HD9 - The Financial Impact of Mandated Health Insurance Benefits and Providers Pursuant to Section 38.2-3419.1 of the Code of Virginia: 1991 Reporting Period


Executive Summary:
Section 38.2-3419.1 of the Code of Virginia and Insurance Regulation No. 38 require every insurer, health services plan, and health maintenance organization to report annually to the State Corporation Commission (Commission) cost and utilization information for each of the mandated benefits and mandated providers contained in §§ 38.2-3408 through 38.2-3419 and 38.24221. This document is the Commission's consolidation of reports submitted by affected companies for the initial reporting period ending December 31, 1991.

Of the 903 companies licensed to issue accident and sickness policies or subscription contracts in Virginia in 1991, 104 were required to file full reports for the initial reporting period of October 1, through December 31, 1991. Although reports were received from each of these companies, the majority contained substantial omissions. As a result, information presented in this report for individually issued health insurance policies and subscription contracts was taken from only 5 companies. Group figures represent information reported by 16 companies. Each of these companies are among the top 20 writers of accident and sickness insurance by premium volume in Virginia. As a result, this report reflects data reported by companies representing 57.50% of the Virginia accident and sickness insurance market and 923,909 units of coverage (single and family individual policies and group certificates) subject to Virginia's mandated benefit and provider requirements. It is anticipated that future reports will represent a larger percentage of this market as companies complete required changes in their data collection and reporting systems.

The figures displayed below represent the amount of total annual premium which has been reported to be attributable to mandated benefits and mandated providers, for both individual and group business, on a percentage basis. Mandated offers of coverage have been separated from those mandated benefits which must be included in policies and subscription contracts to illustrate their impact on group business.

PREMIUM IMPACT
Percent of Total Annual Premium

Individual:

Single:
Mandated Offers - 1.85%
Mandated Benefits * - 4.09%
Mandated Providers - 2.79%
Total - 8.73%
* Excluding mandated offers of coverage

Family:
Mandated Offers - 0.89%
Mandated Benefits * - 4.30%
Mandated Providers - 3.22%
Total - 8.41%
* Excluding mandated offers of coverage

Group:

Single:
Mandated Offers - 9.76%
Mandated Benefits * - 3.28%
Mandated Providers - 2.24%
Total - 15.28%
* Excluding mandated offers of coverage

Family:
Mandated Offers - 11.66%
Mandated Benefits * - 4.50%
Mandated Providers - 2.26%
Total - 18.42%
* Excluding mandated offers of coverage

In addition to premium information, companies reported their claim experience for each mandate for the fourth quarter of 1991. The following is a summary of this experience.

CLAIM EXPERIENCE
Percent of Total Claims

Individual:

Mandated Benefits - 1.96%
Mandated Providers - 0.78%
Total - 2.74%

Group:

Mandated Benefits - 13 .26%
Mandated Providers - 2.55%
Total - 15.81%

Reported group claim expenses for this three-month period generally support the annual premium figures reported for group business when compared on a percentage basis. Reported individual claims, however, do not support the premium figures for individual business. This difference may be due to underreporting for individual business as a result of the use of less sophisticated data collection and information systems by companies in this area. Comparisons between premium and claim information will be more reliable in future reporting periods when both are reported on an annual basis.

Claim information regarding the rate of utilization of the mandated benefits and providers has been generated. However, this information will be most useful when compared with results of future reporting periods. It is anticipated that these rates may also be helpful in assessing the relative effect of new mandates and in comparing the changes that occur among providers that render similar services from one reporting period to another.

Claim information specific to certain medical procedures indicates that for those procedures, most of the mandated provider categories have lower average and median claim costs per visit than do their physician counterparts. However, in some cases the difference between mandated provider and physician costs is small.

The Commission recognizes that it could be argued in some cases that lower charges by mandated providers result in cost savings to the health care system. The Commission also recognizes the counter-argument that mandated providers increase the utilization of covered services and, therefore, irrespective of the unit cost of services, actually increase the total cost of health care. However, at this time, the Commission is unable to substantiate either of these arguments given the data available to it.