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Home My WebLink About09.a. (Handout) Overview of Kaiser's Underwriting MethodologyDraft Outline for CCCSD Board Meeting June 16", 2011 Points of Discussion 9a. (aveph adl)s Overview of Kaiser Permanente's Underwriting Methodology for Central Contra Costa Sanitary and similarly sized groups — why Kaiser Permanente uses this rating methodology • Credibility Factors • Why Projected Claims & Risk vs. Fully Credible • Understanding Risk Factor Rating as a predictor for future claims How this methodology applies to Central Contra Costa Sanitary District, specifically addressing this year's renewal increase drivers • Questions from the Board To address the above topics relative to Central Contra Costa Sanitary District's 2011 Kaiser Permanente renewal, please reference the documents included with this outline. Attachments Include: • Central Contra Costa Sanitary District Renewal Data • Risk Score Explanation • Credibility Table KAISER PERMANEME . t fit'' Executive Summary Group Name: CENTRAL CONTRA COSTA SANITARY Group Number(s): 382 Subgroup(s): 0003,0004,0005,7004 Rates" TRADITIONAL HMO: $10 OV; SO /ADMISSION IP: $50 ER; OPT: CHIRO; HEAR; Subscribe) only Subscriber and I dependent Subscriber and 2 or more dependents SR ADV GRP HMO NCR: S 10 OV; SO /ADMISSION IP, $50 ER; OPT; CHIRO; HEAR; Single MEDICARE ODA NCR' S10 OV; SO/ADMISSION IP; S50 ER; OPT; CHIRO; HEAR; Single Credibility Region: Northern California Contract Period: 07/01/2011 - 06/3012012 Oec08 - Nov09 Dec09 - Novi 0 Average Members': 519 50S Current Rates Change % Proposed Rates $597.63 16.9% 1.195.27 169'7 1.691.30 16.9n, 5359.79 (I.1)% 5764.53 2.8'% _ I Claims Summary SPMPM' TRADITIONAL HMO: Major Service Cateeory Inpatient Dec08 - NovO9 $130.72 Outpatient 137.86 Pharmacy 50 34 Other 54.30 Total Claims Summary SPMPM $373.22 ` Includes Actives and for pre 65 Retirees only "Benefit plan descriptions are summarized, pleaso see Rate and Benefit Summary for full descriptions Chance 140.3% 18.7% 11.1% 19.7% 60.4% S698.85 1,397.71 1.977.75 5355.71 5786.18 Dec09 - Nov10 5314.17 163:68 55.92 65.02 SS98.80 Created On 3129;2011 SPAS BOB Number /Set ID: 197817-115117-47-1 NPS RQR Number: 4690805 NPS RQR Name S I Of I . Cl EU 4. S. 7004 - RQR 47 Page 3 of 37 ?' "3 KAISER PERMANWE: Inpatient - S PMPM and S /Day Group Name: CENTRAL CONTRA COSTA SAKI FARY Region: Northern California Group Number(s): 382 Contract Period: 07,0112011 - 06/30/2012 Subgroup(s): 0003.0004,0005, 7004 Dec08 - Nov09 Dec09 - Nov10 Average Members' 519 505 Inpatient S PMPM' Dec08 - NOvO9 Change Dec09 - Noy10 Service Category Dec08 - Nov09 Chang Dec09 - Nov1O Medical 57.880.99 19.7M 59.430.12 Hospital Medical 546.82 298.6% $186.61 Professional Medical 7.48 61.6% 12.09 Surgical 8.006.65 36.8% 10.951.16 Hospital Sur0ical 52.71 64.4% 86.68 Professional Surgical 10.04 68.2% 16.89 Maternity 4.098.25 4.6% 4.285.92 Hospital Maternity 7.90 (28.51% 5.65 Professional Maternity 4.25 (38.6)96 2.61 Mental Health 0.00 N/A 0.49 Substance Abuse 1.52 (100.0% 0.00 SNF 000 N/A 3.15 Total Inpatient S PMPM $130.72 140.3% 5314.17 J Inpatient S /Day' Service Category Dec08 - NOvO9 Change Dec09 - Noy10 Medical Hospital Medical 57.880.99 19.7M 59.430.12 Professional Medical 1.258.35 (51.5):8 610.71 Surgrcal Hospital Surgical 8.006.65 36.8% 10.951.16 Professional Surgical 1,525.08 39.9% 2,133.56 Maternity Hospital Maternity 4.098.25 4.6% 4.285.92 Professional Maternity 2.206.75 (10.3)% 1.979.67 Mental Health 0.00 NIA 983.56 Substance Abuse 158.00 11 00.0)!6 0.00 SNT 0.00 NIA 3 8L61 Total Inpatient S /Day $5,427.31 53.3% $8,319.31 ' includes Actives and or pie 65 Retirees only. Created On: 312912011 SPAS RQR Number6et ID, 197817,115217 -47 -1 NIPS ROR Number •1690805 NPS RQR Name SI of t. C) FU 4. 5. 7004 - RQR 47 Page 7 of 37 } VAISER PERMANENTE. 5� Inpatient - Days/] 000 and ALOS Group Name: CENTRAL CONTRA COSTA SANITARY Region: Northern California Group Number(s): 382 Contract Period: 07101 /2011 - 06/30/2012 Subgroup(s): 000 3,0004,0005, 7004 Di - NoV09 Dec09 - Novl Q Average Members*: 519 505 Inpatient Days /1000' Service Category Dec08 - Novo 9 han a Dec09 - Nov10 Medical 71.3 233,1% 237.5 Surgical 79.0 20.3% 95.0 Maternity 23.1 (31.0% 15.8 Mental He.ddr 0.0 N/A 5.9 Sutntann; Abuse 115.6 (100.0m, 00 SNP 0.0 NIA 98.9 Total Inpatient Days/ 1000 289.0 56.8% 453.2 _ j Inpatient ALOS' Service Category Dec08 - Nov09 Change Dec09 - NOV].Q Medical 2.5 184.0% 7,1 Surgical 33 18.9% 4.4 Matemuy 1.7 17.6% ?.0 Mental Health 0.0 N /A. 3.0 Substance Abuse 60.0 (100.0)% 0.0 SNP OA N/A 25.0 Total Inpatient ALOS 4.4 47.7% 6.5 Includes Actives and : or pre 65 Retirees only Cieated Ow 1 29;'2011 SPAS RQR Number Set I1), 19781 7- 115217 47 -1 NPS RQR Number 4690805 NPS RQR Name 51 of 1. C) FU 4. S. 7084 - RQR 47 Page 8 of 37 S" KAISER PERMANENTE. Risk Factor Backup Group Name . CENTRAL CONTRA COSTA SANITARY Group Number(s): 382 Risk Score Period : December 2010 Region: Northern California Contract Period: 07101/1011 - 06(3012012 E CENTRAL CONTRA COSTA SANITARY ® Market Segment %of Average Weighted %of Average Weighted Risk Scores Members x Score Average Members x Score Average 0.00 to 0.49 32.9 "% 0.27752 0.09123 40.6% 0.28511 0.11564 030 to 0.74 16.9% 0.59963 0.10151 19.7% 0.59970 0.11815 0.75 to 0.99 7.5% 0.85195 096373 9.2'% 0.85366 0.07865 1.00 to 1.24 9.1 AI 1.12198 0,10160 9.2 % 1.10093 0.10168 1.25 to 1.49 7.1 % 1.33218 0.09441 498; 136951 0.06774 1.50 to 1.74 6.3 % 1.61418 0.10168 3.496 1 61189 0 054 33 1.75 to 1.99 3.9 % 1.87162 0.07369 2.6 % 1.86404 0.04809 2.00 to 2.49 3.1 '% 2.14932 0.06770 3.945 2.19688 0.08600 2.50 13.2 46 4.50568 0.59425 6.5 IS 4.40332 0.78519 1.28979 0.95547 1.28979 _ 1.34990 Total Members = 508 Group Risk Factor = 0.95547 Created On 3/29i20ll SPAS RQR Number iSetlD: 197817- 115217 -47 -1 NPS RQR Number : 4690805 NPS RQR Name SI of 1. Cl Elf 4. 5. 7004 - ROR 47 Page 24 of 37 011 KAISER PERMANEWE. e • - il Risk Factor Year over Year Comparison Group Name: CENTRAL CONTRA COSTA SANITARY Region: Northern California Group Number(s) : 382 Contract Period: 07101 +201 1 - 06!3012012 Prior Period: November 2009 Risk Score Period: December 2010 Risk Scores 40.0% 35.0% 30.0% _ 25.0% 1 20.0% ° -- --- -- -- ---- -__ -�. - 15.0 %' 10.0% 0.0% 0.00 to 0.50 to 0.75 to 1.0010 1.25 to 1.50 to 1.75 to 2.00 to 2.50 up 0.49 0.74 0.99 1.24 1.49 1.74 1.99 2.49 %of Members Risk Scores £.3 Nov 2009 ® Dec 2010 0.00 to 0.49 37.3'x. 32.956 0.50 to 0.74 14.396 16.9% 0.75 to 0.99 7.9% 7.5% 1.00 to 1.24 10.2 % 9.1 % 1.25 to 1.49 6.6% 7.1 % 1.50 to 1.74 3.6% 6.3% 1.75 to 1.99 3.2 % 3.9% 2.00 to 2.49 5.096 3.1 % >2.50 12.2% 132% 100.0!V. 100.096 Group Weighted Market Group Risk Average Score Segment Factor Prior Period 1.24140 0.95918 _ 1.29423 Risk Score Period 1.28979 095547 - 1.34990 Year over Year Change in 1.34990 i 1.29423 = 4.3 % Group Risk Factor: Come. Ot. Created On: 3129;2013 SPAS RQR Numhei'Set ID 197817 -11 5217 -47 -1 5830769 NPS RQR Number � 4600805 NPS RQR Name : 51 of 1. C I EU 4. 5. 7004 - RQR 47 Page 25 of 37 Pill, KAISER PERMANENTEo Risk Scores and Your California Rates Kaiser Permanente began using risk scores in the development of California mid - to -large group rates for 2005 renewals. Our research, along with government - sponsored independent research, has shown that risk scores are better predictors of future utilization and costs than demographics for groups of certain sizes. For 2007, 2008, and 2009, Kaiser Permanente has been using risk scores in the rate development of California groups with fewer than 1,000 members —that is, groups whose utilization is not fully credible. Q: What is a risk score? A: A risk score is a measure that takes into account both the demographics and the indicators of chronic diseases of a group's members. Each member is assigned a risk score based on his or her demographics (age, gender) and indicators of chronic diseases that the individual may have. Risk scores for two people of the same age and gender will differ if one of those individuals has an ongoing medical condition such as diabetes or a heart condition, as indicated by the types of prescription drugs they are currently taking. The risk scores for all of a group's members are averaged and then indexed to the average risk score for the group's market segment to produce the group's risk factor. This risk factor is used in the rating formula. Q: How is a risk score developed? A: Kaiser Permanente uses a model developed by a company called DxCG. DxCG is an industry- leading predictive modeling software company that has a number of different risk models. Kaiser Permanente is currently using a model called RxGroups that employs pharmacy information to predict future costs. DxCG researchers have devoted more than 20 years to developing these predictive models using nationally representative databases for Medicare, Medicaid, and privately insured populations of several million covered lives. This methodology is now being used to calculate Medicare reimbursement. More information about DxCG is available at www.DxCG.com. Q: What kind of information will 1 receive to explain my risk score? A: Kaiser Permanente will provide reports that show the proportion of members in a group that are in set ranges of risk scores. For example, the report will show how many members are in the 0 -0.5 range, how many are in the 0.5 -0.75 range, and so forth. The report will also show the same information for all the Kaiser Permanente members enrolled in the same market segment so that customers can see how their members compare to groups of a similar size. For confidentiality reasons, we will not release information about specific medical conditions in this report. firma KAISER PERMANENTEO 0: How can 1 interpret my group's risk score report? A: There are two elements to the risk score — demographics and indicators of chronic disease. In the example shown on the next page, ABC Company's overall risk score of 0.89425 is lower than that of the market segment overall (0.92856). This can be due to ABC Company's younger population (lower demographics) or lower disease burden (fewer chronic conditions), or both. For example, in the risk score category 0.00 -0.50, ABC Company has a higher proportion of members than its market segment. Members who fall into this category include females to age 24 and females 35-44 with no drug prescriptions and 22- year -old males who have been prescribed drugs for attention deficit disorder. On the other hand, Company ABC has a lower proportion of members in the highest risk category, >2.50. Examples of members who fall into this category are females over 60 with breast cancer and osteoporosis and males over 60 with congestive heart failure or type II diabetes. Please remember, these are only examples. Once a group's average risk score is developed, it is indexed to the risk score for the group's market segment, producing the group's risk factor. Again, in this example, ABC Company's risk score is 0.89425 compared to the market segment's risk score of 0.92856. The group's risk factor is then 0.96305. This group has about 4 percent lower risk than the average for its market segment. 'a KAISER PERMANENTE. ,.,t... , r. • _. . . t Risk Factor Backup Ra[In Re Ion' Southern California 9 9 Group Name: ABC Company Rating Period: 0110112007 - 12131 12007 Group Numbers: 123456 Experience Period: Jan 2005 through Dec 2005 Risk Score Period: December 2005 lan04 -Deco 4 Jan05 - Deco$ Average Annual Members: 253 219 0.00 0.50 075 1.00 1.25 0 ABC Company Average Weighted Members X Score % of Average Weighted Risk Scores Members X Score = Average 0.00 to 0.50 52.76% 0.29460 0 15544 0.50 to 0.75 10.551E 061805 0.06522 0.75 to I.00 10.05% 0.85445 0.08587 1.00 to 1.25 5.03%. 1.12480 0.05652 1 25 to 1.50 4.52'X. . 1.33933 0.06057 1.50 to 1.75 4.52& 1.62889 0.07367 1.75 to 2.00 3.02% 1.85200 0.05584 2.00 to 2.50 5.03% 2.29260 0.11521 2.50 4.52% 4.99500 0.22590 100% 0.89425 Group Risk Factor 0.89425 J 0.92856 = Total Members 199 'See Glossary, for definition 1 50 1.75 200 2.50 ORate Setting Category ' % of Average Weighted Members X Score Average 46.90% 0.29914 0.14030 16.89'% O.G1551 0.10399 8.70% 0.87214 0.07587 7.64'% 1.11743 0.08541 4.52% 1.37730 0,06226 2.98'X, 1.61668 0.04814 2.34% 1.86944 0.04381 3.62% Z.20350 0.07972 6.40% 4.51574 0.28906 100% 0.92856 0.96305 Ilk ? « »2 \ Lz 2� »: � \�\ 227 \ � � m F- : .D 2 E U § \ § E \ E § \ 2 E § } k a : $ / / k \ / 7 &32 2 :3 U) CL \$46 M_(n 0 ,.0 77 m= k =*7 E0 -C /(D E 2/ / ®g£o \ j\ \Urz n $ $ \ § ) ` [ \ \ \/ 2 # (n 6 a ) $ o =� ) ,a >,E {GE %E ;mm�o a.E o Qa 'i675 g20 kg� =\ it))0 7 �= a e Z G e \ #LZ o= \ E® \p\ E'5 -0 c ® e ® — E =a / S S S 2 m o 0 0 0 0 0 to k � .0 x e 0 m 0 r 0 »= 0 0 e� 0 0 nN� 0 0 o d .0 � Q0 0 0 0 0 0 2 E 8¥/ CL e 2= E R\/ ° R o S 0 2 0 e 6 G@ o\ C) ■ k \ / 7 &32 2 :3 U) CL \$46 M_(n 0 ,.0 77 m= k =*7 E0 -C /(D E 2/ / ®g£o \ j\ \Urz n $ $ \ § ) ` [ \ \ \/ 2 # (n 6 a ) $ o =� ) ,a >,E {GE %E ;mm�o a.E o Qa 'i675 g20 kg� =\ it))0 7 �= a e Z G e \ #LZ o= \ E® \p\ E'5 -0 c ® e ® — E =a