Insurance Agencies Begin Rate-Setting Process

The week of June 23, the Employee Benefits Council (EBC) and the Oklahoma State and Education Group Insurance Board (OSEEGIB) met to begin the process of setting insurance rates for state employees. EBC contracts with insurance companies who offer their product to state employees. OSEEGIB administers HealthChoice, which is a self-funded traditional insurance plan offered across the state to public and education employees.

At the EBC meeting on Tuesday afternoon, the Council decided on the plan design to send out for bid through the request-for-proposal (RFP) process. The decision was to obtain bids on the traditional standard and alternative HMO plans that are currently being offered to state employees. In addition, insurance companies will be asked to bid on a modified/standard plan, which changes co-payments for participants. The change would raise co-pays by approximately $5, with the annual out-of-pocket maximum increasing from $1,500 to $2,000 for an individual and $2,000 to $4,000 for a family. In August, the Council will decide whether to offer the standard or modified/standard plan.

In addition, the Council raised the maximum amount that state employees can set aside in their tax-free flexible spending account from $4,200 to $5,000. Beginning January 1, 2009, metro-area participants may pay fees related to commuting when riding public transportation from their flexible spending account.

On Friday morning, OSEEGIB met to discuss recent claims experience that will be used in setting rates.

“Because HealthChoice is a state agency that does not make a profit, premiums are set by actuaries who review current claims experience and trends to forecast future costs,” said OPEA Policy and Research Director Trish Frazier. “Basically, premiums are collected and dispersed to pay for health care. If state employees don’t get sick and costs are low, the system has a good year.”

Unfortunately, this has not been a good year for the insurance plan. The claims experience data indicate that a 13.4 percent increase in premium will be needed beginning January 1. However, in the past OSEEGIB has utilized reserves saved from better years to keep costs down.

“OPEA will be monitoring the rate setting process closely in the next two months,” said Frazier. “Because OPEA passed legislation in the 1990’s requiring that the benefit allowance rise with the premiums, state employees will not have to pay for the additional costs. However, state agencies will be even more challenged with the 2009 standstill budget.”

Insurance rates for calendar year 2009 will be finalized on August 15.

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