How the programmes are priced

Except for HIP, the United Nations Headquarters medical insurance and dental insurance programmes are “experience-rated”. This means the premiums each year are based on the cost of medical or dental treatment received by UN participants in the prior year, plus the expected effect of higher utilization and inflation, plus the appropriate allowance for administrative expenses. The underlying elements in the cost of health insurance for UN Headquarters programme participants are therefore (1) continuing growth in utilization of services and medications, (2) continuing increases in prices for services and medications, and (3) expenses are incurred predominantly in the New York City area, which is a high-cost health care market. In a year following a period of heavy utilization, premium increases are likely to be relatively high. Conversely, if utilization in the prior year has been moderate, the premium increase in the subsequent year will likely be moderate. The yearly premiums are calculated to meet medical expense and administration costs in the forthcoming 12-month contract period. The underlying cost of medical expenses is normally about 95% of the premium, and administrative expenses make up the 5% remainder. Each year the expected overall costs of the programme are first expressed as premiums and then borne collectively by the participants and by the Organization in accordance with the sharing ratios set by the General Assembly.

The HIP plan is “community-rated”. This means HIP premiums are based on the average medical cost of all employers who purchase the same kind of coverage from HIP, and not just that of United Nations participants. The New York State Insurance Department regulates the premium rates for community-rated programmes such as HIP.