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					                                 Public Employees’ Benefit Board
                                     Plan Design Subcommittee
                            Tuesday, June 1, 2004, 1:30 to 4 p.m. - Minutes
                             Conference Room 350, State Capitol Building
                                   900 Court Street NE, Salem OR

                                                                              Approved June 15, 2004
                                  Subcommittee Members Present
Bruce Goldberg                                Diane Lovell
Rocky King

                                   Other Board Members Present
David Hartwig                                  Dan Mielke
Paul McKenna                                   Sheryl Warren

                                           PEBB Staff Present
Carol Dolan                                      Kathy Loretz
Becky Johnson                                    Ingrid Norberg
Diana Jones                                      Susan Pritt
Cheryle Lawrence                                 Erika Sanders

                                           Consultants Present
Mylia Christensen, Aon                            Ken Teunon, Marsh
Pam Hodge, Aon

                                             Guests Present
Bill Lindekugel, Kaiser Permanente               Paul Pfinister, AFLAC
Steve Malvick, Willamette Dental                 Diane Skutack, BCA
Renee McDonald, Regence BCBSO

   II.2005 Life & Disability Renewal Recommendations
  III.2005 Dental Renewal Recommendations
  IV. Wellness Subcommittee Report – Incentives
   V. Plan Design “Add-on” Options Follow-up
           a. Obesity/Bariatric Surgery
           b. Well Child Exams
           c. Tobacco Cessation
           d. Chronic Disease Management – Depression Program
  VI. Chronic Disease Management – Depression
 VII. Other Business
VIII. Public Comment

                                         Action Items
    I. 2005 Life & Disability Renewal Recommendations (see pages 2-3)
   II. 2005 Dental Renewal Recommendations (see pages 3-4)

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Diane Lovell called the meeting to order.

                       2005 Life & Disability Renewal Recommendations
Ken Teunon presented the Standard Insurance Co. renewal summaries to the subcommittee.

Basic Life Insurance
    Requested rate increase: from $0.20 to $0.22 per $1,000 of coverage
    Premium paid in 2003: $525,131
    Based on the current volume the $0.02 increase equals $52,513 annual premium

Voluntary Dependent Life Insurance
    Requested rate increase: from $1.23 to $1.29 per unit
    Based on current units of 8,965, the annual expected premium increase equals $6,455
    Over the past five years the incurred claims to paid premium loss ration has been 103 percent

Optional Voluntary Life Insurance
    Requested rate increase: 10 percent over current age-graded rates
    Based on current active employee and spouse monthly premium of $445,000, the 10 percent
       increase equals $534,000 annual premium increase
    There are approximately 360 ported lives (former employees). The 10 percent increase
       represents approximately $12,200 annual premium increase.

Diane Lovell asked if the Board had any questions. Hearing none, Diane requested a motion on the
renewal proposal.

Motion: Rocky King moved to recommend to the full Board to accept the Standard life insurance
renewal proposal with no premium increase offsets to be applied from the Premium Deposit Account
Second: Bruce Goldberg
Paul McKenna asked why not use the Premium Deposit Account dollars.
Rocky King asked if the Board could use those funds at a different time other than renewal.
Ken Teunon explained that annually is the logical time, but it’s certainly at PEBB’s discretion.
Rocky King stated that in 2006 PEBB could be at a greater cliff in regards to premium increases.
Paul McKenna suggested that the money could be used over several different years.
Sheryl Warren asked if the PDA can only be used for Standard Insurance Co. products.
Ken Teunon explained that a recent AG opinion stated that the money could be used for different
Rocky King added that he would rather bank the money at this stage.
Diane Lovell called for a vote on the motion. The motion passed unanimously.

Short Term Disability (STD)
    Requested rate increase: .55 percent to .60 percent of covered payroll
    Based on the current volume of $50,596,598, the annual increase in premium equals $303,580
    Option to change to a 7-day accident (from 0 day accident) and 7-day illness at .588 percent
       equals an annual premium increase of $230,720
    Option to change to a 7-day accident and 14-day illness at .49 percent equals an annual premium
       decrease of $364,295
    Change benefit formula from 60 percent to 55 percent at .51 percent rate equals an annual
       decrease of $242,864

Diane Lovell stated that some of the options would reduce benefits but offset rates. Diane asked if
Board members were interested in modifying the plan. Hearing none, Diane requested a motion on the
renewal proposal.

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Motion: Rocky King moved to recommend to the full Board to accept the Standard renewal rate
increase of .55 percent to .66 percent of payroll with no plan design modifications.
Second: Diane Lovell
Diane Lovell called for a vote on the motion. The motion passed unanimously.

Long Term Disability (LTD)
    24-month musculoskeletal limitation would result in an 8 percent rate reduction
    Mandatory Rehabilitation Program would result in a 2 percent rate reduction
         o Would be effective for disabilities that commence on or after January 1, 2005
         o Annual LTD premium $6,450,000 and 2 percent reduction equals annual employee
             savings of $129,000

Diane Lovell asked if the Board had any questions.
Rocky King expressed concern regarding the mandatory rehabilitation program.
Diane Lovell expressed concern regarding the 24-month lifetime maximum noting that PEBB currently
has no lifetime maximum.
Rocky King stated that he would rather look at the as part of the evidence-based process.

Motion: Rocky King moved to recommend to the full Board to continue the current long term disability
benefits with no rate or plan design changes.
Second: Bruce Goldberg
Diane Lovell called for a vote on the motion. The motion passed unanimously.

                            2005 Dental Renewal Recommendations
Ken Teunon presented the dental renewal summaries to the subcommittee.

The following plan design options were considered in addition to renewal of current plans:
    Removal of the ODS waiting period for basic and major services for late enrollees. This would
        increase rates by 1.59 percent (annual premium increase of approx $533,725).
        - or -
    Removal of the ODS waiting period for basic and major services for late enrollees plus a
        maximum benefit limit of $500. This would increase rates by .68 percent (annual premium
        increase of approx $228,260).
    Move to a non-refunding contract with ODS. The resulting 2005 renewal increase would be 5.3
        percent vs. a 6.11 percent increase (monthly premium of $2,775,971 vs. $2,797,301, difference
        = $21,330 saving or $255,960 annually). In the past few years, the refunding contract has
        worked in PEBB’s favor. The financial gains ($255,960) due to the small decrease in rates may
        not outweigh the benefits of continuing refunding contract.
    Discontinue mandatory employee dental coverage. Due to the potential for adverse selection,
        dental carriers would need the contribution level in order to develop rates. The financial impact
        of this option is unknown at this time.
    Refund to PEBB of $4 million reserves for other uses or use to buy down the current rates.
        PEBB has the option of using the $4 million reserves to buy down rates or to take transfer the
        money into the Stabilization Reserve fund for other uses. Buying down the rates would result in
        artificially low rates, creating a “cliff” effect in 2006. Keeping the buy-down rate to 2% would
        help mitigate this, creating a saving in 2005 of $632,412.

Diane Lovell asked if Board members had any questions or comments regarding the dental options
under consideration.
Rocky King stated that in any other financial environment but todays, the first or second bullet point
may make some sense.

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Motion: Bruce Goldberg moved to recommend to the full Board to accept the ODS renewal proposal
with no plan design changes.
Second: Rocky King
Diane Lovell called for a vote on the motion. The motion passed unanimously.

Kaiser Permanente
The Kaiser dental renewal includes the following plan design changes in keeping with internal corporate
policy changes:
     New Exclusion: coverage for prosthetic devices excluded when necessary or desired following a
        members decision to have the tooth (or teeth) extracted
            o For non-clinical reasons or
            o When a tooth is restorable
     The “work in progress “ exclusion is revised as follows: Instead of excluding root canal therapy
        when the pulp chamber of a tooth is open before the member’s coverage is effective, root canal
        therapy is now covered at 50 percent in these situations.

Motion: Bruce Goldberg moved to recommend to the full Board to accept the Kaiser Permanente
renewal proposal as portrayed with plan design changes.
Second: Rocky King
Diane Lovell called for a vote on the motion. The motion passed unanimously.

Willamette Dental
    Any changes to the present contribution strategy and mandatory participation would result in
      rate surcharges due to the anti-selection that is likely to occur. The amount of any such
      surcharges will be dependent upon the overall contribution strategy implemented.
    Proposed administration “retention” fees for 2005 is 11.96 percent of premium ($8.60 per-

Ken Teunon added that Willamette is still one of the lower cost plans, even with the increase.

Motion: Rocky King moved to recommend to the full Board to accept the Willamette Dental renewal
proposal as portrayed with no plan design changes.
Second: Bruce Goldberg
Diane Lovell called for a vote on the motion. The motion passed unanimously.

                          Wellness Subcommittee Report – Incentives
Dan Mielke reported the Wellness Subcommittee activities regarding incentives.

The subcommittee decided to move forward with a pilot program for the walking program. The details
of the proposal will be available at the next meeting. One thought is to tie in the requirement to complete
a Health Risk Assessment (HRA) before receiving a pedometer.

Diane Lovell explained that the program will promote wellness within agencies and possibly
Dan Mielke explained that the pilot will have limited locations and agencies. Main goal is to get
members to complete an HRA.
Diana Jones explained that the pilot will most likely be in Salem. Diana added that there are other
options to get members to complete HRA, possibly Pebb.benefits.
Bruce Goldberg asked what happens with HRA info.
Diana Jones explained that aggregate data and reporting is available from the Web tool. There has been
discussion of using carrier aggregate info. PEBB needs first hand reporting of what the health risks are
so the focus will be on the right areas.
Dan Mielke explained that when PEBB initiated the HRA discussion regarding mandatory or voluntary
requirements it was left as voluntary.
Bruce Goldberg stated that if the HRA isn’t mandatory, then the tracking is questionable and if they are

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not hooked into some sort of program then there is no intervention by a provider.
Diane Lovell stated that requiring an HRA is an overall policy issue for the Board to discuss.
Dan Mielke stated that PEBB has to get started somewhere. Exercise is the only proven method to make
people healthier.
David Hartwig asked the subcommittee to consider incentives rather than mandatory which can create
Rocky King asked when the results of the pilot will be available?
Dan Mielke explained that the pilot will most likely be implemented in July with results available some
time in the Fall.

                              Plan Design “Add-on” Options Follow-up
Diane Lovell explained that the subcommittee had reviewed some information regarding add-ons at the
last meeting and had asked for follow-up. Diane suggested that the subcommittee walk through each
option, one-by-one, and make a decision for final recommendations to the Board in two weeks.

Tobacco Cessation
Diana Jones reviewed the handouts with the subcommittee.

Free & Clear is a four-call phone counseling program that includes an initial assessment, informed of
appropriate prescription drug or nicotine replacement therapy, four scheduled outbound calls over six
months and unlimited inbound calls over twelve months.

Free & Clear also offers nicotine replacement therapy (NRT) products (patches and gum). Products are
purchased in quantity from Novistar, dispensed by mail, based upon determining appropriate dosage
during the interview.

If the program goal is set to enroll 5% of smokers (approximately 620 members), the combined costs for
phone counseling and NRT is estimated at $220,100 (The generic prescription, buproprion, is already
covered in the formulary.)

Exploring synergies that might occur from coordinating service with Oregon’s Tobacco Quit Line
(which contracts with Free & Clear) include advertising, promotion, and seamless enrollment.

Free & Clear tobacco cessation program. Free & Clear is a systematic and evidence-based behavior
change program that helps tobacco users quit. Free & Clear has the longest history of any provider, has
contracted with several states, tracks outcomes and publishes those outcomes.

Dan Mielke asked if PEBB utilizes the program, would the cost be covered by PEBB, or would there be
any cost to member.
Diana Jones explained that PEBB has the option to design the program including cost break-out. Diana
added that she would recommend the proposal be sent to the Wellness Subcommittee for its
consideration. It seems logical to considered the program along side other wellness programs.
Diane Lovell stated that she supports the recommendation to take the proposal to the Wellness
Subcommittee. This will take it out of the plan design budget and put it into the wellness budget.
Bruce Goldberg stated that doesn’t matter what pot it comes out of, tobacco cessation is one of the most
important programs PEBB can do. PEBB should be involved in a proven benefit that works.
Diane Lovell added that counseling and some sort of replacement drug provides the best outcome.

Dan Mielke explained that he had to leave the meeting but wanted to state that he supports all of the
concepts that are in all four areas. The only question has to do with the finances as opposed to the

Bariatric Surgery
Diana Jones reviewed the handouts with the subcommittee.

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On 5/18/04, the Board asked for additional information about the historical numbers of surgeries,
complications, and types of procedures from Regence BCBSO and Kaiser Permanente.

RBCBS has provided the following information: The RBCBS pilot covered 36 employees bariatric
surgery for 2003. These include RBCBS employees from four states including Oregon. Twenty of the
surgeries were performed on Oregon RBCBC members. Of these 20 procedures, 11 were lap band
procedure and a single surgeon at Legacy Health System performed all of the surgeries .The RBCBS
pilot project is still in progress and the final results are not available. To date RBCBS ' pilot project
members have not experienced any significant complications utilizing the centers of excellence facilities
selected by RBCBS. PEBB's quote does include a 10% complication rate. The rate for a procedure
without complications is estimated at $19,000 .The rate for a case with complications is estimated at

Kaiser Permanente: For 2002, one PEBB member had the surgery and 11 PEBB members had surgery in
2003.The surgeries were performed at Sunnyside Kaiser facility. Kaiser was asked to compare their rate
of surgeries to the RBCBS estimate of 0.1% surgery rate that RBCBS used as a base for quotes. Kaiser
noted that if the same ratio were applied to their 16000 PEBB members the estimated number of
surgeries would be 16 per year.

Diane Lovell explained that the subcommittee has discussed the issue several times and its now time to
make a recommendation to Board.
Bruce Goldberg stated that he was very much in favor of evidence-based approach that the Board took
with Dr. Helfand. PEBB learned a lot about evidence-based design and bariatric surgery and began to
consider it as a medical procedure and if it works or not. Given the current funding issues, it is hard to
recommend addition of a benefit. Given that, this is something to consider in a different financial
Rocky King stated that PEBB we offers the benefit already, its just not geographically not equitable.
Bruce Goldberg added that the same thing could be said about smoking cessation. This isn’t the only
benefit that is different depending on the carrier.
Rocky King stated that obesity is a complicated issue. Rocky added that he could not feel good about
adding a penny of anything due to the budget.
Diane Lovell suggested that PEBB could self-fund a pilot project and not pass the cost to employees or
the state.
Bruce Goldberg asked what the predicted number of surgeries is in the first year.
Pam Hodge explained that the estimate is 20 cases for $1.9 million.
Diane Lovell stated that based on the evidence and how long PEBB has been working the issue, PEBB
has shown the desire to do the right thing. To go this far and not take a step doesn’t feel like PEBB is
keeping faith. Not that PEBB made any commitments. Diane added that she feels the next logical thing
is to take a step. However, using reserves is a dangerous path.
Rocky King explained that he would love to find a trade-off related to cost and improving people’s
Diane Lovell added that she believes PEBB can take another step but it may be another year down the
Bruce Goldberg stated that he is hearing support for adding a benefit except there is no money to
Diane Lovell summarized that the consensus is to recommend not adding the benefit due to money.
Diane added that possibly during the next year PEBB may find a cost neutral way to implement a
benefit. Additionally, better evidence may be available in a year regarding laparoscopic. Diane and
Diana will draft a recommendation.

Chronic Disease Management – Depression Program
Diana Jones reviewed the handouts with the subcommittee.

PEBB has included Depression Disease management as an area of development in Chronic Disease
management planning and in the general population. PEBB has received pricing and program

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information from RBCBS to expand services in the existing disease management program to improve
diagnosis and treatment of PEBB members with a chronic disease and depression. It is estimated that
approximately 2,782 PEBB members with a chronic disease also have depression.

Reliant has also proposed adding services that would add behavioral health programming for the general
PEBB population related to the treatment of depression these include quality improvement, prevention
and outreach activities described in their proposal. It is estimated that as many as 17,000 PEBB members
may experience some type of depression based on national averages in men and women.

Diana Jones recommended that the Board consider the Reliant proposal, which is a more
comprehensive program that reaches out to all PEBB members to look for depression with a specific
focus on certain diagnoses.
Diane Lovell stated that the proposal is consistent with the chronic disease management and wellness
focus. Diane asked if the program would be managed through the wellness program.
Diana Jones explained that yes, ongoing discussion would involve the Chronic Disease Management
work group which includes carriers.
Bruce Goldberg asked what benefits members would see, an increased quality of life, less time in the
Diana Jones explained that members would receive phone calls about counselor appointments,
medications, etc. Reliant will track medications and hospitalization. Also included is a pre and post
evaluation to get at true outcomes.
Bruce Goldberg stated that its more a question of what is the best thing PEBB should be providing to
its members.
Diane Lovell asked what does PEBB want to do around depression.
Bruce Goldberg stated that he would like some more info before making decision.
Diane Lovell suggested a short Plan Design Subcommittee meeting before the next Board meeting to
review additional information.
Mylia Christensen added that Reliant’s proposal includes matching national benchmarks, frequency of
intervention, and one of the goals listed is to make change in quality of life.
Bruce Goldberg stated that he wants to know if the product has been used elsewhere and if its been
Diane Lovell added that the Board wants to review not just reports but outcomes based as to what the
Board will see.

Well Child Exams
Diana Jones reviewed the handouts with the subcommittee.

A long-standing priority to emphasize preventive health, current benefit is close to USPTF
recommendations, available to all members with children.

Diana Jones explained that the US Preventive Task Force (USPTF) recommendations are consistent
with PEBB’s current benefit.
Diane Lovell asked if Regence is truly claiming that increasing the number of well child visits will cost
as much as it would to add bariatric surgery.
Pam Hodge answered yes. Aon ran the numbers and came up with substantially lower estimated cost
Diane Lovell asked to verify the number of new exams predicted per year.
Pam Hodge explained that the expected number is 21,061 with the proposed benefit schedule at $1.94
million as incremental cost. The current number of visits is approximately 10,000. PEBB would be
paying for the difference between the current number of visits and the new number.
Diane Lovell explained that the increase would be costly. Diane asked where the other Board members
are on adding this benefit.
Rocky King suggested that prevention and earlier diagnosis should lead to less cost in the future. Rokcy
asked why the savings cannot be predicted.
Bruce Goldberg explained that prevention doesn’t always save money, its just the right thing to do.
However, maybe PEBB cannot afford to do it right now.

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Sheryl Warren suggested that PEBB might look at a trade-off of benefits at a different time.
Paul McKenna added that another point for not adding the benefit is that PEBB has good reason to
believe Regence is overcharging for the benefit, the numbers are questionable.

David Hartwig stated that some members might argue eloquently for any one of these benefits, even in
today’s world. The Board should have a formal discussion of what moneys PEBB has and their purpose.
PEBB heard significant feedback from members who took the time to speak to the Board, particularly
about bariatric surgery. PEBB needs to be sound about its money and its purpose.

Diane Lovell summarized the “add-on” options as follows: The tobacco cessation program is deferred to
the Wellness Subcommittee and the depression proposal is coming back to the Plan Design
Subcommittee with more information. Diane Lovell and Diana Jones will draft a summary reflecting the
desire to add the benefits and the decision not to based on finances.

                                            Public Comment
                                            Other Business
                                           Meeting adjourned

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