RENEGOTIATION OF HOSPITALIZATION CONTRACT AND INCREASE IN PREMIUM RATES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87-00868R000100060057-8
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 10
• Document Creation Date: December 22, 2016
• Document Release Date: July 16, 2009
• Sequence Number: 57
• Publication Date: July 12, 1961
• Content Type: MEMO

STAT
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0 M H A., N E H R AS K A .Z THE LARGEST EXCLUSIVE HEALTH & ACCIDENT COMPANY IN THE WORLD
June 20, 1961
Presigent
Government Employees Health Association
P. 0. Box 463
Washington 4, D. C.
This will confirm our convexgation of June 19 in regard to
your group insurance program and the experience under that
program during the first 11 months. The estimated premium
for the period is $1,223,629 and the estimated incurred
claims for the same period are $1,146,678. As you can see,
this gives us an approximate loss ratio slightly in excess
of 94 per cent; if we add to this the retention quoted the
Civil Service Commission originally, which was slightly in
excess of 8 per cent, the overall loss ratio will exceed our
break-even point.
We have, of course, had an opportunity to review a full 24-
month claim runout under your original program, and it has
become rather obvious to us now that the primary reason for
the rather high loss ratio is the very optimistic approach
that we took to the rerating of the premium rates due to
the interim experience that we had under the old contract.
This rating did not properly reflect the claim lag of the
previous coverages and, as a consequence, the new program
was given credit for a
actually existed at
This ,ou will recall, was discussed in
meeting on Monday. With these points
A,jidering the liberalizations made in the
..."glint contract, it becomes apparent that the present rates
are inadequate not only for the current benefits but especially
so when considering the increased benefits contemplated to
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June 20, 1961,
become effective on November 1, 1961. In addition to the
increased benefits, the steadily increasing cost of medical
care, both in the hospital and by the medical profession,
must be taken into consideration when we look to the future
of the program.
As you know, other government programs providing major medical
benefits either from first dollar or in conjunction with a
base plan benefit have a premium rate in excess of $19 per
month for the family enrollment. This is also true of two
of our own programs providing benefits equal to the high-
option plan. Under these high-option plans the single
employee rate is in excess of $7 monthly per individdal.
Effective November 1, 1961, we are recommending the following
changes in the premium structure for your insurance program:
1. Self Only .$ 5.64 monthly
2. Self and Family .$15.50 monthly
3. Self and Family - $15.50 monthly
Female and Nondependent Husband
As mentioned previously, the benefits under your current
program have been broadened to include certain services of
a dentist, podiatrist, a liberalized surgical schedule and
a new lifetime maximum benefit of $20,000 The new premium
structure which has been suggested is, as you can see, con-
siderably less expensive than the other high-option programs
offered to Federal employees which provide major medical
benefits.
sidered one of the most eco:-:.__J cal for your members. Even
with these adjustments, when you take into consideration the
liberalizations made, we feel that you have one of the top
programs from the standpoint of protection and economy.
We will most certainly be looking forward to the reaction of
your Board to these suggested adjustments and would like to
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-1(f -e -- .
June 20, 1961
volunteer our services if it is necessary to present any
further facts to your Board justifying the new rate schedule
or in,your discussion with the Civil Service Commission.
Yours sincerely
A. W. Randall
Vice President
cj
kc-
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CURRENT HIGH OPTION RATES PER MONTH OF EXISTING PLANS
Single
Famil
Employee's Share
Family Plan Share
Single
y
Aetna
6. 76
17. 46
3.94
10. 70
12.61
Blue Cross
7.39
19.37
Group Health
9.90
25. 76
19.00
6.74
Foreign Service
3. 42
13. 48
'
12.55
NSA
5
7.3
_-19.31
RATES FOR GEHA
P?-,sent Rates
3.53
14.00
1.77
I'zoposed Rates
5. 64
15. 50
2. 82
35 ':. ductible for each illness or accident and only 80% of hospital extras and : `.cal fees.
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