BAS 2017 Molina Healthcare Case Competition Timothy Hinh, Brian - PowerPoint PPT Presentation

BAS 2017 Molina Healthcare Case Competition Timothy Hinh, Brian Hsu, Alisa Nguyen, Luna Xu 1

Background and Case Objective Affordable Care Act (ACA) External Factors - Border Redrawing 2018 Premiums - Competitor Leaving Internal Factors - Rising Costs - Demographic Changes 2

Overview Area Calibration Area Calibration Data Projections Calculations - Claim data - Cost Trends - Risk - Membership - Future Adjustment records Membership - Calibration - Demographic Factors - Final Premiums 3

Data Processing and Projection Membership Cost Metrics Characteristics Using historical data to identify trends Considering future population shifts and determine claim expenses on a statewide and industry wide - Utilizations/1000 scale - Unit Cost - Regional Membership Changes - Demographic Changes Final Premiums Claims Expenses Calibration Factors 4

Unit Cost ● Increase in unit costs weighted by yearly utilizations (2015-16) 5

Unit Cost (Utilization Weighted Average) 2015-16 Comparison 6

Utilization/1000 ● Increase in utilizations weighted by member months (2015-16) 7

Membership Projection ● Redrawing of regional borders leading to changes in population ● US Care departure results in increased regional market share 2018 Membership By Region 3000 2500 2000 Count 1500 1000 500 0 LA Berkeley Santa Barbara 2016 Members 2018 Member Gain 8

Age Distribution Age Distribution 180 160 ● California demographic shift 140 120 ● Regional age distribution Count 100 80 ● Gain/Lapse rates (by age) 60 40 20 0 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 Age Median Age: 41 → 41 Average Age: 42.2318 → 43.3311 9 Source: California Finance Department

Final Premiums Calculation Total (weighted) premium Total (weighted) premium Average (weighted) Area Calibration Premium Age Calibration Final Premiums 10

Average Premium Breakdown Total (weighted) premium Average (weighted) Total (weighted) premium Premium Cost from Profit Margin member claims (3.0%) (70.2%) Administrative Risk Transfer Costs (given as Payment (11.7%) 15.1%) 11

Cost from Member Claims and Total Premium Calculation 2016 Base Claims PMPM = $348.66 2016 Base Claims PMPM = $348.66 Applied Util/1000, Unit Cost, and Demographic/Age factors 2018 Projected Claims PMPM = $436.58 2018 Projected Claims PMPM = $436.58 Applied Paid-to-allowed factor (0.7) 2018 Cost PMPM = $305.61 2018 Cost PMPM = $305.61 Added Administrative Costs, Risk Transfer Adjustment, and Profit Margin Average Premium (PMPM) = $435.35 Average Premium (PMPM) = $435.35 12

Final Premiums Calculation Total (weighted) premium Total (weighted) premium Average (weighted) Area Calibration Premium Age Calibration Final Premiums 13

Area Calibration Factors Calculation Projected claims PMPM in 2018 by region • Calculated area factors by taking the ratio of each region’s claims PMPM to • the overall claims PMPM • Calculated area calibration by taking the weighted average of these area factors Regions Los Angeles Berkeley Santa Barbara Area Factors .9466 1.1424 .8801 Area Calibration 1.000163 14

Final Premiums Calculation Total (weighted) premium Total (weighted) premium Average (weighted) Area Calibration Premium Age Calibration Final Premiums 15

Age Calibration Factors Calculation Used projected membership distribution by age year with age curve to • calculate the age calibration factor as 1.600 Age Distribution 180 160 140 120 Count 100 80 60 40 20 0 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 Age 16

Final Premiums Calculation Total (weighted) premium Total (weighted) premium Average (weighted) Area Calibration Premium Age Calibration Final Premiums 17

Final Premiums Calculation Combine average premium with localized factors: age and area • Final Premium describes price charged to person of specific age living in one • of the three regions 18

Comparing Regions Criteria: • Natural Growth Lapse Rates • • Border Redrawing 19

Final Premiums Calculation Total (weighted) premium Total (weighted) premium Average (weighted) Area Calibration Premium Age Calibration Final Premiums 20

Individual Premium Rates 21

THANK YOU 22