UNIVERSITY OF ALASKA BASELINE ASSESSMENT AND
FY2012 INITIATIVES
E X P E R T I S E
T R E N D S
PARTNERSHIP
A N A L Y S I S
October 26, 2010
V A L U E
S T A T I S T I C S
P L A N N I N G
T
O
O
L
S
Agenda
 Current State
 Benchmarking
 Health Reform Impact
 Efficiency Opportunities
 FY 2012 Initiatives
− Wellness
− Dependent Audit
− Plan Design
 Timeline/Next Steps
 Appendix
Current State
Our Understanding of the University of Alaska
 The UA system has 3 main campuses in Fairbanks, Anchorage and Juneau with
14 rural campuses throughout the state
 Workforce characteristics:
− 43% Male/ 57% Female
− Average Length of Service is 8.7 years
− Median Salary is $54,995
− 43% of University between 46-60/ Avg. age 45.9
− Medical Opt-Outs = 7%
− Average family size is 2.33
 73% of enrolled employees are in the Standard Plan with 14% in the Deluxe
and 13% in the Economy
 Focus on benefits costs and measurement of effectiveness of programs
 Benefit package should be competitive and help to attract and retain
 There are four unions (2 faculty, 1 trades, 1 fire)
 The JHCC and SHCC work to create quality, efficiency and cost effectiveness of
the health plan
4
University of Alaska Benefits Guiding Principles
The University employee benefits should be:
 Neither a competitive advantage or disadvantage in recruiting or retaining
employees
 Focused on providing employees and their families with comprehensive
coverage
 Be aligned with vendors and providers who provide excellent service
 Promote such strategies as health awareness, health promotion and medical
consumerism
 Affordable to employees and to the University
 Sustainable
 Simple to administer
5
Demographics – Entire Population
Age Interval
Under 20
Frequency
% of Total
800
0
0%
700
20-24
82
2%
25-29
359
8%
30-35
593
13%
36-40
528
12%
41-45
511
11%
46-50
645
14%
51-55
681
15%
100
56-60
599
13%
0
61-65
360
8%
Over 65
124
3%
Male
Female
Combined
Average Age
46
46
46
Youngest EE
20
21
20
Oldest EE
77
73
77
16%
593
600
645
528
681
14%
599
12%
511
500
359
400
300
360
124
200
82
0
10%
8%
6%
4%
2%
0%
* Based on 4,482 individuals
Age
* Based on 4,482 individuals
Gender
Employees
Percentage
Males
1,941
43%
Females
2,572
57%
* Based on 4,513 individuals
6
Demographics – Entire Population
Average Length of Service1
Average Number of Years
8.7 Years
Low
1 Year
High
40 Years
Salary2
Median
$54,995
Opt Outs
Number of Employees Opting Out
288
Opt Out Percentage
7%
1Based
2Based
on 4,484 Individuals
on 4,310 Individuals
7
Demographics by Medical Plan
Economy Plan
Standard Plan
Deluxe Plan
Average Age
Male
Female
43
43
46
46
52
50
Combined
43
46
51
Median Salary
$51,692
$54,698
$61,797
Average Length of Service
7 Years
9 Years
11 Years
Medical & RX Claims PEPY
$6,239
$11,817
$23,466
As of August 2010
8
Rolling 12 PEPY Claims Cost
University of Alaska
$25,000
PEPY Medical & Rx Claims Cost
$20,000
$15,000
$10,000
$5,000
$0
Jul-07
Oct-07
Jan-08
Apr-08
COMBINED PEPY
Enrollment
# of employees
Headcounts as of August 2010
Jul-08
Oct-08
Jan-09
Economy Plan
Apr-09
Standard Plan
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Deluxe Plan
Combined
Economy
Standard
Deluxe
4,223
647
3,062
514
9
Top 30 Claimants – FY 2010
Claimant
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Enrollment
Status
Active
Inactive
Active
Inactive
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Inactive
Active
Active
Active
Active
Active
Inactive
ICD9 Description
CHRONIC RENAL FAILURE
CEREBROVASCULAR DISEASE
ENCOUNTER FOR OTHER AND UNSPECIFIED PROCEDURES AND AFTERCARE
LYMPHOID LEUKEMIA
ENCOUNTER FOR OTHER AND UNSPECIFIED PROCEDURES AND AFTERCARE
DIABETES MELLITUS
LYMPHOID LEUKEMIA
MULTIPLE SCLEROSIS
CHRONIC RESPIRATORY FAILURE
ACUTE MYOCARDIAL INFARCTION
MALIGNANT NEOPLASM OF BRAIN
CHRONIC ISCHEMIC HEART DISEASE
MALIGNANT NEOPLASM OF PANCREAS
ANEURYSM
SPINAL MUSCULAR ATROPHY
PERIPHERAL VASCULAR DISEASE
INFANTILE CEREBRAL PALSY
POLYARTERITIS NODOSA
ENCOUNTER FOR OTHER AND UNSPECIFIED PROCEDURES AND AFTERCARE
ENCOUNTER FOR OTHER AND UNSPECIFIED PROCEDURES AND AFTERCARE
CARDIOMYOPATHY
MALIGNANT NEOPLASM OF FEMALE BREAST
SEPTICEMIA
PERIPHERAL ENTHESOPATHIES
DIVERTICULA OF INTESTINE
COMPLICATIONS OF INTERNAL PROSTHETIC DEVICE, IMPLANT, AND GRAFT
MALIGNANT NEOPLASM OF TRACHEA, BRONCHUS, AND LUNG
CHRONIC ISCHEMIC HEART DISEASE
DISEASES OF LUNG
MALIGNANT NEOPLASM OF PROSTATE
Paid Claims
$801,740.44
$463,114.69
$452,319.66
$333,140.25
$330,598.79
$322,729.22
$297,112.52
$289,894.90
$277,494.15
$253,115.26
$248,484.42
$222,889.39
$215,496.20
$203,055.58
$187,328.93
$167,241.97
$167,157.30
$164,218.75
$160,843.38
$145,471.45
$144,984.43
$136,762.59
$133,051.61
$131,861.34
$128,280.92
$128,220.14
$127,478.33
$127,058.32
$126,724.60
$121,108.56
10
Large Claimant Analysis – FY 10
 The number of expected claims is based on actuarial analysis utilizing the
University of Alaska’s estimated number of members.
 The number of claims for the University is based on FY 10 large claims
information
Claim in Excess
# of Expected
Claims*
# of Claims for U of Alaska
$100,000
30.7
48
$200,000
8.2
14
$300,000
2.9
6
$400,000
1.2
3
$500,000
0.7
1
*Not adjusted for Alaska claims cost
11
Top 30 Claimants – July 2010 to September 2010
Claimant
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Enrollment
Status
Active
Inactive
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
ICD9 Description
LYMPHOID LEUKEMIA
CHRONIC ISCHEMIC HEART DISEASE
CEREBROVASCULAR DISEASE
CONGENITAL ANOMALIES OF HEART
NEOPLASM OF COLON
NEOPLASM OF COLON
MALIGNANT NEOPLASM OF FEMALE BREAST
SPONDYLOSIS/OSTEOARTHRITIS
INTERVERTEBRAL DISC DISORDERS
CEREBROVASCULAR DISEASE
DISORDERS OF CERVICAL REGION
ENCOUNTER FOR OTHER AND UNSPECIFIED PROCEDURES
CHRONIC ISCHEMIC HEART DISEASE
ACUTE MYOCARDIAL INFARCTION
CHRONIC ISCHEMIC HEART DISEASE
CORONARY ATHEROSCLEROSIS
OSTEOARTHROSIS
MALIGNANT NEOPLASM OF ESOPHAGUS
MALIGNANT NEOPLASM OF FEMALE BREAST
SECONDARY MALIGNANT NEOPLASM
DIABETES MELLITUS
MALIGNANT NEOPLASMS OF LYMPHOID
CHRONIC SINUSITIS
ENCOUNTER FOR OTHER AND UNSPECIFIED PROCEDURES
MALIGNANT NEOPLASM OF FEMALE BREAST
ENCOUNTER FOR OTHER AND UNSPECIFIED PROCEDURES
OBESITY AND OTHER HYPERALIMENTATION
MALIGNANT NEOPLASM OF FEMALE BREAST
DISORDERS OF BACK
OSTEOARTHROSIS AND ALLIED DISORDERS
Paid Claims
$596,100.94
$372,659.81
$158,843.44
$142,540.05
$138,237.12
$122,303.49
$109,961.76
$109,777.16
$105,480.39
$100,143.59
$93,943.74
$89,212.84
$85,464.90
$85,142.88
$79,589.40
$79,416.42
$78,242.63
$77,793.62
$75,018.47
$71,836.69
$70,073.47
$69,561.81
$66,891.03
$63,457.21
$63,422.35
$59,385.95
$58,524.47
$53,354.71
$53,350.04
$51,113.86
12
Lifetime Maximum as of 10/15/2010 (No Rx)
Number
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Status Total_Amount Lifetime Maximum
Active $1,531,295.09
$2,000,000.00
Inactive $1,486,233.33
$2,000,000.00
Active $1,228,655.23
$2,000,000.00
Inactive $1,226,709.17
$2,000,000.00
Active $1,152,609.15
$2,000,000.00
Active $1,044,808.88
$2,000,000.00
Active
$909,130.05
$2,000,000.00
Inactive $902,919.60
$2,000,000.00
Inactive $736,781.44
$2,000,000.00
Inactive $726,083.92
$2,000,000.00
Active
$723,294.17
$2,000,000.00
Active
$704,291.19
$2,000,000.00
Inactive $692,235.85
$2,000,000.00
Active
$663,430.39
$2,000,000.00
Inactive $660,528.67
$2,000,000.00
Active
$654,836.48
$2,000,000.00
Inactive $641,368.18
$2,000,000.00
Active
$640,876.94
$2,000,000.00
Inactive $640,407.23
$2,000,000.00
Active
$627,446.61
$2,000,000.00
Inactive $618,181.05
$2,000,000.00
Inactive $595,950.91
$2,000,000.00
Active
$583,504.43
$2,000,000.00
Inactive $567,097.73
$2,000,000.00
Active
$556,662.45
$2,000,000.00
Inactive $545,046.65
$2,000,000.00
Active
$535,473.74
$2,000,000.00
Inactive $535,042.96
$2,000,000.00
Active
$532,757.53
$2,000,000.00
Active
$530,382.62
$2,000,000.00
All Inactive employees are no longer on the plan
13
7 Year Status Quo Benefit Plan Cost Projection
No Change in Strategy
$135,000,000
$125,000,000
4,300 Covered Employees
$115,000,000
$66.4m
$105,000,000
$54.5m
$95,000,000
$43.6m
$85,000,000
$33.7m
$75,000,000
$13.7m
$6.5m
$65,000,000
$23.1m
$55,000,000
FY10
FY11
FY12
FY13
Current Spend
Projected Net
Spend Status Quo
Cost Increase Over
Current
FY14
FY15
FY16
FY17
Projected Spend
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Cumulative
$65,100,874
$71,610,961
$78,772,058
$88,224,704
$98,811,669
$108,692,836
$119,562,119
$131,518,331
$511,213,102
$6,510,087
$13,671,184
$23,123,830
$33,710,795
$43,591,962
$54,461,245
$66,417,457
$120,607,858
Cost projections are based on FY10 actuals projected forward by 10% for FY11-12, 12% for FY13-14 and 10% for FY15-17 assuming continued 17% current
employee contributions. Cost projections are for medical/Rx claims costs less pharmacy rebates
14
Medical Utilization Definitions
 Contract Months – Number of enrolled employees for a 12 month period
 Medical Total PMPM – Total medical cost on a per member per month basis
 Inpatient – Services provided to patients who are hospitalized
 Outpatient – Hospital based services where the employee is not admitted
 Professional – Primary Care or Specialist Care Physician services
 Average Contract Size – The average number of dependents (Spouse and
Children) for each enrolled employee
15
Medical Utilization
Utilization Category
7/1/08 - 6/30/09
7/1/09 - 6/30/10
% Over Previous Yr
2010 Norm*
Medical Contract Months
50,912
51,980
2.1%
--
Medical Member Months
116,118
117,985
1.6%
--
2.28
2.27
-0.5%
--
$389.14
$406.01
4.3%
$362.38
Paid Claims Per Member Per Month
$79.30
$95.52
20.4%
$86.52
Visits Per 1000 Members
988.99
1,089.80
10.2%
1,152.47
Paid Claims Per Visit
$962.22
$1,051.75
9.3%
$900.85
Services Per 1000 Members
4,043.61
4,407.81
9.0%
4,477.22
4.09
4.04
-1.1%
3.88
$235.34
$260.04
10.5%
$231.89
ER Utilization: Paid Claims PMPM
$13.81
$16.66
20.7%
$16.58
ER Utilization: Visits Per 1000 Members
146.64
159.99
9.1%
227.08
$1,129.85
$1,249.64
10.6%
$876.28
$205.72
$207.58
0.9%
$162.13
17,485.76
17,819.42
1.9%
15,235.34
$141.18
$139.79
-1.0%
$127.70
Average Contract Size
Medical Total PMPM
Outpatient
Services Per Visit
Paid Claims Per Service
ER Utilization: Paid Claims Per Visit
Professional Provider
Paid Claims Per Member Per Month
Services Per 1000 Members
Paid Claims Per Service
*2010 Norm based on Premera’s Alaska large group book of business.
16
Medical Utilization
Utilization Category
7/1/08 - 6/30/09
7/1/09 - 6/30/10
% Over Previous Yr
2010 Norm*
Medical Contract Months
50,912
51,980
2.1%
--
Medical Member Months
116,118
117,985
1.6%
--
2.28
2.27
-0.5%
--
$389.14
$406.01
4.3%
$362.38
$80.45
$71.74
-10.8%
$79.14
47.64
48.01
0.8%
61.16
229.94
206.98
-10.0%
273.89
4.83
4.31
-10.7%
4.48
$20,265.19
$17,932.55
-11.5%
$15,527.22
Average Contract Size
Medical Total PMPM
Inpatient
Paid Claims Per Member Per Month
Admissions Per 1000 Members
Days Per 1000 Members
Average Length of Stay
Paid Claims Per Admission
*2010 Norm based on Premera’s Alaska large group book of business.
17
Major Diagnosis Category
Claims Paid October 1, 2009 thru September 30, 2010
Major Diagnosis Category
Paid PMPM
Total Paid Claims
Percentage of Overall Total
Musculoskeletal System
Health Status & Services
Other
Neoplasms
Circulatory System
Ill-Defined Conditions
Digestive System
Injury and Poisoning
Nervous System
Genitourinary System
Respiratory System
Mental Disorders
Endocrine, Metabolic and Immunity
Pregnancy and Related
Skin and Tissue
Infectious and Parasitic
Congenital Anomalies
Blood
Perinatal
Injury and Poisoning External Causes
$82.26
$47.75
$39.71
$39.07
$34.71
$33.45
$29.74
$27.31
$25.71
$24.21
$16.40
$14.81
$13.66
$13.32
$6.00
$3.47
$3.27
$1.70
$0.73
$0.04
$9,678,618.46
$5,617,886.48
$4,672,390.18
$4,597,232.97
$4,083,610.05
$3,935,780.09
$3,498,709.88
$3,213,346.92
$3,025,088.71
$2,848,129.66
$1,929,065.19
$1,742,078.92
$1,606,849.17
$1,566,562.07
$705,409.29
$407,805.39
$385,226.55
$200,117.32
$85,557.47
$4,317.70
17.99%
10.44%
8.68%
8.54%
7.59%
7.32%
6.50%
5.97%
5.62%
5.29%
3.59%
3.24%
2.99%
2.91%
1.31%
0.76%
0.72%
0.37%
0.16%
0.01%
Total
$457.31
$53,803,782.47
100.00%
Total Percentage of Paid Claims by Diagnosis Category
Claims Paid October 1, 2009 thru September 30, 2010
19
Pharmacy Utilization
 University of Alaska pharmacy trend is at 12.4% which is above national
pharmacy trend
 Generic Dispensing Rate increased 3.6% from 58.7% to 60.9% but is lower
than Caremark’s book of business benchmark of 66.1% and industry
benchmark of 65.2%
 Specialty Rx total Cost increased 35.9% and the percent of Specialty Rx total
gross cost also increased 13.6%
− Five of the top 25 drugs by cost are specialty drugs
− July 1, 2010, the University of Alaska implemented Caremark’s specialty drug
management program
 Lipitor and Nexium make up the #1 and #3 spot on the top 25 drugs by
volume and #1 and #2 on the top 25 drugs by cost
− Lipitor - $380,913 & Nexium - $307,695
− July 1, 2010, the University of Alaska implemented step therapy for High Cholesterol
and Proton Pump Inhibitors
Comparison Period of July 08 – June 09 (previous) to July 09 to June 10 (current)
20
Executive Summary – Utilization and Demographics
 The University’s average age of 46 is above the national norm of 40 to 41
 Heart Disease is a chronic disease within the University’s population
− Heart disease is the #1 lifestyle related condition with over $4.1M in paid medical
claims for last 12 month period (October 2009 to September 2010)
 The University of Alaska’s pharmacy trend is at 12.4% which is above national
pharmacy trend
21
Benchmarking
Medical Benchmarking:
In-Network Deductibles
Individual Deductible
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
University of
Alaska
ASEA Union
University of
California
Stanford
Boise State
Oregon
USC
University of
Washington
23
Medical Benchmarking:
In-Network Deductibles
Family Deductible
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
University of
Alaska
ASEA Union
University of
California
Stanford
Boise State
Oregon
USC
University of
Washington
24
Medical Benchmarking:
In-Network Out of Pocket Maximum
Individual OOP Max
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
University of
Alaska
ASEA Union
University of
California
Stanford
Boise State
Oregon
USC
University of
Washington
25
Medical Benchmarking:
In-Network Out of Pocket Maximum
*Opportunity to increase OOP Maximum
Family OOP Max
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
University of
Alaska
ASEA Union
University of
California
Stanford
Boise State
Oregon
USC
University of
Washington
26
Medical Benchmarking:
In-Network Coinsurance
Coinsurance
30%
25%
20%
15%
10%
5%
0%
University of
Alaska
ASEA Union
University of
California
Stanford
Boise State
Oregon
USC
University of
Washington
27
Medical Benchmarking:
Primary Care Physician Copay
PCP Copay
$30
$25
$20
$15
$10
$5
$0
University of
Alaska
ASEA Union
University of
California
Stanford
Boise State
Oregon
USC
University of
Washington
* 0% (No Bar) means the plan does not have copays. Physician office visits are subject to deductible and coinsurance.
28
Medical Benchmarking:
In-Network Prescription Drug Copays
Rx Copays
$160
$140
$120
$100
$80
$60
$40
$20
$0
University of
Alaska
Stanford
University of
California
Boise State
USC
Oregon
*Opportunity to increase Tier 3 Copay
University of
Washington
29
Medical Benchmarking:
Employee Monthly Contributions
Employee Only Tier Contributions
$250
$200
$150
$100
$50
$0
University of
Alaska
ASEA Union
USC
Boise State
Stanford
University of
California
University of
Washington
30
Medical Benchmarking:
Employee Monthly Contributions
Dependent Tier Contributions
$700
$600
$500
$400
$300
$200
$100
$0
University of
Alaska
Boise State
ASEA Union
University of
Washington
USC
Stanford
University of
California
31
Medical Benchmarking - Employee’s Perspective
32
Dental Benchmarking
University of Alaska
Economy Standard Deluxe
ASEA Union
Boise State
PPO
Traditional PPO
In-Network Deductible
Individual
$50
$25
$0
$25
Family
N/A
N/A
$0
$75
In-Network Benefits
Class I
0%
0%
0%
0%
Class II
20%
20%
20%
15%
Class III
50%
50%
50%
50%
Maximum Benefit
$2,000
$2,000
$2,000
$2,000
Orthodontia
Ortho Benefit
50%
Not Covered
Not Covered Not Covered
Ortho Max Benefit
N/A
N/A
$1,500
Contributions
Employee Only
Employee + Spouse
Included Included Included Included w/
w/ Medical w/ Medical w/ Medical
Medical
Employee + Child
Employee + Family
Stanford - PPO
PPO
Premier
$25
N/A
$25
N/A
$0
$0
$50
$150
30%
50%
50%
$1,000
20%
20%
50%
$1,000
0%
20%
50%
$2,000
0%
20%
50%
$1,000
50%
$1,000
50%
$1,000
50%
$1,500
Not Covered
$7.74
$36.24
$46.50
$59.74
$7.74
$36.24
$46.50
$59.74
$3.92
$8.24
$7.08
$11.36
$0.00
$0.00
$0.00
$0.00
USC
DHMO
PPO
Univ. of California
Delta Care
PPO
$50
$150
Various
Copays
0%
20%
40%
$1,500
$50
N/A
Various
Copays
50%
$1,500
$7.00
$15.00
$15.00
$25.00
$20.00
$54.00
$45.00
$91.00
Washington
Delta Care
PPO
100%
80%
50%
$1,700
$50
$150
Various
Copays
50%
$1,500
Not
Not
Published Published
0%
20%
50%
$1,750
50%
$1,750
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
 The University of Alaska has the highest annual maximum benefit at $2,000.
Most dental plans have a $1,000 maximum with one school’s maximum at
$1,750
 Of the five Universities benchmarked, only 2 require employee contributions
for the dental plan
 All schools, except one, provide 100% benefit for preventive care
33
Vision Benchmarking
Exams
Copay / Allowance
Frequency
Lenses / Frames
Copay
Lenses Allowance
Frames Allowance
Frequency
Contact Lenses
Copay
Contact Allowance
Frequency
Contributions
EE
ES
EC
EF
UA All Plans
ASEA Union
B. State
Stanford
USC
$10 copay
$110 Allowance
$32 Allowance
12 Months
$25 copay
12 Months
$10 copay
12 Months
$25 copay
Covered In Full
$120 Allowance
24 Months
None
$150
$125
24 Months
-$60 Bifocal Allowance
$30 Allowance
24 Months
$25 copay
Covered in Full
$150 Allowance
12 Months
$15 copay
Covered in Full
$150 Allowance
24 Months
None
$120
24 Months
None
$170
12 Months
-$47 Elective Allowance
12 Months
-$150 Allowance
12 Months
-$150 Allowance
12 Months
Included w/ Medical
$10.30
$16.48
$16.84
$27.14
$9.32
$12.90
$13.16
$21.20
Included w/ Medical
Included w/ Medical
34
Benchmarking Executive Summary
 The Standard plan’s individual and family deductibles are in line with the PPO
deductibles offered at other Universities.
 The Standard plan’s individual and family out-of-pocket maximum are richer
than the PPO out-of-pocket maximums offered at other Universities.
 The University of Alaska health plan’s coinsurance at 80% is in line with the
PPO coinsurance offered at other Universities.
 The Standard plan’s employee only contributions are in line with the other
Universities.
 The Standard plan’s dependent tier contributions are richer than the other
Universities.
 The non-preferred brand (3rd tier) drug copay of $40 is below the benchmarked
Universities.
 Three out of the six Universities offer a High Deductible Health Plan.
 The University of Alaska’s Dental and Vision plans are in line with the
benchmarked Universities.
35
Health Reform Impact
Healthcare Reform Blueprint
Employer Impact
No Lifetime Maximum Dollar Limits- Currently $2 Million
Dependent Children Aged to 26 – Current 19/24
No Pre-Existing for Children under 19 – Currently have pre-
Free Rider Surcharge:
ex
University of Alaska Must Offer Qualifying Coverage [60%]
Emergency Room Out-of-Network Needs to be Paid at
Network Level- Currently Deductible and Coinsurance
No Cost Share for Preventive Care
Nondiscrimination
GC
at an Affordable Cost [No More than 8-9.5% of Household
Income] $2,000 Penalty per FTE for Noncompliance
GC
GC
No Annual Dollar Limits on Essential Health Benefits
OTC Medication Not Eligible for FSA Reimbursement
Notify Participants of Changes (60) Days Prior to Effective
Date
Cover Clinical Trials
Waiting Periods Limited to 90 days – Currently 30 days
Automatic Enrollment
No Pre-Existing for All Employees
Plans Required to Produce
4-Page Plan Summaries
W-2 Reporting of Health
Plan Values
2011
GC
2012
Required Notice about
Exchanges [3/2013]
Health FSA Limit to $2,500-
Currently $5,000
2013
Grandfather Clause – “Plans” in effect as of 3/23/2010 are exempt
from implementing this change.
2014
37
Healthcare Reform Blueprint
Employee Impact
No Lifetime Maximum Dollar Limits- Currently $2 Million
Individual Mandate:
Dependent Children Aged to 26
All Individuals Must Have Qualifying Health Coverage or Pay
No Pre-Existing for Children under 19
a Penalty; In 2014 = Greater of $95/$285 or 1% of
Emergency Room Out-of-Network Needs to be Paid at In-
Household Income
Network Level- Currently Deductible and Coinsurance
No Cost Share for Preventive Care
Health Insurance Exchanges for Individual Market
Nondiscrimination
No Annual Dollar Limits on Essential Health Benefits
OTC Medication Not Eligible for FSA Reimbursement
Waiting Periods Limited to 90 Days
Automatic Enrollment
Cadillac Tax:
40% Excise Tax on
Health Benefits For
“High Value” Plans
Taxation:
.9% Additional Medicare Tax and 3.8%
Passive Income Tax on Individuals Earning
+$200,000 [$250,000 for Families]
2011
2012
2013
2014
2018
38
Short Term Mandated Benefits
 FY 2012 Mandated Healthcare Reform changes are estimated to cost the University
of Alaska between $2,800,000 and $3,200,000
2011
Regulation
Remove $2M Lifetime Maximum
Permit Dependent Children to Age 26
GF
$800,000*
$2,000,000 to $2,400,000
Remove Pre-existing condition on children
Minimal
Remove cost share on preventive services
$0
Total Cost
GF
U of Alaska Cost
$2,800,000 to $3,200,000
Grandfathered Clause – “Plans” in effect as of 3/23/2010 are exempt from implementing this change.
*$800,000 is for current renal failure that would have come off plan at $2M maximum but now is Unlimited
39
University of Alaska Plan Grandfather Status
Action
U of Alaska Current
Retain Status
Lose Status
Change Third-Party Medical Vendor
N/A
Yes
-----
Change Self-Insured to Fully-Insured
N/A
-----
Yes
Eliminate all or substantially all of a
benefit
N/A
-----
Yes
Any increase in cost sharing
expressed as percentage
20%
20%
21%
Not Applicable
Not Applicable
Not Applicable
$500
$250
$100
$550
$250
$100
$600
Any change
Any Change
Increase in Out-of-Pocket Maximum
- Economy
- Standard
- Deluxe
$3,000
$750
$500
$3,500
$750
$500
$3,750
$800
$550
Decrease in employer contributions
83%
78%
77%
Increase in flat dollar copayment
Increase in Deductible
- Economy
- Standard
- Deluxe
40
Effects of University Losing Grandfather Status
Mandated Benefit
Current U of Alaska
Benefit
Estimated Cost of Change
No Cost Share for Preventive Care
No cost share with
$750 limit
Minimal Cost Increase
Coverage of Routine Clinical Trials
Not Covered
Minimal Cost Increase
Covered the Same
No Cost Increase
Designation of Allopathic or Osteopathic PCP for Children
Is Not Required
No Cost Increase
Obstetrical & Gynecological Care without a Referral or Authorization
Is Not Required
No Cost Increase
New appeals process to include external review
Is Not Required
Minimal Cost Increase
Cover Emergency In & Out-of-network the same
41
Long Term Mandated Benefits
Regulation
U of Alaska Est. Cost
2012
W-2 Reporting of 2012 health plan values
Minimal
2012
4 Page summary
Minimal
2013
Reduce FSA from $5,000 to $2,500
2014
Free Rider Surcharge
2014
Automatic Enrollment (0% to 50% opt-in)
2018
Cadillac Tax
N/A
One plan with qualifying coverage (60%) at
affordable cost (8%)
$0 to $1,400,000
$4,021,000
 If all 288 current opt outs were to enroll in 2014 then the estimated cost
increase would be an additional $2,800,000
 2,680 employees would trigger the Cadillac Tax in 2018 under the current plan
designs
42
2014 – Free Rider Surcharge
 “Qualifying” – Must cover 60% of “Allowed Charges”
 “Affordable Coverage” – Cost must not exceed 9.5% of employee’s household
income (8% to avoid vouchers)
 If Not Both “Qualifying” and “Affordable” then Penalty is $3,000 x Number of
FTEs Who buy coverage in Exchange Capped at $2,000 times total FTEs. The
penalty is not assessed on Part-Time Employees.
 What does 8% look like on Active Plans:
Current FY11 Annual
Employee Contribution
Required Salary to
Support 8% Rule
Economy – Employee Only
$395
$4,938
Standard – Employee Only
$1,116
$13,950
Deluxe – Employee Only
$2,547
$31,838
Plans
43
2014 – Vouchers and Employer Penalties
 If Employee contribution is more than 8% but less than 9.5% of his/her
“Household Income” AND
 Employee Household Income is <= 400% of Federal Poverty Level ($54,120
Individual and $110,280 family of four) and Employee elects to get coverage in
the Exchange then employer must offer a voucher equal to maximum
contribution employer pays toward any employee’s group coverage
− $19,813 a year based on the 2010 Deluxe plan’s employee plus family contribution
 Conclusion – Make sure employer contributions are below 8% of employees’
“Household Income”
 CAVEAT – The final rules have not been written
− It is unclear what “Qualifying Coverage” means exactly though its “60% of Allowed”
44
2014 Health Exchanges
 Beginning in 2014, individuals may purchase coverage through the
Insurance Exchange established by states (with a federal Exchange
as a fall-back if state does not act).
 The levels of coverage offered through the Exchanges and the
expected premium for these plans is as follows:
2014 Anticipated Premium*
Plan Option
Single
Family
Low $3,692
Low $9,953
Med $4,615
Med $12,442
High $5,538
High $14,929
Low $4,308
Low $11,612
Silver
70% of allowed charges
Med $5,385
Med $14,515
High $6,462
High $17,417
Low $4,923
Low $13,271
Gold
80% of allowed charges
Med $6,154
Med $16,589
High $7,385
High $19,905
Low $5,538
Low $14,930
Platinum
90% of allowed charges
Med $6,923
Med $18,663
High $8,308
High $22,393
*Anticipated premium based on the Henry J. Kaiser Family Foundation calculator for the Silver
plan, for a 40-year-old individual. Premiums were trended to 2014 and adjusted for the other
plan options. The range represents a low, medium and high cost area.
Bronze
Average U of Alaska
employee in the
Standard plan pays
$1,116 per year for
comparable single
coverage and $3,125
for comparable
family coverage
Expected Coverage Level
60% of allowed charges
2018 Cadillac Tax
Economy
$40,000
$33,339
$35,000
$30,000
$35,006
$36,757
$27,041
$25,000
Single
$20,439
$20,000
Family
$15,000
$10,000
$7,300
$9,657
$11,907
$12,502
$13,127
Single Limit
Family Limit
$5,000
$0
2010
Does not include FSA dollars
2014
2018
2019
2020
46
2018 Cadillac Tax
Standard
$45,000
$40,000
$36,460
$35,000
Single
$22,352
Family
$20,000
$15,000
$10,000
$40,197
$29,572
$30,000
$25,000
$38,283
$7,983
$10,561
$13,021
$13,673
$14,356
Single Limit
Family Limit
$5,000
$0
2010
2014
2018
2019
2020
47
2018 Cadillac Tax
Deluxe
$50,000
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
$43,092
$45,247
$47,509
$34,951
Single
$26,418
Family
$9,435
2010
$12,483
$15,390
$16,160
$16,968
Single Limit
Family Limit
2014
2018
2019
2020
48
Impact of Terminating the University of Alaska Plans
University of Alaska
2014 Expected Cost
Current Plans
Terminate Plans
Employer Cost
Medical Program
Additional Taxes (Medicare) due to Termination of Plan
$157,663
Total Expected Cost of Free Rider Surcharge (disregard first 30 FTEs)
Total Expected Employer Cost for 2014
$8,558,000
$69,959,214
$ Change
$8,715,663
($61,243,551)
% Change
-87.5%
Exchange subsidies based
on Household Income
Employee Cost
Employer/Exchange: Employee Contribution
$10,873,327
$84,056,725
Employer/Exchange: Employee Out-of-Pocket Expenses
$12,782,279
$15,247,617
Employee's additional taxes
Employee Total Annual Cost
Total Employer and Employee (after subsidies) Cost (Total Expected
Employer Cost for 2014 + Employee Total Annual Cost)
$3,850,819
$23,655,606
$93,614,820
$103,155,161
$111,870,824
 Increased employee costs due to higher expected exchange premiums and little to no subsidy amounts for higher paid individuals.
49
RESPONDENT DATA
2011 Plan Year Decisions
Healthcare Reform Survey Results
Total Respondents—85
Fully Insured—1
Self-Insured—84
««TOTAL CLIENTS WITH 2,000+ EMPLOYE ES»»
Client Will Lose
Grandfather Status
26%
Client Will Move Dental
To Age 26
5%
Client Will Move Vision
To Age 26
11%
69%
27%
14% 2%
11%
62%
27%
Client Will Move to
Eight-Tier Contribution
62%
84%
The Number of Clients That Will
The Number of Clients That Will
The Number of Clients That Will
The Number of Clients That Will
The Number of Clients That Won't
The Number of Clients That Won't
The Number of Clients That Won't
The Number of Clients That Won't
Undecided
Undecided
Undecided
Undecided
Client Will Add a Load To The
"Child" Categories (Employee
Child and Family) Rates To
Fund Added Lives
Client Has Co-Pays Today and
Will Move Mental
Health/Chemical Dependency
Co-Pay to PCP
5% 20%
49%
27%
24%
75%
If Covering Dependent
Maternity, Client Will Exclude
Dependent Maternity Moving
Forward (ASO Clients Only)
16%
29%
Client Will Move Their LTM to
Unlimited as Opposed to
Current LTM as Annual
Maximum (ASO Clients Only)
24%
5%
71%
55%
The Number of Clients That Will
The Number of Clients That Will
The Number of Clients That Will
The Number of Clients That Will
The Number of Clients That Won't
The Number of Clients That Won't
The Number of Clients That Won't
The Number of Clients That Won't
Undecided
Undecided
Undecided
Undecided
2011 Plan Year Initiatives Data collected through Lockton Service Team survey conducted in August 2010.
50
Healthcare Reform Summary
 Mandated Healthcare Reform changes are estimated to cost the University of
Alaska between $2,800,000 and $3,200,000
 Retaining Grandfather status – benefits do not outweigh the costs
− Minimal to no cost increase to the University for loss of Grandfather status
− 69% of Lockton clients over 2,000 employees will lose Grandfather status in 2011
 Options to control risk due to unlimited lifetime maximum
− Evaluate $1M or $2M maximum
− Consider Individual Stop Loss at $500,000
 Eliminating the medical plans in 2014 would substantially decrease the cost of
healthcare for the University but would significantly increase the cost of
healthcare for its employees
51
Healthcare Reform Summary (Continued)
 The University must prepare for 2014 when it needs to have one plan with
qualifying coverage (pays 60% of allowable charges) and offered at an
affordable cost (8% of employee household income)
 The estimated Cadillac Tax in 2018 could cost the University over $4,000,000
− The University should begin to make plan design changes to reduce its exposure to
the Cadillac Tax
− The University should begin to lower the actuarial plan value of its medical plans
− The University should assist employees in having healthier lifestyles
52
Efficiency Opportunities
Summary
 We reviewed each line of coverage the University offers
− Based on data from carriers and the University
− Plan assessment and Claim analysis
− Utilization review/cost drivers
− Demographic analysis
− Reviewed medical actual to budget performance
 Overall status - each line of coverage is strong and the medical is at or above
benchmark norms
 We have developed some options for FY 2012 based on our analysis and
understanding of the University of Alaska
54
Efficiency & Management Opportunities
Purchasing
Efficiency
Eligibility
Management
Participant
Cost Sharing
Health Risk
Management
55
Purchasing Efficiency
 All lines of coverage have:
− Stable, reputable, quality carriers
− Competitive rates
 Verify thru RFP process in 2010 and 2011 and annual discussion with vendors
− Sophisticated reporting capabilities
− Online access for employees
 Medical, dental, and vision:
− Appear to have adequate in-network access and discounts
 RFP process in 2011 would validate access and discounts
56
Premera vs. Beech Street Providers
ANCHORAGE
FAIRBANKS
JUNEAU
Premera
Beech Street
Premera
Beech Street
Premera
Beech Street
General Physician
209
162
65
47
72
11
Pediatrician
209
32
37
10
49
3
OBGYN
140
19
28
3
42
0
Internist
51
32
19
8
11
4
Dermatologist
0
1
2
0
1
0
Orthopedic
4
8
18
1
7
1
In-Network Providers
 Provider can only charge a contracted rate as part of the Premera network
 Providers cannot balance bill members (charge above contracted rates)
 Member receives a higher benefit level from the plan
Out-of-Network Providers
 Provider may balance bill member for amounts over Reasonable & Customary
 Member receives lesser benefit level from the plan
In each main campus location, the University of Alaska’s healthcare plan
provides more in-network providers than the Beech Street network.
57
Premera vs. Beech Street Network Hospitals in Alaska
Beech St reet
Premera
Alaska Nat ive Medical Cent er
Yes
Yes
Alaska Regional Hospit al
Yes
No
Providence Alaska Medical Cent er
Yes
Yes
Mat Su Valley Regional Medical Cent er
Yes
Yes
St Elias Specialt y Hospit al
No
Yes
Yes
Yes
No
Yes
No
Yes
No
Yes
No
Yes
Yes
Yes
Mount Edgecumbe Hospit al
No
Yes
Sit ka Communit y Hospit al
No
Yes
Sit ka Medical Cent er
No
Yes
Yes
Yes
No
No
Y ukon Kuskokw im Delt a Regional Hospit al
No
No
Y ukon Kuskokw im Healt h Cent er
No
No
No
Yes
Providence Valdez Medical Cent er
Yes
Yes
Providence Sew ard Medical Cent er
Yes
Yes
Cordova Communit y Medical Cent er
Yes
Yes
W rangell Medical Cent er
No
Yes
Sout h Peninsula Hospit al
Yes
Yes
Cent ral Peninsula Hospit al
Yes
Yes
Anchorage
Fairbanks
Fairbanks Memorial Hospit al
Juneau
Bart let t Regional Hospit al
Juneau Recovery Hospit al
Dillingham
Kanakanak Hospit al
Ket chikan
Ket chikan General Hospit al
Kot zebue
Maniilaq Healt h Cent er
Sit ka
21 Hospitals in Alaska are in the
Premera network, compared to
only 12 in the Beech Street
network.
Kodiak
Providence Kodiak Island Medical Cent er
Barrow
Samuel Simmonds Memorial Hospit al
Bet hel
Nome
Nort on Sound Regional Hospit al
Ot her
58
Eligibility Management
 Medical, dental, and vision currently:
− 30 days from date of hire
− Part-Time Employees have the same benefits & contributions as Full-Time employees
 Option: Part-Time employees pay more than Full-Time employees
−
From Mercer survey, 43% of employers with 1,000-4,999 employees offer the same plans and
different contributions between full-time and part-time
− Medical definition of dependents: legal spouse, children up to age 24 if full time
student and will change to age 26 with Healthcare Reform
 Option: Adding working spouse surcharge
−
Was not supported by JHCC in December 2009
59
Participant Cost Sharing
 Medical
− Current share: University pays 83% of total cost
 Option: Reduce percentage with Union approval
 Option: 8 tier employee contributions
−
EE, EE + 1, EE + 2, EE+3, EE +SP, EE + SP + 1, EE + SP + 2, EE + SP + 3
 Option: Contributions tied to completion of wellness activities and outcomes
 Option: Working spouse surcharge
 Option: Tobacco surcharge
 Dental and Vision
− Current share by plan: University pays 83% of cost
 Determine if dental and vision should continue as core benefits or become subject to a
greater cost share
60
Wellness – What We Believe
 Healthcare Reform is going to increase medical trend over and above current
projections
 Targeted interventions based on key conditions show prompt returns for a small
percentage of the population. Lifestyle programs and culture change will reach
a larger percentage of the population.
 Employers and participants must have “skin in the game” through active
engagement and financial accountability.
− Incentives should drive participation and penalize those who do not achieve results
 Integrated claim, Health Risk Assessment, and Biometric data establish the Risk
Profile and allow for continuous program measurement
– Targeted and population based, integrated with plan design and outcome based
 Outcomes should be tracked by improving aggregate health status:
− BMI, Blood Pressure, Cholesterol/Fasting Glucose and Tobacco Use
 Long-term health improvement and cost reduction can only be achieved with:
− High consumer engagement (80% over 3-5 years)
61
Wellness – What We Believe
 On average $1 of medical and pharmacy costs there is about $2.3 of health-
related productivity costs that employers must pay – and that figure is much
greater for some conditions.1
 A recent study reports that for every dollar spent on wellness programs there
are $3.37 dollars returned in reduced medical costs and $2.73 returned in
reduced absenteeism.2
 One of the foundational tenets of the field of corporate wellness is that it is
clearly better to prevent health problems than to treat them later on. When
done effectively, health promotion has demonstrated a successful history of
both improving health and providing a significant return, with ROIs ranging
from 3:1 to 5:1 or higher.3
1,2http://www.thehealthcareblog.com/the_health_care_blog/2010/09/front-line-managers-are-key-to-wellness-program-participation.html
3http://www.livewellcolorado.org/assets/pdf/partners-in-action/worksites-and-businesses/ucsw-white-paper.pdf
62
Health Risk Management – Disease Management
 Disease Management thru Alere went live on 8/1
− Have identified 831 individuals and have reached out to them
− Nurseline 24/7 report in December
− 1st Qtr report will be delivered around March 29th
− Need to integrate Alere data with WIN data
63
Health Risk Management – Vision
 Integrate Vision claims with Alere (Disease Management Vendor)
− Eye exams can detect early stages of chronic conditions (diabetes, glaucoma,
hypertension, etc.)
− People with diabetes miss 8.3 days of work per year compared to 1.7 days for
people without diabetes
− A typical client with 10,000 employees will have:




435 employees with Diabetes
71 employees with Glaucoma
1,656 employees with Hypertension
576 employees with High Cholesterol
− In the case of diabetes, the direct cost avoidance for diabetic patients managing
their disease versus those who are not is approximately $4,000 a year
Sources: VSP
64
Health Risk Management – Dental
 Dental
– More than 120 medical conditions may possibly be detected by a dentist through an
examination of the mouth. Some of those conditions are: diabetes, high blood
pressure, sleep disorders, and kidney disease
– There are two connections between heart disease and oral health
 Chronic gum disease can lead to development of heart disease
 Gingivitis (Gum disease) is caused by plaque buildup and affects 80% of adults according
to the Academy of General Dentistry (AGD). The bacteria from gum disease can dislodge
and enter the bloodstream, attach to blood vessels and increase clot formation. The clots
decrease blood flow to the heart and cause an elevation in blood pressure and thus
increasing the risk of a heart attack. Gum disease can be prevented by brushing and
flossing and going in for routine dental checkups.
 More than 90% of all systemic diseases, including heart disease, have oral
symptoms. Patients who visit their dentists on a regular basis can be diagnosed and
treated early.
 According to the AGD, proper diagnosis and treatment of tooth and gum infections in
patients have led to a decrease in blood pressure medications and improved overall health.
– Increase number of cleanings for diabetics and pregnant women
– There is the possibility of having the preventive dental services be part of wellness
credit
65
Why Health Not Health Insurance
The Case for Employers
Medical and
Pharmaceutical
Direct Medical Costs – 24%
Indirect Medical Costs
76%
Presenteeism
Long-term
disability
Absenteeism
Source: Harvard Business Review- Presenteeism, 2004
Short-term
disability
66
Why Health Not Health Insurance
Behavior is the single
greatest determiner of
health status
 In a group of 100 workers:
–
–
–
–
–
–
–
60
50
50
27
24
14
10
are sedentary
have high cholesterol
are at least 20% overweight
have cardiovascular disease
have high blood pressure
use tobacco products
have diabetes
Primary Factors Impacting Health Status
Among U.S. Workforce
60%
Medical Costs
$1.7 T
50%
Behavior=60%
40%
30%
20%
10%
0%
Access to
Care
Genetics
Environment
Behavior
Source: 2006 HR Southwest Human Resources Conference and Exposition
67
Health Status Declining
Obesity Trends* Among U.S. Adults
(*BMI 30, or about 30 lbs. overweight for 5’4” person)
1985
2008
No Data
<10%
10%–14%
15%–19%
20%–24%
25%–29%
≥30%
68
Economic Value of our Behavior
Health
risks
Unhealthy
behaviors
Chronic
disease
Health care
costs and lost
productivity
Obesity Linked to Conditions
Stroke
Obstructive Sleep Apnea
Type II Diabetes
Fatty Liver Disease
Gallbladder Disease
Metabolic Syndrome
Back Pain
Cataracts
Cardiovascular Disease
Hypertension
Pulmonary Disease
Coronary Heart Failure
Cancers– Particularly of the breast,
esophagus, colon, pancreas,
edometrial, kidney and rectum
Gynecologic Abnormalities
Osteoarthritis– especially of the knee
Gout
Higher Annual Health Care Costs
Overweight /Obese costs +$2,326 per member per year in direct costs.
Metabolic Syndrome costs +$3,100 per member per year in direct costs
69
Metabolic Syndrome
 What is it?
– A cluster of 3 or more conditions that together place people at high risk for
developing a host of debilitating illnesses
Normal/Ideal Range
Waist Circumference
Male
Female
< 40 inches
< 35 inches
Triglycerides
< 150 mg/dL
Reduced HDL Cholesterol
> 40 mg/dL
> 50 mg/dL
Elevated Blood Pressure
Systolic < 130 and/or Diastolic < 85
Elevated Fasting Glucose
< 100 mg/dL
– Approximately 33% of a typical population have metabolic syndrome1
 Statistics show the additional annual medical cost for members with metabolic
syndrome is $3,1081:
– $552 is attributed to additional cardiovascular episodes
– $2,256 is related to higher expenses for the prevalence of related conditions,
particularly cardiovascular disease and diabetes
1Source:
Fitch et al., Milliman 2009, pg. 13
70
Age and Risk Drive Healthcare Costs
$10,095
$12,000
$9,221
$10,000
$6,664
$8,000
$4,130
$3,432
$6,000
$5,445
$4,000
$2,025
$2,000
$0
$7,268
$1,247
<35
$2,741
$3,601
$3,366
$1,515
35-44
0-2 risks
$4,319
$1,920
45-54
3-5 risks
55-64
65+
5+ risks
Eddington, D. W. Emerging Research. AJHP. 2001:15(5):341-349.
71
UA’s Wellness Program Goals
 UA’s Wellness Program Goals
– Establish a culture of wellness
– Identify the risk factors or problems University of Alaska employees and spouses
have
– Help University of Alaska employees improve their health
– Slow the rate of increase in health plan costs
72
Wellness Program – Employer Objectives
 Establish Culture of Wellness
– Healthier food choices
 Cafeteria (subsidize health options)
 Vending machine selections
 Catered events/meetings
– Increase healthy activities
 Challenges
 Competitions
 Identify
– Increase in IHP Participation with full Biometrics
– Identify top 3 disease states and create streamlined communications targeting the
identified disease states
 Address
– Reduction in Absenteeism & Presenteeism
– Increasing Productivity
– Enhancing Recruitment
73
Overview of WIN Programs for UA
 Large depth of services
–
–
–
–
–
–
Health Risk Assessments (PWP)
Get The Point (GTP) activity tracking
Onsite Biometric Screening and Coaching (IHP)
Onsite Biometric Screening events
Group presentations (Wellness Breaks)
Website, Newsletter
 WIN provides multiple face to face touches
 Best in class employers typically spend 2% of total costs on wellness programs
– University of Alaska is spending $1.6 million without incentives which is
approximately 2.5% of total costs
– The employee portion is $5.27 pepm (17% employee contribution)
 WIN consultants now provide Alere contact information to drive participation in
the disease management program and also contact information for ComPsych
(EAP)
– The University’s EAP program participation is above ComPsych norms
74
Health Risk Assessment (PWP)
 Health Risk Assessment (HRA)
– It is available on-line
– The assessment is also mailed to the home
 Incentive to complete the HRA
– $100 for the employee to do the HRA
– $100 for the spouse to do the HRA
– Cost for FY10 was $231,000 (includes cost of administration)
 In 2009, 39% of eligible members took the PWP
 In 2010, 33% of eligible members took the PWP
– 73% of the 2,259 participants were employees
75
Incentives
 Get the Point (GTP)
 Tracking Activities for 4 months
− Employee can earn $50, $75, $100 & $200 based on points from tracking activities
 JHCC Incentives
− Tracking system for daily activities
− Employee can earn $100 by either doing 50/50 or Health club
 50/50
−
Employee receives $100 if he or she tracks activities for 2 months and also self reports biometric
data
−
Employee receives $50 if he or she self-reports biometric
 Health club
−
$100 health club reimbursement in lieu of tracking activities for 2 months and reporting biometric
data
− Tracking Activities for 4 months
 $300,000 incentive pool allocated by the University is used for this program
76
Individualized Health Planning Sessions (IHPs)
 Year 1, the program was available in Anchorage and Juneau
 Year 2, the program included Fairbanks
 There are six face-to-face sessions with no out-of-pocket costs to the employee
– The employee can attend all six sessions or just the initial and final
– Over the last two phases (10/08-6/09 & 10/09-6/10) there has been a 20% dropout
rate from initial to final session
 Initial consultation and 4 follow-up visits with a final strategy meeting
– During these visits employee and wellness consultant develop action plan, set goals
and track progress
– Program does not require full biometric screening at initial or final meeting
 Personal interaction is valued by the University employees
 IHP program has demonstrated improved health in participants
77
IHP Enrollment – Year 1, 2 & 3
79%
1,600
1,400
1,200
1,000
800
21%
600
400
200
0
Male
Female
78
IHP Enrollment – Year 1, 2 & 3
30%
600
24%
500
25%
400
300
200
10%
5%
6%
100
0
18-24
25-29
30-39
40-49
50-59
60-69
70+
79
IHP Participants Interests –
Year 1, 2 & 3
1,200
1,120
1,000
800
600
317
400
200
197
70
34
20
25
13
0
80
IHP Participants’ Feelings about their state of health
–Year 1, 2 & 3
624
700
600
671
569
531
500
400
224
300
167
200
92
30
100
0
Fair
good
First Session
Very Good
Excellent
Last Session
81
IHP Participants’ Behavior Change – Year 1, 2 & 3
872
900
800
700
600
500
400
300
200
100
0
529
381
202
128
193
242
56
10
First Session
207
Last Session
82
IHP Participants’ Blood Pressure – Year 1, 2 & 3
700
549
600
559
554
604
500
400
300
270
210
200
100
0
Hypertension (OVER
140 or OVER 90)
Pre-hypertension
(120-139 or 80-89)
First
Normal (<120 and
<80)
Last
83
IHP Participants’ Cholesterol Levels – Year 1, 2 & 3
804
877
900
800
700
600
500
400
300
200
100
0
545
472
Normal
Over 200
First
Last
84
IHP Participants’ BMI – Year 1, 2 & 3
600
500
391
406
467
477
519
493
400
300
200
100
10
11
0
Under 18.5
Normal (18.524.9)
First
Overweight
(25-29.9)
Obese (30+)
Last
85
IHP Outcomes
 Employees that lost at least 10 pounds - 116 participants
 Employees that lost at least 2 inches from their waistline - 229 participants
 Employees that decreased their blood pressure to a normal level from at least
140/90
- 147 participants
 Employees that decreased their total cholesterol by at least 40 points - 121
participants
86
Hospitalization Costs for Heart Disease in Alaska
for 2007
 Bypass - $144,642
 Catheterization - $55,151
 Percutaneous Coronary Intervention - $53,879
 Ischemic Heart Disease - $46,651
 Diseases of the heart - $33,183
 Stroke – $27,163
 Congestive Heart Failure - $20,814
http://www.hss.state.ak.us/dph/chronic/chp/pubs/burden_Dec09.pdf
87
Wellness Executive Summary
 Cutting edge wellness program based on on-site coaching visits
 The University is spending an appropriate amount for a wellness program
 There is good utilization of the current wellness programs
 Participants in wellness programs are realizing improved health and reduced
risk factors
 We believe you are achieving a minimum ROI of one-to-one
 IHP enrollment has been embraced by a larger percentage of the female
population compared to the male population
– It is valuable to reach the female population as they make a majority of the
healthcare decisions for the family
– Need to target male employees for participation in IHPs as they are at a greater risk
for cardiovascular disease
88
FY 2012 Initiatives
Wellness
FY12 Potential Opportunities
 Ideas from JHCC & SHCC on Incentives
− Ideas for $300,000 incentives
 Guiding Principles
−
Better engage campuses and bring them together
−
Use total amount of money
 Wellness Competitions
−
Walking
−
Weight loss challenge
 Continue 50/50 and Health club reimbursement
 Health Fairs
 Include spouses in IHP program
 Lockton with the University of Alaska perform employee interest survey on incentives
 Include Rural Campuses in competitions and programs
90
Lockton Guiding Principles
 Measurement – Need to establish a baseline
 Simplify and streamline incentives and communications
− Implement employee credit on medical plan contributions
− Reward outcomes and not just activity
 Target high risk individuals
− Reduce health risk factors
− Improve employees health
 Keeping healthy people healthy
91
What Impact Can an Employer Have
on Reducing Health Risk?
Health Risk Management (HRM) Progression
Red – Need to Do
Green – Implemented
Incent Positive
Behavior Change by
rewarding Compliance
Indentify High Risk
Individuals and
Introduce Targeted
Programs
Mandate Biometrics
for Total Population
Implement Behavior
Based Plan Design
• Encourages more
efficient use of
medical services
• Employee
educated on true
cost of healthcare
• The biggest risk is
the unknown risk
Continuously
Re-Measure Population
Health Risk thru
Biometrics
• American Medical
Association
recommended
health screenings
• Weight Loss
• Non-Smoker
• Tobacco Cessation
• Healthy Weight
• Disease
Management
• Medication
Compliance
• Depression
• Reward
Counseling
participation with
payroll contribution
discounts or prohibit
enrollment in richer
plan design options
© 2005 PSC Group, LLC
• Reassessing the
health risk on a
routine frequency
is necessary to
recalibrate
programs as
needed and to
demonstrate
success to
employees
• Employees
complying are
charged
discounted
premiums and/or
discounted plan
deductibles
92
Reducing Health Risk Requires Eliminating Status Quo
No consumerism
• Little knowledge of true
cost of care
• Promotes overutilization of services
Entitlement Mentality
• Insulated from impact to
bottom line of business
Passive
Participant
$$$$
Poor Lifestyle Choices
• No consequence for risky
behaviors
• Smokers, obesity, noncompliance with medications
93
Cost Reduction Achieved by Requiring
Accountability
Behavior Based
Plan Design
HSA / HRA / HDHP
Passive
Participant
$$$$
Healthy
Behaviors
Premium Discounts
for Maintaining or
Improving Health
Status
Active
Participant
$$
Shared Savings
Bonus Compensation
to Employees for
Achieving Cost
Targets
94
HRA, HSA & FSA
Features
HSA
HRA
Health FSA
Yes
No
No
Employee
Employer
Employer
Employee contributions allowed
Yes
No
Yes
Employer contributions allowed
Yes
Yes
Yes
Allocations/contributions subject
to annual dollar limits
Defined by IRS
Employer
discretion
Employer
discretion
Requires qualified high-deductible
healthcare coverage
Fund owner
If available
through
custodian
No
No
Distributions permitted for nonmedical reason
Subject to tax
No
No
Unused funds carry over year to
year
Yes
Employer
discretion
No
Account is fully portable
Yes
No
No
Funds can be invested
Health Savings Account (HSA)
An employee-owned account that works in combination
with a qualified high- deductible health plan that allows
employees to save for future medical costs through taxadvantaged contributions.
Health Reimbursement Arrangement (HRA)
An employer-sponsored health-care reimbursement
arrangement that employees can use to help pay
coinsurance, deductible and other eligible expenses for
medical care.
Flexible Spending Account (FSA)
A tax-advantage, employer-sponsored health-care
spending account that employees can use to pay for
eligible health-care expenses or dependent care
expenses. FSAs can be paired with many Premera health
plans.
NOTE: This material is no t intended to pro vide legal o r tax advice. The law allo ws the co mbinatio n o f funds o nly to the extent that the co mbinatio n co mplies with criteria specified in
the law. Emplo yees and emplo yers sho uld co nsult their o wn tax and legal adviso rs regarding which type o r co mbinatio n o f funding arrangements is appro priate fo r their needs and
circumstances.
95
Behavioral Based Plan Design
Current Plan Design
(In Network Benefits)
Deductible
Company
HRA Fund
Behavioral Based Plan Design
(In Network Benefits)
$500 - Individual
$1,500 - Family
N/A
Out-of-Pocket
Maximum
(Coinsurance &
Deductible)
$3,000– Individual
$6,000 - Family
Coinsurance
20%
Physician
Visit
Deductible & Coinsurance
Pharmacy
Copays
$5 – generic
$25 – preferred
$40 - nonpreferred
$1,500 – Individual
$3,000 – Family
P
r
e
v
e
n
t
i
v
e
C
a
r
e
1
0
0
%
High Deductible Health
Reimbursement Plan
(HRA)
 Company funds HRA
Covers first part of deductibles:
$800 – Individual
$1,400– Family
for first-dollar use
towards deductible
 Unused HRA dollars
$4,500 – Individual
$9,000 - Family
20%
Deductible & Coinsurance
rolled forward for use
in future years
 Participant more
accountable for
healthcare spending
 Transparency to actual
Deductible & Coinsurance
cost
96
Health Risk Identification & Improvement
Participation Incentive Strategies
Identification and Improvement Programs
- Health Status Questionnaire
- Non-Smoker
-2 or Less Risk Factors
- Biometric Screenings
- Healthy Weight
- Health Coaching Participant
Participation Incentive Strategies
Premium Contribution Discounts
Employer
Contribution
to HSA/HRA
Reduced
Deductibles
andAccount
Copays
Reduced Deductibles
andAccount
Copays
Employer Contribution
to HSA/HRA
Gift Cards
0%
20%
40%
60%
80%
100%
Participation Percentage
A dollar lost is valued by the individual more than a dollar gained
97
Incent Healthy Behaviors - To Mitigate Cost Trend
Required Activity
Award
Complete Health Risk Questionnaire
Program
Participation
Rewards
Bio-Metric Screening (employee choice of Designated Medical Center, Onsite
exams or Personal Physician)
Attend One (1) Health Coaching Session
$1,200 Annual /
$100 Monthly
Premium Discount
Complete Disease Management / Health Coaching Program
(If indentified as a candidate based on risk factors or claims utilization)
Cholesterol
Blood
Pressure
Glucose
Gold
< 180
< 120/80
< 100
Silver
< 200
< 130/85
< 110
Award
Level
Reduce
Health Risk
Factors
Bronze
< 220
< 140/90
< 126
Waist
Circumference
Tobacco Use
Bronze
(Subject to HIPAA Limitations)
20% Premium Discount
Males < 40
inches
No
Females <35
inches
10% Premium Discount
5% Premium Discount
Not
Qualified
Alternative
Standard
Award
No Discount
Physician Affidavit of Medical
Condition
Complete
Weight Loss
Program
Complete Tobacco
Cessation Program
5% Premium Discount
98
FY12 Potential Opportunities – PWP & IHP Program
 Strategy:
− Eliminate incentives for PWP
 Utilize $231,000 for incentives tied to biometric testing, completion of IHP and tracking
activities in GTP
− Consider qualifications for IHP program based on screening results and readiness to
change.
− Require completion of 5/6 IHP sessions or pay penalty
− Require pre/post full biometric screening
− Lockton to receive pre/post screening report with Metabolic Cluster on IHP
participants from WIN.
− Lockton to integrate this report into InfoLock claims data and provide University of
Alaska with risk reduction to demonstrate savings.
− Create Dashboard Report with Key Metrics for annual measurement
 Risk Stratification
 Preventive Care Utilization
 ER Visits
99
Strategy - Incentives
 Streamline entire incentive strategy
– Discontinue $100 employee & spouse incentive for PWP (HRA) completion
– Streamline incentives within 50/50 and GTP programs
 New 50/50
– Employee receives $100 if he or she completes PWP & Biometrics thru WIN (Not Self-Reported)
– Spouse receives $50 if he or she completes PWP & self-reports biometrics
 New GTP
– Lower dollar threshold for tracking activities to $25, $50, $75 and $100
 New IHP
– Employee will apply to be accepted into the program
– Employees will receive $250 incentive upon completion of 5 to 6 sessions with full biometric data
taken at initial and final sessions
– Employees will incur a $100 penalty and not receive the $250 incentive if they do not attend at least
5 sessions
 Require Full Biometric Screening for Premium Credit (Future State)
– Offer premium credit for taking biometrics, IHP participation
 All biometrics be taken for a screening to be considered complete
100
Strategy - Incentives
Current Wellness Program
PWP
Current Incentive
Proposed Wellness Program
New PWP
Proposed Incentive
Employee Complete PWP
$100
Integrate with 50/50
N/A
Spouse Complete PWP
$100
Integrate with 50/50
N/A
50/50
Employee Input Biometrics
$50
Employee Tracks Activities for 2 months
$50
OR Reimbursement for Health Club
Membership
GTP
Employee Tracks Activities for 4 months
New 50/50
Employee completes PWP & Biometrics
thru WIN (Not Self-Reported)
Spouse Completes PWP and Self-Reports
Biometric Data
$100
$50
$100
New GTP
$50, $75, $100 or $200
Employee Tracks Activities for 4 months
IHP
New IHP
Employee attends up to 6 coaching
sessions with screenings
Accepted Employee attends 5 to 6
coaching sessions ($100 penalty if
attends less) & does full pre & post
biometric screening
$20
$25, $50, $75 or $100
$250
The maximum an employee can receive is $350
101
Other Suggestions
 Have Alere reach out to IHP participants that meet specific disease criteria
 Onsite Medical Clinic and Pharmacy for Fairbanks and Anchorage
 Schedule Two-Day Vendor Summit to facilitate integration in February 2011
 Brainstorm ideas to integrate Nursing School, PA School and Student Health
Center
 Put Blood Pressure cuff and scale at various University locations
– $70 for cuff and $100 for scale
 Build Relationships with MD’s in each location
– Few providers in each region, may be possible to integrate them into strategy
– Leverage Premera Provider Relations
 Less expensive/better way to offer onsite fitness classes
– Partner with local gym, community recreation center, Purchase Wii Fit, DVD Library
 Creates activity indoors
102
Case Study:
Company Overview, Challenge and Solution

Overview: Texas-based Manufacturing Company
- Middle market client
- Male-dominant
- Locations: Texas, Colorado, Kansas
- Medical provider: United Healthcare PPO

Challenge: 10-12% annual rise in medical costs

Solution: Lockton suggested disease prevention and not just disease management
- Employees must participate in Wellness Plan (biometric screening and/or health assessment)
in order to receive contribution discount and deductible credit
• $500 deductible for non-participant, $300 deductible for participant
•
21% difference in contributions for participant vs. non-participant
•
Implemented in Fall 2008 to create baseline and administered again in Fall 2009
•
Identified those with Metabolic Syndrome
•
2010 is a continuation of the program, but now requires employees to complete the health assessment
and biometric screenings and a risk-based outreach program to receive discounts
- Fitness center on campus
- Healthier cafeteria food options
103
Case Study:
Initial Results
 Members who completed BOTH the Biometric
Contributors to
Risk Factor
Reduction
Screening and Member Health Assessment:
–
–
2008- 72%
2009- 76%
-4.2%
Total Cholesterol
Data from MHA and Biometric Screenings
Average Number of Health Risk
Factors
Average Population Health Score
2008
2.9
2009
2.5
2008
76.4
2009
78.6
2.8%
-5.3%
HDL Cholesterol
7.6%
2.6%
Cardiac Risk
Ratio
-10.6%
-3.1%
13.7%
-1.4%
-2.4%
0.0%
-59ee’s
-6.1%
-10.2%
86ee’s
4.0%
-2.0%
LDL Cholesterol
11.1%
6.0%
2.0%
-5.0%
7.8%
8.0%
-3.1%
7.3%
-13.8%
Risk Factor Stratification
(2008 to 2009)
10.0%
Changes
Glucose
-27ee’s
-17.7%
19.1%
-4.0%
-2.3%
-6.0%
High Risk
(5+)
Moderate Risk
(3-4)
Low Risk
(0-2)
Tobacco Use
-1.4%
3.7%
104
Case Study:
Metabolic Syndrome Results
Metabolic Syndrome Screening
Identified with Metabolic
Syndrome
2008
48.3%
2009
40.2%
Cost Increase (Savings)
Attributable to Change in
Metabolic Syndrome Counts at
$259 PMPM
-8.1%
Elevated
Triglycerides
Reduced HDL
Cholesterol
Cost Increase
(Savings)
Attributable to
Change in
Metabolic
Syndrome Counts
@ $259 PMPM
All Locations
-121
($376,068)
Location A
6
$18,648
Location B
-8
($24,864)
Location C
-1
($3,108)
Location D
-11
($34,188)
Location E
-46
($142,968)
Location F
-3
($9,324)
Location G
-5
($15,540)
Location H
-3
($9,324)
Location I
5
$15,540
Location J
-48
($149,184)
Location K
1
$3,108
Location L
-8
($24,864)
$376,068
Risk Factors for Metabolic Syndrome
Elevated Waist
Circumference
Location
Net Change
in Cohort
Members
Identified
with
Metabolic
Syndrome
Male
Female
> 40 inches
> 35 inches
> 150 mg/dL
< 40 mg/dL
< 50 mg/dL
Elevated Blood
Pressure
Systolic > 130 AND/OR Diastolic > 85
Elevated Fasting
Glucose
> 100 mg/dL
Financial results based on National Health and Nutrition Examination Survey (NHANES) data from 1999-2001
105
Case Study:
Financial Impact of Health Risk Management
Full or Partial Compliance
(HRA and/or Biometrics)
No Compliance
Totals
88.2%
11.8%
100%
Member Count
2008
2009
Change
2008
2009
Change
2008
2009
Change
PMPY Total Cost
$2,450
$2,694
10.0%
$4,784
$5,065
5.9%
$2,725
$2,974
9.1%
PMPY Med Cost
$1,970
$2,074
5.3%
$4,382
$4,707
7.4%
$2,255
$2,385
5.8%
$480
$620
29.2%
$402
$358
(10.9%)
$471
$589
25.2%
4,146
4,789
15.5%
571
322
(43.6%)
3,724
4,261
14.4%
188
209
11.2%
54
16
(70.4%)
172
186
8.1%
35
42
20.0%
10
9
(10.0%)
32
38
18.9%
3.1
5.8
90.2%
18.0
10.0
(44.4%)
4.8
6.3
30.9%
PMPY Rx Cost
Office Visits
ER Visits
Admissions
ALOS
$8,000
Per Member Per Year (PMPY)
$7,000
$7,416
$6,742
$6,000
$6,129
$5,572
$5,000
$4,000
$3,000
$2,000
$4,784
$2,725
$2,450
$5,065
$2,974
$2,694
$3,176
$2,855
$3,393
$3,027
$3,626
$3,208
$3,875
$3,401
$1,000
2008
2009
Full or Partial Compliance
2010
2011
No Compliance
2012
2013
Total
106
Wellness Executive Summary – 2011 Strategy
 Streamline entire incentive strategy to reward outcomes and not activities
 Track and measure health changes of the University’s population
 Lockton to receive pre & post screening report with Metabolic Cluster on IHP
participants from WIN.
 Lockton to integrate this report into InfoLock claims data and provide
University of Alaska with risk reduction to demonstrate savings.
107
FY 2012 Initiatives
Dependent Audit
Why The Need To Audit Dependent Eligibility?
 Tremendous Savings Opportunity
– Challenged every year to continue to offer a high level of benefits and manage
costs at the same time
– Significant opportunity to trim healthcare costs. Message to employees
is…”every ineligible dependent increases the costs for everyone else”.
 Enforce Rules
– Committed to providing competitive health plans for employees and their
families, everyone pays for eligibility fraud and abuse
– University code of conduct likely mandates honesty and strict enforcement of
rules and business ethics
– In a decentralized environment with lots of locations…easy to “fudge” data and
stay under the radar
 Education
– Employees feel a sense of entitlement, may not consider that it is fraud to
enroll ineligible dependents
– For unique employee populations that do not meet the traditional definition of
an eligible dependent, the dependent eligibility audit provides an avenue to reeducate employees on “who” is eligible to participate in the health plans
109
Why The Need To Audit Dependent Eligibility?
 Compliance and Fiduciary Responsibilities of a Plan Sponsor
– Maintain the fiscal well being of our benefit plans for our plan participants
– Uphold and enforce the eligibility rules, as clearly as stated in our SPD
– Section 125 Pre-Tax Contributions, allowing pre-tax deductions for unqualified
dependents/beneficiaries could set-up a liability or tax violation
– Legally responsible to provide accurate reporting, ineligible participation on
our health plans could present a risk and/or personal liability exposure to plan
fiduciary
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Objectives of the Project
 Achieve substantial savings on health plans without adversely affecting
current plan design or increasing employee premium contributions
 Communicate in a firm, but sympathetic tone to our employees
 Conduct a comprehensive audit on all employees covering dependents to
eliminate discrimination issues (no random sampling or targeting employees
who have dependents with large claims)
 Create awareness and enhance education, a dependent eligibility audit is a
catalyst to engage employees in the fiscal well being of the University’s
health plan
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Challenges of the Project
 Process is time consuming and labor intensive even with outsourcing
 Address the employee reaction
– Employees may think they are already compliant and audit is unnecessary
– Employees may express concerns of negative effect on morale and employees
accused of fraud, difficult at first for leadership to be on board, educate and
communicate prior to commencing the project
– Union leaders may challenge the process, stating that it is not legal under their
collective bargaining agreement
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Key Considerations
 Will you offer an amnesty period at the beginning of the audit? It’s a get
out of jail free card and encourages people to remove their ineligible
dependents quickly with no penalties.
 What effective date will you drop dependent coverage (the process to
determine eligibility can take 4 – 6 months)
 What action/discipline will be levied against those who don’t respond or
don’t pass the audit? Review your University “Code of Conduct” provisions.
Most policies have strict rules about fraud and stealing.
 Will you offer COBRA? Talk to your in-house counsel, if dependents were
ineligible to begin with, it is unlikely they are eligible for COBRA.
 Hold your ground once you decide to implement an audit, at a minimum
ineligibles should be terminated from the health plan(s) following the
completion of the audit
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Key Considerations – (Continued)
 Will you provide premium refunds to employees for dropped dependents?
 Will you go back and seek recovery for prior year claims? How will the
collection process be structured?
 Will you terminate employees who have lied and kept ineligibles on the plan
or will you recover claim dollars spent on ineligibles?
 How will you prevent dropped dependents from coming back in your plan?
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Key Considerations – (Continued)
 Who will approve all communications? What about escalated issues and
exceptions?
 How will the HR field reps be trained to handle employee questions?
 How will expected financial savings be calculated? Will you request a claims
dump from the current medical vendor to determine past claims history?
 Will you report the final savings to employees?
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Key Steps in the Process
 Kick Off letter from Senior Leadership (what the audit is about, why we
were doing it, what to expect, look for letter from third party, etc)
 Initial audit letter from third party auditor (ConSova, BUDCO…)
 Document review, verification, follow-up (allow at least 60 – 90 days)
 “Confirmation of approval” letters to those who are marked as complete.
“Missing info” letters sent to those where certain documents are still needed
 Reminder letters to “Missing” and Non-responder groups close to deadline
 Extension period, Final letters, reach-out calls to employees.
 Drop letters mailed
 Appeals period
 Drop letter confirmations if appeal is denied. Reinstatements for those
where appeal was accepted.
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What To Expect During the Audit
 Employee responses generally fall into one of 4 categories:
– “Completes” - Information provided is accurate and complete
– “Incompletes” - Employee provides some data on dependents but not all (i.e.
marriage certificate but no current tax filing, etc). Some employees eventually have
a complete file…some never do and the dependent is dropped.
– “Non responders” - No matter what you do, they don’t respond
– “Ineligibles” - Audit process confirms they are not eligible
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FY12 Potential Opportunities – Dependent Audit
 Dependent Audit
− Current member to employee ratio is 2.33 with 2,950 enrolled employees with
covered dependents
− Employers are seeing 8% to 15% of enrolled dependents drop coverage due to
ineligibility
 Estimated $1,600 savings for each ineligible member per year
 Estimated audit cost of $80,000
 Assume 5% ineligible dependents (344) there is a projected year 1 savings* of $470,400
 Assume 10% ineligible dependents (687) there is a projected year 1 savings* of
$1,019,200
 Projected breakeven is removing 50 ineligible dependents
*Savings do include cost of audit
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Summary
 Dependent Eligibility Audits are an excellent tool to ensure that covered
dependents meet your plan’s eligibility rules
 Can be a significant potential savings opportunity for the University
 Expect to deal with lots of issues, emotions, and politics….not a project for the
faint of heart
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FY 2012 Initiatives
Plan Design
FY12 Potential Opportunities - Pharmacy
 Plan Design
− Remove Nexium from the University’s pharmacy plan
 There are multiple Over-The-Counter (OTC) drug alternatives to replace Nexium
 From July 09 to June 10 the cost of Nexium to the University plan was $307,695
−
From Jan 2010 to June 2010, the University had 1,682 PPI claims of which 629 were for Nexium
 Estimated cost savings of $250,000
− Exclude coverage for all Proton Pump Inhibitor (PPI) drugs from the University’s
pharmacy plan and implement a $5 copay for OTC PPI drugs
 There are multiple OTC alternatives for PPIs
−
Current OTC drugs available are Omeprazol, Prevacid, Prilosec
 Estimated cost savings of $328,800
− Exclude coverage for all Non-Sedating Antihistamine (NSA) drugs from the
University’s pharmacy plan and implement a $5 copay for OTC NSA drugs
 The exclusion of NSA drugs is becoming a fairly common provision among plan sponsors.
 There are multiple OTC alternatives
−
Current OTC drugs available are Alavert, Claritin, and Zyrtec
 Estimated cost savings of $85,500
July 1, 2010, the University of Alaska implemented step therapy for High Cholesterol and Proton Pump Inhibitors
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FY12 Potential Opportunities - Pharmacy
 Plan Design
− Implement Evidence based plan design for certain disease states
 The University would offer reduced generic copays for Cholesterol, Cardiovascular,
Diabetes and COPD drugs
 The reduced copays would allow the employee to receive their maintenance drugs at a
reduced cost and thus increase compliance
 The retail generic copay would be $2.00 and the mail order copay would be $5.00
 Estimated cost savings of $44,900
−
Projected overall increase in net University pharmacy spend of $36,441
−
Projected medical savings from health utilization changes of $80,927
July 1, 2010, the University of Alaska implemented step therapy for High Cholesterol and Proton Pump Inhibitors
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FY12 Potential Opportunities - Pharmacy
 Plan Design
− Increase differential between preferred brand name and non-preferred brand name
drug copay from $40 to $60
 Increase non-preferred brand retail copay from $40 to $60
 Estimated cost savings of $140,000
− Mandatory Mail Order
 Refills for maintenance drugs are only covered if filled through mail-order
 Possibility of drug spoilage with cold weather
−
Over the last 12 months, the Caremark mail facility has only completed 3 reshipments of products
due to weather related conditions
 Allow 2 refills before mandatory mail order
−
Anticipate that 2,503 members would be disrupted by mandatory mail order
 Estimated cost savings of $100,400
July 1, 2010, the University of Alaska implemented step therapy for High Cholesterol and Proton Pump Inhibitors
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FY12 Potential Opportunities - Pharmacy
 Plan Design
− Increase retail copay by 2 times if the member does not use mail order for the third
refill of the maintenance drug
 Retail Generic copay would increase from $5.00 to $10.00
 Retail Brand copay would increase from $25.00 to $50.00
 Retail Brand Non-Preferred copay would increase from $40.00 to $80.00
 Allow two refills at retail before increased copay on third retail copay
−
Anticipate that 2,503 members would be disrupted by mandatory mail order after two refills at
retail
 Estimated cost savings of $150,400
− Reference based drug pricing
 Establish maximum plan reimbursements by therapeutic class.
 Plan participant pays all charges in excess of the maximum reimbursement
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Pharmacy Savings
Rebates
Dispensing
Fees
Drug
Utilization
Network
Discounts
 Step Therapy
 Prior Authorization
 Quantity / Day Limits
 Network Discounts
 Generic Cost
Differential
 Dispensing Fees
 Retail vs. Mail
 Reference Based
Pricing / Therapeutic
Class MAC
 Drug Exclusions
 Therapeutic Class
Exclusions
 Rebates
Member Disruption
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FY12 Potential Opportunities - Medical
 Plan Design
− Eliminate Deluxe plan and continue with the Standard and Economy plans
 Estimated cost savings of 0.5% ($280k to $360k)
− Eliminate Deluxe Plan and increase the Standard plan deductible from $250 to $500
and the Economy plan deductible from $500 to $1,000
 Estimated cost savings of 3% ($1.8M to $2.1M)
− Increase Deluxe deductible to $500 with $3,000 Out-of-Pocket (OOP) Maximum,
Standard deductible to $750 with $3,500 OOP Maximum and convert the Economy
plan to a high deductible health plan (HRA account) with $1,500 deductible with
$4,000 OOP Maximum & $250 in seed money
 Estimated cost savings of 10% ($6.0M to $7.0M)
− Introduce Full Replacement High Deductible Health Plan with HRA account that has
a one-to-one actuarial value to the Economy plan
 Estimated cost savings of 11% ($7.0M to $8.0M) realized due to reduced utilization and
movement of population to Economy plan
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7 Year Benefit Plan Cost Projection
Full Replacement HDHP with HRA
$135,000,000
$125,000,000
4,300 Covered Employees
$115,000,000
$105,000,000
$95,000,000
$85,000,000
$75,000,000
$65,000,000
$55,000,000
FY10
FY11
FY12
FY13
Current Spend
Projected Net
Spend Status Quo
Projected Net
HDHP Spend
HDHP Cost
Savings
Over Status Quo
FY14
Projected Spend
FY15
FY16
FY17
HDHP Plan
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Cumulative
$65,100,874
$71,610,961
$78,772,058
$88,224,704
$98,811,669
$108,692,836
$119,562,119
$131,518,331
$511,213,102
$63,733,756
$70,107,131
$78,169,451
$87,158,938
$95,874,832
$105,462,315
$116,008,547
$395,044,108
($7,877,206)
($8,664,926)
($10,055,253) ($11,652,731) ($12,818,004) ($14,099,804)
($15,509,785)
($51,068,120)
 Costs savings realized movement of individuals from Standard to Economy plan and a change in utilization patterns
 Cost projections are based on FY10 actuals projected forward by 10% for FY11-12, 12% for FY13-14 and 10% for FY15-17. Cost projections are for medical/Rx
claims costs less pharmacy rebates
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2011 Potential Opportunities – Employee Contributions
 Employee contributions
− 8 Tier employee contributions to offset additional dependents coming back onto the
plan as a result of healthcare reform
 EE only, EE + 1, EE +2, EE + 3, EE + Sp, EE + SP +1, EE +SP + 2, EE + SP + 3
 Can be administratively burdensome
− Spousal surcharge for working spouses that have other coverage available to them
 The average annual medical cost of a spouse is 3x more than that of a dependent child
 The State of Alaska offers a 20% plan that adversely affects the University plans
 JHCC considered implementing spousal surcharge from Fall River Consulting report but
was not supported by the committee
− Excluding High risk activities
 Sky diving, bungee jumping, operating motorcycle or plane, scuba diving, hang gliding,
rock climbing, parachuting, and parasailing
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2011 Potential Opportunities – Employee Contributions
 Employee contributions
− Tobacco surcharge
 The American Cancer Society estimates that smokers cost employers $3,300 more per
year than a non-smoker in medical and productivity costs
 Add a $50 per month surcharge onto employee contributions for tobacco users
 Employees sign affidavit that they don’t smoke to have the $50 per month surcharge
removed from the employee contribution
− Increase part-time employees medical contributions more than full-time employees
 There are approximately 299 part-time employees or 7% of the enrolled employees
 Part-timers cost more
−
Typically don’t have as much access to coverage
−
Coverage is harder to afford due to lower wages, thus resulting in adverse selection
−
They have more time to seek out care than a full-time employee
 If the average part-time contribution increased $50 per month, the University would
receive an additional $179,000 per year in contributions to offset medical costs
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FY12 Potential Opportunities – Medical Tourism
 Domestic Medical Tourism
− Plan savings if members travel to Puget Sound area to receive care for specific
procedures
− University would cover airfare, lodging, food and car for member & another person
 Estimated cost of $3,000 to $4,000
− For each knee replacement done in Seattle and not Fairbanks, the University could
save approximately $46,000
− 43 Knee Replacements, 29 Hip Replacements, 26 Discectomy, 1 Gastric Bypass and
1 Hysterectomy for FY 10
Procedures
Hysterectomy
Projections Allowed per Episode for 20111
Area of Surgery
Difference between Puget Sound
Anchorage Juneau
Fairbanks Puget Sound Anchorage
Juneau
Fairbanks
Gallbladder Surgery
$26,447
28,649
$28,180
25,622
$33,058
31,776
$16,259
16,257
$10,188
12,392
$11,921
9,405
$16,799
15,519
Knee Replacement
65,670
66,098
87,550
37,393
28,276
28,704
50,157
Hip Replacement
53,981
62,602
86,186
35,380
18,602
27,222
50,806
Disc Fusion
82,488
81,461
76,688
54,874
27,615
26,587
21,814
Discectomy
36,890
48,200
36,448
22,727
14,163
25,473
13,720
Gastric Bypass (RNY)
55,679
73,799
165,340
29,182
26,497
44,617
136,158
1. Average allowed per episode trended to 2011 for Alaska and Puget Sound Facilities. This includes all services from physician's initial
evaluation to consults with specialists to surgery to post surgery care.
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FY12 Potential Opportunities – Onsite Medical Clinic
 Pilot Onsite Medical Clinic – Fairbanks or Anchorage
− Goals for the Onsite Medical Clinic
 Improved Health
 Lower Cost
 Increased Access
− What would be the hours of operations?
 Number of Hours and Days?
 Different hours for spring/fall and summer?
− How should the Onsite Medical Clinic be staffed?
 Physician
 Mid-level nurse practitioner or physician assistant
− What services should be provided?
 Acute episodic
 Primary Care
 Occupational Health
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Onsite Medical Clinic (Continued)
− Who should be seen in the clinic?
 Employee Only
 Spouses and dependents
− Managed by outside firm (turnkey)
 Critical volume of 1,500 participants seen on average 3-3.5 visits annually for a 40 hour
week.
 Typical turnkey operations in the lower 48 for a 40 hour clinic is approximately $550,000$600,000 for first year costs with a 1,500 square foot existing space plus build out and
medical equipment of $100,000.
−
Administration, Implementation and IT/EMR-$250,000-$300,000
−
Salaries, benefits, malpractice, and continuing education-Mid-level clinician, physician oversight,
Nurse Coach and Medical Assistant-$250,000
−
Consumables and limited CLIA exempt lab with the majority lab sent to a contract national lab$50,000.
 Expected break even point at end of year three
132
Onsite Medical Clinic (Continued)
− Cost offsets through use of onsite medical clinic
 Direct cost eliminations - outside office visits, specialist visits, emergency care and urgent
care visits-$50,000-$100,000.
 Improved drug costs through higher generic utilization and lower laboratory costs
$50,000.
 Lower medical large claim costs $150,000-$200,000.
 Savings for lower disability claims, work related injury cost, productivity, and time away
from work and absenteeism-$200,000-$250,000
− Managed by local firm
 Generally less costly
 If not a turnkey then requires program development and more local management
resources
133
FY12 Potential Opportunities – Other Ideas
 Coordination of Disease Management program with WIN & VSP
 Stop Loss Analysis
− Healthcare Reform and unlimited medical benefits create increased exposure
 Value based benefits
134
Timeline/Next Steps
Timeline/Next Steps
Activity
Target Date
Responsibility
Baseline Assessment & FY 2012 JHCC Plan
Recommendations
October 26th – 27th
Lockton
Preliminary FY 2012 Baseline Assessment
October 26th – 27th
Lockton/U of Alaska
December 7th
Lockton/U of Alaska
End of December
Lockton/U of Alaska
Middle of February 2011
Lockton/U of Alaska
March 2011
Lockton/U of Alaska
Mid April to Mid May
Lockton/U of Alaska
Annual Enrollment to Vendors
June 6, 2011
U of Alaska
Effective Date
July 1, 2011
U of Alaska
Follow-up Meeting with JHCC on Cost
Projections & Strategy
Finalize FY 2012 Plan Design
Finalize FY 2012 Costs and Employee
Contributions
Finalize Employee Communications
Annual Enrollment
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Appendix
Dependent Audit Results
Dependent Audit Results
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