1 Baldwin Street,

Drawer 33

Montpelier, VT   05633-5701


Phone: (802) 828-2295

Fax: (802) 828-2483


Joint Fiscal Office




Preliminary Response to Memorandum from Administration


To:       John Crowley, Commissioner

From:   Joint Fiscal and Leg Council

Date:    February 22, 2006

Re:       H.861 – Response to Feb 21, 2006 BISHCA Memo regarding Demographic, Actuarial and Financial Information Needed 


Below is the list of questions from the BISHCA memo as well as our preliminary answers.


Catamount Health costs:

  • How were the per member costs of Catamount Health calculated?  Was an appropriate claims base used?  Was the claims base properly adjusted for differences in benefits, eligibility, demographics, and provider reimbursement?
    1. Dr. Thorpe took the state employee point of service plan and adjusted it for:

·        Catamount Health reimbursement level of Medicare plus ten percent

·        the differences in demographics of the uninsured target group

  • What administrative costs have been included?  
    1. By building it off the state employee plan, comparable administrative costs are included. The administrative costs of the state plan reflect three different programs rather than the one proposed with Catamount which should offset other differences in administrative costs. An additional 1% was added to the state employee plan assumption of 4% administrative costs.     
  • What is the assumption for medical inflation?
    1. There is an 8.5% inflation assumption
  • What are the age, gender, single/family composition, adult/child composition, and household income assumptions?
    1. The underlying model Dr. Thorpe uses incorporates this information.  We did not do an analysis at that level of detail. 
    2. We would look to do one as soon as BISCHA’s new Vermont Health insurance survey is released – the survey may have impacts on everyone’s plans
  • What cost sharing (copayments, coinsurance, and deductibles) is assumed?
    1. The model is built on the state employee point of service plan with similar aggregate cost sharing
  • Why do the PMPY costs fluctuate between 2008, 2009, and 2010?
    1. Because Dr. Thorpe’s model assumes that the first enrollees will be the sickest of the pool
  • How were these cost fluctuations calculated?
    1. They were calculated by starting from a baseline and adjusting for selection expectations plus inflation 
  • Why are the PMPY costs assumed in the 2-15 “balance sheet different from the costs assumed in the 2-10 “balance sheet”?
    1. The premium structure and benefit package changed. The plan was coupled to a different state employee benefit plan option
  • How were adoption rates calculated?
    1. This is Dr. Thorpe’s expertise. He based his work on a Congressional Budget Office and Joint Committee on Taxation study and other studies which were used to build the model. 

Catamount Health premiums:

  • Premium contributions for Catamount Health assume 30% average individual contribution to premium in 2008, 34% in 2009, and 34% in 2010.  How realistic are the enrollment projections given these high levels of individual premium contribution?

a         The participation rate assumptions are 1/3 to ˝ lower than the ones the administration is using.  The administration is assuming 56% participation Dr. Thorpe’s assumption is 30%.   Also, this question is looking at average premiums and not the sliding scale.  Dr. Thorpe’s analysis is based on national studies and trend analysis mentioned above


  • How many individuals are assumed to be in each income group?

a         This information has been given to the committee during testimony and will be forward to the administration – Note the categories are small so there is considerable movement within them.

  • Does the legislative plan assume any enrollment without a subsidy in the over 350% of FPL group?  If the over 350% FPL group does not enroll in significant numbers, how much additional funding will be needed to support subsidies for the under 350% FPL group?

a        Yes, assumptions are made that this group will enroll. There is no internal subsidy assumed

  • Even in the subsidized groups, premiums range from 16% to 55%.  How realistic is it that low to moderate-income individuals, many of whom have rejected their employer’s offer of insurance, will enroll in Catamount Health at these premium contribution levels?

a        Repeat of earlier questions. The analysis is based on national analysis of price sensitivity and is less aggressive than the administration’s participation rate assumptions

  • What are the assumptions and modeling for enrollment projections, given these premium levels?

a        Repeat of earlier question – Se Dr. Thorpe’s Overview of Catamount Health.


  • What type of reinsurance is contemplated?
    1. It is anticipated 75/25 above $30,000 (Reinsurer pays 75% above $30,000)
  • How would this type of reinsurance transfer public, taxpayer risk and ongoing liability to the private market?
    1. The way insurance works normally, Catamount pays a premium in exchange for the insurance company bearing this risk.
  • Is the public agency still ultimately responsible for the payment of claims?
    1. Yes.  The public entity remains liable - that the reason for reinsurance
  • How were the costs of reinsurance estimated?
    1. They are based on 10% of claims costs with a 10% administrative fee
  • Are these estimates reasonable?
    1. Yes, although they are estimates and may be low given the lack  of experience with the program
  • When will the actual reinsurance program and cost estimates be disclosed?
    1. The bill is permissive about reinsurance. We disclosed them above.

Medicaid enrollment:

  • When would each of the Medicaid program changes being?

a        See generally, H.861 Secs. 22(a) for effective dates & implementation.

b        Medicaid reimbursement changes – July 1, 2006 (Sec. 8, 21(a) & 22(a))

c         The premium changes are July 1, 2007  (Sec. 10, 11 & 22(a))

d        Chronic care RFP no later than January 1, 2007 (Sec. 5 & 22(a))

e         AHS chronic care plan by January 1, 2007 (Sec. 6)

  • How were per member costs for new enrollment in Medicaid calculated?  Were all Medicaid population categories included, or just VHAP?  Was an appropriate claims base used?  Was the claims base properly adjusted for differences in benefits, eligibility, demographics, and provider reimbursement?

a         No adjustment for provider reimbursement for traditional Medicaid beyond the proposal built in to the balance sheet.  

  • What administrative costs have been included?

a        Dr. Thorpe included 5% of the program costs for administration.  The administration did a similar proposal in Medicaid with no administrative costs other $110,000 for marketing. The administration has no claims costs in their proposal.    

  • What is the assumption for medical inflation?

a        6% percent for the new Medicaid enrollees based on discussions with OVHA.

  • What are the age, gender, single/family composition, adult/child composition, and household income assumptions?

a        Model built on average per member per month. Dr. Thorpe could go through the details if necessary

  • How were adoption rates calculated?

a        See questions above

  • Why do the PMPY costs fluctuate so much between 2008, 2009 and 2010?  Why are these numbers so different from the PMPY costs assumed on the 2-10 “balance sheet?

a        See questions above –  (selection, timing of those who don’t have insurance coming in)

Medicaid premium reductions and other program changes:

  • How large is the reduction from current levels, and from current revenue?

   a. 35% in VHAP; 50% in Dr. Dino.  Also see revenue on balance sheet

  • How would the reductions be allocated across the Medicaid populations?

a.      See related charts (Premium Comparison Chart)

b.      See H.861, Sec. 10 & 11

  • What is the cost impact of implementing “presumptive eligibility”?

a.      It is not in the bill we are not sure what you are referring to exactly.

  • What other Medicaid program changes, if any, are assumed?

a.      Changes in chronic care management based on the governor’s model, and OVHA initiatives.   

  • What modeling was done to translate these program changes into projections of the number of new Medicaid beneficiaries?

a.      With the exception of the changes in premium there are no program changes likely to effect enrollment

Chronic care:

  • How were the chronic care cost savings numbers calculated?
    1. In consultation with OVHA, the literature and Dr. Thorpe’s experience in this field. Dr. Thorpe has used his experience with well designed programs in other states and targets 5% savings over time.   
  • What information exists on the baseline of chronic conditions for Medicaid populations, how these populations are treated currently, and the cost of their treatment?
    1. OVHA testified to House Health Care on this issue and would be a proper source on this question.
  • How reliable are the financial projections of cost savings?
    1. We think they are conservative but they are projections and as such are subject to change.
  • How realistic is it that $10 million in savings will be achieved in the second year of the program?
    1. In part those savings are based on OVHA’s 1% initiative. It is an estimate based on $300 million of spending so it would require a 3% overall cost reduction in the second year or the program’s first year.
  • Are the savings net of administrative costs of administering the chronic care management program?  What are the estimated administrative costs of the program?
    1. The savings are net of administrative costs
  • What are the per member costs of the health risk assessment?  Where have the costs of the health risk assessment, and treatment associated with the health risk assessment, been included in the costs of Catamount Health, and the costs of Medicaid?
    1. It is built into the premium structure of the CIGNA plan. We will do it differently but it is covered under state employee plan

Medicaid funding of Blueprint costs:

  • Is it reasonable to assume that Medicaid’s share of Blueprint should be 38% of the total Blueprint costs.

a        It is a consensus number developed during the design of global commitment and comes from the Administration list of MCO investments

  • What percent of health care costs are attributable to Medicaid?  Under 30%?

a        This number is based on % pop on Medicaid, underinsured or uninsured as allowed under the waiver

  • What proportion of the insured population is enrolled in an OVHA comprehensive program?  Under 20%?

a        Do not understand the question