Health Benefits at
Benchmark Universities
Presented to
Health Benefits Task Force
September 5, 2001
Vocabulary
Allowed charge: amount negotiated
between health care provider and insurer or
health plan as payment in full for service
Balance bill: amount that may be billed to
patient by non-network provider in excess
of allowed charge
Coinsurance: percentage of allowed charge
paid by patient
Vocabulary
Copayment: fixed amount paid by patient
for service received
Premium: amount remitted by employer to
insurer or health plan, generally monthly,
for coverage of each enrolled employee or
family
Vocabulary
Primary Care Provider (PCP): physician or
other plan-approved health practitioner
responsible for primary care and sometimes
referrals in a managed care plan
Tiering: system of grouping dependent
coverage sets, e.g., parent plus child(ren),
employee plus spouse
Benchmark Analysis
Relevant characteristics of benchmarks’
health plans
Benefit designs offered
Analysis of specific benefits
Comparison with in-state public employers
Retiree participation
Total and employee costs
Market basket analyses
Benchmarks
Arizona
California--Los Angeles
Florida
Georgia
Illinois
Iowa
Maryland
Michigan
Minnesota
North Carolina
No. Carolina State
Ohio State
Penn State
Purdue
Texas
Texas A&M
Virginia
Washington
Wisconsin
Benchmarks
9 are integrated with state employee benefit
system: Arizona, Florida, Illinois, Maryland,
Minnesota (currently), North Carolina, NC State,
Washington, Wisconsin
3 others are part of statewide university system:
Texas, UCLA, Georgia
Several of remaining are much larger than UK,
e.g., Ohio State, Michigan
14/19 have different plan years: major effect in
period of high inflation
Benchmarks
Effect of tiering: having fewer tiers tends to
suppress full family premium. 6 different tiering
systems:
6 use only Employee and Family tiers
4 use Employee, Employee + 1, and Family
4 use same 4 tiers as UK
2 use Employee, Employee + child(ren), Family
2 use Employee, Employee + 1 child, Employee +
spouse, and Family
Penn State uses 2 tiers for HMOs and 3 for PPO
17/19 have at least one self-insured plan
Benefit Designs Offered
3 benchmarks offer only PPOs and fee-for-service
plans: UNC, NC State, Georgia
6 offer only HMOs and variants with FFS
alternative for traveling faculty
Trend to smaller number of alternatives
Market consolidation
Administrative simplification
Innovations: triple option, risk corridor,
HMO/PPO hybrid (end of presentation)
Selection criteria for plan comparison
Design most comparable to UKHMO and
UKPPO
Available in county of university’s main
campus
Available to largest number of employees
Benefit Comparison:
Outpatient Physician Visit
UK: $0 PCP copay, $10 specialist
Benchmark range:
$0--2
$5--4 (1 uses $5 PCP/$10 specialist)
$10--8
$15--2
Benefit Comparison:
Emergency Department Visit
UK: $50 copay; waived if admitted
Benchmark range:
$25--4
$50--6
$75--3
Other--3
Benefit Comparison:
Prescription Drug Copayment
Most use three levels: generic, formulary branded,
non-formulary branded
UK: $8/$20/$40
Only 2 benchmarks share a design ($5/$10/$25)
3 do not appear to use formularies; UCLA covers
only formulary drugs
3 use coinsurance rather than copayments in
HMOs
Benefit Comparison:
Prescription Drug Copayment
UK’s non-formulary copay is one of 2 highest (but
note potential effect of coinsurance percentage)
New year designs likely to raise copay
Several require member choosing branded drug
when generic available to pay difference
Kentucky law requires dispensing branded
when prescriber notes “dispense as written”
Benefit Comparison:
Inpatient Hospitalization
UK: $100 copay
Benchmark range:
$0--9
$75, $100, $150, $300--1 each
$200--2
Benefit Comparison:
Inpatient MH/SA
UK: 100% MH, 20% coinsurance SA, 31
day limit
Benchmark range:
100% coverage--11
Others have copay ranging $75-$200
4 others cover SA at lower level than MH
Day limits--8 others
Other restrictions--4 (lifetime limit, dollar
limit, coinsurance)
Benefit Comparison:
Outpatient MH/SA
UK: 50% coinsurance; 20 visit limit/yr
6 others have day limits
Most use copays ranging $5-$25
Only other use of coinsurance is 10% with
prior authorization, 50% without
Benefit Comparison:
Durable medical equipment
UK: 100% coverage
Only 5 others at this level
Most common charge: 20% coinsurance
Several have benefit ceilings
Retiree participation
About half have some retiree participation
Confounding variable is participation in state
employee plans
Several offer only Medicare supplementals
Several have varying contribution by length of
service
UK among most generous
None contribute to surviving spouse coverage
Cost comparison:
Total plan cost
Single HMO mean = $238.77 vs. UK $230
Single PPO mean = $273.70 vs. UK 253
Family HMO mean = $608.76 vs. UK $641
Family PPO mean = $676.32 vs. UK 706
Cost comparison:
Total plan cost
Effect of earlier starting plan year in time of
rapid health inflation
Effect of tiering: only 4 others use 4-tier
system
Several have relatively lower family premium and
higher Employee + child(ren)
Most anticipate major increase in 2002
Cost comparison:
Employee contribution
 Single HMO:
range $0-$49.75
mean $15.16
median $10.42
UK = $21
 Single PPO:
range $0-114.18
mean $40.98
median $39.82
UK = $44
Cost comparison:
Employee contribution
 Family HMO:
range $0-$432
mean $90.56
median $67.38
UK = $432
 Family PPO:
range $0-$497
mean $221.52
median $187.25
UK = $497
Cost comparison:
Employee contribution
UK within benchmark range for single employee
contribution but far higher for employee
contribution to family coverage
Note effect of 3-tier plans: lower family premium
but higher for parent with 2+ children
UKHMO employee plus child(ren) still higher than
next highest full family HMO premium
Cost comparison:
Employee contribution
Problem: reducing family premium to $250 for
current enrollees would cost $3.2 million
Likely higher enrollment if lower premium
(estimated 1,000)
Would add $2,184,000 to total cost: with
probable overall inflation, total of at least $5.5
million recurring
Does not address cost for single parents or
couples
Cost comparison:
Higher subsidy for dependent tiers
 All benchmarks subsidize dependent tiers at substantially
higher rates than employee-only coverage. Following
HMO computations exclude UK.
Range of single subsidies: $168-$285
Range of family subsidies: $387-$697
Mean of single subsidies: $224.52
Mean of family subsidies: $526.26
Family:single ratio range: 1.93:1 - 3.13:1
Family:single ratio mean: 2.34:1
Cost comparison:
Higher subsidy for dependent tiers
Cost of increasing dependent subsidy to
lowest of benchmark levels (family=1.93:1)
$209 X 1.93 = $403.37 X 1465 enrolled at
Family level=$7,091,245
In-State Public Employers
 Regional universities
Louisville
EKU
NKU
WKU
Morehead
Murray
 State
 Federal Employee Health Benefit
 LFUCG
In-State Public Employers:
Benefits Comparison
Office visit: UK is alone in not charging
copay/coinsurance
Emergency Department: 4/10 charge $50
copay; others lower or coinsurance
Inpatient hospital: 6/10 charge $100 copay
Inpatient MH/SA: 3rd most generous
Outpatient MH/SA: least generous
In-State Public Employers:
Benefits Comparison
Prescription drugs: ranks 6th of 10 (most to
least generous) based on copays
Durable medical equipment: tied with
Louisville as most generous
Balance of analysis is incomplete because
new year data arriving daily
In-State Public Employers:
Cost Comparison
 Single employee premium:
mean $14.94
median $6.96
range $0-$75.49 (FEHBP)
UK $21
 Family employee premium:
mean $314.13
median $259.76
range $207-$432
UK $432
Market basket analysis--healthy
Reasonably healthy family of four on
Family tier coverage
Market basket composition
4 well visits
4 sick visits
1 ED visit
2 maintenance prescriptions
6 other prescriptions
Market basket analysis--healthy
 Total out-of-pocket plus family premiums
 UK: $5,442
 Next highest (Texas): $2,601.88
 Mean = $1592.44
 Median = $1505.44
Market basket analysis--healthy
 Total cost of services only
 Range $125-$430
 Mean: $272.50
 Median: $274.11
 UK: $258 (in middle of range)
Market basket analysis--unhealthy
Family of four on Family tier coverage with
significant health problems
Market basket composition
–
–
–
–
–
–
–
4 well visits
20 sick visits
2 ED visits (one leading to admission)
1 hospitalization
2 maintenance prescriptions
24 other prescriptions
$500 worth of durable medical equipment
Market basket analysis--unhealthy
 Total cost (including premium)
Range: $612-$5,846
Median: $2,330.00
Mean: $2,384.24
UK: $5,846 (highest)
Market basket analysis--unhealthy
Total out-of-pocket for services only
Range: $612-$1465.00
Mean: $1064.41
Median: $1000.00
UK: $662 (2nd lowest)
Innovations in benefit design
Triple option (typically)
In-network with referral
In-network without referral
Out-of-network
Triple option appeal: uniform premium, pay more
for added options at time of service
Disadvantage: assumes uniform access to network
providers
Innovations in benefit design
Risk corridor plan (Minnesota 2002)
Somewhat like MSA without rollover feature
(due to federal limits on group size)
High-deductible insured coverage plus
Employer contribution of about 1/2 deductible
level
Advantages: greater employee control of
provider selection
Innovations in benefit design
Risk corridor plan (Minnesota 2002)
Advantages: potential total cost savings if
Unnecessary utilization in prior design
New design motivates more prudent use
Disadvantages:
Uncertain access to group discounts
If premium is lower, potential exposure of
enrollees to serious financial problems
Innovations in benefit design
HMO/PPO hybrid
Deductibles and coinsurance percentages
for some benefits
Other benefits not subject to deductible
and require flat dollar copayments
Typically favors preventive services
Innovations in benefit design
HMO/PPO hybrid
Advantages:
May reduce costs without much administrative cost for
medical management
Lower expenditures for low users, higher for high users
Disadvantages:
Complexity may confuse members
Shifting more of out-of-pocket expense to less healthy
may be perceived as inequitable