In 2001, San Francisco had somewhere between 25,000 and 37,000 employees (the total numbers of insured individuals including family members and retirees are variously reported). There were reportedly 12-17 known transgender employees, and actuaries assumed that for every known transgender employee there were 1-2 unknown transgender employees.
Utilizing the rough British Columbia rate of 0.05 cases per thousand individuals and making the assumption that San Francisco would likely have a higher incidence of transsexualism than British Columbia, actuaries originally anticipated a worst-case of 35 people might use the San Francisco transgender benefits program each year. With an assumed employee base of just over 37,000 and a total enrollee base of 80,000, this translates into a worst-case, predicted rate of
- 0.946 claimants per thousand employees per year (45 times the rate of 0.021 claimants per thousand adults in British Columbia), or
- 0.438 claimants per thousand enrollees per year (20 times the rate of 0.021 claimants per thousand adults in British Columbia).
Compare our calculated rate for all adults in British Columbia (0.021 per thousand) to the overestimates used to structure San Francisco's coverage in 2001. The worst case utilization of 0.946 claimants per thousand employees was 45 times the rate for British Columbia. More conservatively, the overestimated rate of 0.438 claimants per thousand enrollees was still greater than 20 times that of British Columbia.
Hedging Against a Magnet Affect
To limit the possibility that transgender people might deliberately seek employment or coverage under the plan (the feared "magnet effect" causing "adverse selection") actuaries also proposed limiting the availability of the benefit to only those employees, retirees or dependents who had been members of the plan for more than one year. This was later revised - see San Francisco Transgender Benefit: Actual Claims Experience and Plan Changes (2001-2006).
Costs of Services / Lifetime Maximum Dollar Cap
In 2001, the cost of services in British Columbia ranged from $4,000 to $75,000, depending on what was clinically appropriate and necessary for the person.
Actuaries also presumed that claims for the known transsexual employees would be low because some were already "in various stages of treatment and [would] not need to undergo every procedure were these benefits available." While a few people might have costs in the higher range, most total costs could be expected to be much lower, and other people might utilize no services at all.
Estimating that costs might run as high as $37,000 for male-to-female procedures and $77,000 for female-to-male procedures, actuaries suggested a lifetime cap on costs per person of $50,000.This was also later revised - see San Francisco Transgender Benefit: Actual Claims Experience and Plan Changes (2001-2006).
To offset the total projected costs, the actuaries further suggested that all City Plan participants be charged an additional $1.70 per month. Because employee and retirees could select a plan that did not include the transgender benefit, the actual amount that would be raised by this measure was uncertain. The actuaries must have assumed that all those requiring these services would shift to the City Plan, but fertility and other benefits had also been added at the same time and the impact on enrollment was still speculative.
If the worst-case scenario occurred, and 35 individuals utilized the maximum $50,000 benefit each year, the City Plan would require $1.75 million to cover services each year. If all 80,000 employees, retirees and dependents paid $1.70 monthly surcharge, San Francisco would collect over $1.63 million annually, just shy of the "worst case," but enough to cover more than 32 individuals at the maximum benefit.
Shortcomings of the 2001 Estimates
Clearly, not every person requiring surgical interventions would require the most expensive interventions, and of those who did few would be likely to reach the maximum dollar amount in one year. The 1997 report by the San Francisco Human Rights Commission articulates these arguments. Given there were at most 17 known transgender employees at the time, that not all would require surgery, and that cost estimates were based on the maximum dollar value of the range of possible services, these estimates were overinflated. But by how much? Only with time and transparent reporting of utilization would anyone know for sure. Nevertheless, the number and magnitude of claims were in reality far less than originally projected by actuaries - see San Francisco Transgender Benefit: Actual Claims Experience and Plan Changes (2001-2006).