Health Care Plan and Rates. Purdue University Board of Trustees Audit and Insurance Committee July 15, 2013

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1 Health Care Plan and Rates Purdue University Bard f Trustees Audit and Insurance Cmmittee July 15, 2013

2 Health Care Strategy Cmmittee Steve Abel (Chair) Cllege f Pharmacy Pam Aaltnen (Vice Chair) Schl f Nursing Dn Buskirk (FCBC Chair) Technlgy, Leadership and Innvatin Gary Carter (CSSAC Chair) Operatins and Maintenance Jenny Cddingtn Schl f Nursing Bart Cllins Schl f Cmmunicatin Tina Grady Frt Wayne Human Resurces Debrah Kark Calumet Nursing Keith Kluender Speech, Language and Hearing Sciences Denise Laussade Treasury Operatins Luis Lewin Human Resurces Sue Miller Nrth Central Human Resurces Beau Mre (APSAC Chair) Human Resurces Eva Ndine Human Resurces Randy Rapp (FCBC member) Building Cnstructin Management Technlgy April Sauer Agricultural Ecnmics Charlene Sullivan Schl f Management Tm Templin Health and Kinesilgy David Williams (Senate Vice Chair) Cllege f Veterinary Medicine Hwie Zelaznik (FCBC member) Health and Kinesilgy 2

3 Health Care Strategy Cmmittee Fcus Develp alternative slutins t the rising csts f health care fr the shrt and lng term, while cntinuing t prvide high-quality and affrdable health care t Purdue emplyees and dependents. Shrt Term Lng Term - 5 years (in prgress) Recmmendatins fr lng term t be delivered in February

4 Health Care Strategy Cmmittee Shrt-term (2014) Recmmendatins Offer 3 Insurance Plan Optins Mdify cpay and incentive int ne PPO ptin and rename plans Add anther cnsumer driven health plan Cnsider impact n lw incme earners Develp a mdified and mre rbust enrllment tl including histrical data fr the enrllee Prmte Use f Centers f Excellence Center fr Healthy Living-West Lafayette Castlight Anthem (Blue Distinctin Centers) Expand Castlight Link Castlight t benefits enrllment Cntinually review and update website as needed Incentivize use fr preventin and treatment interventins Implement Wellness Campaign Up t fur per year (maximum ne per quarter) Based n dashbard f tp cnditins Incentivize with individual and University-wide ptins 4

5 Current Prgram Current 2013 Medical Benefit Plan Three ptins are available Purdue Chice Fund Plan (cnsumer-driven health plan): 2,851 emplyees Incentive Plan (PPO): 4,303 emplyees Cpay Plan (frmer HMO plan design): 4,475 emplyees Ttal cvered lives: 26,962 Tw-tier premium structure: Under $44,000 & $44,000 and abve Plans are self-insured Budget fr calendar year 2013 is $163 millin University cntributes 84% f the premium 5

6 Current Prgram 2013 Plan Design Plan Design Cmparisn Purdue (2013) Cpay Incentive Chice HSA Single n/a n/a $650 Family n/a n/a $1,300 Deductible Single $400 $500 $1,400 Family $800 $1,000 $2,800 Out f Pcket Single $1,500 $2,400 $3,400 Family $3,000 $4,800 $6,800 C-Insurance 80/20 80/20 80/20 Center fr Healthy Living Cpay $10 $10 80/20 6

7 Redesigning Prgrams 2014 Guiding Principles Implement changes t cmply with health care refrm fr 2014 and beynd. Maintain high-quality, affrdable medical insurance fr emplyees Mdernize plans, premiums and incentives t encurage cnsumerism Reduce csts fr emplyees and University Reach the 80/20 prescribed by the Bard f Trustees Expand educatin n medical benefits Prvide emplyees the right tls Develp a partnership Purdue University Emplyees Cmmunity 7

8 Health Care Refrm Regulatins Implement changes required by health care refrm Pharmacy benefit changes Minimum actuarial value Affrdable premiums Reprting and paying f fees Estimating fees and additinal claims expense f apprximately $2.8 millin Tracking and ffering f benefits t new full-time benefits eligible emplyees Cntinue t mnitr changing regulatins t be sure Purdue is in cmpliance Cadillac Plan 40% Tax in

9 2014 Plan Design Changes Replace existing plans with three new ptins: Purdue Health Plan Purdue Health Plan Plus HSA 1* Purdue Health Plan Plus HSA 2* All plans will: Redesigning Prgrams Have deductible/cinsurance arrangement, except Center fr Healthy Living services Offer preventive generic prescriptins at n cst (e.g., diabetes, high bld pressure) Keep tw-tier premium structure: Under $44,000 & $44,000 and abve Cmbine prescriptin and medical deductibles *HSA = Health Savings Accunt 9

10 Redesigning Prgrams 2014 Plan Design Changes Encurage cnsumerism Develp lab and imaging benefits Radilgy claims are apprximately $11 millin per year Lab claims are apprximately $5 millin per year (with an expected $2 millin reductin in 2013 due t lab tier currently in place) Clnscpy claims are apprximately $1.8 millin per year Csts vary by prvider fr the same service, $2,430 - $5,569 Implement Castlight Rewards Small financial incentive fr chsing the lwest cst/highest quality prvider e.g., $20 incentive fr standard imaging. ROI rati culd be in Year One depending n engagement. Adjust Center fr Healthy Living cpay Purdue Health Plan Plus HSA 1 and 2 10

11 Redesigning Prgrams 2014 New Plan Design Plan Design Cmparisn Purdue (2014) - Prpsed PHP HSA 1 HSA 2 HSA Single n/a $650 $650 Family n/a $1,300 $1,300 Deductible Single $750 $1,750 $2,500 Family $1,500 $3,500 $5,000 Out f Pcket Single $2,400 $3,500 $5,000 Family $4,800 $7,000 $10,000 C-Insurance 80/20 80/20 75/25 Center fr Healthy Living Cpay $10 $45 $45 11

12 2014 Plan Design Changes Begin educatin n plan changes and rates Will begin educatin immediately fllwing bard apprval Several methds f cmmunicatin will include: Sessins Labs Redesigning Prgrams campaign Truven Infrmed Enrllment Tl Will allw emplyees t see what plan is the mst cst effective based n past claims histry, premiums and HSA cntributins 12

13 Emplyee Premium Under $44, Premiums Purdue Health Plan Difference Prpsed 2014 Premiums Purdue Health Plan Plus HSA 1 Difference Purdue Health Plan Plus HSA 2 Difference Purdue Chice Fund Emplyee Only $196 $747 $551 $178 ($18) $0 ($196) Emplyee & Children $354 $1,345 $991 $321 ($33) $37 ($317) Emplyee & Spuse/SSDP $468 $2,828 $2,360 $890 $422 $204 ($264) Emplyee & Family $588 $3,834 $3,246 $1,206 $618 $241 ($347) Purdue Incentive Emplyee Only $411 $747 $336 $178 ($233) $0 ($411) Emplyee & Children $748 $1,345 $597 $321 ($427) $37 ($711) Emplyee & Spuse/SSDP $1,087 $2,828 $1,741 $890 ($197) $204 ($883) Emplyee & Family $1,311 $3,834 $2,523 $1,206 ($105) $241 ($1,070) Purdue Cpay Emplyee Only $897 $747 ($150) $178 ($719) $0 ($897) Emplyee & Children $1,562 $1,345 ($217) $321 ($1,241) $37 ($1,525) Emplyee & Spuse/SSDP $2,268 $2,828 $560 $890 ($1,378) $204 ($2,064) Emplyee & Family $2,746 $3,834 $1,088 $1,206 ($1,540) $241 ($2,505) Emplyees in the PHP Plus HSA 1 and 2 will receive HSA cntributins f $650/emplyee r $1,300/emplyee plus ne r mre. Emplyees may cntribute t their HSAs, up t a cmbined University and emplyee limit f $3,300/emplyee and $6,550/emplyee plus ne r mre 13

14 Emplyee Premium- $44,000 and Abve Purdue Chice Fund Emplyee Only $651 $1,496 $845 $497 ($154) $0 ($651) Emplyee & Children $1,044 $2,693 $1,649 $895 ($149) $276 ($768) Emplyee & Spuse/SSDP $1,632 $4,513 $2,881 $1,606 ($26) $833 ($799) Emplyee & Family $1,954 $6,117 $4,163 $2,178 $224 $1,129 ($825) Purdue Incentive Emplyee Only $1,067 $1,496 $429 $497 ($570) $0 ($1,067) Emplyee & Children $1,764 $2,693 $929 $895 ($869) $276 ($1,488) Emplyee & Spuse/SSDP $2,569 $4,513 $1,944 $1,606 ($963) $833 ($1,736) Emplyee & Family $3,104 $6,117 $3,013 $2,178 ($926) $1,129 ($1,975) Purdue Cpay Emplyee Only $1,651 $1,496 ($155) $497 ($1,154) $0 ($1,651) Emplyee & Children $2,726 $2,696 ($30) $895 ($1,831) $276 ($2,450) Emplyee & Spuse/SSDP $3,966 $4,513 $547 $1,606 ($2,360) $833 ($3,133) Emplyee & Family $4,793 $6,117 $1,324 $2,178 ($2,615) $1,129 ($3,664) Emplyees in the PHP Plus HSA 1 and 2 will receive HSA cntributins f $650/emplyee r $1,300/emplyee plus ne r mre. Emplyees may cntribute t their HSAs, up t a cmbined University and emplyee limit f $3,300/emplyee and $6,550/emplyee plus ne r mre 14

15 Emplyee Scenari Jenny and family: Medical and prescriptin csts = $18,906 in Incentive Plan Annual deductible = $1,000 Jenny pays: Annual premium $1,311 + Deductible + $1,000 Cinsurance up t Out f Pcket + $3,581 Maximum Paid using Purdue cntributin N/A Jenny pays medical expenses $5,892 + annual premium Purdue pays medical expenses $13,014 During 2014, Jenny is a better cnsumer due t her chice f medical plan ptin and her educatin thrugh Castlight: Saves $5,800 n fur CT scans by using Castlight Saves $6,000 n tw preventive clnscpies by using Castlight Saves $200 by using the Center fr Healthy Living instead f ging t Urgent Care The result: Claim csts were lwered by $12,000 fr a ttal cst f $6,906 in Purdue Health Plan Plus HSA1 Annual deductible = $3,500 Jenny pays: Annual premium $1,206 + Deductible + $3,500 Cinsurance up t Out f Pcket Maximum Paid using Purdue cntributin - $1,300 Jenny pays medical expenses $4,087 + annual premium Purdue pays medical expenses $2,819 15

16 Benchmarking In rder t be sure Purdue is ffering affrdable benefits and t assess the verall medical cst versus ur peers and cmpetitrs we benchmarked ur Peer Universities, as well as Indiana Emplyers with 500+ emplyees. Peer Universities Include: Michigan State, Nrthwestern, Indiana University and 7 additinal universities. Purdue s average PPO Csts are significantly higher, while ur CHDP csts are lwer. Purdue's Medical Csts Benchmarking Purdue University Peer Universities Indiana Emplyers 500+emplyees Average PPO csts $12,510 $10,242 $10,924 Average CDHP csts $6,261 $6,587 $7,913 Average Ttal Health Benefit Cst $12,790 $10,353 $10,414 *Averages include administrative fees and health savings accunt cntributins. 16

17 Benchmarking Purdue Health Plan Cmparable Traditinal PPO Rates Emplyee Family Purdue 2014 ($44k +) $1,496 $6,117 State f Indiana 2013 $5,128 12,852 Indiana University 2013 $1,348 $3,735 University f Michigan 2013 $1,524 $7,084 HSA1 Cmparable HDHP Rates Emplyee Family Purdue 2014 ($44k +) $497 $2,178 State f Indiana 2013 $2,124 $4,408 Indiana University 2013 $639 $1,842 University f Michigan 2013 $0 $2,736 HSA2 Cmparable HDHP Rates Emplyee Family Purdue 2014 ($44k +) $0 $1,129 State f Indiana 2013 $1,111 $1,554 Indiana University 2013 n/a n/a University f Michigan 2013 n/a n/a 17

18 Ttal Purdue Health Care Expenditures Year Ttal 2004 $74,964, $92,429, % 2008 $111,250, % 2010 $140,445, % 2011 $146,920, % 2012 $149,042, % 2013 $160,000,000-$163,000,000* 9.4% 2014 $156,000,000-$158,000,000* (3.1%) * This range is due t ptential migratin and claims expenses variatins. 18

19 Health Plan Strategy The plan design and premium changes fr 2014 prvide a strategy that will encurage ur emplyees t becme better cnsumers f health care. In the lng run, this will create reduced csts fr the University and ur emplyees. We will cntinue t encurage ur emplyees t be respnsible cnsumers f health care by using Castlight t find the highest quality/lwest cst care when applicable. Educatin will be the key fcus. The mre infrmatin and tls we can give emplyees during their decisin making prcess the mre successful this strategy will be. The Health Care Strategy Cmmittee and Human Resurces will cntinue t develp a lng term strategy t build a partnership between Purdue, the emplyees and the cmmunity. 19