1101 Market Street, 11th Floor • Philadelphia, PA 19107

Phone: 215-238-6300 •

November 26, 2001

Annual Evaluation of National and Philadelphia Medical Insurance Marketplace Reflects on Bar Association Insurance

Dear Philadelphia Bar Member:

In our continuing effort to ensure that the Philadelphia Bar Association sponsored program underwritten by Independence Blue Cross is the most appropriate choice as the endorsed product, our administrator, USI Colburn Insurance Service performed the annual task of evaluating the National and Philadelphia Medical Insurance Marketplace. We would like to share an overview of that report with you.

Nationally, health care costs are expected to increase at an annual rate 12% this year alone, a figure, which does not include prescription drug cost. Prescription drug costs have risen 20 percent or more over the past year due to increased utilization of new, expensive drugs. Locally, we can expect a similar increase to last year's of 15-20 percent. This expected rate of increase was relatively consistent for PPOs, point- of-service plans and HMOs. Currently, the Association, through its broker, USI Coburn, is in the process of reviewing the current cost and utilization within the community rated program. In addition, your Insurance Programs Committee meets annually with representatives from IBC to explore strategies to control rising cost and deliver a quality health care plan.

When asked about the importance of various factors in selecting and evaluating health plans, nationally, employers attributed more importance to quality of care and access than any other surveyed item. Of course, we are also concerned about cost, continuity of service and consistency.

In addition to the different types of programs (Traditional Indemnity, PPO, Point-of-Service, and HMO), there are also different rating structures to be considered. Currently our bar plan through IBC is Community Rated. Community Rating means simply that the risk is spread through the community market. In contrast, under an Experience Rating structure, the participant's utilization directly impacts the rates. The Philadelphia Bar Association program was experienced rated until the mid-80s. However, as utilization of the program benefits increased, many members left the plan and enrolled in the community programs where costs were considerably lower. Ultimately, the plan was moved into a community rating where it remains today. As a result, the plan regained its competitive position in the market and participation continues to grow yearly. As a rule, experience rated programs can not compete with a community-based program where the risk is spread over a large population. Even today, when comparing an experience rated to a community-based plan, the experience plans are found to be paying higher rates and experiencing lower participation.

In addition to plan design and cost, our market review includes identifying and evaluating the choices available in the market for Philadelphia Bar Association members. Having established criteria to evaluate carriers such as physician network, the availability of plan options within the law firm, solo practitioner participation within the plan, wide prescription drug options, customer service standards, and claims handling, Independence Blue Cross remains our carrier of choice.

The complexity of selecting, evaluating and managing medical benefits is a major challenge and causes some employers to wish they could excuse themselves from the business altogether. USI Colburn Insurance Service has served as our broker of record for more than 50 years. Their experienced and knowledgeable representatives are available to assist you in evaluating plan designs, communicating the plans to your employees and completing the necessary enrollment paperwork. USI Colburn also has a Customer Service Department consisting of over 30 representatives solely available to answer your questions or those of your employees. USI Colburn is directly online with Independence Blue cross providing you with one source for immediate handling of all administrative aspects of your firm's health care plan.

We recognize the effects of increasing health care cost on all our members. Together with USI Colburn, we do our best to help you to explore cost savings options allowing you to make informed choices.

For more information on the medical plan sponsored by the Philadelphia Bar Association, please contact USI Colburn directly at 1-800-265-2876.

Arthur W. Lefco, Chair
Insurance Programs Committee
Philadelphia Bar Association

# # #