ua choice mike humphrey director of benefits october 2007

UA Choice

Mike HumphreyDirector of Benefits

October 2007

Employer ResponsesEmployer Responses

Shifting CostsShifting Costs EmployeesEmployees

Managed CareManaged Care

Reducing CostReducing Cost

Changing DeliveryChanging Delivery

Plan Change &Plan Change &Wellness ProgramsWellness Programs

Employers ResponsesEmployers Responses

Shift the Cost (“squeezing the balloon”)Shift the Cost (“squeezing the balloon”) Benefit cutbacks Benefit cutbacks – higher deductibles– higher deductibles Employers contribute less toward the plan cost Employers contribute less toward the plan cost Employee charges for coverage are increasedEmployee charges for coverage are increased

Change the Delivery SystemChange the Delivery System Managed Care, Open & Closed NetworksManaged Care, Open & Closed Networks High Performance NetworksHigh Performance Networks

Reduce the Cost (“deflating the balloon”)Reduce the Cost (“deflating the balloon”) Contract with Medical Providers to take lessContract with Medical Providers to take less Wellness initiativesWellness initiatives Disease managementDisease management

Top Top StoriesStories

Top Top StoriesStories

University Health Care Trends University Health Care Trends Beyond 2007Beyond 2007

Are they sustainable?Are they sustainable?

$12,000

$13,000

$14,000

$15,000

$16,000

$17,000

$18,000

$19,000

$20,000

$21,000

Net Proj Costs FY08 Net Proj Costs FY09 Net Proj Costs FY10 Net Proj Costs FY11

Per

Em

plo

yee

Per

Yea

r H

ealt

h P

lan

Co

sts

7% 11% 15%

Annual

$87 Million

$78 Million

$70 Million

Employer and Employee Health ChargesStandard Plan FY 08 Per Month

$1,023.75

$1,263.00

$560.00

$890.00 $915.00$885.00

$847.00$879.78

$847.00 $854.00 $851.00

$366.00

$720.00

$839.18

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

UA

Fbks B

oroug

h

Fbks S

chool D

istri

ct

Anchor

age T

eacher

Tru

st

Junea

u Teac

hers

Junea

u Non

-Tea

cher

s

Selec

t Bene

fits

(with

vis

ion) (

State

)

GGU (S

tate

)

SU (Sta

te)

Local 7

1 (S

tate

)

Public S

afety

(Sta

te)

College

& Univ

Per

sonnel

Ass

oc. E

E Onl

y

College

& Univ

Per

sonnel

Ass

oc. E

E & F

amily

Avg fo

r all

group

s

Employer Contribution Employee Single Coverage Employee Family Coverage

FY 07 Paid ClaimsTotal Claims Experience For An Individual

5,286

1,462

640

327210 158 91 95 72 41

482

0

1,000

2,000

3,000

4,000

5,000

6,000

<$1,000 $1,001-$2,000

$2,000-$3,000

$3,001-$4,000

$4,001-$5,000

$5,001-$6,000

$6,001-$7,000

$7,000-$8,000

$8,001-$9,000

$9,001-$10,000

10,001.00+Nu

mb

er o

f P

arti

cip

ants

Hav

ing

Th

is A

mo

un

t O

f C

laim

s E

xper

ien

ce I

n A

Yea

r

What will the projected

increases do to employee

charges

What will the projected

increases do to employee

charges

Projected 14.5% Health Care Trend

$605$895

$1,374

$2,013

$914

$2,507

$3,847

$5,636

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

FY08Charge

FY09 $ 5 Mill RecoveryApplied

FY10 $3.4 Mill RecoveryApplied

FY11 $0 Recovery Applied(Exhausted)

An

nu

al C

har

ge

EE EE + SP EE + CH Family

Projected 10% Health Care Trend

$605 $662

$1,098$1,252

$914

$1,854

$3,075

$3,506

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

FY08Charge

FY09 $1 Mill Recovery Applied FY10 $3.4 Mill RecoveryApplied

FY11 $4 Mill Recovery Applied

An

nu

al C

har

ge

EE EE + SP EE + CH Family

So What So What Can Be Can Be DoneDone

So What So What Can Be Can Be DoneDone

Health & Wellness

Current UA Support Programs In Place

UA’s Health ProgramsUA’s Health ProgramsCase Management – for the seriously illCase Management – for the seriously ill

Disease Management – for the chronically illDisease Management – for the chronically ill

Health Risk Assessment Health Risk Assessment

Wellness/Life Style CoachingWellness/Life Style Coaching

On Site Wellness ProgramsOn Site Wellness Programs

Pharmacy Program ManagementPharmacy Program Management

Disease Management Disease Management Principles and GoalsPrinciples and Goals

• Improve the health and increase the quality

of life of UA employees and dependents

• Support the physician / patient relationship

• Improve employee productivity

• Reduce total health care costs

UA’s Disease Management ProgramUA’s Disease Management Program

2006 Program2006 ProgramDiabetesDiabetesHeart FailureHeart FailureCoronary Artery DiseaseCoronary Artery Disease

2007 Program2007 ProgramDiabetesDiabetesHeart FailureHeart FailureCoronary Artery DiseaseCoronary Artery DiseaseLow Back PainLow Back PainOsteoporosisOsteoporosisOsteoarthritisOsteoarthritisHepatitis CHepatitis CUrinary IncontinenceUrinary IncontinencePressure UlcersPressure UlcersAtrial FibrillationAtrial FibrillationInflammatory Bowel DiseaseInflammatory Bowel DiseaseIrritable Bowel SyndromeIrritable Bowel SyndromeFibromyalgiaFibromyalgiaAcid Related DisordersAcid Related Disorders

UA Disease Management Opportunity Analysis

2006 Program2006 Program

Number of Number of participants – 431participants – 431

Costs avoided – Costs avoided – $493,000$493,000

2007 Program2007 Program

Number of Number of participants – 2,100 participants – 2,100 est.est.

Costs avoided – Costs avoided – $723,000 est.$723,000 est.

Preventable claims costPreventable claims costGroup Level health care expendituresGroup Level health care expenditures

75%

25%

Not Related

Preventable

Source: Anderson, et. al., (2000, Sept/Oct). The Relationship Between Modifiable Health Risks and Group-Level Health Care Expenditures, AJHP, 15(1), p. 45-52.

DepressionStressBlood SugarSmokingObesityBlood PressureSedentary Life

N = 46,026 X 6 years

$1,160

$955 $955 $906

$571 $568 $520

$363

$1,931

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

Health risks push costs upHealth risks push costs upYet preventable through lifestyle changeYet preventable through lifestyle change

Average annual per capita excess health costs when risk is present.

Average annual per capita excess health costs when risk is present.

Goetzel, R et al. The Relationship Between Modifiable Health Risks and Health Care Expenditures, Journal of Occupational and Environmental Medicine. 1998;10:843-854

Effect of Single Risk FactorsEffect of Single Risk Factors

10%

12%

20%

21%

35%

46%

70%

0% 20% 40% 60% 80%

No Exercise

High BP

Smoker

Obesity

Blood Sugar

Stressed

Depressed

Percent Higher Annual Health Plan Costs

Health Plan Cost

Source: Goetzel RZ, et. al. (1998, October). The relationship between modifiable health risks and health care expenditures: An analysis of the multi-employer HERO health risk and cost database. JOEM, 40(10):843-54.

Effects of Health Risks on AbsenteeismEffects of Health Risks on Absenteeism

116%

118%

131%

140%

150%

0% 50% 100% 150% 200%

Mental Health

Back pain

Stressed

No Exercise

Obesity

Percent Higher AbsenteeismSource: Serxner, S., et al., (2001). The impact of behavioral health risks on worker absenteeism. JOEM, 43(4), 347-354

Sick Leave Absenteeism

UA’s Phase 1UA’s Phase 1“Virtual” Program With WebMD“Virtual” Program With WebMD

Referrals

WIN for AlaskaWIN for Alaska

Health In Action Health In Action Program Program

UA’s On Site Wellness ProgramUA’s On Site Wellness ProgramWith WIN For Alaska With WIN For Alaska –– Goals Goals

Increase Increase awareness of awareness of health riskshealth risks

Reduce the Reduce the number of health number of health risksrisks

Increase Increase participation in participation in healthy behaviorshealthy behaviors

Provide a supportive Provide a supportive environment for environment for lifestyle changeslifestyle changes

Increase employee Increase employee satisfaction and satisfaction and moralemorale

UA’s Phase 2 Program UA’s Phase 2 Program With WebMD & WIN For AlaskaWith WebMD & WIN For Alaska

VirtualVirtual

Site-basedSite-based

UA Choice Pharmacy Program

UA Choice Pharmacy Program

Current UA Choice Current UA Choice Standard PlanStandard Plan

Copays Retail MailSpecialty

Meds

Generic $7 $7 $7

per 30 DS

Brand (w/no generic) $10 $10 $10

per 30 DS

Brand (w/generic) $10 $10 $10

per 30 DS

Maximum Days Supply 30 100 90Deductibles na na naOut-of-Pocket Maximum na na na

PharmaCare’s ObservationsPharmaCare’s Observations

PharmaCare (Caremark) reviewed last years PharmaCare (Caremark) reviewed last years prescription drug utilization and performanceprescription drug utilization and performance

The factors most impacting plan cost are The factors most impacting plan cost are Member Utilization – the number of medicationsMember Utilization – the number of medicationsProduct Mix – name brand vs. genericProduct Mix – name brand vs. genericPlan Design – name brand vs. generic costPlan Design – name brand vs. generic cost

Of these three key areas, plan design offers the Of these three key areas, plan design offers the greatest opportunity for impact.greatest opportunity for impact.

PharmaCare SummaryPharmaCare Summary

44% of participants are utilizing the plan 44% of participants are utilizing the plan PharmaCare standard book of business PharmaCare standard book of business approximately 33% take advantage of the plan. approximately 33% take advantage of the plan. This high utilization is reflective of the rich benefit This high utilization is reflective of the rich benefit offered. offered.

Within the Standard plan, 84% of UA’s utilizing Within the Standard plan, 84% of UA’s utilizing population can be found. population can be found. They process 70% of total Rx’s and account for They process 70% of total Rx’s and account for

almost 75% of the total plan cost.almost 75% of the total plan cost.

UA Choice Utilization – Fiscal Year 07UA Choice Utilization – Fiscal Year 07

UA Choice PlanEligible

Members

# of People Utilizing the

Plan

% Using the Plan

Total # of Rx's

# of Rx's per

Person

DELUXE PLAN 1,235 334 27% 9,580 28.7STANDARD PLAN 7,181 3,302 46% 28,380 8.6ECONOMY PLAN 975 317 33% 1,615 5.1

Totals 9,391 3,953 42% 39,575 10.0

UA Choice Utilization – Fiscal Year 07UA Choice Utilization – Fiscal Year 07

UA Choice Plan Member Paid UA Paid Total PaidUA's % of Total

DELUXE PLAN $121,826.82 $710,380.60 $832,207.42 85%STANDARD PLAN $233,995.99 $2,152,719.34 $2,386,715.33 90%ECONOMY PLAN $27,528.17 $74,197.87 $101,726.04 73%

$383,350.98 $2,937,297.81 $3,320,648.79 88%

July 1, 2007 to June 30, 2007 July 1, 2007 to June 30, 2007 Product MixProduct Mix

Univ. BoB: Retail: $61.55 Mail: $191.41Univ. of Alaska: Retail: $63.72 Mail: $249.05

Univ. BoB: Brand Rx: $138.19 Generic Rx: $24.07Univ. of Alaska: Brand Rx: $131.88 Generic Rx: $25.59

PharmaCare RecommendationsPharmaCare Recommendations

Increase the promotion of generics Increase the promotion of generics Move to a uniform three tier plan design for all Move to a uniform three tier plan design for all plans (Deluxe, Standard and Economy)plans (Deluxe, Standard and Economy)Update the plan copays and coinsuranceUpdate the plan copays and coinsuranceImplement 30 day supply limit for specialty Implement 30 day supply limit for specialty med to prevent wastemed to prevent wasteAdd standard prior authorization and quantity Add standard prior authorization and quantity limits limits Addition of a member educations program Addition of a member educations program designed to highlight the true cost of the designed to highlight the true cost of the prescription program (Script Summary)prescription program (Script Summary)


Expand Brand / Generic copay differentialExpand Brand / Generic copay differential 3,200 Brands w/gen alternatives 3,200 Brands w/gen alternatives Avg cost savings $100 per genericAvg cost savings $100 per generic

Change preferred name brands to a Change preferred name brands to a coinsurance percentages to help plans keep coinsurance percentages to help plans keep pace with inflationpace with inflation

Addition of 3Addition of 3rdrd tier non formulary brand to tier non formulary brand to increase generic and preferred name brand increase generic and preferred name brand useuse

RecommendationsRecommendationsPlan DesignPlan Design

Generic $5.00Generic $5.00 Lower generic copay results in direct cost, but Lower generic copay results in direct cost, but

should encourage more generic useshould encourage more generic use

Preferred Name Brand 80/20%Preferred Name Brand 80/20% Help increase the use of name brands with the Help increase the use of name brands with the

best discountsbest discounts

Non-Preferred Name Brand 70/30%Non-Preferred Name Brand 70/30% Steer participants away from medications with little Steer participants away from medications with little

discountdiscount

Combined savings to the Pharmacy PlanCombined savings to the Pharmacy Plan $578,000 -- over 12.3%$578,000 -- over 12.3%


Implement 30 day supply (DS) limits for specialty Implement 30 day supply (DS) limits for specialty medications to prevent waste medications to prevent waste Relocate distribution center to SeattleRelocate distribution center to Seattle

Estimated waste = $160,000Estimated waste = $160,000

PharmaCare reports – 42% of patients using the PharmaCare reports – 42% of patients using the specialty pharmacy say they are better able to specialty pharmacy say they are better able to manage their condition and their medicationsmanage their condition and their medications


Adjust $500 individual pharmacy out-of-pocket Adjust $500 individual pharmacy out-of-pocket maximum to $1,000 for specialty medicationsmaximum to $1,000 for specialty medications

1% to 5% reduction plan cost = $66,000 - $330,000 1% to 5% reduction plan cost = $66,000 - $330,000 annuallyannually


Implement Industry Standard Prior Authorizations Implement Industry Standard Prior Authorizations and Quantity Limitsand Quantity Limits

Over a dozen eligible Prior Authorization classes Over a dozen eligible Prior Authorization classes Cosmetic Acne/Skin/Dermatological – YTD Spend $83,000Cosmetic Acne/Skin/Dermatological – YTD Spend $83,000 1% to 3% savings opportunity = $66,000 to $199,000 total plan 1% to 3% savings opportunity = $66,000 to $199,000 total plan

costcost

Quantity Limit options for three growing classes of meds = Quantity Limit options for three growing classes of meds = savings @ $.10 pmpmsavings @ $.10 pmpm

Implement without the option to grandfather existing patientsImplement without the option to grandfather existing patients $.10 pmpm x 9500 mbrs = $950 month x 12 = $11,400 savings $.10 pmpm x 9500 mbrs = $950 month x 12 = $11,400 savings

opportunityopportunity


Total annual pharmacy plan costsTotal annual pharmacy plan costs

avoided (saved)avoided (saved)

$950,000$950,000

Proposed FY 09 Health Plan Changes

This is a link to an Excel file This is a link to an Excel file namednamed

FY 09 health planFY 09 health plan

QuestionsQuestions

ua choice mike humphrey director of benefits october 2007

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