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State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W. Schacht Chairman, Board of Directors Roland W. Burris Attorney General Richard W. Carlson Executive Director

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Page 1: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

State of Illinois

Comprehensive Health Insurance Plan

Jim Edgar Governor

1993 Annual Report and

Financial Summary

James W. Schacht Chairman, Board of Directors

Roland W. Burris Attorney General

Richard W. Carlson Executive Director

Page 2: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W
Page 3: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

State of Illinois Office of the Board of Directors

Comprehensive Health Insurance Plan

400 West Monroe Street, Suite 202 •Springfield, Illinois 62704·1823 Telephone: 217n821333 (Voice) • 1-800-962-8384 (Consumer Information)

217/7821410 (TOO) • 217/782-6468 (Fax)

To the Honorable Members of the 88th General Assembly

September 15, 1994

It is my pleasure to present, on behalf of the Board of Directors of the Comprehensive Health Insurance Plan, its Annual Report and Financial Summary for Calendar Year 1993.

This report is completed in accordance with the requirements of the Comprehensive Health Insurance Plan Act (215 ILCS 1 05/3) and contains significant information concerning CHIP insureds, benefits, operations and cost containment activities

Respectfully submit d,

tv ames W Schacht hairman of the Board of Directors

Page 4: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

State of Illinois Office of the Board of Directors

Comprehensive Health Insurance Plan

4ll0 West Monroe Street, Suite 202 •Springfield, Illinois 62704-1823 Telephone: 217/782-6333 (Voice) • 1-4100-962-8384 (Consumer Information)

217/782-"410 (TOO) • 2171782-USB !fax)

September 15, 1994

The Honorable Jim Edgar Governor State of Illinois Room 207, State House Springfield, IL 62706

Dear Governor Edgar.

On behalf of our Board of Directors, I am pleased to present the fifth Annual Report summarizing major activities of the Comprehensive Health Insurance Plan for Calendar Year 1993.

The past year has been witness to a renewed debate over health care, and the success of the Illinois Comprehensive Health Insurance Plan over these past five years is a base on which Illinois can build for the future. Through December 31,1993, more than 9,000 persons, who were previously unable to obtain insurance, have been able, at one time or another, to look to CHIP for coverage they could find nowhere else.

I am a firm believer that individuals and state governments do well to build on their strengths. CHIP was seen, during the 1980s, as a goal. It has served successfully now for five years in meeting the needs of those Illinois citizens who have found themselves uninsurable.

CHIP provides a solid foundation which can be built upon and developed to help meet the continuing needs of those Illinois residenis who remain uninsured.

Executive Director

Page 5: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

1993: The Focus on Health Care

It is difficult to recall a t1me when health insurance was as hotly debated as it was during 1993. The President's proposal and the subsequent. often headline - grabbing, discussions that have occurred have brought this issue to the fore and what will come of it all remains to be seen.

December 31, 1993 marked the end of the fourth full year that CHIP was in operation. As of that date, total benefits pa1d to CHIP Insureds since inception had surpassed $100 million. During this year, the Board of Directors was able to increase its existing enrollment limitation from 4,500 to 4,750. This enabled more persons to obtain coverage through CHIP, and greatly reduced the amount of time individuals, once otherwise qualified, had to wa1t for an opening in CHIP. There are presently about 250 persons on the waiting l1st.

CHIP continues to work for the people of Illinois because it serves a very real need. By the end of 1993. more than 9,000 Illinois residents had availed themselves of coverage through CHIP. These persons are among the estimated 150,000 citizens of Illinois who have a special stake in the current health care debate. Their number gives testimony to the fact that Illinois has taken an important step toward resolving one of the perplexing problems of health insurance -- insurance for the uninsurable -- and by so doing has made possible a track record of success on which the State can rely as it makes important decisions about health care for tomorrow.

Illinois Comprehensive Health Insurance Plan "Insurance for the Uninsurable"

Page 6: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

Funding and Administration Program Funding CHIP is funded partly by premiums paid by enrollees and, to the extent that premiums do not meet anticipated expenses, partly by an appropriation from the state's General Revenue Fund.

Illinois law requires that the premium charged be 135 percent of the rates charged individuals for comparable coverage by five or more insurance companies having the highest volume of individual health insurance premium in Illinois. Premiums paid by persons insured under CHIP averaged approximately $4,000 per year in 1993.

As in previous years, an appropriation from the state's General Assembly was needed to fund the plan's anticipated deficit. Such annual appropriations have been necessary since the program began, due in large part to the serious health problems and medical conditions that are characteristic of CHIP enrollees.

Illinois Comprehensive Health Insurance Plan "Insurance for the Uninsurable" 2

Page 7: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

Administration CHIP is governed by a seventeen-member board of directors, which by statute includes the Director of Insurance as Chairman, the Attorney General, the Chairperson of the Health Care Cost Containment Council ten public members appointed by the Governor, and four ' legislative members.

The administration of the program -- premium billing, claims and customer service--is done pursuant to a contract with an administrative carrier. Since January 1, 1992, Health Care Service Corporation, which does business as Blue Cross and Blue Shield of Illinois has served in this capacity. '

The board's activities are supported and managed by a small staff based in Springfield, headed by its Executive Director, Richard W Carlson. Mr. Carlson formerly served as Assistant Director of the Illinois Department of Insurance ( 1981-1989) and as Superintendent of the Illinois State Lottery (1977-1981) Mr. Carlson is the co-author of An Introduction to the Illinois General Assembly and was on the legislative staff for the Illinois State Senate from 1969 to 1977. He was named as a Charter Member of the Samuel K. Gove Legislative Staff Intern Hall of Fame for outstanding public service by Illinois Issues magazine.

The Independent accounting firm of KPMG Peat Marwick serves as the board's independent auditor and has, since the Inception of the program, annually audited the plan's financial statements.

Robert E. Wagner, an attorney and president of Robert E. Wagner and Associates, serves the Board as 1ts outs1de legal counseL He is a former Assistant Attorney General, and continues to serve as Special Assistant Attorney

Illinois Comprehensive Health Insurance Plan

General for the Department of Insurance and the CHIP Board. He is a member of the Federation of Regulatory Counsel and maintains an active private practice in insurance regulatory law.

Ronald M. Wolf serves the board as its outside consulting actuary and is Vice President and Principal of Tillinghast, a Towers Perrin Company, in St. Louis. He is a Fellow of the Society of Actuaries, a Member of the American Academy of Actuaries, and a Fellow of the Conference of Actuaries in Public Practice.

The board also receives substantial actuarial support from an Actuarial Advisory Committee comprised of six of the leading life and health actuaries in this state. This committee meets periodically to review with Mr. Wolf and members of the board's Finance Committee the results of his work and any recommendations he plans on making on rate adjustments or other actuarial matters prior to their submission to the board. Their contribution has been very generous and helpful in assuring the long-term financial stability and success of CHIP.

"Insurance for the Uninsurable" 3

Page 8: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

CHIP BOARD OF DIRECTORS

Statytorv Members

James W. Schacht, Petersburg. Chairman. Acting Director of Insurance; Spec1a1 Deputy, offtce of ihe Special Deputy: Chief Deputy Director, Department of Insurance since 1978; served as Acting Director on two other occasions at request of Governors Jim Edgar and James Thompson; received National Association of Insurance Commissioner's (NAIC) distinguished Robert E. Dineen Award in 1990 in recognition of his outstanding contribution to insurance regulation; active in NAIC in leadership capacity on number of task forces and subcommittees dealing with financial, examination and reporting matters, his most recent accomplishment has been the development and implementation of the NAIC Financial RegulatJons Standards and Accreditation Program.

Honorable Roland W. Burris, Chicago. Elected Attorney General of the State of llltnois tn 1990 after serving three terms as State Comptroller; active member of the National Association of Attorneys General (NAAG), and serves as the chairperson of the Civil Rights Commtttee: began career in State Government in 1973 as the Director of the Illinois Department of General Services. assumed position of National Execut1ve Director and Chief Operating Officer for Operation PUSH. the Ch1cago-based civil and human rights organization in 1977. elected State Comptroller 1n 1978, becoming the first Afncan-American elected to statewide constitutional office tn Illinois; served as Vice Chairperson of the DemocratJC National Committee; Juris Doctor from Howard University Law School in Washington D.C

Johanna Lund, Rockford Chatr, IUinois Health Care Cost Contatnment Counc11: President, Health Care Consultants, Inc ; Prestdent, Rockford Counc1l for Affordable Health Care

Public Members

Robert L. Adler, Chicago. Chair, Personnel Committee. Insurance Consultant; affiliated with Near North Insurance Brokerage, Inc.; retired President & C.E.O., Associated Agencies, Inc., Chicago; past President, Jewish Federation of Chicago

Howard J. Bolnick, F.S.A., Chicago. Chair, Finance Committee. President, Celtic Life Insurance Company; former partner, Coopers & Lybrand, specializing in actuarial consutting; Fellow of the Society of Actuaries; M.B.A , University of Ch1cago

Raymond J. DeFilippo, R.H.U., Bloomington. Chair, Underwriting and Carrier Oversight Committee. Retired Director of Group & Health Insurance, Country L1fe Insurance Company; Member. Technical Advisory Panel of the Senate Select Committee on Hosp1tal Cost Containment when original CHIP legtslat1on was debated Regtstered Health Insurance Underwnter.

Sharon K. Heaton, Graymont Owner of Heaton Agency, Inc_, in Pontiac: former PreSident Professional Insurance Agents of Illinois; Nat1onal Director and Member, Board of Directors. Professional Independent Insurance Agents of lllinots former Trustee of National Group Trust,Vice President and ExecutiVe Commtttee Member, National Assoctation of Professional Insurance Agents

Richard F. Kotz, Esq., Glencoe. Secretary. Associate Corporate General Counsel and Assistant Secretary of Sears, Roebuck and Co.. Consultant to National Institute of Mental Health: former Glencoe Village Trustee; former President of Midwest regtonal group of the American Society of Corporate Secretanes and former National Board Member of the Society; graduate of Wharton School of Finance and Commerce of the Umversity of Pennsylvania and of its Law School, M.B.A from The American University, member, American, Illinois and Ch1cago Bar Associat1ons and American Corporate Counsel Association

Betsy D. Mitchell, Savoy Consumer Member. Dtrector of Public Affatrs for Devonshire Realty Ltd. in Champaign; Consuttant, Cook-Witter, Inc.; M A. in Public Administration. Universtty of lllino1s; M.A. tn Political Science, Eastern Illinois University, and mother of a special needs child

Saul J. Morse, Esq., Springfield. Treasurer and Consumer Member. Chair, Grievance Committee. Vice President and General Counsel, Illinois Medical Society and Illinois State Medical Insurance Services, Inc.; former member. Illinois Human Rights Commission. 1985-1991· 1985 Disabled Advocate of the Year, Illinois Department of Rehabilitation Services; 1990 Susan Sutter Award as outstanding disabled Illinoisan, Illinois State Easter Seal and United Cerebral Palsy Association; member, Sangamon County, Illinois, and American Bar Associations; member, American Society of Medical Association Council; member. National Health Lawyers Association; B.A . University of Illinois; Juris Doctor, College of Law, Universny of Illinois

Janis M. Orlowski, M.D., RIVer Forest. Physician and Assistant Professor of Medicine at Rush Medical College in Chicago; former Residenl, Chief Resident and Fellow Section of Nephrology, Department of Internal Medicine: Rush-Presbyterian-St. Luke's Medical Center; certified by the National Board of Medical Examiners, American Board of Internal Medicine. and Subspecialty Board. Nephrology; twice rectpient of Teacher of the Year Award, Department of Medicine; member American College of Physicians, lllinots and Chtcago Society of Internal Medicine, Illinois and Chicago Medical Soctety, UCDS Advisory Panel of the American Medical Association. and the Amencan Soc1ety of Nephrology; 8 A 1n B1omed1cal Engineering, Marquette Umversity; M.D from the Medical College of Wtsconsin, Milwaukee. Wisconsin

Robert E. Schaaf, C.L.U., Ch.F .C., Springfteld. President. Insurance Management Services. Inc.; Instructor. NAIC Financial Examiners and Insurance Department Staff Education programs, past Director of National Association of Life Compantes; past President and Dtrector of Illinois Association of L1fe Companies and the Central Illinois Chapter of Chartered Life Underwriters Associatton, past Director of !!hno!S Ufl? and Health Gua~ntv As!;nr.i"tinn· Chartered Life Underwriter; Chartered Fin·a-n~ia1 C~~~~lta~t: B.B A from the Un111erstty of Wisconsin. '

Sr,{an ·w. s-. .. :ank, C.L U., VVau!<egan. Chair, Commumcations Committee; Vice President, Swank Insurance Agency; Treasurer, Statewide Insurance Company; former President, Independent Insurance Agents of Lake County; Chartered Life Unde!Writer.

Illinois Comprehensive Health Insurance Plan "Insurance for the Uninsurable" 4

Page 9: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

Legjslatjye Members

Honorable Howard W. Carroll, Chicago. State Senator, 8th Distnct; Assistant Minority Leader, Illinois State Senate; Member, Senate Committees on Appropriations; Financial Institutions; Executive Appointments; and State Government Operations; rece1ved "Outstanding Legislator" award from Coalition of Citizens with Disabilities in Illinois, 1992; practicing Attorney; Juns Doctor from De Paul Un1versity College of Law, Chicago.

Honorable David Leitch, Peoria. State Representative, 93rd D1strict, Minonty Conference Chairperson, Illinois House of Representatives; Member, House Appropnat1ons-Human Services; Environment & Energy; r.. .. abor & Commerce Committees, Ex-officio member of all other House comm1ttees. 1n i 993, he became one of onl'j two people 1n nation to receive the "Government Achievement" award from the National Hemophilia Foundation, Vice-President, F~rst of America~llllnois, N.A, B A. 1n Histor;, Kalamazoo College, Kalamazoo, Michigan

Honorable Robert A. Madigan, Lincoln State Senator, 45th District, Chairman of Senate Insurance. Pensions & Licensed Achv1t1es Comm1ttee, Member. Agnculture & Conservation. Appropriations Committees. Commission on Intergovernmental Cooperation, G.fl .. Ret~remen! System, Board of Trustees; full~t1me state legislator. 8 S. from Millikin U mvers1ty, Decatur

Honorable Frank J. Mautino, Spring Valley State Representative, 76th District, V1ce Chairperson, House Committee on Appropnations~Public Safety; Member, Committees on Aging. Agriculture & Conservation, Elementary & Secondary Education and Insurance; full·tlme legislator; first appointed in 1991 to complete term of his late father, R1chard A Mautino, who was Chairman of House Insurance Committee and also served on the CHIP Board at the time of his death, subsequently elected to full~term in 1992; B.S. in Marketing from llhno1s State University

The Actyarja! Advjsorv Cororojttee

Charles J. Sherfey, F.S.A., Chairman, is a Senior Consultant for Coopers & Lybrand and a past~President of the Chicago Actuarial Association. Mr. Sherfey is a Fellow of the Society of Actuaries, a Fellow of the Canadian Institute of Actuanes. a Member of the American Academy of Actuaries and a Chartered Life Underwriter He has a Bachelor of Arts degree m Economics from the University of Nebraska and is a member of the Board of Pensions of the Presbyterian Church (USA).

Michael S .. Abroe, F.S.A., IS a principal in Chicago office of Milliman & Robertson, Inc., and 1s a Fellow of the Society of Actuaries and a member of the American Academy of Actuaries His area of expertise is health insurance. He has assisted a variety of clients with administration and management. strategic planning and acquisitions. as well as marketrng and pnc1ng Mr. Abroe has advised many types of orgamzations. such as hospitals, 1nsurance compan1es, Blues Plans, HMOs and PPOs. Before JOining Milliman & Robertson. Mr Abroe was Vice Pres1dent and Health Actuary at Bankers Life and Casualty where he was responsible for actuanal aspects of the~r individual and small group health lines of business.

Paul W. Janus, F .S.A .. 1s Senior V1ce President and Chief Actuary for Bankers Life and Casualty Company He is a Fellow of the Society of Actuaries and a member of the Amencan Academy of Actuaries He has served as President of the Chicago Actuarial Association and as Chairman of the Health Insurance Association of America's Individual Insurance Committee. He is a 1961 graduate of Knox College. Galesburg, Illinois.

Carl F. Ricciardelli, A.S.A., is President and Chief Operating Officer of the Fort Dearborn Life Insurance Company. He was formerly Vlce President and Chief Actuary at Blue Cross and Blue Shield of Illinois, a position he held for more than nine years. His career spans more than 35 years in management and actuarial work with a number of life and health insurers as well as in the consulting field. He 1s an Associate of the Society of Actuaries, a Member of the American Academy of Actuaries, and Enrolled Actuary, and a Fellow of the Life Management Institute

Richard J. Ruppel, A.S.A., is Vice President and Actuary for the Golden Rule Insurance Company, a pos1tion he has held s1nce 1967. He 1s a member of the Soc1ety of Actuaries and the Amencan Academy of Actuaries He is a 1959 graduate of St. Meinrad College, St. Meinrad, Indiana and holds a Master of Science degree from Butler University, Indianapolis, Indiana

Nonnan J. Zwitter, F.S.A., is an actuary for the CNA Insurance Companies. He is a Fellow of the Society of Actuaries, Member, Academy of Actuaries, and Member of American Academy of Actuaries Health Committee Mr Zwitter rece1ved h1s Bachelor of Arts degree in Mathematics from the Umversity of Wisconsin ~ Milwaukee rn 1970 and 1s a Chartered Lrfe Underwnter and a Fellow of the L1fe Management lnstitute.July 21, 1994

Illinois Comprehensive Health Insurance Plan "Insurance for the Uninsurable" 5

Page 10: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

CHIP Program Specifics Who is Eligible for CHIP?

Illinois residents can generally qualify for CHIP if they meet one of the following cnteria:

• they have applied for health insurance and have been rejected because of a pre-existing condition; or

• they have a very expensive existing policy which costs more than they would pay under CHIP; or

• they have one of the qualifying medical conditions (see table at right).

Residents with other medical conditions may also be eligible for CHIP, but must meet one of the first two standards. If at least one family member meets the medical eligibility criteria, other resident members of the same household are also eligible for coverage

Persons are not eligible for CHIP who have or obtain other health insurance which is substantially similar to or more comprehensive than CHIP or would be eligible for such coverage if they elected to obtain it (unless the rate they would be required to pay exceeds what they would pay for CHIP); who receive or are approved to receive Medicaid; who are 65 years of age or older and covered by Medicare; who have voluntarily terminated coverage under CHIP within the past 12 months; who have already received $500,000 in benefits paid under CHIP; who are residents of a public institution; or whose premium is paid or reimbursed by a government agency or program or a health care provider.

Illinois Comprehensive Health Insurance Plan

Acquired Immune Oefteiency Syndrome (AIDS) or Aids Related Complex (ARC)

Angina Pectoris

Arteriosclerosis Obliterans

Cerebrovascular Accident (Stroke}

Chemical Dependency

Cirrhosis of the Liver

Coronary Insufficiency

Coronary Occlusion

Cystic Fibrosis

Friedreich's Ataxia

Hemophilia (Classical)

Hodgkin's Disease

Huntington's Chorea

Juvenile Diabetes

Kidney Failure Requiring Dialysis

Leukemia

Lupus Erythematosus Disseminate

Metastatic Cancer

Multiple or Disseminated Sclerosis

Muscular Atrophy or Dystrophy

Myasthenia Gravis

Myotonia

Paraplegia or quadriplegia

Parkinson's Disease

Poliomyelitis

Polycystic Kidney

Severe Traumatic Brain Injury

Sickle Cell Anemia

Silicosis Pneumoconiosis (Black Lung)

Syringomyelia

Wilson's Disease

"Insurance for the Uninsurable" 6

Page 11: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

Persons who were previously covered under a health care policy or plan provided by an employer are not eligible for CHIP if the employer has more than ten employees and has discontinued their coverage without discontinuing coverage for all employees. This is to prevent large employers from removing persons from their plan who are seriously or chronically ill -a practice referred to as dumping- merely to lower the cost of Insurance.

Options for Coverage Under CHIP CHIP offers a standard plan for persons who are not eligible for Medicare, and an alternate plan for persons who are eligible for Medicare. Each plan offers a choice from among annual deductibles of $500, $1,000 or $2,500.

Although the $2,500 deductible plan was not made available until January 1, 1994, by December 31, 1993, 475 CHIP enrollees had elected to enroll in this plan for the premium savings that they would experience.

The standard plan insures 90 percent of the CHIP enrollees.

If two or more members of the same family are insured under a single CHIP policy, a family annual deductible of $1,000, $2,000 or $5,000 is available.

Illinois Comprehensive Health Insurance Plan

The standard policy provides coverage for hospital, physician, and surgical services as well as prescription drugs, hospice and home health care, and other medical items, up to a lifetime maximum of $500,000.

The second plan, which supplements Medicare (but is not a standard Medicare supplemental policy), is designed for persons who are under 65 years of age and eligible for Med1care due to a disabling condition. Persons in this category frequently find it difficult to obtain supplemental coverage in the insurance marketplace and find CHIP to be a valuable resource. Persons age 65 and over are not normally eligible for CHIP, because of the availability of supplemental 1nsurance in the private market due to recent changes in federal law. Premiums for this coverage are half of those charged for a standard policy, since benefits which otherwise would be payable by CHIP are reduced by benefits received through Medicare. Normal deductible and co-insurance requirements apply.

Whichever program a person is enrolled in, the deductible which applies must be met each calendar year Afterward the plan pays 80 percent of the usual and customary charges for covered services. Once an enrollee accumulates either $2,000, $2,500 or $4,000 (depending on their deductible) in out-of-pocket expenses, the plan will begin paying at 100 percent of covered charges until the beginning of the next calendar year An out-of-pocket expense is any covered expense incurred but not reimbursable during any calendar year because of the deductible and co-insurance. All benefits are subject to the $500,000 lifetime maximum.

Enrollees may also purchase an optional indemnity rider which provides limited maternity coverage. This is

"Insurance for the Uninsurable" 7

Page 12: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

available in $500 increments, up to a maximum of eight in Rate Area A. The number of increments that may be purchased varies by geographic area, and is somewhat less for the other three rate areas. This rider is available oniy at time of initial application for the plan or within 60 days of an enrollee's date of marriage.

Pre-Existing Medical Conditions In most cases, benefits are not payable under a policy issued by CHIP for care received by an enrollee during the first six months of coverage for any condition or illness which was either manifest or for which an enrollee received medical advice or attention during the six month period prior to the effective date of coverage. After a policy has been in force for six months, conditions that pre-existed the policy effective date are treated the same as any other illness.

At the inception of CHIP, any enrollee whose policy became effective during the first year of the plan's operation (May 1 , 1989 to May 1, 1990) could pay a permanent 10 percent surcharge on their premiums and reduce the six-month waiting period to two months. The coverage that was given, however, excluded any charges for treatment of a pre-existing condit1on directly or indirectly related to surgery for the full six months. This option expired pursuant to Illinois law on May 1, 1990 and by that time 982 enrollees had availed themselves of it.

Another option that Illinois law permitted at plan inception was a complete waiver of the six-month exclusionary period. To qualify, applicants had to demonstrate that they had previously satisfied a similar waiting period on pre-existing conditions under another policy and that they were involuntarily terminated from their

Illinois Comprehensive Health Insurance Plan

previous coverage. This option remains available in a limited number of cases. Due to a change in Illinois law, however, applicants must now also

• apply for coverage no later then 30 days following the date of their 1nvo1untary termination;

• be ineligible for continuation or conversion rights to substantially similar coverage following termination; and

• pay a permanent surcharge of up to 1 0 percent. Seven new waivers were put into effect during 1993.

Self-Reported Diagnoses of Enrollees with Waivers Since CHIP Enrollment Began

Condition Number Percent

Heart

Cancer

Brain/Nervous System

Diabetes

Mental Conditions

Musculo-Skeletal

Digestive, Kidneys, Liver

Circulatory Blood Diseases

Unknown

Respiratory Disorders

AIDS or AIDS Related

Lupus

Congenital Disorders

1

Other Con~~~:L

360

287

184

175

120

117

102

80

57

48

41

30

28

138

1,767

20%

16%

10%

10%

7%

7%

6%

5%

3%

3%

2%

2%

1%

8%

100%

"Insurance for the Uninsurable" 8

Page 13: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

How Much Does CHIP Coverage Cost? Compliance with the 135 percent statutory requirement is monitored through periodic review and recommendations from Tillinghast, the board's outside consulting actuary. To develop premiums in accordance with the statutory requirement, CHIP's consulting actuaries begin by averaging the premiums charged by the five largest insurers offering individual comprehensive major medical policies in Illinois, adjusting for differences in coverage. Their recommendations are then reviewed by actuaries from the Illinois Department of Insurance and the Actuarial Advisory Committee before being presented to the board's Finance Committee and, later, to the board for final approval.

14K i ANNUALIZED PREMIUMS FOR STANDARD J ZK POLICY WITH $500 DEDUCTIBLE

FOR RATE AREA B

JOK II FEMALE

8K D MALE AVERAGE

/:, 4K - - - - - -

6K

2K

A B C D E F G H J K

Illinois Comprehensive Health Insurance Plan

A=< 30 B = 30-34 c = 35-39 D = 40-44 E = 45-49 F = 50-64 G = 55-69 H = 60-64 I = 65-69 J = 70-74 K= 76+

Based on such reviews, rates for the CHIP program were modified twice during 1993.

Premiums paid by CHIP enrollees, like premiums paid to insurance companies, vary dependent upon one's age, sex, where he or she lives within the state, the type of policy and the deductible amount.

For the purpose of establishing rates, the state is divided into four geographical rate areas that reflect the differences in the cost of medical care in those areas. The basis for area rating is county of residence, except for the City of Chicago.

Rate Area A: The City of Chicago. This is the area where health

care costs and, consequently, premiums are the highest.

Rate Area 8: Suburban Cook, all of DuPage, Kane, Lake, McHenry

and Will Counties.

Rate Area C: All of Boone, Champaign, DeKalb, Grundy, Kankakee,

Kendall, Madison, Peoria, Rock Island, Sangamon, St. Clair, Tazewell, and Winnebago counties.

Rate Area D: The remaining counties in downstate Illinois. This rate

area has the lowest premiums and is predominantly rural in nature.

"Insurance for the Uninsurable" 9

Page 14: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

CHIP Population Characteristics Enrollment By statute, each year the Board of Directors is required to estimate the number of new policies 1t believes 1t has the financial capacity to issue during the year. The board must then take the necessary steps to assure that plan enrollment does not exceed the number of Illinois residents which it has estimated can be insured at any one time. Accordingly, enrollment had been limited to 4, 500 since 1989, a limit that was first met in February of 1990. In 1993, the CHIP board

Reasons for Policy Terminations

increased this cap to 4,750. Persons who apply for coverage, who would otherwise qualify except for the limitation on enrollment, are placed on a waiting list As existing insureds drop or terminate their CHIP coverage, +hn.~" ""'""'""'""';,..,....,~ .,....,.,... fill,...,... ·~!;+h +h ..... roo,... •uh,... .....,~,... .... + f.h,.. +........... of: UI~.;JV VtJOIIIII~.;J CII'C:O IIII~U YYILIIliiU>:)'C VYIIV CIIV GlL UI'CO lUtJ 01

this waiting list Since CHIP became operative 1n May, 1989, the

cuinulative enrollment through 1993 was 9, 124. Enrolirnent at the end of 1993 stood at 4,693.

Illinois Comprehensive Health Insurance Plan

Applications during 1993 totaled 1, 710--an average of 142 per month. At year-end, almost 250 persons were on the waiting list

During 1993, 952 CHIP policyholders terminated or had their coverage terminated. The largest percentage of term1nat1ons are due to non-payment, as in past years. In these cases, the policies lapsed because the premiums were not paid.

Persistency of policies issued by CHIP is strong, with 92 percent of policies issued in 1993 still in force at the end of the year.

Enrollment ACtivity by Policy Type

January 1, 1993- December 31, 1993 Standard Standard Med Sl.tpp Med Supp TOTALS

'"'" $1000 '""" $1000

New Applications Entered 1,037 585 68 20 1,710 New Members Added 724 511 57 8 1,300

Applications Rejected' 642 257 37 17 953

Members Terminated 550 437 111 27 1,125 Number Insured Year End 2,823 1,419 362 89 4,693 On Wait List Year End 246 1 This number includes persons who did not meet the qualifications for CHIP as well as persons who withdrew their applications.

"Insurance for the Uninsurable" 10

Page 15: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

Plan. Per.~ 1089 -1m Member Terminations by Reason

1 Year Month Issued ln~Forct1 "' 1989 Subtotal 4,508 1,611 36% Description Tenninations Percent

1990 Subtotal 1,350 516 38% Lapsed For Non - Payment 251 29%

Insured's Request 182 21% 1991 Subtotal 1,015 608 60%

Age 65 128 15% 1992 Subtotal 980 725 74%

Other Coverage 119 14% 1993 Jan 76 58

Death 82 10% Feb 111 92

Premium Too High 29 3% Mar 102 91

Medicare 22 3% Apr 110 98

NSF- Check Returned By Bank 16 2% May 110 99

Non-Resident 15 2% Jun 156 133

Medicaid/Medical Assistance 6 1% Jut 164 146

Maximum Benefit 4 0% Aug 69 64

10 Day Free Look 3 0% Sept 91 64

Total 857 100% Oct 87 64

Th1s table shows member terminations as of the month in which coverage Nov 124 122

ceases The table on the previous page, which is taken from Blue Cross and Blue Shield Dec 56 54 monthly reports, shows member terminations as of the month in wh1ch the terminations are recorded. This accounts for the difference between the totals.

Subtotal 1,256 1,125 90%

Total 9,109 4,585 50%

Illinois Comprehensive Health Insurance Plan "Insurance for the Uninsurable" 11

Page 16: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

Age, Gender and Geography Age-Gender pjstribytjon: Thirty percent of CHIP enrollees at the end of 1993 were between the ages of 55 and 64. The next largest age groups into which enrollees fell are: ages 45 to 54 (23 percent); ages 35 to 44 (18 percent); ages 0 to 25 (15 percent); and ages 25 to 34 (14 percent). Less than 1 percent of CHIP enrollees are age 65 or older. Many of those in the under age 25 category are children who have serious medical conditions, many of whom require constant care, and who have been unable to obtain insurance coverage elsewhere. As for the age 65 and older category, there are now ample choices in the open market for supplemental coverage when persons become eligible for Medicare. CHIP is only appropriate at this age if a person is ineligible for Medicare.

Planwide, the split between the sexes is nearly even, with 51 percent female and 49 percent male.

Illinois Comprehensive Health Insurance Plan

Participation by females is lower in the younger years, evens up in the middle-aged category, and then outstrips males in the older age groups. Females comprise only 43 percent, versus 57 percent for males, of the under 25 age group. Then they even up at 50 percent with males in the 35-44 age group, and they are 58 percent of the 55-64 age category.

65+ ~-Zl: 55/64

45/54

35/44

25/34

<25 .1§. ··~·;;; !!!¢•; ...... ,., .•. ,lll!ll··; .. ;;·'ZJ?'•·'·•

2(Xl 400 ffXl 800 I roJ

Aae- Gender Distribution

"Insurance for the Uninsurable" 12

Page 17: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

suburban or "collar" counties (areas A and B, respectively) HIP Population Density by County pjstributjon by Rate Area: Chicago and the ~

arehometo63 --------------------------------------~

percent of the people enrolled in CHIP. The next largest group lives in downstate, rural Illinois (area D). This area accounts for 23 percent of the people enrolled in CHIP at the end of 1993.

As the map at right clearly shows,

Where do they live?

CHIP is serv1ng persons throughout Illinois. At least one person in all but f1ve counties in Illinois was enrolled 1n CHIP at year-end 1993.

Illinois Comprehensive Health Insurance Plan

• [J --

I]

Ill ~

0

1,000 to 1.600

400.600

100 -400

50 ·100

11. 50

1 . 10

None

"Insurance for the Uninsurable" 13

Page 18: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

Benefits Paid to Policyholders A health insurance plan experiences a lag between the time an insured receives medical services and the time bills for these services a;e submitted by p;oviders and finally processed for payment. For this reason, the claims that are paid by the end of any given month do not represent all of the claims which were incurred prior to the end of that month and will eventually be paid. In recognition of claims that have been incurred but not reported, a reserve is established.

During calendar year 1993, paid losses totaled $27,111,760. In anticipation of claims that were not submitted by year-end, a reserve of $8 million was established.

The table to the right summarizes paid claims by major categories. The tables on the following pages summarize charges by major diagnosis categories.

Inpatient

48%

11%

Illinois Comprehensive Health Insurance Plan

Category Paid Percent

Inpatient $15.418.022 48% 1Physician 8,065,634 25%

Outpatient 3,697,760 11%

Major Medical 3,313,769 10%

Coordinated Home Care 922,508 3%

Miscellaneous Bills 759,762 2%

Extended Care/Skilled Nursing 80,246 0%

Medicare Deductibles 16,130 0%

Other Medicare Professional -20 0%

Total' $32,273,811 100%

Total does not reflect adjustments of prior claims or other subsequent adjustments and thus differs from the amount of paid losses shown on the financial statement at the end of this report. The amount quoted to the left of this table is taken from the financial statement.

"Insurance for the Uninsurable" 14

Page 19: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

Inpatient utilization by Major Diagnostic; Categories . . ·• ..... ·,

Major Diagnostic Category Total Total Sid Average Avg Admits %of Charges %o1Total AvgChg per Deviation Chg per Length or StdDev (Adm) Total (Chg) Chgs Adm Total Chg Day Stay (LOS) LOS/Adm

Circulatory System 253 22.19 $4,688,770 27.7 $18,532 $24,670.1 $2,943 6.3 6

Digestive System 141 12.37 1,639,811 9.7 11,629 15,750.6 1,612 7.2 10

Respiratory System 124 10.88 2,089,788 12.3 16,853 30,756.4 2,337 7.2 8.8

Musculoskeletal Sys Con Tissue 108 9.47 1,607,090 9.5 14,880 13,657.1 2,186 6.8 6.5

Nervous System 80 7.02 706,338 4.2 8,829 10,645.4 1,612 5.5 6.6

Endocrine, Nutrit. & Metabolic 66 5.79 563,679 3.3 8,540 6,847.8 1,619 5.3 4

Mental Diseases & Disorders 59 5.18 699,448 4.1 11,855 10,887.8 821 14.4 13

Myeloproliferative Disorders 47 4.12 1,354,775 8 28,825 67,848 7 4,356 6.6 9.6

K1dney & Urinary Tract 37 3.25 457,127 2.7 12,354 13,435.8 2,229 5.5 4.7

Hepatobiliary Sys. & Pancreas 35 3 07 758,041 4.5 21,658 38,349.9 2,256 9.6 14.5

Skin, Subcutan Tissue & Breast 34 2.98 528,628 3.1 15,547 18,801.8 1,908 8.1 12.1

Use/Induced Organic Mental Dis 27 2.37 178,343 1.1 6,605 8,967.1 724 9.1 7.8

Infectious & Parasitic Diseases 24 2.11 596,124 3.5 24,838 47,570.7 1,817 13.7 18.9

Female Reproductive System 22 1.93 249,715 1.5 11,350 6,925.9 2,448 4.6 2.8

Factors lnficg Heth Slats/Other Cont 19 1.67 234,664 1.4 12,350 9,153.8 1,203 10.3 12.3

Blood & Blood Forming Organs 17 1.49 235,226 1.4 13,836 24,121.6 2,642 5.2 7.5

Ear, Nose, Mouth & Throat 11 0.96 60,946 0.4 5,540 2,959.3 1,296 4.3 2.1

Pregnancy, Childbirth & Puerperium 8 07 47,729 0.3 5,966 3,566.2 1,645 3.6 2.1

lnjy /Poisoning/Toxic Efct of Drug 7 0.61 37,648 0.2 5,378 2,561.6 1,711 3.1 3.3

Non-Classified 6 0.53 41,966 0.2 6,994 2,084.4 645 10.8 13.6

Eye 5 0.44 42,572 0.3 8,514 4,117.5 1,702 5 3.8

Male Reproductive System 5 0.44 41,629 0.2 8,325 4,160.5 1,665 5 1.3

HIV Virus Infection 4 0.35 58,125 0.3 14,531 7,045.4 1,937 7.5 3.8

Newborns/Neonates Perinatl Conds 1 0.09 6,988 0 6,988 0 873 8 0

Total 1,140 100 $16,925,170 100 $14,846.64 $25,338.9 $2,060 7.2 8.9

Source: Blue Cross and Blue Shield of Illinois

Illinois Comprehensive Health Insurance Plan "Insurance for the Uninsurable" 15

Page 20: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

Outpatient OtiiiZatiOIII>y Major Diagnostic Code .· .· ............ ·. ,···

Diagnostic Category 1

1

Total Cases I %of Total I Total Charge~-~ % TotChgs Avg $/Case Cases

Benign and Malignant Neoplasms 1,073 13.05 $873,364 18.9 $813

Signs & Symptoms & Ill-Defined Conditions 1,066 12.97 528,318 11.4 495

Diseases of the Circulatory System 878 10.68 532,596 11.5 606

Factors Influencing Health Status 793 9.64 432,911 9.4 545

Musculoskeletal & Connect Tissue Disease 631 7.67 303,486 6.6 480

Diseases of the Genitourinary System 614 7.47 361,483 78 588

Endocrine and lmmunrty Disorders 575 6.99 163,578 3.5 284

Dis. of Nervous System & Sense Organs 445 5.41 327,232 7.1 735

Injury & Poisoning 443 5 39 213,672 4.6 482

Diseases of the Digestive System 419 5.1 287,297 6.2 685

Diseases of the Respiratory System 357 4.34 187,269 4.1 524

Dis. of Blood & Blood Forming Organs 317 3.86 186,339 4 587

Infectious and Parasitic Oiesases 192 2.34 58,974 1.3 307

Menta I Ill ness 166 2 02 40,358 0.9 243

Diseases of Skin & Subcutaneous Tissue 123 1.5 34,308 0.7 278

Congenital Anomalies 91 1 11 62,450 1.4 686

Substance Abuse/Chemical Dependency 31 0.38 16,601 0.4 535

Pregnancy. Childbirth and Puerperium 6 0.07 7,325 0.2 1,220

Prenatal Conditions 2 0.02 1,011 0 505

Total 8,222 100 $4,618,572 100 $561

~1"'\1 ,,.,...o,. ~~~ 10 r"rn~e. "!!t""'n ~~~ 10. C:hi.oiM n.f 1\lin,...ilt" _...,....,, ........... Loll '-'I .... '-'' V~~ Ul IY LJIU ..... VI 11'-'1\,A ....,, !lUI IVI.;;J

Illinois Comprehensive Health Insurance Plan "Insurance for the Uninsurable" 16

Page 21: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

Cost Containment

Illinois law permits CHIP to implement cost containment measures, which are especially critical for state subsidized health care programs since they serve to minimize the need for deficit funding.

The adm1nistrat1ve agreement entered between CHIP and Blue Cross and Blue Shield of Illinois provides for fixed administrative fees per insured and also allows CHIP to receive a discount on all claims paid by this administrator.

CHIP enrollees are all issued CHIP Blue Cross and Blue Shield identification cards. This facilitates quick admission for them to hospitals under contract with Blue Cross, and allows-- in many cases-- for hospital bills to be submitted electronically to the plan administrator. It also has allowed several CHIP enrollees with recurrent breast cancer, who have met specific medical criteria on a case -by -case bas1s, to participate 1n a clinical trials program of the National Cancer Institute involving autologous bone marrow transplantation (ABMT). While this procedure is currently not a covered expense under a CHIP policy, the plan administrator, Blue Cross and Blue Shield of Illinois, is providing financial assistance for this particular medical research program. In connection with this program, Blue Cross and Blue Shield of Illinois has made s1zable contributions from its corporate funds on behalf of several CHIP enrollees. These were not insurance benefits, and were not paid out of any CHIP or State of Illinois funds.

Illinois Comprehensive Health Insurance Plan

CHIP requires pre-admission review of all hospital and skilled nursing facility confinements and medical management of all large cases. Penalties for non-compliance with the pre -admission review requirement are spelled out in the CHIP policy, and may involve benefit reductions or, in some cases, denial of payment for hospital charges.

Admission pre-certification is conducted for CHIP by the plan administrator, Blue Cross and Blue Shield of Illinois. The Administrator reported that during 1993 the number of days requested was reduced in 146 cases, resulting in a savings of $387,960.

CHIP also requires prior approval for benefits payable for certain durable medical equipment, hospice and home health care services and specified organ transplants.

"Insurance for the Uninsurable" 17

Page 22: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

Summary of Operations

Illinois Comprehensive H...tthlnstJnlrice Plan Year Ended December 31, 1993

Plan Income:

Net Written Premiums

Less: Unearned Premiums

Net Earned Premiums

Investment Income

Total Plan Income

Plan Expenses:

Paid Losses

Change in Incurred But Not Reported

Total Incurred Losses

Agent Referral Fees

Administrator Expenses

CHIP Administrative Office Expenses

Total Administrative Expenses

Total Plan Expenses

Plan Deficit January 1, 1993- December 31, 1993

$18,304,870

(210,267)

$27,111,760

(1,200,000)

$24,950

1,077,765

1,104.456

$18,094,603

1,882,694

$19,977,297

$25,911,760

$2,207,171

$28,118,931

(8,141.634\

Illinois Comprehensive Health Insurance Plan "Insurance for the Uninsurable" 18

Page 23: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W
Page 24: State of Illinois Comprehensive Health Insurance Plan · State of Illinois Comprehensive Health Insurance Plan Jim Edgar Governor 1993 Annual Report and Financial Summary James W

5 0 ~·