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New York, January 5, 1998

The Insurance Department today announced that it has slashed Healthnow’s requested 83.9% average rate increase on its direct pay standard HMO and point of service contracts to 28.6%. This increase affects only 420 members.

The Department also cut a requested 28.4% average rate increase for Capital District Physicians’ Health Plan’s prescription drug riders, inpatient mental health riders, and an emergency room copayment rider to 21.1%. The rate changes for both HMOs were effective January 1, 1998.

These decisions by the Department come after a careful examination of the HMOs’ current financial conditions and their projections of revenue and expenses for next year. Testimony submitted at public hearings in November in Albany were also considered.

The Department determined that Healthnow used very limited data in developing its costs for 1997 and its projections for 1998 increases for these contracts. Therefore, the Department rejected the projected costs for these rating periods and instead used actual data that was available for January 1, 1996 to June 30, 1997. The requested rates were further reduced to reflect the proper single to family mix and the reallocation of administrative expenses. The Department also eliminated the demographic pool surcharge.

Capital District Physicians’ Health Plan’s requested overall average rate increase of 28.4% consisted of a 30.6% rate increase for prescription drug riders, a 70.2% decrease for its inpatient mental health riders, and a 77.1% increase for its $25 emergency room copayment rider. The HMO projected prescription drug costs to increase approximately 5% from 1997 to 1998 and the costs associated with its inpatient mental health riders to decrease approximately 70% due to a capitated provider arrangement. The Department agreed with the HMO’s projections for its inpatient mental health and $25 copayment emergency room riders and approved these changes as requested. However, the Department determined that the HMO’s prescription drug cost projections were based on very limited data. Therefore, the Department reduced the rate increase on these riders to 23.2%. The overall average increase approved is 21.1%.

The Healthnow decision affects 420 of the HMO’s members in Albany, Clinton, Columbia, Essex, Fulton, Greene, Montgomery, Rensselaer, Saratoga, Schenectady, Warren and Washington counties.

The Capital District Physicians’ Health Plan decision affects 67,000 of the HMO’s members in Albany, Schenectady, Schoharie, Saratoga, Rensselaer, Columbia, Greene, Warren, Washington, Fulton, and Montgomery counties.

Tables listing individual contract rate changes are available upon request.

Department of Financial Services


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