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> Document 62 : INS 99-14 : Hearing Decision
HARVEY & FRANK ATTORNEYS Anthem-BCBS Maine Received by 1301 TiimeJQL-@2C@11 4136- NOV 1 8 1999 ROBERT S. FRANK Docket N. INS 99-14 Document No - November 18, 1999
Alessandro A. luppa, Superintendent of Insurance c/o Lyndy Morgan Docket No. INS-99-14 Bureau of Insurance 124 Northern Avenue Gardiner, Maine 04345 Re: Anthem-Blue Cross Blue Shield of Maine (BCBSME) proceeding Docket No. INS-99-14 Dear Superintendent luppa: Per the request of Barbara of November 15, 1999, we have scanned the non-confidential portion of the Comparative Premium Rate Analysis. We were unsuccessful in fitting the entire document onto a floppy disk and therefore, we are providing just one compact disk containing the information. Our records indicate that we previously provided the Bureau with two hard copies of the public version of the CPRA. We are enclosing an additional one, per Barbara's request. Should you have any questions, please don't hesitate to call. Very truly yours, A@
Enclosures cc: Service List (w/o enc.) Karen Foster (w/o enc.)
TWO CITY CENTER, P.O. Box 126 - PORTLAND, ME - 04112-0126 (207) 775-1300 - FAX: (207) 775-5639 FRANK@HARVEYFRANK.COM PAGER PHONE: 207-450-3900
STATE OF MAINE DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION BUREAU OF INSURANCE
In Re: Application of Associated Hospital Service of Maine d/b/a Blue Cross and Blue Shield of Maine to convert to a Stock Insurer and Voluntarily Liquidate and Dissolve Certificate of Service and In Re: Application of Anthem Health Plan of Maine, Inc. to Acquire the Assets of Associated Hospital Service of Maine d/b/a Blue Cross and Blue Shield of Maine and Related Transactions Docket No. INS-99-14 (Consolidated)
CERTIFICATE OF SERVICE The above signed person hereby certifies that on November 18, 1999, he caused a copy of the following document to be served by United States mail, first class postage prepaid, on each of the persons listed below. James Zimpritch, Esq. Judith Chamberlain, Esq. Martin Robles, Esq. William Laubenstein, Esq. Gregory A. Brodek, Esq. (Maine Health Alliance) Andrew B. MacLean, Esq. (Thomas D. Hayward, M.D., Maroulla S. Gleaton, M.D., and the Maine Medical Association) Joseph P. Ditre, Esq. (Consumers for Affordable Health Care Foundation/Coalition) Michele M. Garvin, Esq. (Central Maine Healthcare Corporation) Robert 1. Goldman (Maine Council of Senior Citizens) Bonnie Post (Sacopee Valley Health Center, Regional Medical Center at Lubec, Eastport Health Care, Inc. and the Maine Ambulatory Care Coalition) John Dieffenbacher-Krall (Maine People's Alliance)
STATE OF MAINE DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION BUREAU OF INSURANCE
IN RE: APPLICATION OF ASSOCIATED HOSPITAL SERVICE OF MAINE d/b/a Application of Blue Cross and Blue BLUE CROSS AND BLUE SHIELD OF Shield of Maine for Conversion and MAINE TO CONVERT TO A STOCK Related Transactions INSURER AND VOLUNTARILY LIQUIDATE AND DISSOLVE and IN RE: APPLICATION OF ANTHEM HEALTH PLAN OF MAINE, INC. TO ACQUIRE Application of Anthem Health Ins THE ASSETS OF ASSOCIATED of Maine, Inc. to Acquire the Assets HOSPITAL SERVICE OF MAINE D/B/A of Blue Cross and Blue Shield of BLUE CROSS AND BLUE SHIELD OF Maine and Related Transactions MAINE AND RELATED TRANSACTIONS Docket NO. INS-99-14 (CONSOLIDATED)
COMPARATIVE PREMIUM RATE ANALYSIS November 4, 1999 For the Applicant For the Acquired Insurers David Frick, Esq. Edward J. Kane Anthem Insurance Companies, Inc. Blue Cross And Blue Shield Of Maine 120 Monument Circle 2 Gannett Drive Indianapolis, Indiana 46204-4903 South Portland, Maine 04106-6911 With a copy to: With a copy to: James B. Zimpritch, Esq. Robert S. Frank Pierce Atwood Harvey & Frank One Monument Square Two City Center, Fourth Floor Portland, Maine 04101 Portland, Maine 04101
MILLIMAN & ROBERTSON, INC. Actuaries & Consultants Intemationally WOODROW MILLIMAN Suite 300, 259 N. Radnor-Chester Road, Radnor, Pennsylvania 19087-5260 November 2, 1999 Telephone: 610/687-5644 Fax: 610/687-4236 Mr. Francis G. McGinty Senior Vice President, Health Care Policy and Finance Blue Cross and Blue Shield of Maine 2 Gannett Drive South Portland, ME 04106-6911 Re: Comparative Premium Rate Analysis, Pursuant to Paragraph H of 24 M.R.S.A. §2301-9(D), Conversion to a Domestic Stock Insurer Dear Mr. McGinty: At your request, Milliman & Robertson, Consultants and Actuaries, has prepared this comparative premium rate analysis ("CPRA") in support of the Blue Cross Blue Shield of Maine ("BCBSME" or the "Company") plan of conversion ("Conversion Plan") filing pursuant to 24 M.R.S.A. §2301-9(D) ("Conversion Statute"). This CPRA is intended to comply with the comparative premium rate analysis requirement contained in Paragraph H of the Conversion Statute. The analysis involves both the conversion of BCBSME to a domestic stock insurer and the contemporaneous purchase of its assets and assumption of its liabilities by a domestic stock insurer Anthem Blue Cross Blue Shield of Maine ("Anthem BCBSME"), a new wholly owned subsidiary of Anthem Insurance Companies, Inc. (hereinafter the entire transaction, for purposes of this CPRA, is termed the "Conversion"). We hereby consent to the use of this analysis by BCBSME as an Exhibit to, or otherwise as part of, the Conversion Plan. Introduction and Scope We have reviewed and are familiar with the Conversion Plan -which has been filed with the Superintendent by BCBSME, to which this CPRA is to be attached pursuant to the Conversion Statute. The Conversion Statute requires that the Conversion Plan provide a "comparative premium rate analysis of all of the organization's plans and product offerings, comparing actual premium rates for the 3-year period before the filing of the conversion plan and projected premium rates for the 3-year period following the proposed conversion." Paragraph H of the Conversion Statute further requires that the "rate analysis must address the projected impact, if any, of the proposed conversion upon the cost to subscribers as well as the projected impact, if any, of the proposed conversion upon the organization's underwriting profit, investment income, tax position and loss and claim reserves, including the effect, if any, of adverse market or risk selection on reserves."
Albany, Atlanta, Boston, Chicago, Dallas, Denver, Hartford, Houston, Indianapolis, Irvine, Los Angeles, Milwaukee, Minneapolis, New York, Omaha, Philadelphia, Phoenix, Portland, MF, Portland, OR, St. Louis, Salt Lake City, San Diego, San Francisco, Seattle, Tampa, Washington, D.C., Bermuda, Tokyo WOODROW MILLIMAN Member Firms in Principal Cities Worldwide P 10001
Mr. Francis G. McGinty November 2, 1999 Page Two
BCBSME directly writes insured health business in Maine as Blue Cross Blue Shield of Maine. We have included in the rate analysis all such insured health business (excluding the Federal Employees Program or FEP, whose premium rates are not determined by BCBSME and will not be affected by the Conversion). We have not included the health business written by either Maine Partners Health Plan, Inc, or Central Maine Partners Health Plan, Inc. We have not considered these separate entities since their corporate form, according to BCBSME, will not change as a result of the Conversion of one of their parent companies (i.e., of BCBSME). The projected premium rates developed in this CPRA are intended solely for the purpose of satisfying the requirements of Paragraph H of the Conversion Statute. In reviewing this material, please be advised that the projected premium rates are not intended to be a substitute for premium rates developed by BCBSME or its successor Anthem BCBSME during the normal conduct of its business, or a constraint on the actual development of premium rates to be implemented. Historical Premium Rates for the Three-Year Period Prior to Filing the Conversion Plan Average monthly premium rates per member for all plans and product offerings of BCBSME have been compiled for calendar years 1996, 1997, and 1998. These historical average premium rates are displayed in Chart 1, shown separately by market segment and type of product (managed care vs. indemnity). In assembling premium rates for the three calendar years prior to the filing of the Conversion Plan, we relied upon BCBSME's financial staff to compile the actual historical data needed. While we reviewed this information for reasonableness and consistency, we performed no audits or independent verification of its accuracy. To the extent that there are errors in the historical information provided, the projected average premium rates in the analysis may be affected. This will not necessarily, however, have an effect on our conclusions as to the projected impact of the proposed transaction upon the cost to subscribers or upon the specified financial operations of the organization. The premium rates shown in Chart 1 are monthly averages for the year, market segment, and type of product indicated. Within most of the categories shown are a very large number of separate premium rates which recognize such variables as detailed benefit provisions (deductible, copays, etc.), rate types (single, family, etc.), effective dates within the year, and rating characteristics. These premium rate variables are important to the Company and to the BCBSME customer involved, but they are not variables which affect in any way the comparative premium rate analysis for purposes of the Conversion Statute. MILLIMAN & ROBERTSON, INC. P 10002
Mr. Francis G. McGinty November 2, 1999 Page Three Projected Premium Rates for Transitional Years 1999 and 2000 Calendar years 1999 and 2000 are transitional years, with 1999 including portions prior to and after the filing of the Conversion Plan and with 2000 including portions prior to and after the Conversion itself. Since calendar year 1999 has not yet been completed, actual premium rates are available for the early part of it, but they must be projected for the remainder of the year. Half of calendar year 2000 is prior to the assumed date of the Conversion of June 30, 2000 and half is after it, so that projected average premium rates must be developed separately for the January-June and July-December periods. Chart 2A contains the projection of average premium rates per member per month (PMPM) for the transition years 1999 and 2000. Chart 2B contains the projection of average premium rates PMPM for the two halves of transition year 2000. The development of these projected values is described in the section which follows. Projected Premium Rates for the Three-Year Period Following the Conversion Paragraph H of the Conversion Statute requires that premium rates be projected for the 3-year period following the proposed conversion. The Company and Anthem have assumed an effective date for the Conversion of not later than June 30, 2000, based on their expectation for completing the approval process during the early part of the year 2000. Providing projected premium rates for three full calendar years following the proposed conversion, therefore, requires values for the years 2001-2003. Further, in order to provide a full continuum of premium rates between the three historical calendar years 1996-1998 prior to the filing of the Conversion Plan and the three projected years 2001-2003 following the Conversion, we have incorporated projected average premium rates PMPM for the transition years 1999-2000. Projected premium rates for the last half of calendar year 2000 and for calendar years 2001-2003 were developed under two alternative scenarios -- Blue Cross Blue Shield of Maine with no conversion, and Anthem Blue Cross Blue Shield of Maine (after conversion and asset purchase). The projection of average premium rates which reflect the effects of the Conversion was prepared to comply directly with the requirements of Paragraph H of the Conversion Statute, and it provides the basis for assessing the projected impact of the proposed conversion upon the cost to subscribers (i.e., on premium rates). In order to facilitate this assessment, we have also projected average premium rates for BCBSME without the Conversion for the same time periods. Doing so enables a direct comparison of projected average premium rates with the Conversion and without it, so that the effects of the Conversion can be identified and analyzed directly.
MILLIMAN & ROBERTSON, INC. P 10003 Mr. Francis G. McGinty November 2, 1999 Page Four Chart 3 contains the projection of calendar year 2001-2003 average premium rates PMPM for business written directly by BCBSME under its current corporate structure. This chart reflects what we have termed the "BCBSME (No Conversion) Scenario." The average premium rates PMPM for calendar years 1999-2003 for the "BCBSME (No Conversion) Scenario" in Charts 2A and 3 were based directly on the Company's premium rate projections in its 10199 Financial Forecast for 1999-2003 for BCBSME (No Conversion). The values for 1999 from this forecast scenario recognize actual experience for the first half of the year and reflect projected values for the remainder. Forecast percent annual increases in average premium rates PMPM for each market segment and type of product (managed care vs. indemnity) are contained in the Appendix to this letter. We believe that the method of developing the "BCBSME (No Conversion) Scenario" premium rates for the CPRA which we have used is reasonable, and it is consistent with the underlying assumptions by market segment and type of product incorporated in the Company's latest forecast for this scenario. Chart 4 contains the projection of calendar year 2001-2003 average premium rates PMPM for business written directly by Anthem BCBSME as a domestic stock insurer, upon the conversion and asset purchase by Anthem Insurance Companies, Inc. ("Anthem"). Chart 2A contains corresponding projected average premium rates PMPM for calendar year 2000, where the first half of the year is prior to the Conversion. Chart 2B contains the underlying average premium rates PMPM for each half of calendar year 2000. These charts reflect what we have termed the "Anthem BCBSME Scenario. The average premium rates PMPM for calendar years 2001-2003 for the "Anthem BCBSME Scenario" in Chart 4 were based directly on the premium rate projections in the 10199 Financial Forecast for 2000-2003 for Anthem BCBSME. This forecast was prepared by BCBSME and adopted by Anthem. Forecast percent annual increases in average premium rates PMPM for each market segment and type of product (managed care vs. indemnity) are contained in the Appendix to this letter. We believe that the method which we have used for developing the "Anthem BCBSME Scenario" premium rates for the CPRA is reasonable, and it is consistent with the underlying assumptions by market segment and type of product incorporated in Anthem's forecast for this scenario. Comparison of Projected Premium Rates, With and Without the Conversion Anthem has indicated that the plans and product offerings of BCBSME, along with the manner in which they are sold and the supporting services which are provided to subscribers, will not be materially affected by the Conversion. Therefore, the impact of the Conversion upon the cost to subscribers can be assessed by comparing premium rates for like plans and product offerings with and without the Conversion. The purpose of this section of the CPRA is to compare the projected premium rates with and without the Conversion, and to analyze the factors giving rise to any impact of the Conversion upon the Company's premium rates. MILLIMAN & ROBERTSON, INC P 10004 Mr. Francis G. McGinty November 2, 1999 Page Five Chart 5 shows the percentage differences in projected average premium rates PMPM for calendar years 2001-2003, for each of BCBSME's market segments and types of products. The percentages were calculated using the projected average premium rates PMPM from Charts 3 and 4. They are expressed as the percentage excess of projected average premium rates in the "Anthem BCBSME Scenario" over the 'BCBSME (No Conversion) Scenario". As shown in Chart 5, the projected average premium rates are 2% higher in the "Anthem BCBSME Scenario" than in the "BCBSME (No Conversion) Scenario" by calendar year 2003. For calendar year 2001, the difference in average premium rates PMPM for group business is less than 2%, reflecting the phase-in of premium rate adjustments to coincide with group rate change effective dates (renewal dates). This continues to a small extent into calendar year 2002 for certain large group business. The projected average premium rates PMPM used in this CPRA, as indicated above, were developed from Anthem's 1 0199 Financial Forecast for 2000-2003 for Anthem BCBSME and from BCBSME's consistently prepared 10199 Financial Forecast for 1999-2003 for BCBSME (No Conversion). Projection results for 1999 are the same in both scenarios, and likewise for the first half of calendar year 2000. The differences in projected average premium rates PMPM for calendar years 2001-2003 from these two financial forecast scenarios produce the comparative results shown in Chart 5. The remainder of this section analyzes the variables used in the premium rate build-up process and the anticipated effects of the Conversion on each of the premium rate build-up components. Premium Rate Build-Up Process. The actuarial rate development process generally used for the major types of health insurance products underwritten by BCBSME can be characterized as a premium rate build-up approach. Such an approach is consistent with commonly accepted and widely used practices in the health insurance industry for the types of indemnity and managed care products written by the Company. This process is subject to competitive market considerations, regulatory scrutiny, and underwriting judgment as to risk selection. These forces can perhaps best be described as representing indirect effects or constraints on the results that might otherwise be produced in the process of determining rates. 4:1 Incurred Claims and Trends. This premium rate build-up component makes provision for the anticipated cost of medical care services used by subscribers and covered dependent members. It represents the single largest component of the premium rates for BCBSME's health insurance plans and product offerings. Anthem believes that the Conversion will have a favorable impact on medical care costs, and we concur with this assessment. Below is a summary of the analysis and logic leading to this conclusion.
MILLIMAN & ROBERTSON, INC. P 10005
Mr. Francis G. McGinty November 2, 1999 Page Six
The primary determinants of medical costs used in developing premium rates are (i) the anticipated utilization of covered medical care services by subscribers and dependents in a rating pool and (ii) the anticipated cost of such services under the subscriber's product and plan of benefits. In actually projecting anticipated medical costs, a widely accepted practice is to keep these two determinants combined, focusing on percentage changes in medical costs per member per month (PMPM) for the rating pool (i.e., pure premium trends) from an historical base period. Over time, medical costs PMPM for a rating pool tend to change, but most of this is due to factors unrelated to organizational structure -- such as external influences on utilization levels and patterns, changes in benefit mix or deterioration in the morbidity level of a rating pool, ongoing increases in provider charges and fees, and the leveraging effects of fixed dollar cost-sharing amounts. Notwithstanding the significant effect that external factors have on medical costs PMPM, some impact in the future may be achieved as a direct consequence of actions taken by Anthem BCBSME. These include, in particular, the structure and level of contractual payments to providers and the facilitation of effective clinical management of care provided to subscribers. We have considered the external influences on utilization levels and patterns, and we have concluded that none of them will be adversely affected by the Conversion. Instead, secular changes in utilization levels and patterns are driven by such factors as changes in physician practice patterns, advances in industry technology, and population morbidity changes. We have also considered the various causes of change in benefit mix or deterioration in the morbidity level of the Company's rating pools, and we have concluded that none of them will be adversely affected by the Conversion. Changes in benefit mix reflect market and customer-driven decisions, and Anthem has affirmed that it does not anticipate any changes to existing products, marketing, or underwriting as a result of the Conversion. Deterioration in morbidity can be caused by a number of unrelated factors -- particularly lapses triggered by high or materially increased rate levels, or adverse shifts in enrollment mix within a rating pool that are not self-correcting through the rating structure. Anthem has affirmed that it does not intend to make any material changes in BCBSME's underwriting, marketing, rating, subscriber services, or premium rate levels as a result of the Conversion.
MILLIMAN & ROBERTSON, INC. p 10006 Mr. Francis G. McGinty November 2, 1999 Page Seven
We considered the Company's current provider payment or reimbursement structures, and we have concluded that these will not be adversely affected by the Conversion. Our analysis included a review of standard contractual agreements for major provider types. A substantial portion of BCBSME's contractual agreements with providers involve fixed dollar payment amounts or maximums. These amounts are determined through negotiation. Anthem and BCBSME have advised us that they do not expect the Conversion to have an adverse impact on provider arrangements. We have also considered the leveraging effects of fixed dollar cost-sharing amounts (e.g., annual member deductibles and per service copays) on medical costs borne by BCBSME and reflected in the Company's premium rates. As total underlying medical costs rise, but fixed dollar deductibles and copays remain fixed, the portion of total medical costs covered by BCBSME (after deductible or after copay) and reflected in its rates rises faster than the underlying rate of escalation in total costs. This leveraging of BCBSME costs is a direct result of the level of the fixed dollar deductible and copay amounts relative to the total cost of the services involved, and the underlying rate of escalation in the total cost of the services. We have concluded, therefore, that such leveraging of costs will not be adversely affected by the Conversion. Finally, we have considered the impact that the Conversion may have on the actions that can be taken by Anthem BCBSME to manage medical costs overall. Anthem anticipates a modest increase in claim savings as a direct result of the Conversion, and we concur with this expectation. Increased claim savings are attributable to the systems support for clinical management and contracting that can be provided by Anthem -- which will enable certain types of more cost-effective provider payment structures, better information reporting in support of medical management, and more effective clinical management support to physicians. Anthem's 10199 Financial Forecast for 2000-2003 for Anthem BCBSME assumes increased claim savings from these sources, enabled by the Conversion, amounting to 0. 35 % per year for calendar years 2001-2003 for regular business. We believe that such an assumption is modest and reasonable. To the extent that even greater claim savings can be achieved as a result of the Conversion, such savings would serve to further improve Anthem BCBSME's profitability and/or enable it to be more competitive by lowering premium rates. The overall conclusion reached by Anthem, with which we concur, is that the Conversion can be expected to have a favorable impact on medical costs PMPM. Medical costs undoubtedly will change over time as a result of external factors, but any adverse change will be due to factors unrelated to the Conversion.
MILLIMAN & ROBERTSON, INC. P 10007 Mr. Francis G. McGinty November 2, 1999 Page Eight Administrative Expenses. This premium rate build-up component makes provision for the operating expenses, including overhead, of the Company in the administration of its products. It represents the second largest component of the premium rates for BCBSME's health insurance plans and product offerings. Anthem believes that the Conversion will have a favorable impact on administrative expenses, and we concur with this assessment. Below is a summary of the analysis and logic leading to this conclusion. The primary determinants of administrative expenses used in developing premium rates are (i) BCBSME's cost of operations, as affected by enrollment as well as underlying unit costs, and (ii) the amount of reimbursement received by BCBSME for services provided in connection with non-underwritten sources. In actually projecting anticipated administrative expenses, BCBSME's budgeting process considers both of these determinants. We have considered the factors affecting the member enrollment component of administrative expenses, and we have concluded that they will not be adversely affected by the Conversion. Instead, changes in enrollment trends will be driven by factors such as changes in products offered and premium rate levels combined with changes in underwriting, marketing, and services provided. Anthem has affirmed that it does not intend to alter the existing products it offers as a result of the Conversion. The only anticipated change in premium rate levels due to the Conversion is a 2 % increase to cover premium taxes. This 2 % change in premium rates is unlikely to be material to Anthem BCBSME's competitiveness, so no significant impact on enrollment trends is anticipated. Further, Anthem does not intend to make any changes in underwriting, marketing, or subscriber services as a result of the Conversion. Therefore, the Conversion is not expected to have any effect on enrollment trends and the resulting enrollment levels as they affect administrative expenses. We have also considered the impact that the Conversion may have on the cost and resource level per member needed to provide all administrative services, and on the amount of reimbursement offset. Anthem anticipates moderate reductions to claims related expenses and general administrative expenses as a direct result of the Conversion, and we concur with this expectation. Anticipated reductions in the total administrative expense budget are attributable to the systems support, bulk purchasing opportunities, and overall economies of scale that are expected from Anthem -- which will enable better service to subscribers, more effective use of BCBSME personnel, and purchasing economies. A continuation of reimbursements for non-underwritten sources, with modest increases year-to-year (primarily due to growth), is anticipated by the Company, with no material adverse impact expected by Anthem as a result of the Conversion.
MILLIMAN & ROBERTSON, INC. P 10008 Mr. Francis G. McGinty November 2, 1999 Page Nine Anthem's 10199 Financial Forecast for 2000-2003 for Anthem BCBSME assumes reductions in total claims related expenses and general administrative expenses, enabled by the Conversion, amounting to .per year from calendar years 2001-2003 (excluding certain one-time conversion related expenses, discussed later in this section). We believe that such an assumption is moderate in amount, given the scale brought by Anthem, and should be achievable. To the extent that such reductions are not realized, then the return on investment to Anthem as the purchaser of BCBSME's assets is likely to be diminished, since premium rate levels are significantly limited by market considerations. Should even greater reductions be achieved as a result of the Conversion, however, the resulting savings would serve to further improve Anthem BCBSME's profitability and/or enable it to be more competitive by lowering its premium rates. The overall conclusion reached by Anthem, with which we concur, is that the Conversion will have a favorable impact on the administrative expense component of premium rates. As with medical costs, administrative expenses likely will change over time as a result of a wide range of factors, but any adverse change will be due to factors unrelated to the Conversion. Broker Commissions. The Broker commission component represents the provision in the Company's premium rates to pay for the sales and servicing commissions paid to independent agents and brokers. It is typically expressed as a percentage of premium. Anthem believes that the Conversion will not have an adverse impact on broker commissions, and we concur with this assessment. Below is a summary of the analysis and logic leading to this conclusion. We have considered maintenance of the Company's current broker agreements and commission scales, and we have concluded that this will not be adversely affected by the Conversion. Our analysis included a review of the standard broker agreement. Agreements such as this, and the associated payment levels, are determined through market forces and negotiation. Anthem and BCBSME have advised us that they do not expect the Conversion to adversely affect the arrangements with brokers. The overall conclusion reached by Anthem, with which we concur, is that there is, no reason to believe that the current broker commission premium rate component will change as a result of the Conversion. Commission scales and payment levels may change from time to time as a result of changes in market conditions, but any change will be due to factors unrelated to the Conversion. Portions Redacted MILLIMAN & ROBERTSON, INC. P 10009 Mr. Francis G. McGinty November 2, 1999 Page Ten
Maine Premium Tax. For purposes of the CPRA, Anthem has assumed. that Anthem BCBSME, as a domestic stock insurer, will be subject to a 2% premium tax on all of its insured business (this excludes FEP, which is a Federal government program written and directed outside of Maine). Since these are tax issues and not actuarial issues, we offer no opinion. Anthem's 10199 Financial Forecast for 2000-2003 for Anthem BCBSME assumes that premium tax will be paid to the State of Maine at the rate of 2% of gross premium for all of its business (as noted above, FEP is not included). The forecast further assumes that premium rates for Anthem BCBSME's business will be increased accordingly, upon the first practical or contractually feasible rate change effective dates (renewal dates). Anthem believes, therefore, that the Conversion will cause a small increase in subscriber premium rates, equating to 2% of premium, due to the imposition of premium tax on this business, and we concur with this expectation. The 2% impact has been reflected in the premium rates projected for this CPRA. Federal Income Tax. Federal income taxes typically represent a premium rate build-up component in the sense that such taxes serve to reduce gains produced byprofit margins or contingency reserve contributions in premium rates and by investment earnings. Any material adverse change in Federal income taxes could require additional ongoing provision for such additional taxes, unless other sources of gains can be achieved. The Company currently pays Federal income tax on net income at the alternative minimum tax rate of 20%. With the Conversion, Anthem assumes that Anthem BCBSME will be taxed at higher, regular corporate tax rates. Anthem also assumes that any net operating loss carryforwards accumulated by BCBSME will not carry to Anthem BCBSME. Anthem does not anticipate any other potentially adverse Federal income tax. changes. Since these are tax issues and not actuarial issues, we offer no opinion. Anthem believes, therefore, that the Conversion will have an adverse impact on Federal income tax liability. Anthem's 10/99 Financial Forecast for 2000-2003 for Anthem BCBSME assumes that Federal income tax will be paid at an average tax rate of 35 '% of net income. No increase to premium rates is anticipated, however, as a consequence of this change in Federal income tax. Instead, sufficient claim cost savings and administrative expense reductions are contemplated to offset the additional. Federal tax burden on Anthem BCBSME.
MMLD4AN & ROBERTSON, INC. P 10010 Mr. Francis G. McGinty November 2, 1999 Page Eleven
Guaranty Association Assessments. Anthem understands that Anthem BCBSME, as a domestic stock insurer, will be subject to any future assessments of the Maine Life and Health Insurance Guaranty Association. The statute and regulations prescribe the assessment process and carrier recoupment of such assessments in premium rates. Anthem's 10199 Financial Forecast for 2000-2003 for Anthem BCBSME assumes that minimal annual assessments will be made against Anthem BCBSME, based on historical assessment rates. No adjustment was made to premium rates to compensate for this new cost, because of its immateriality. We concur with this treatment. Any potential premium rate impact effectively is prospective only in nature, following a significant assessment in the future (if and when it should occur). The maximum potential future impact, we believe, is modest -- unlikely to reach 2% of Anthem BCBSME rates for insured business in the foreseeable future. Investment Income on Cash Row. Investment income on cash flow serves at least as an indirect component of the premium rate build-up process. It represents the value of investment earnings Generated on the funds created by the anticipated excess of (i) premiums received by the Company over (ii) claims. paid plus the Company's premium retention. The primary source of such funds is the cash flow created by the Company's reserve for claims incurred but unpaid (or sometimes termed loss and claim reserves). Premium income is received by the Company to provide for claims incurred by covered subscribers, where these claims typically have a lag in payment (i.e., claims 'incurred but unpaid) due to the time required for billing by the provider and processing by BCBSME. Prepayment or late payment of premium may also affect investment income on cash flow. The primary determinants of investment income on cash flow are (i) the size of the funds generated by cash flow, relative,to the associated amount of premium income, and (ii) the investment earnings rate on the Company's investment portfolio. We have considered the factors affecting the size of the funds Generated by cash flow, relative to the associated amount of premium income, and we have concluded that they will not be adversely affected by the Conversion. The primary source of the funds Generated by cash flow is the Company's reserve for claims incurred but unpaid, and the principal factor affecting its size, relative to premium income for a set of plan and product offerings, is claim submission and processing speed. As discussed later in this CPRA, in connection with the Company's loss and claim reserves, we have concluded that the speed with which claims are submitted and processed will not be adversely affected by the Conversion.
MILLIMAN & ROBERTSON, INC. P 10011 Mr. Francis G. McGinty November 2, 1999 Page Twelve
We have also considered the factors affecting the investment earnings rate on invested assets, and we have concluded that it will not be adversely affected by the Conversion. As discussed later in this CPRA, Anthem does hope to achieve as a result of the Conversion a change in the mix of invested assets that will improve the return on invested. assets, although this has not been quantified. The overall conclusion reached by Anthem, with which we concur, is that investment income on cash flow will not change adversely as a result of the Conversion. Such income undoubtedly will change over time, but any adverse change will be due to factors unrelated to the corporate structure and ownership of the Company. Profit and Contingency Reserve Contributions. The remaining rate build-up component is for profit and contingency reserve contributions. For the Company under its current structure, such amounts (along with investment income) are essential to provide surplus to ensure the financial strength of the enterprise and to help fund its capital expenditures. As a domestic stock insurer owned by Anthem after the Conversion, Anthem BCBSME will need to produce a sufficient stream of profits to generate unacceptable rate of return to its new owner. Anthem believes that the Conversion will not require a material increase in average premium rates in order to produce greater profit, and we concur with this assessment. Below is a summary of the analysis and logic leading to this conclusion. The need for profit and contingency reserve contributions under the Company's current structure and present circumstances is substantial. As a result of its impaired statutory surplus position late in 1998 and early in 1999, BCBSME secured capital through the issue of surplus notes to provide immediate surplus relief. In the absence of the Conversion, the Company's future financial results will have to be sufficient to provide for the interest costs on the surplus note balances outstanding-,(out of pre-tax gains) and to make principal repayments on the surplus notes (out of after-tax gains). In addition, the Company must rebuild its permanent statutory surplus to an adequate risk capital level as quickly as possible. Such rebuilding of statutory surplus must also come from future net profit s (i.e., out of after-tax gains). The Company's 10199 Financial Forecast for 1999-2003 for BCBSME (No Conversion) reflects premium rate levels and operating costs (claims and - administrative expenses) that BCBSME anticipates under relatively aggressive management of all aspects of the Company's operations. This produces a projected operating gain which reaches only of premium income by calendar years 2002 and 2003. Operating gain, as the term is used here, represents profit produced by premium rates before investment income, results from subsidiaries, or income taxes. Portions Redacted MILLIMAN & ROBERTSON, INC P 10012 Mr. Francis G. McGinty November 2, 1999 Page Thirteen If all assumptions made in preparing this projection of operating results can be achieved, along with the assumptions as to all of the other factors that affect net income, then BCBSME expects to remain solvent and in minimal compliance with the Blue Cross and Blue Shield Association's capital requirements to retain use of the trademark. Such a scenario, however, provides little margin for either mis-estimation or even small adverse variances in results, and the level of surplus involved provides no significant protection against major contingencies -or unforeseen outcomes. Financial recovery, even with no future setbacks, would require an extended period of time under this scenario. With the Conversion, Anthem BCBSME will have Anthem Insurance Companies, Inc. as its owner. Anthem is a well capitalized mutual health insurance company. It will have paid a negotiated purchase price to acquire the assets of BCBSME -- the proceeds from which will be used to repay the outstanding balance of BCBSME's surplus notes at the time of closing, acquire fall equity ownership of Machigonne (currently only 57 % of this subsidiary is owned by BCBSME)-, provide for certain obligations and liabilities, and provide funds to a Foundation created for this purpose under the Conversion Statute. Anthem will then have the further responsibility to ensure that Anthem BCBSME is adequately capitalized. Given an outlay of funds of the magnitude involved, the new owner presumably will expect a rate of return on its investment which is competitive with the industry and capital markets generally. We believe a competitive range for rate of return today on such an investment to be about We have analyzed the level of profit needed to be generated by Anthem BCBSME in order to produce a return on investment consistent with the ' I range. Under what we believe to be reasonable long-term operating assumptions, a net margin in premium rates of around of premium and fee revenue, along with investment income, can be anticipated to produce for its owner a rate of return that meets a target range. In making this assessment, we would note that enrollment levels are an important element in determining rate of return, serving as a balance to increasing margins in premium rates. Anthem's 10199 Financial Forecast for 2000-2003 for Anthem BCBSME assumes no in crease in premium rates other than a loading for premium tax. This forecast scenario contains the claim cost savings and administrative expense reductions indicated earlier. It produces a projected operating gain which reaches of premium income by calendar year 2003. Such a level of operating gain, if sustained, should produce a reasonable long-term return on investment, within the range, in our judgment. Portions Redacted MILLIMAN & ROBERTSON, INC. P 10013 Mr. Francis G. McGinty November 2, 1999 Page Fourteen
The overall conclusion reached by Anthem, with which we concur, is that average premium rates do not need to increase materially as a result of the Conversion in order to produce additional profit. Although a- profit component to future retention charges for Anthem BCBSME will be needed, Anthem does not intend for this to cause rates to increase materially from levels that would otherwise have been required. Instead, sufficient claim cost savings and administrative expense reductions are contemplated to produce reasonable profit levels for Anthem BCBSME. For purposes of this comparative premium rate analysis, no increase in overall projected premium rates due to additional provision for profit has been assumed. Expenses Associated with the Conversion. Certain one-time expenses are expected to be incurred by Anthem BCBSME that are attributable to the activities surrounding and associated with the operational transition from BCBSME (prior to the Conversion) to Anthem BCBSME. These have been reflected in the 10199 Financial Forecast for 2000-2003 for Anthem BCBSME. No impact on premium rates was assumed, however, because of the one-time nature of these expenses. Projected Impact Upon the Cost to Subscribers The anticipated full impact of the Conversion upon the cost to BCBSME subscribers is a 2% increase, which we consider not to be material. More specifically, we conclude the following:
These results are demonstrated in Chart 5, and the underlying basis for concluding this is established in the analysis contained in the section of this CPRA above.
MILLIMAN & ROBERTSON, INC. P 10014 Mr. Francis G. McGinty November 2, 1999- Page Fifteen As indicated earlier, this CPRA does not constitute a rate filing. The projected rates shown were developed solely for purposes of Paragraph H of the Conversion Statute. Anthem BCBSME will continue to develop new premium rates through the normal day-to-day conduct of its business, subject to applicable Maine statutes and regulations. Projected Impact Upon Certain Financial Operations of the Company Paragraph H of the Conversion Statute requires that the comparative premium rate analysis address the projected impact, if any, of conversion on certain key financial items of the organization. Below is an analysis of each of these items. Underwriting Profit. Underwriting profit (loss), or operating income, is typically defined by companies writing business similar to that of BCBSME as the excess of premium earned for insured business over costs chargeable to that business. The major categories' of costs chargeable to such business include incurred claims (or medical costs), administrative or operating expenses, broker commissions, and state premium taxes. The major operating or income statement items not included in underwriting profit (loss) include investment income, other income or expense, income taxes, and the earnings of subsidiaries. Anthem believes that the Conversion will have a favorable ongoing impact on underwriting profit, and we concur with that assessment. Certain one-time adverse impacts are anticipated in calendar years 2000-2002, however, as a result of expenses associated with the operational transition from BCBSME (prior to the Conversion) to Anthem BCBSME and with certain premium taxes as loadings to premium rates are implemented only on rate change effective dates (renewal dates). The impact of the Conversion on the Company's premiums and on each of the major categories of costs is analyzed in a previous section of this CPRA. That analysis contributes to our conclusion. Premiums are expected to increase 2% as a result of the Conversion. Medical costs (incurred claims) and administrative expenses (other than certain one-time expenses associated with the Conversion) are expected to decrease as a result of the Conversion, as discussed earlier. Broker commissions are not expected to change adversely due to the Conversion. State premium taxes will be 2 % of premium (per statute), offsetting the- fully phased-in increase in premiums. The overall impact of these factors is an improvement in underwriting profit. By calendar year 2003, underwriting profit (operating gain) is projected to have increased from of premium income under the 'BCBSME (No Conversion) Scenario" to of premium income under the "Anthem BCBSME Scenario." Portions Redacted
MILLIMAN & ROBERTSON, INC. P 1001 5 Mr. Francis G. McGinty November 2, 1999 Page Sixteen Investment Income. Investment income is typically defined by companies similar to BCBSME as the earnings on invested assets. ' The major return on assets not reflected in investment income is from equity in earnings of subsidiaries and unrealized gains or losses on marketable equity securities. There are two elements of such investment income, namely earnings on cash flow and earnings on capital and surplus funds. Earnings on cash flow result largely from the reserve for claims incurred but unpaid (loss and claim reserves). Earnings on capital and surplus funds arise from invested assets beyond those associated with cash flow items; these earnings are used to support capital and surplus at target levels. Anthem believes that the Conversion will not have a material adverse impact on the investment income it earns, and we concur with that assessment. The impact of, the Conversion on investment income, in the context of premium rate build-up components, is analyzed in an earlier section of this CPRA. That analysis contributes to our conclusion. To the extent that BCBSME's ownership by a well capitalized health insurance company provides opportunities for investing in such a way as to realize higher yields, which Anthem hopes to achieve, then investment income could increase. Anthem does not otherwise expect any material adverse change in its invested assets as a result of the Conversion, nor does it intend or expect to change its investment policies in such a way as to result in any material adverse change in its investment yield. The reserve for claims incurred but unpaid is not expected to change as a result of the Conversion (see subsection below on Loss and Claim Reserves), so associated earnings on cash flow are not expected to change. Other invested assets, likewise, are not expected to change adversely as a result of the Conversion, in part since the surplus notes are to be repaid as part of the purchase price. As a result, associated earnings attributable to capital and surplus are not anticipated to change adversely. Tax Position. Anthem anticipates possible adverse changes in terms of its Federal income tax obligations as a result of the Conversion, which have been reflected in the CPRA and described earlier. Since these are tax issues and not actuarial issues, we offer no opinion. Loss and Claim Reserves. Loss and claim reserves are accounting items which reflect the estimated value of benefit payments to be made in the future for covered medical care services which have been rendered as of a given valuation date but which have not yet been paid by BCBSME as of that date. These reserves are typically termed in the health insurance industry as the outstanding claim liability or the reserve for claims incurred but unpaid. Paragraph H of the Conversion Statute specifically requires that this comparative premium rate analysis address the projected impact, if any, of the proposed conversion upon the organization's loss and claim reserves, including the effect, if any, of adverse market or risk selection on reserves.
MILLIMAN & ROBERTSON, INC. P 10016 Mr. Francis G. McGinty November 2, 1999 Page Seventeen
Adverse market conditions, which are external to the Company, include primarily the acceptance of the Company's products by the local market and the prevailing market price levels of comparable products by competitors. Risk selection includes those practices of the Company which affect its determination of the insurance risks it will take and its setting of the premium rates it believes necessary for the insurance risks taken. Anthem believes that the Conversion will not have a material adverse impact on loss and claim reserves, including consideration of any potential adverse market and risk selection, and we concur with that assessment. These reserves are directly related to (i) the dollar volume of total incurred medical costs, (ii) the speed with which claims are submitted and processed, and (iii) enrollment patterns. We have considered the projected dollar volume of total incurred medical costs for Anthem BCBSME, as it affects loss and claim reserves, and we have concluded that this will not be adversely affected by the Conversion. As was developed in the section above, in the context of premium rate build-up components, medical costs PMPM and enrollment are not expected to change adversely as a result of the Conversion. Therefore, this component of loss and claim reserves will not change adversely as a result of the Conversion. We have also considered the speed with which claims are submitted to and processed by the Company, as it affects loss and claim reserves, and we have concluded that it will not be adversely affected by the Conversion. Instead, this is driven by such factors as changes in provider billing practices and advances in communication and processing technology. Provider billing practices affecting the speed of submission are outside of the control of BCBSME (other than basic claim submission standards, which are not affected by the Conversion). Advances in communication and processing technology are anticipated regardless of the Conversion, so that any impact they may have on processing speeds is not affected by the Conversion. In addition, we have considered enrollment patterns projected for the future, as they affect loss and claim reserves, and we@ have concluded that they will not be affected by the Conversion. As developed above, Anthem does not intend to make changes in underwriting, marketing, or subscriber services as a result of the Conversion which will adversely affect its enrollment trends, either by product or in total. In addition, the only premium rate change resulting from the Conversion is a 2 % increase to cover premium tax. In our judgment, this is not a material increase and will not cause a material shift in enrollment patterns that might affect loss and claim reserves.
MILLIMAN & ROBERTSON, INC. P 10017 Mr. Francis G. McGinty November 2, 1999 Page Eighteen Finally, in evaluating the potential impact of the Conversion on loss and claim reserves, we have considered the factors associated with adverse market conditions and risk selection, and we have concluded that they will not affect loss and claim reserves. The market's acceptance of the Company's products is unrelated to the factors affecting loss and claim reserves. Anthem does not intend to materially change the products or provider networks the Company currently offers as a result of the Conversion, 'so acceptance of Anthem BCBSME's products by the local market should not be affected by the Conversion. In addition, prevailing price levels of comparable products by competitors in the market will be determined by the rating actions of those competitors and not by the Conversion; and Anthem does not intend to alter marketing or actuarial and underwriting practices as a result of the Conversion, so that risk selection is not expected to change. The overall conclusion reached by Anthem, with which we concur, is that loss and claim reserves will not be adversely affected by the Conversion, due to adverse market or risk selection, or to any other factors. related to the Conversion. Loss and claim reserves undoubtedly. will change over time, but any change will be due to factors. unrelated to the corporate structure and ownership of the Company. Conclusion The health care environment is changing rapidly and will clearly affect BCBSME and its subscribers. Relative to this change, we believe that the impact of the Conversion on cost to subscribers is minimal. It is our opinion that the Conversion will have no material adverse act on BCBSME's premium rate levels or the cost to its subscribers. It is also our opinion that the Conversion will have no material adverse impact on BCBSME's underwriting profit, investment income, or loss and claim reserves (or any adverse market or risk selection on reserves). Moreover, the Conversion is likely to benefit the Company and all of its subscribers in total by enabling a stronger long-term capital base. We will be happy to answer any questions related to our analysis and conclusions. Sincerely,
Ronald G. Harris, F.S.A. William E. Finch, F. S.A. Consulting Actuary Consulting Actuary RGH/ac/HMEL2107 Attachments MILLIMAN & ROBERTSON, INC. P 10018 Chart I Blue Cross Blue Shield of Maine Three Year History of Average Premium Rates PMPM (1) Calendar Years 1996 - 1998
(1) Source: Provided by the Company.
11/2/99 4:54 PM g:\hme\hme88\premsumm\Prernium PMPM2.xIs Sheet: Chartl P 10019 Chart 2A Blue Cross Blue Shield of Maine Projection of Average Premium Rates PMPM (1) Transition Years 1999 and 2000
Calendar Year 2000 Market Segment and T@pe Calendar BCBSME Anthem of Product Year 1999 (No Conversion)i BCBSME (2) Small Group (2-50) Managed Care Indemnity Large Group Portions Redacted Managed Care Indemnity Non-Group Managed Care Indemnity Companion Plan Managed Care NA NA NA Indemnity (1) Source: Based on Financial Forecasts for 1999 - 2003, prepared by the Company. (2) Recognizes phase-in of premium tax loading to premium rates with rate effective date schedules. See text for explanation.
1 1099 4:54 PM g:\hme\hme88\premsumm\Premiu m PMPM2.xIs Sheet: Chart2A p 10020 Chart 2B Blue Cross Blue Shield of Maine Projection of Average Premium Rates PMPM (1) Transition Year 2000, by Half Year
July - December 2000 Market Segment and Type January -June BCBSME I Anthem of Product 2000 (No Conversion)l BCBSME,(2) Small Group (2-50) Managed Care Indemnity Large Group Managed Care Portions Redacted Indemnity Non-Group Managed Care Indemnity Companion Plan Managed Care NA NA Indemnity (1) Source: Based on Financial Forecasts for 1999 - 2003, prepared by the Company'. (2) Recognizes phase-in of premium tax loading to premium rates with rate effective date schedules. See text for explanation.
11/2/99 4:54 PM g:\hme\hme88\prernsumm\Premium PMPM2.xls Sheet: Chart2B P 10021 Chart 3 Blue Cross Blue Shield of Maine Three Year Projection of Average Premium Rates PMPM (1) BCBSME (No Conversion) Scenario for Calendar Years 2001 - 2003
Market Segment and T@pe Calendar Calendar Calendar of Product Year2001 Year2002 Year2003 Small Group (2-50) Managed Care Indemnity Large Group Portions Redacted Managed Care Indemnity Non-Group Managed Care Indemnity -A Companion Plan Managed Care NA NA NA Indemnity (1) Source: Based on the Company's Financial Forecast for 1999 - 2003. See text for explanation.
11/2/99 4:54 PM g:\hme\hme88\premsumm\Premium PMPM2.xls Sheet: Chart3 P 10022 Chart 4 Blue Cross Blue Shield of Maine Three Year Projection of Average Premium Rates PMPM (1) Anthem BCBSME Scenario for Calendar Years 2001 - 2003
Market Segment and Type Calendar Calendar Calendar of Product Year 2001 (2) Year2002(2) Year2003 Small Group (2-50) Managed Care Indemnity Large Group Managed Care Portions Redacted Indemnity Non-Group Managed Care Indemnity Companion Plan Managed Care NA NA Indemnity (1) Source: Based on Financial Forecasts for 1999 - 2003, prepared by the Company and adopted by Anthem. (2) Recognizes phase-in of premium tax loading to premium rates with rate effective date schedules. See text for explanation.
11/2/99 4:54 PM g:\hme\hme88\premsumm\Premium PMPM2.xls Sheet: Chart4 P 10023 Chart 6 Blue Cross Blue Shield of Maine Percent Difference in Projected Average Premium Rates PMPM (1) Excess of Premium Rates in Anthem BCBSME Scenario over BCBSME (No Conversion) Scenario for Calendar Years 2001 - 2003
(1) See text for explanation. (2) Recognizes phase-in of premium tax loading to premium rates with rate effective date schedules.
11/2/99 4:54 PM g:\hme\hme88\premsumm\Premium PMPM2.xls Sheet: Chart5 P 10024 Appendix
Chart 6: Projected Annual Percent Change in Premium Rates PMPM, Transition Years 1999 and 2000 Chart 7: Projected Annual Percent Change in Premium Rates PMPM, BCBSME (No Conversion) Scenario for Calendar Years 2001 - 2003 Chart 8: Projected Annual Percent Change in Premium Rates PMPM, Anthem BCBSME Scenario for Calendar Years 2001 - 2003
11/2/99 4:54 PM g:\hme\hme88\premsurnrn\Premium PMPM2.xls Sheet: Appendix p J0025 Chart 6 Blue Cross Blue Shield of Maine Projected Annual Percent Change in Premium Rates PMPM (1) Transition Years 1999 and 2000
Calendar Year 2000 Market Segment and Type Calendar BCBSME Anthem of Product YearI999 (No Conversion) BCBSME (2) Small Group (2-50) Managed Care Indemnity Large Group Portions Redacted Managed Care Indemnity Non-Group Managed Care Indemnity companion Plan Managed Care NA NA NA Indemnity (1) Source: Based on Financial Forecasts for 1999 - 2003, prepared by the Company. (2) Recognizes phase-in of premium tax loading to premium rates with rate effective date schedules. See text for explanation.
11/2/99 4:54 PM g:\hme\hme88\premsumm\Premium PMPM2.xls Sheet: Chart6 p 10026 Chart 7 Blue Cross Blue Shield of Maine Projected Annual Percent Change in Premium Rates PMPM (1) BCBSME (No Conversion) Scenario for Calendar Years 2001 - 2003
Market Segment and Type Calendar Calendar Calendar of Product Year 2001 Year2002 Year2003 Small Group (2-50) Managed Care Indemnity Large Group Portions Redacted Managed Care Indemnity Non-Group Managed Care Indemnity Companion Plan Managed Care NA NA NA Indemnity (1) Source: Based on the Company's Financial Forecast for 1999 - 2003.
11/2199 4:54 PM g:\hme\hrne88\prernsurnm\Premium PMPM2.xls Sheet: Chart7 p 10027 Chart 8 Blue Cross Blue Shield of Maine Projected Annual Percent Change in Premium Rates PMPM (1) Anthem BCBSME Scenario for Calendar Years 2001 - 2003
Market Segment and Type Calendar Calendar Calendar of Product Year2001(2) Year2002(2) Year 2003 Small Group (2-50) Managed Care Indemnity Large Group Portions Redacted Managed Care Indemnity Non-Group Managed Care Indemnity Companion Plan Managed Care NA NA NA Indemnity (1) Source: Based on Financial Forecasts for 1999 - 2003, prepared by the Company and adopted by Anthem. (2) Recognizes phase-in of premium tax loading to premium rates with rate effective date schedules. See text for explanation.
11/2/99 4:54 PM g:\hme\hme88\premsumm\Premium PMPM2.x1s Sheet: Chart8 P 10028
10/99 Financial Forecast for 2000 - 2003 For Anthem BCBSME Comparative Balance Sheets (GAAP Basis) (In Thousands) ACTUALS
'Months in reserve reported factors out the quota share reinsurance treaty between Blue Alliance Mutual Insurance Co. and BCBSME. Note: Certain amounts may not add due to rounding
P 10032 10/99 Financial Forecast for 1999 - 2003 For BCBSME (No Conversion) Comparative Balance Sheets (GAAP Basis) (In Thousands) ----- -------- - Accruals ----------------------------
Months in reserve reported factors out the quota share reinsurance treaty between Blue Alliance Mutual Insurance Co. and BCBSME. Note: Certain amounts may not add due to rounding.
P 10033
Membership Projections included in the 10/99 Financial Forecast for 1999 - 2003 for BCBSME (No conversion) and 10/99 Financial Forecast for 2000 - 2003 for Anthem BCBSME (in thousands) --------------- ACTUALS ---------------
p 10034
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