UA Choice
Mike Humphrey
Director of Benefits
October 2007
Employer Responses
Shifting Costs
Changing Delivery
Reducing Cost
Employees
Managed Care
Plan Change &
Wellness Programs
Employers Responses
Shift the Cost (“squeezing the balloon”)



Benefit cutbacks – higher deductibles
Employers contribute less toward the plan cost
Employee charges for coverage are increased
Change the Delivery System


Managed Care, Open & Closed Networks
High Performance Networks
Reduce the Cost (“deflating the balloon”)



Contract with Medical Providers to take less
Wellness initiatives
Disease management
Top
Stories
University Health Care Trends
Beyond 2007
Are they sustainable?
$21,000
Annual
$20,000
$87 Million
Per Employee Per Year Health Plan Costs
$19,000
$78 Million
$18,000
$17,000
$16,000
$70 Million
$15,000
$14,000
$13,000
$12,000
Net Proj Costs FY08
Net Proj Costs FY09
7%
Net Proj Costs FY10
11%
Net Proj Costs FY11
15%
$1,400
Employer and Employee Health Charges
Standard Plan FY 08 Per Month
$1,263.00
$1,200
$1,023.75
$1,000
$890.00
$915.00
$885.00
$879.78
$847.00
$847.00 $854.00 $851.00
$839.18
$800
$720.00
$560.00
$600
$366.00
$400
$200
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Employer Contribution
Employee Single Coverage
Employee Family Coverage
Number of Participants Having This Amount Of Claims Experience In A Year
FY 07 Paid Claims
Total Claims Experience For An Individual
6,000
5,286
5,000
4,000
3,000
2,000
1,462
1,000
640
327
482
210
158
91
95
72
41
$4,001$5,000
$5,001$6,000
$6,001$7,000
$7,000$8,000
$8,001$9,000
$9,001$10,000
0
<$1,000
$1,001$2,000
$2,000$3,000
$3,001$4,000
10,001.00+
What will the
projected
increases do
to employee
charges
Projected 14.5% Health Care Trend
$6,000
$5,636
$5,000
$3,847
Annual Charge
$4,000
$3,000
$2,507
$2,013
$2,000
$1,374
$1,000
$914
$895
$605
$0
FY08
Charge
EE
FY09 $ 5 Mill Recovery
Applied
EE + SP
FY10 $3.4 Mill Recovery
Applied
EE + CH
FY11 $0 Recovery Applied
(Exhausted)
Family
Projected 10% Health Care Trend
$4,000
$3,506
$3,500
$3,075
Annual Charge
$3,000
$2,500
$1,854
$2,000
$1,500
$1,252
$1,098
$914
$1,000
$662
$605
$500
$0
FY08
Charge
EE
FY09 $1 Mill Recovery Applied
EE + SP
FY10 $3.4 Mill Recovery
Applied
EE + CH
FY11 $4 Mill Recovery Applied
Family
So What
Can Be
Done
Current UA Support Programs In Place
Health & Wellness
UA’s Health Programs
Case Management – for the seriously ill
Disease Management – for the chronically ill
Health Risk Assessment
Wellness/Life Style Coaching
On Site Wellness Programs
Pharmacy Program Management
Disease Management
Principles 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 Program
2006 Program
Diabetes
Heart Failure
Coronary Artery Disease
2007 Program
Diabetes
Heart Failure
Coronary Artery Disease
Low Back Pain
Osteoporosis
Osteoarthritis
Hepatitis C
Urinary Incontinence
Pressure Ulcers
Atrial Fibrillation
Inflammatory Bowel Disease
Irritable Bowel Syndrome
Fibromyalgia
Acid Related Disorders
UA Disease Management
Opportunity Analysis
2006 Program
Number of
participants – 431
Costs avoided –
$493,000
2007 Program
Number of
participants – 2,100
est.
Costs avoided –
$723,000 est.
Preventable claims cost
Group Level health care expenditures
25%
Depression
Stress
Blood Sugar
Smoking
Obesity
Blood Pressure
Sedentary Life
Not Related
75%
N = 46,026 X 6 years
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.
Preventable
Health risks push costs up
Yet preventable through lifestyle change
$2,000
$1,931
$1,800
Average annual per
capita excess health costs
when risk is present.
$1,600
$1,400
$1,160
$1,200
$955
$1,000
$955
$906
$800
$571
$600
$568
$520
$363
$400
$200
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Goetzel, R et al. The Relationship Between Modifiable Health Risks and
Health Care Expenditures, Journal of Occupational and Environmental
Medicine. 1998;10:843-854
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Effect of Single Risk Factors
70%
Depressed
46%
Stressed
35%
Blood Sugar
21%
Obesity
High BP
No Exercise
0%
Health Plan Cost
20%
Smoker
12%
10%
20%
40%
60%
80%
Percent Higher Annual Health Plan Costs
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 Absenteeism
Sick Leave Absenteeism
Mental Health
150%
Back pain
140%
Stressed
131%
No Exercise
118%
Obesity
116%
0%
50%
100%
150%
Percent Higher Absenteeism
Source: Serxner, S., et al., (2001). The impact of behavioral health
risks on worker absenteeism. JOEM, 43(4), 347-354
200%
UA’s Phase 1
“Virtual” Program With WebMD
Referrals
WIN for Alaska
Health In Action
Program
UA’s On Site Wellness Program
With WIN For Alaska – Goals
Increase
awareness of
health risks
Reduce the
number of health
risks
Increase
participation in
healthy behaviors
Provide a supportive
environment for
lifestyle changes
Increase employee
satisfaction and
morale
UA’s Phase 2 Program
With WebMD & WIN For Alaska
Virtual
Site-based
UA Choice
Pharmacy
Program
Current UA Choice
Standard Plan
Copays
Generic
Brand (w/no generic)
Brand (w/generic)
Maximum Days Supply
Deductibles
Out-of-Pocket Maximum
Retail
$7
Mail
$7
Specialty
Meds
$7
per 30 DS
$10
$10
$10
per 30 DS
$10
$10
$10
per 30 DS
30
na
na
100
na
na
90
na
na
PharmaCare’s Observations
PharmaCare (Caremark) reviewed last years
prescription drug utilization and performance
The factors most impacting plan cost are
Member Utilization – the number of medications
Product Mix – name brand vs. generic
Plan Design – name brand vs. generic cost
Of these three key areas, plan design offers the
greatest opportunity for impact.
PharmaCare Summary
44% of participants are utilizing the plan
PharmaCare standard book of business
approximately 33% take advantage of the plan.
This high utilization is reflective of the rich benefit
offered.
Within the Standard plan, 84% of UA’s utilizing
population can be found.
 They process 70% of total Rx’s and account for
almost 75% of the total plan cost.
UA Choice Utilization – Fiscal Year 07
UA Choice Plan
Eligible
Members
DELUXE PLAN
STANDARD PLAN
ECONOMY PLAN
1,235
7,181
975
# of People
Utilizing the
Plan
334
3,302
317
Totals
9,391
3,953
% Using
the Plan
Total # of
Rx's
27%
46%
33%
9,580
28,380
1,615
# of Rx's
per
Person
28.7
8.6
5.1
42%
39,575
10.0
UA Choice Utilization – Fiscal Year 07
UA Choice Plan
DELUXE PLAN
STANDARD PLAN
ECONOMY PLAN
$121,826.82
$233,995.99
$27,528.17
UA's %
of Total
$710,380.60 $832,207.42
85%
$2,152,719.34 $2,386,715.33
90%
$74,197.87 $101,726.04
73%
$383,350.98
$2,937,297.81 $3,320,648.79
Member Paid
UA Paid
Total Paid
88%
July 1, 2007 to June 30, 2007
Product Mix
Univ. BoB: Retail: $61.55
Mail: $191.41
Univ. of Alaska: Retail: $63.72
Mail: $249.05
Univ. BoB: Brand Rx: $138.19
Generic Rx: $24.07
Univ. of Alaska: Brand Rx: $131.88
Generic Rx: $25.59
PharmaCare Recommendations
Increase the promotion of generics
Move to a uniform three tier plan design for
all plans (Deluxe, Standard and Economy)
Update the plan copays and coinsurance
Implement 30 day supply limit for specialty
med to prevent waste
Add standard prior authorization and quantity
limits
Addition of a member educations program
designed to highlight the true cost of the
prescription program (Script Summary)
PharmaCare Recommendations
Expand Brand / Generic copay differential

3,200 Brands w/gen alternatives

Avg cost savings $100 per generic
Change preferred name brands to a
coinsurance percentages to help plans keep
pace with inflation
Addition of 3rd tier non formulary brand to
increase generic and preferred name brand
use
Recommendations
Plan Design
Generic $5.00

Lower generic copay results in direct cost, but
should encourage more generic use
Preferred Name Brand 80/20%

Help increase the use of name brands with the
best discounts
Non-Preferred Name Brand 70/30%

Steer participants away from medications with little
discount
Combined savings to the Pharmacy Plan

$578,000 -- over 12.3%
PharmaCare Recommendations
Implement 30 day supply (DS) limits for specialty
medications to prevent waste
Relocate distribution center to Seattle
 Estimated waste = $160,000

PharmaCare reports – 42% of patients using the
specialty pharmacy say they are better able to
manage their condition and their medications
PharmaCare Recommendations
Adjust $500 individual pharmacy out-of-pocket
maximum to $1,000 for specialty medications

1% to 5% reduction plan cost = $66,000 - $330,000
annually
PharmaCare Recommendations
Implement Industry Standard Prior Authorizations
and Quantity Limits
Over a dozen eligible Prior Authorization classes


Cosmetic Acne/Skin/Dermatological – YTD Spend $83,000
1% to 3% savings opportunity = $66,000 to $199,000 total plan
cost
Quantity Limit options for three growing classes of meds =
savings @ $.10 pmpm


Implement without the option to grandfather existing patients
$.10 pmpm x 9500 mbrs = $950 month x 12 = $11,400 savings
opportunity
PharmaCare Recommendations
Total annual pharmacy plan costs
avoided (saved)
$950,000
Proposed FY 09 Health
Plan Changes
This is a link to an Excel file
named
FY 09 health plan
Questions