BPC Benefits Update. Cost, Value, Concerns, Strategies. Presented by Greg Fialko, Senior Human Resource Director, UHR November 30, /10/2012

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1 BPC Benefits Update Cost, Value, Concerns, Strategies Presented by Greg Fialko, Senior Human Resource Director, UHR November 30, ,000,000 Medical, Rx, Dntl Claims - 7% Growth after FY12 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 - Med-Rx-Dntl Claims FY'01 - FY'12 Trendline 1

2 FY FY2012 Actual Expenses* FY2011 FY2012 $ Difference % Difference Medical $29,970,570 $31,497,629 $1,527, % Drug $8,397,468 $8,268,978 ($128,490) -1.53% Dental $1,497,125 $1,466,426 ($30,699) -2.05% All Other $4,210,425 $4,392,303 $181, % Premiums ($5,110,862) ($7,806,075) ($2,695,213) 52.73% Total $38,964,726 $37,819,261 ($1,145,465) -2.94% Standard Rate $39,261,332 $38,155,101 ($1,106,231) -2.82% * Based on university accounts, not Anthem/ESI reports ** All other difference from $400K admin fee negotiation; and $600K liability accrual FY2012 Paid Claims Analysis FY2011 FY2012 Difference Medical + RX Aggregate Paid Claims 39,900,585 42,322,671 2,422, % Key Factors Contributing to Increase FY12 $ Change % of FY12 Cost % of Difference Employee Count (401,947) -0.95% -17% Family Size 387, % 16% Cost Share 369, % 15% High Cost Claimants (402,340) -0.95% -17% Price 1,224, % 51% Use 1,245, % 51% 2,422,085 2

3 FY2012 Paid Claims Analysis - continued Medical Claims Payments FY12 % Change Inpatient Admissions 13.0% Inpatient Days 20.8% Indication of case severity Inpatient Claims Expense 9.2% or quality/case management issue Outpatient Facility Visits 5.4% Outpatient Claims Expense 5.9% Office Visits (number of) -0.9% Office Visits Claims Expense 7.1% Indication of either type of Professional Claims Expense 9.4% physician (specialist) or provider fee Inpatient Surgery Admissions -3.1% Inpatient Surgery Days 10.7% Indication of case severity Inpatient Surgery Claims Expense 20.8% Indication of case severity or provider fee Future Cost Drivers 5-8% trend guidance from Mercer Consulting a. Health care reform b. Inflation -- (provider price, overhead, profit, etc.) c. University plan design d. University location e. University demographics (avg. age; # covered lives, etc.) and health - Average age of all members is 6% above Anthem benchmark - Member to subscriber rations is 8% above Anthem benchmark f. Innovation - New technology; procedures; medicines; etc. g. Provider consolidation: as hospitals and doctors merge their bargaining power with insurance companies increases 3

4 Affordable Care Act - Major Provisions Impacting University 1. Starting in 2014 must provide health care to anyone working and average of 30 hours per week. If not, pay $2K per employee penalty. - Impact on Group III and other part time appointments - Impact on the meaning of FTE at Ohio University 2. Starting in 2014 state exchanges will be created with subsidies for low wage earners to purchase health care from exchanges. Fines of $2K-$3K for employers for any low wage earner who purchase coverage through an exchange. Message: University must begin discussions regarding impact of Affordable Care Act, potential fines (some may be unavoidable) and especially Affordable Care Act - Major Provisions Impacting University 3. Starting in 2014 employes must provide adequate coverage or pay fine of $2K - $3K per eligible employee. 4. Starting in 2018 health plans with values greater than $10,200 for single plans and $27,500 for family plans will be fined for the difference in cost/value per employee. If Ohio University costs increase 7% annually it will reach threshold in FY19 for single plans and FY21 for family plans. Value of plan is overall plan value before employer - employee premium split. Value can not be impacted by increasing employee premiums. Message: University must begin discussions regarding impact of Affordable Care Act, potential fines (some may be unavoidable) and especially

5 FY2013 Health Plan Cost/Value Family Size Annual Cost Monthly Cost University Annual Cost Fac/Staff University Annual Cost Monthly Cost Fac/Staff Monthly Cost Single $6,312 $526 $5,384 $928 $449 $77 Single +1 $12,612 $1,051 $10,794 $1,818 $899 $152 Family $18,924 $1,577 $16,214 $2,710 $1,351 $226 Traditional Methods to Impact Health Care Costs 1. Insurance/Administrator Contracts - Health Benefits RFP in 2010 and 2006 (Admin fees 6% of costs) - Life/Disability IUC Group Purchase in Benefit Plans Offered 3. Employee Cost Sharing (premiums, deductibles, copays) - July, 2009 changes to medical deductibles, copays, etc. - July, 2009 prescription drug mandatory mail order and generic drug programs - July 2010 AFSCME plan changes similar to July, 2009 changes - July 2011 premium shift to 15% 4. Consumerism -- Cost and Quality Data - Anthem.com provides access to relative cost and quality data 5. Employee Health -Wellworks -Healthy Ohio - Health Risk Appraisal with $10 per month incentive for emloyee and spouse/partner (approaching 1,000 participants) -Wellworks free membership after 100 visits (150 participants) 5

6 Future Strategies for Health Care Cost Management 1. Cost and Quality Transparency 2. Health Savings Account (HSA) Plan 3. Healthy Outcomes Incentives/Discounting 4. Advocacy and Wellness 5. Cost Sharing / Plan Design 6. UMA / Ohio Health Partnership 1. Cost/Quality Transparency - Provide employees access to cost data for all procedures for all providers (Athens, Columbus, state and nationwide) - Can provide provide incentives/rewards for using low cost providers Potential Implementation Date: July 1, 2013 or earlier Implementation Issues: Requires Oracle interface Investment: As much as $500,000 annually; $60K-$100K startup fee ROI: $900K - $1.4 million medical and Rx savings depending on participation level achieved Impact: Create culture of shared responsibility and accountability between university and faculty/staff. - Local provider sensitivities 6

7 2. Health Savings Accounts (HSA) - Make available as an option through Anthem or other vendor including private health care exchanges - Include employer contribution to HSA account - Requires high deductible $1,250 single -- $2,500 family - HSA account can be used for retiree health care, especially for Alternative Retirement Plan participants Potential Implementation Date: January 2014 Implementation Issues: Complicated contractual relationships with Anthem or vendor, bank, etc. Investment: Administrative fee per participant can be 20% higher than traditional PPO fees. ROI: Depends on enrollment level; Anthem projects 10% savings if only plan offered. Impact: Optional plan may be received favorably, especially by ARP enrollees. Full replacement would be a major shift for faculty/staff. 3. Healthy Outcomes Incentives/Discounts - Discount/Increase employee premiums based on positive or improved biometrics such as cholesterol, body mass, tobacco use, etc. - Test all faculty/staff - Provide programs to improve health - Current law allows up to 20% of the full cost of health plan to vary based on biometric outcomes. (30% in 2014) Potential Implementation Date: July 2013 (Begin process) Implementation Issues: Requires Oracle interface with vendor Investment: $150K - $175K annual vendor fees - Potential additional costs to provide health improvement programs ROI: 3% - 5% reduction in health care costs in first year; 2-5 year bend in trend line - Higher premiums for non-compliant individuals normally cover annual investment. Impact: Create culture of shared responsibility and accountability between university and faculty/staff. - Major shift for faculty/staff 7

8 4. Advocacy and Wellness Advocacy: Personalized Medical Guidance (PMG) in place - 24/7 Nurse line (in place) - Onsite clinics (family care, pharmacy, lab, etc.) (in place) Wellness: Healthy Ohio; Wellorks Programs; CHIP sponsorship; (All in place could be expanded) Potential Implementation Date: In place Implementation Issues: minimal issues Investment: Healthy Ohio $300K in FY12; $399 budgeted - PMG pilot program: $250K budgeted per year for two years ROI: Industry standard ROI is 3-1. ROI for PMG will be tracked/reported Impact: Create culture of shared responsibility and accountability between university and faculty/staff. 5. Cost Sharing / Plan Design - Employee premiums - Deductible, copay and coinsurance levels and limits - Value based discounting (ex. low or no copay for diabetic supplies or other prescriptions) - Surcharges: tobacco use; spouse opt out/in premiums Potential Implementation Date: Some in place; July 2013 Implementation Issues: 90 day advance notice to insurance companies; 60 days notice to faculty/staff Investment: None/minimum ROI: Varies dependent on premium or cost sharing level; surcharge level; etc. Impact: Total compensation impact; 8

9 6. UMA / Ohio Health Partnership; Other provider partnerships - Potential Ohio Health / O Bleness / UMA tier or plan - On-site clinics such as a discounted primary care center - Potential savings on unit price for office visits and labs; paid time off savings; would need further research on on-site pharmacy and/or Rx delivery - Onsite diabetes center partnership - Research partnerships Potential Implementation Date: Unknown Implementation Issues: Contractual issues; liability issues; etc. Investment: Minimal for tiered networks; onsite clinics could include significant investment ROI: Dependent on contractual relationship; potential savings on price, paid time off, etc. Impact: Potential positive impact via case management and/or continuity of care, etc. - Preferred tier provider capacity 9