11

Public Employees Benefits BoardPublic Employees Benefits Board

2006 Medical Procurement2006 Medical Procurement

July 12, 2005July 12, 2005

Richard Onizuka, Health Care PolicyRichard Onizuka, Health Care PolicyWashington State Health Care AuthorityWashington State Health Care Authority

22

2006 Purchasing Environment2006 Purchasing EnvironmentGoalsGoals

Stay within fiscal limits set by the Stay within fiscal limits set by the Legislature in the budgetLegislature in the budget

Provide health plans that compare well Provide health plans that compare well with other quality employerswith other quality employers

Ensure adequate access to providers and Ensure adequate access to providers and hospitals for employees and retirees in all hospitals for employees and retirees in all countiescounties

Encourage the use of quality providers and Encourage the use of quality providers and evidence-based medicineevidence-based medicine

33

2006 Purchasing Environment2006 Purchasing EnvironmentBudget AssumptionBudget Assumption

Washington State Fiscal GrowthWashington State Fiscal Growth

2005/2009 Projection: 3.8%2005/2009 Projection: 3.8%

Budgeted Health Care Bid Rate Trend Budgeted Health Care Bid Rate Trend

8.5% 8.5%

Employee Contributions Employee Contributions

12% Weighted Average12% Weighted Average

44

2006 Purchasing Environment2006 Purchasing Environment

13.9%

11.9%

8.0%

3.8%

6.8%

13.2%

16.1%

10.8%

19.9%

13.2%9.8%

14.8%

4.2%3.3% 2.9% 2.8% 3.3% 3.2%

4.1%

15.1%15.4%

12.2%14.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1998 1999 2000 2001 2002 2003 2004 2005

PEBB Non-Medicare Premium Increases WA State Fiscal Growth HCA Medical Cost Increases

55

2006 Purchasing Environment2006 Purchasing Environment

CalPERS 2006 Non-Medicare CalPERS 2006 Non-Medicare Premium Increase: 8.9% Overall Premium Increase: 8.9% Overall AverageAverage

Hewitt Association 2006 prediction:Hewitt Association 2006 prediction:Nationally, 12.4% MCO rate increase Nationally, 12.4% MCO rate increase

66

Overview and Board ActionOverview and Board Action

EligibilityEligibility

BenefitsBenefits

Non-Medicare PremiumNon-Medicare Premium

Medicare Explicit SubsidyMedicare Explicit Subsidy

77

Eligibility RulesEligibility Rules(Requires Board Action)(Requires Board Action)

HCA Recommends Adoption of the HCA Recommends Adoption of the Proposed Eligibility Rules under WAC Proposed Eligibility Rules under WAC 182-08 and WAC 182-12. 182-08 and WAC 182-12.

88

Benefit RecommendationsBenefit Recommendations

UMP PPO & UMP NeighborhoodUMP PPO & UMP Neighborhood

Bariatric SurgeryBariatric Surgery

99

Description of Benefit Changes UMP PPO

UMP Neighborhood

$30 premium rebate (one-time) for healthy lifestyle and use of preventive care services (NEW)

√ √

Cover routine eye exams once per year (now once every 2 years) √ √Same network benefits in other states as currently provided for services in Washington/Oregon (now 80% for network services in other states)

√ no

Increase the annual out-of-pocket maximum to $1,500 per individual / $3,000 per family (now $1,125 per individual / $2,250 per family)

√ √

Separate 16-visit massage therapy benefit (now included with Physical, Occupational and Speech Therapy in 60-visit benefit)

√ √

Pay 90% for Tier 1 (generic) prescriptions filled at retail pharmacies(now paid at 80%)

√ √

Enrollee coinsurance cap @ $75 per 30-day supply for Tier 1 and 2 (generic and preferred brand name) prescriptions filled at network retail pharmacies (now capped at $50 per 30-day supply)

√ √

$100 enrollee co-payment for up to 90-day supply of a Tier 3 (non-preferred brand name) prescription filled through mail order(now $80 enrollee co-payment)

√ √

Eliminate annual medical / surgical deductible (now $200 per individual or up to $600 per family)

no √

UMP Benefit Recommendation (Requires Board Action on Overall Benefit Package)

Overall package is cost neutral.

1010

Bariatric SurgeryBariatric Surgery

HCA does not recommend inclusion of HCA does not recommend inclusion of Bariatric Surgery for 2006Bariatric Surgery for 2006

Legislative Directive: Legislative Directive: No Benefit Enhancements if at, or above, budgetNo Benefit Enhancements if at, or above, budget

Bids reflected significant variabilityBids reflected significant variability

Medical evidence is not conclusiveMedical evidence is not conclusive

Benefit not commonly offered by other Benefit not commonly offered by other employersemployers

1111

2006 Non-Medicare Bid Rate2006 Non-Medicare Bid RateOverviewOverview

Budget Assumption Budget Assumption 8.5%8.5%

Initial Procurement Results: 11.8%Initial Procurement Results: 11.8%

Final Procurement Results: Final Procurement Results: 8.0% 8.0%UMP PPO with Alternatives = .8% UMP PPO with Alternatives = .8% UMP NBR with Alternatives = 2.6%UMP NBR with Alternatives = 2.6%MCOs= 14.2%MCOs= 14.2%

1212

Non-Medicare Average Bid Rate Non-Medicare Average Bid Rate IncreasesIncreases

Plan Name

1-Year Bid Rate Avg. I ncrease

(2005-2006)

3-Year Bid Rate Avg. I ncrease

(2004-2006)

5-Year Bid Rate Avg. I ncrease

(2002-2006)

CHPWA 9.8% 19.0% 15.3%Group Health Coop. 15.2% 11.3% 13.9%Kaiser Foundation 10.9% 14.0% 12.9%Options Health Care 18.9% 13.6% 15.3%PacifiCare 10.3% 16.8% 16.4%Regence 13.1% 15.5% 16.3%UMP PPO 0.8% 7.0% 10.1%UMP Neighborhood 2.6% n/a n/a

Notes: 1) Increases shown are average increases in normalized bid rates after implemented benefit changes. 2) Average increases are simple unweighted averages and do not reflect enrollment shifts. 3) UMP Neighborhood first offered January 1, 2004. 2005 increase was 14.0%

1313

Increase in Average Non-Medicare Increase in Average Non-Medicare ContributionsContributions

$13 $14 $14

$27$37

$72$79

$68

$81

$-$10$20$30$40$50$60$70$80$90

CY1998

CY1999

CY2000

CY2001

CY2002

CY2003

CY2004

CY2005

CY2006

Year

Avg E

mplo

yee

Contr

ibuti

on

2006 Contribution does not include “switching assumptions”

1414

Change in Non-Medicare Bid RateChange in Non-Medicare Bid RateSubscriber Only (First Tier)Subscriber Only (First Tier)

     

       

Plan Name 2005 First Tier

Normalized Bid Rate 2006 First Tier

Normalized Bid Rate

Employee Contribution change from 2005 1st Tier

CHPWA $ 384.73 $ 422.62 $ 16

Group Health Coop. $ 348.43 $ 401.41 $ 31

Kaiser Foundation $ 364.95 $ 404.89 $ 18

Options Health Care $ 376.40 $ 447.54 $ 50

PacifiCare $ 436.18 $ 481.18 $ 23

Regence $ 429.80 $ 486.23 $ 34

UMP PPO $ 361.10 $ 364.05 $ (19)

UMP Neighborhood $ 352.60 $ 361.87 $ (13)

1515

Employee ContributionsEmployee Contributions(Requires Board Action)(Requires Board Action)

CY 2005 CY 2006 CY 2005 CY 2006 CY 2005 CY 2006 CY 2005 CY 2006

Plan Name Subscriber Subscriber Sub. & Spouse

Sub. & Spouse

Sub. & Child(ren)

Sub. & Child(ren) Full Family Full Family

CHPWA 57$ 73$ 123$ 155$ 99$ 127$ 166$ 210$ Group Health Coop. 20$ 51$ 51$ 113$ 36$ 90$ 66$ 151$ Kaiser Foundation 37$ 55$ 84$ 120$ 65$ 96$ 112$ 161$ Options Health Care 48$ 98$ 107$ 205$ 85$ 171$ 143$ 278$ PacifiCare 108$ 131$ 226$ 272$ 189$ 230$ 307$ 371$ Regence 102$ 136$ 214$ 282$ 178$ 238$ 290$ 385$ UMP PPO 33$ 14$ 76$ 38$ 58$ 25$ 101$ 49$ UMP Neighborhood 25$ 12$ 59$ 34$ 43$ 21$ 78$ 43$

CY 2006 Estimated Required Premium pspm $676CY 2006 Estimated Employer Contribution pspm $595Average Employee Contribution $81% Employee Contribution of Required Premium 12.0%

Budget Assumption 12.0%Variance 0.0%

1st Tier 2nd Tier 3rd Tier 4th Tier

1616

2006 Medicare Bid Rate2006 Medicare Bid RateOverviewOverview

Budget Assumption: 13.5%Budget Assumption: 13.5%

Procurement Results: 10.2%Procurement Results: 10.2%

MCOs= 13.4%MCOs= 13.4%

UMP= 7.8%UMP= 7.8%

1717

Medicare Average Bid Rate Medicare Average Bid Rate IncreasesIncreases

Plan Name

1-Year Bid Rate Avg. I ncrease

(2005-2006)

3-Year Bid Rate Avg. I ncrease

(2004-2006)

5-Year Bid Rate Avg. I ncrease

(2002-2006)

CHPWA 9.3% 19.4% 15.7%Group Health Coop. 17.1% 15.7% 19.1%Kaiser Foundation 21.3% 16.0% 16.0%Options Health Care 25.1% 24.9% 20.8%PacifiCare 1.4% 24.4% 22.5%Regence 3.3% 17.5% 14.0%UMP PPO 7.8% 13.8% 7.5%

Notes: 1) Increases shown are average increases in normalized bid rates after implemented benefit changes. 2) Average increases are simple unweighted averages and do not reflect enrollment shifts. 3) UMP Neighborhood is not offered to the Medicare risk pool.

1818

2006 Estimated 2006 Estimated Medicare Retiree ContributionMedicare Retiree Contribution

Plan Name2005 First Tier Retiree Pays

2006 Estimated First Tier

Retiree Pays

Dollar Increase

Retiree Pays Since 2005

2006 Projected Percent of

Retiree Enrollment

CHPWA 210.75$ 228.56$ 18$ 0.7%Group Health Coop. 152.41$ 185.48$ 33$ 27.8%Kaiser Foundation 111.26$ 137.42$ 26$ 3.5%Options Health Care 209.83$ 278.19$ 68$ 1.1%PacifiCare 173.84$ 165.46$ (8)$ 9.1%Regence 306.85$ 308.48$ 2$ 1.4%UMP PPO 183.20$ 194.07$ 11$ 56.3%

1919

Increase in Medicare Retiree Increase in Medicare Retiree SubsidiesSubsidies

$41.26 $43.16

$62.48$69.98

$85.84$92.74

$102.35

$116.19

$131.84

$-

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

CY1998

CY1999

CY2000

CY2001

CY2002

CY2003

CY2004

CY2005

CY2006

Year

Su

bs

idy

pe

r R

eti

ree

Pe

r M

on

th

2020

2006 Medicare Retiree Subsidy2006 Medicare Retiree Subsidy(Requires Board Action)(Requires Board Action)

Retiree Subsidy: $131.84Retiree Subsidy: $131.84

2121

2007 and Beyond2007 and Beyond

2222

Data Analysis and DiagnosisBusiness and HR Priorities

Enrollment, costs and demographics Cost drivers and savings opportunities

Traditional Tactics Advanced Strategies

Large Employer Health Care Strategies

Plan Design• Types of plans• Number of choices• Cost Sharing• Service-related offerings• Pay-related designs• Pharmacy• Savings/spending

accounts

Contributions• Percentage of cost• Salary stratified• Indexed to plan costs• Tiered for family size• Risk-related• Opt-out credits (cash)

Financing• Funding decision –

insured, self-insured, minimum premium

• Gain sharing• Employee self-funding –

FSA, HRA

Vendors• Vendor selection• Performance measures• Clinical capability• Operational audits• Network strategy• Renewal negotiation

Maintain a healthy workforce• Identification of health

risks• Health promotion

programs• Self-care assistance• Health risk management• Incentives for health

awareness – risk appraisal participation

Engage employees in behavior change• Raise cost awareness

through education and cost sharing

• Education about cost and health conditions

• Tools about provider cost and quality

• Availability of savings accounts

Focus on high costpopulation• Disease management• Case management• Maternity programs

•Advocacy programs• Incentives for care

management compliance• Integrate information

and/or care management with disability and worker’s compensation

Purchase Highest Quality and MostCost Effective Care• High performance

network• Collective purchasing• Supply chain purchasing• National initiatives for

quality improvement