insured based on NHID SDR data 2017.

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New Hampshire Key Findings New Hampshire is in the top 10 states by medical expenditures Uninsured rate is lower than the national rate Individual Market insurer participants constantly changing Inclusion of NH PAP in the 2016 Individual Market is a key driver of

medical cost increases 2016 Small Group Market average premiums decreased and minimal

benefit buy down Utilization trends are on the rise impacting overall trends Pharmacy trends declining in 2016, however continue to be a key

contributor to overall trends, driven by specialty drugs Self-Insured Market is 2.6 times the size of the Large Group Fully-

Insured Market with similar claim costs but richer benefits