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Medical
insurance rate increase
The skyrocketing Medical insurance rate increase has forced the
Presbyterian Church (USA) Board of Pensions (BOP) to raise subscription
rates for several of its Medical insurance rate increase. The increases,
approved during an Oct. 25 meeting here, will go into effect on
Jan. 1.On a more encouraging note; the board learned that its investment
portfolio realized a 16.1 percent return for the first three quarters
of the year. If the market holds up, the positive return - after
three years of stock market losses - will enable the board to rebuild
its contingency reserve.
"We need to be realistic about the investment challenges we face
in the Balance of this decade," said Richard Young, chair of the
BOP's Investment Committee. "If the Medical insurance rate increase
Plan closes the year with a 15 percent return, the Compound annual
return for the 10 years ended Dec. 31, 2003, will be 8 Percent,
exactly in line with actuarial expectations. This is very good."
Young warned, however, that "the negative returns of 2000-2002 will
continue to be a part of the long-term returns (calculation) in
the decade ahead. This is not very good." He said it is "unlikely
we will again see the returns we had from 1995-1999 to offset the
losses of 2000-2002."
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Conceding
that making predictions about the financial markets is "risky and
maybe unwise," Young said: "I think we can predict that the double-digit
stock market performance and experience apportionments of the 1990s
will not be repeated in the next decade." Experience apportionments
are percentage increases in pensions of retired BOP members and
pension credit increases for active members. They are based on the
market performance of the board's investment portfolio. Several
double-digit apportionments were granted during the boom years of
the 1990s. BOP officials blame ever-rising Medical insurance rate
increase on improving medical technology, a relaxation of managed-care
controls, increasing demand from an aging population, tough negotiating
by hospitals and physicians, and rising costs for prescription drugs.
The Medical insurance rate increase are expected to increase 12.5
percent next year, matching the assumptions the board used in setting
dues and benefit changes for 2004. John Cookson, of Milliman USA,
the BOP's medical-plan actuary, told board members: "If current
Medical insurance rate increase trends continue, even with the best
estimate, the projected net loss on reserves could be about $10
million in 2005."
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