Private Option Cost Slightly Exceeding Projections; Officials Say Cost Will Decrease

Apr 24, 2014

DHS Director John Selig, Director Division of Medical Services Andy Allison.
Credit Nathan Vandiver / KUAR

State health officials provided legislators with information Thursday on the cost of the private option which is exceeding projections by $24 a month per-person. Steven Schramm, with the actuarial firm Optimus worked with the Department of Human Services on private option figures.

Schramm said the population of the private option has been two years older than projected and argued the $24 more a month per-person will come down in the future.

“The emerging experience from other states is actually that the later enrollments are younger than the earlier enrollments and so I believe because of Arkansas’s pre-enrollment process we may have masked that somewhat. So, it’s reasonable to assume based on other states’ experience that in fact this may be the high point of the average age,” said Schramm

The Director of the Division of Medical Services Andy Allison supported Schramm’s argument to the joint meeting of the Public Health, Welfare, and Labor committees. Allison said with 155,000 people enrolled out of an expected private option population of 250,000 health profiles, demographics, and choices of the private option population are likely to change projections.

Allison said another change removing benefits should drive down costs next year.

“Premiums that we’re paying for members that are enrolled in those plans with partial dental and vision coverage are more expensive and that has an impact on our average cost. That will change next year and that would be I think, financially to the good of the state and is one source of mitigation on premiums in coming years,” said Allison.

Republican Representative Charlotte Douglas of Alma asked the testifying officials if costs stay above projections, unfettered by changes, how the state would fund the private option after 2016 when federal cost support drops from 100 percent to 90 percent.

Steven Schramm argued measuring the true cost of the private option should include its effect on the cost of insurance for the non-private option population.

“Even if premiums have gone up more than we anticipated, if in the overall healthcare market everybody including those of us who aren’t on the private option, have premiums lower than they would have been because the market is more competitive, I think that’ll be an important factor to take into account. Because the state as a whole may be better off even if, which we don’t expect to happen, even if the private option were somewhat more expensive than we anticipated,” said Schramm.

Health officials emphasized the program, which began in January, is still in an early phase and projections and actual costs will be better understood as time progresses allowing changes to plans to take effect, demographics to even out, and as competition among providers increases as they move into every area of the state.