Press Release

For Immediate Release
August 29, 2001

Contact: Pam Henning, (608) 267-2929

State Group Insurance Board Finalizes 2002 Health Insurance Premium Rates

MADISON -- Eric Stanchfield, Secretary of the Wisconsin Department of Employee Trust Funds (ETF), announced today that the Group Insurance Board approved premium rates for health insurance plans affecting over 200,000 active state government employees, state retirees and their dependents throughout Wisconsin. The rates, which affect how much the State of Wisconsin, employees and retirees spend on health insurance, take effect January 1, 2002.

The premium rate increases for the state's participating Health Maintenance Organizations (HMOs) average 14.4% for 2002. The rates for all health plans, including the state's three self-insured traditional fee-for-service plans, will increase by an average of 19.1%.

Once again higher prescription drug costs played a role in the rate increases, but actuaries for ETF, administrator of the group health insurance plans, also blame the escalating cost of health care provider fees, hospital costs, and an aging population that is utilizing more health care services.

"The HMO rate increases in particular are very competitive," says Tom Korpady, administrator of ETF's Division of Insurance Services. "Rate increases elsewhere have been a lot higher. We've heard reports of

health insurers, particularly in the private sector, seeking premium rate increases next year of 35-40%. We believe that our HMOs have made a reasonable attempt to moderate increases."

Korpady cited a recent USA Today article reporting rate increase requests by health insurance providers of 13%, 20%, even 50% -- the highest in a decade.

Korpady credits changes to the Department's premium rate development and negotiation process with saving the State and its employees nearly $8 million in premium increases next year. At the start of the rate negotiation process last June, when participating Health Maintenance Organizations (HMOs) compete to do business with the state, ETF gave health insurance plans advance notice it would not accept unjustified premium rate increases. Individual health insurance plans, says Korpady, would not have been allowed to participate in the program if the Board deemed their final premium bids unsatisfactory or unsubstantiated.

"The process was very successful and meaningful," says Korpady. "The health plans realized it was of great importance and they provided the information that was necessary to make it work. We sharpened our negotiating stance and in the end it increased competition, which is good for everyone."

Fee-For-Service Plans

The Board expressed concern about the substantial increases in premium rates for participants covered under the state's fee-for-service plans, which last year covered about 5,000 employees, retirees, and their dependents. Although rates for all of these plans will increase by an average of 22% next year, participants in the Standard Plan alone will see a rate increase of 46%. Because they are self-funded, fee-for-service plans, premium rates are a direct reflection of claim experience.

"We expected to see significant increases in the Standard Plan premium rates," says Bill Kox, Director of ETF's Bureau of Health Benefits and Insurance Plans. "However, we have no authority under state law to modify the Plan, which makes it difficult to manage costs."

Local Employer Health Insurance Rates Increase in 2000

Higher physician charges, hospital costs, and pharmacy costs are also driving health insurance rates up for the approximately 250 local employers (cities, towns, villages, etc.) who participate in the state's group health insurance program. Their rates will increase a weighted average of 14.4%. This affects more than 11,000 local employees, retirees, and their dependents.

Uniform Benefits

The Board also took action to approve notable changes to its Uniform Benefits medical package for alternate health plans (HMOs). This affects State employees and annuitants and local government employees whose employers participate in ETF health insurance programs.

The purpose of Uniform Benefits is to limit the difference in each plan's benefit structure and simplify the selection of a health plan for employees. Employees are able to compare all of the plans equally and then select one based on such factors as out-of-pocket premium cost, quality of services, referral policies, access to specific physicians or providers, and drug prior authorization requirements. Adopted in 1994, Wisconsin's Uniform Benefits package is fairly unique among state health insurance programs.

Notable Uniform Benefits changes for 2002:

The Group Insurance Board approved the following changes to Uniform Benefits, effective January 1, 2002.

1. Prescription Drug Out-of-Pocket Maximum

   The annual prescription drug out-of-pocket maximum will be $270 for an individual and $540 for a family. In 2001 it was $240 for an individual and $540 for a family.

2. Extraction of Replacement of Natural Teeth Due to an Accident

   Treatment must commence within 18 months of the accident.

3. Emergency Room Copayment

   The emergency room copayment will increase from $25 to $40 per occurrence and will continue to be waived if the participant is admitted directly to the hospital.

4. Hearing Aids

   One hearing aid per ear will be covered at 80% every three years, up to a maximum of $1000 per hearing aid.

Changes to Self-Insured Plans for 2002

The Group Insurance Board approved the following changes to the self-insured plans for 2002. No benefit changes will be made to the state Standard Plan, SMP or Medicare Plus $100,000.

1. Standard Plan II

1. The deductible (per person) will increase from $300 to $500
2. Out-of-pocket max (per person) will increase from $1,000 to $2,000
3. Prescription copay will change from $7 for generic drugs and $14 for brand name drugs to $7 and $21.

2. Local Government Standard Plan

1. The deductible (per person) will increase from $150 to $250
2. Out-of-pocket max (per person) - no change
3. Prescription copay will change from $3 for all prescriptions to $5 for generic drugs and $15 for brand name drugs.

3. Local SMP

1. The deductible (per person) will increase from $100 to $200
2. Out-of-pocket max (per person) - no change
3. Prescription copay will change from $3 for all prescriptions to $5 for generic drugs and $15 for brand name drugs.

Related Facts:

• The Department of Employee Trust Funds and the Wisconsin Group Insurance Board have statutory authority for Group Health Insurance program administration and oversight.
• HMO plans follow Group Insurance Board guidelines for eligibility and program requirements.
• The Group Health Insurance program for active employees currently contracts with 17 HMO plans and three fee-for-service plans.

Who is eligible to participate in the program?

• State employees participating in the Wisconsin Retirement System (WRS).
• Elected state officials and members or employees of the Legislature.
• University of Wisconsin System - visiting faculty; graduate assistants employed at least one-third of full-time.
• Only blind employees of Workshop for the Blind with at least 1,000 hours of service.
• State retirees, their surviving spouses and dependents, and former employees who have 20 years of state service.
• Local government employees participating in the WRS whose employer elects to participate.
• Local government retirees and employees who terminate employment after age 55 (age 50 for protectives) and have 20 years of creditable service.