Introduction to Benefits – Experience Rating by liuqingyan

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									         Introduction to Benefits –
         Medical, Dental and Prescription Drug
PEBA
February 11th, 2009
Today’s Goals


• Market overview
• Plan types, their key applications,
• Vendor overviews, funding and rating
  options, and design implications.




                                         2
Market Overview
Healthcare Cost Change v. Inflation/Earnings


 16%
                                              13.9%
 14%                               12.9%

 12%                     10.9%                           11.2%

 10%                                                                   9.2%
                 8.2%
                                                                                  7.7%
  8%
                                                                                              6.1%       5.7%
  6%   5.3%
                     4.0%      4.0%                                                    3.8%
          3.6%                                                          3.5%        3.5%          3.7%    3.8%
  4%              3.1%      3.3%                    3.0%
                                          2.6%                             2.7%                2.6%          2.9%
        2.3%                                     2.2%       2.3%
                                                               2.1%
                                       1.6%
  2%

  0%
        1999      2000      2001       2002      2003      2004         2005        2006       2007       2008

                                      Health Insurance     Inflation     Earnings




                                                                                                                    4
Healthcare Costs vs. Earnings




  Towers Perrin 2009 Health Care Cost Survey
                                               5
Hospital Expenses per Inpatient Day




  Source: National Health Expenditure Data, Health Expenditures by State, Centers for Medicare and Medicaid Services, Office of the Actuary, National
  Health Statistics Group, released February 2007

                                                                                                                                                        6
Monthly Cost by Group




  Towers Perrin 2009 Health Care Cost Survey
                                               7
Obesity Epidemic

                           1990                                                     1998




                                                         2007




  No Data           <10%             10%–14%        15%–19%     20%–24%   25%–29%    ≥30%

   CDC Behavioral Risk Factor Surveillance System                                           8
Cost of Healthcare in PA




                           9   9
Health Care Dollar


•Leverage purchasing
•Guaranteed administration
•Performance guarantees

                            Your Health Care Dollar

•Network access             15%
•Discounts
•Plan Design
•Wellness                                             Medical Claims
                      20%                             Rx Claims
                                                      Administration
                                               65%
•Guaranteed
discounts
•Rebates
•Lower
Administration Fees
                                                                       10
Trend Drivers


        Where does the 8% increase come from?

  1%    Technology
                      Proactive Strategies
                          •Wellness
 3.5%   Utilization
                          •Health Promotion
                          •Disease Management
                          •Consumerism
                                           Reactive Strategies
  3.5% Inflation                               •Discounts
                                               •Vendor Fees
                                               •Design
                                               •Contributions

                                                                 11
Patient Claim Distribution


                                     Sample Claims Distribution
Targeting interventions to the 14%
that use 85% will provide the                            2%          $100/person
highest ROI.
                                                         13%
Very likely that 40% of costs are
for just four chronic conditions:
  • Coronary artery disease
                                        50%
  • Asthma                                               34%
  • CHF
  • Diabetes

            Patients in these
            categories move             36%
              up and down                                51%         $15,000/person
              from year to
                                        10%
                  year
                                         4%
                                     % of Employees    % of Claims



                                                                                      12
Medical
PA Primary Vendors

• Four Blues
    –   Capital Blue Cross
    –   Independence Blue Cross
    –   Highmark
    –   Blue Cross of Northeastern PA (NEPA)
•   Aetna
•   Geisinger
•   Health America
•   United Health Care
•   Cigna
•   UPMC
                                               14
Medical

• Product Availability
    –   HMO: Gatekeeper, network coverage only
    –   POS: Gatekeeper, In and out of network coverage
    –   PPO: Direct access / no referrals, in and out of network coverage
    –   CDHC: HRA & HSA plans
    –   Limited Benefits

• Product Strategies
    – Changes impacting view of traditional product / cost continuum
    – Opportunities: Open Access & coinsurance based HMO’s

• Network Access – access to national networks for all products.
    – Capitation vs. Fee For Service
    – Access: National, Reciprocal, Geographically Limited



                                                                            15
Funding Alternatives

• Funding Alternatives:
   – Fully Insured (Prospective)
       • Rating types: Community, Variable, Experience
   – Self Insured

• Highlights:
   – Fully Insured
      • Pro’s: monthly premium predictability / no risk;
      • Con: “winner take all”, limited transparency of experience
   – Self Insured
      • Pro’s: Improved cash flow, ability to remove state mandate
         requirements, remove premium tax, plan flexibility, Stop Loss
         caps risk exposure
      • Con: “leap of faith” to transition funding without understanding
         experience




                                                                           16
Why Self-Insure?

• Reduce Costs by Self-insuring
   –   Remove premium tax
   –   Lower margins and profit
   –   Better control over designs
   –   Lower long term costs
   –   Lower rates of increase


• Gain Control Over Your Future
   – Create plans specialized for your
     employees
   – Flexibility to work with specialty
     vendors for what they do best
   – Add-on services to control
     adverse health conditions



                                     .    17   17
Understanding the Direction of the
Market
• What is going to impact your benefits strategy:
   –   Experience Rating
   –   Aging population and increased chronic care needs
   –   Greater role of employee in cost sharing
   –   Consumerism
   –   Voluntary coverage’s


• Key Shift – Change in focus from discounts to targeted
  identification and engagement capabilities
   – Total Cost Management Approach: Claim Cost = Discount x
     Utilization
   – Need to impact utilization




                                                               18
Different Rating Methodologies

• Experience Rating (100+ Ee’s)
  – Claims
  – Large Claims
  – Utilization
  – Demographics
  – Industry
• Community Rating (<100 Ee’s)
• Blended
Approach Varies Based on Employer Size –
Fully Insured

• Reduced costs through “traditional"
  negotiations
  – Fact-based negotiations of vendor variables
     •   Trend
     •   Margin
     •   Credibility
     •   Methodology
     •   Expenses
  – Leverage market as needed
• Advantages
  – Minimize disruption
  – Maintain benefit level and carrier


                                                  20
Fact Based Negotiations




                               21
                          21
Pharmacy
Major Pharmacy Benefit Managers in
the U.S.

• Top three handle 50% of outpatient
  prescription volume
  – CVS/CaremarkRx
  – Medco Health Solutions
  – Express Scripts
• Others
  – Wellpoint Pharmacy Management
  – Benecard
  – MedImpact
                                       23
Who PBMs Serve


• Health plan organizations
    – Corporate health plans
    – Insurance groups
    – Blue Cross Blue Shield plans
•   Government entities (federal, state, local)
•   Taft Hartley funds/unions
•   Third party administrators (TPAs)
•   Discount card/cash card programs
                                                  24
PBM Services

• Administer benefit plan design
• Develop, contract and administer retail
  pharmacy networks
• Mail Service Pharmacy
• Patient services
• Clinical and consultative services



                                            25
Rx

      Red-Book
      Medi-Span               Manufacturer
                                                                            Employer Members
                                                            Mail Order
                    Wholesaler            Hospitals          Facilities
                                                           (PBMs own)


  Supermarkets        Retail Chains
   Brand-20% AWP       Brand-20% AWP
  Generic-66% AWP     Generic-66% AWP




                                 PBM’s Contract
                                 Brand -(18% - 20%) AWP
                                    Generic -66% AWP
                                                                                 Direct



                                                    Health Plan (CBC/Highmark etc.)
 26
                                                                                               26
Administer Benefit Plan Design


 •   Copay levels                      •   Maximum out-of-pocket
 •   Days supply                       •   Plan stop loss
 •   Deductibles                       •   Maximum allowable cost
 •   First-fill restriction            •   Drug coverage
 •   Maximum number of                     rules/exclusions
     refills

            Goal is to spread financial responsibility equitably
                    between the payer and the patient


                                                                   27
Develop, Contract, and Administer
Retail pharmacy networks


•   Claims processing
•   Payment, reporting, and auditing
•   Pharmacy network contracting/fraud and abuse
•   Mail Service Pharmacy
    – For management and administration of long term
      chronic medication needs




                                                       28
Prescription Lifecycle


      Member                   Pharmacy                     PBM

                            Submit online claim   • Verify eligibility
  Take prescription and                           • Determine benefit
   ID card to pharmacy          to PBM            • Drug utilization review
                                                    (DUR)




        Receive           • Fill prescription     • Deliver online response
    prescription drug     • Collect copayment     • Store information




                                                                              29
Patient Services

• Call center support
• Web tools
• Mail service pharmacies
• Specialty drug pharmacies
• Medication therapy management
  services for Medicare prescription drug
  plans (PDP)
• Member communication programs

                                            30
Clinical and Consultative Services

• Clinical and benefit design analysis and
  recommendations
• Clinical services designed to ensure
  appropriateness, quality, and safety of prescription
  drug use (formulary development and support,
  utilization and trend management services, DUR,
  safety and care programs)
• New drug information, emerging issues, industry
  updates
• Reporting
• Research

                                                         31
This Is The Decade of Generic Drugs
More than $50 billion of brands going generic


                                                                          Brand Drug Patent Expirations
                                16

                                14    $10.0      $14.3       $11.0     $11.6         $8.5      $5.5
Annual Sales, in billions ($)




                                12
                                                  Other
                                10                                       Other
                                8                             Other
                                       Other      Flonase                            Other
                                                                       Fosamax
                                6                Pravachol
                                                                       Effexor/XR   Topamax
                                                  Zoloft     Zyrtec                 Lexapro    Other
                                4    Zithromax                         Risperdal
                                                             Ambien
                                     Duragesic                                                 Aricept
                                2                                                              Cozaar
                                     Oxycontin     Zocor     Norvasc    Advair      Prevacid
                                                                                               Abilify
                                0
                                       2005        2006       2007       2008        2009      2010


                                                                                                          32
Increasing the Use of Generics
Moving from brand to generic drugs


  Chemical equivalence                Therapeutic equivalence
       Two drugs with active                Two drugs with active
  ingredients that are identical at    ingredients that are identical at
        the molecular level                   the clinical level




     Zocor              simvastatin      Lipitor            simvastatin
     Occurs 95%+ of the time                 Occurs infrequently
      with little intervention               without intervention


    Gains in generic fill rate depend mostly on moving
    from brands to therapeutically equivalent generics

                                                                           33
What Are Specialty Medications

• Specialty drugs are high-cost injectable, infused, oral or inhaled
  drugs that generally require close supervision and monitoring of
  the patient’s drug therapy

• Growing at twice the rate of traditional medications
   – Accounting for $30 billion in U.S. sales and 12% of the total
     pharmaceutical market

• Costs can often be astonishing
   – Colon cancer drug Avastin can cost $100K/year
   – Gaucher’s disease can cost $200-$500K/year

• Biogenerics would bring competition into this industry and
  provide more patients with access to these life-saving drugs



                                                                       34
Rx Norms




           35
Additional Benefit
Considerations
Dental Market Factors

•   There are approximately 6 viable dental carriers in PA:
     –   Cigna
     –   Aetna
     –   Delta
     –   Guardian
     –   MetLife
     –   United Concordia
•   Market is aggressively pricing business with multi year guarantees.
•   There is a renewed emphasis to increase provider access in rural
    areas.
•   Plan design strategy can address network shortfalls.
•   Carriers will put forth financial guarantees to grow networks in specific
    areas.
•   Expanding definitions of covered services (e.g white fillings,
    orthodontics, implants, etc.)


                                                                                37
Types of Coverage

Capitated Dental Plan
• Pure DHMO
   – Dentist paid on a per capita basis, fixed rate for each individual or family
     enrolled.
   – Participant must see a DHMO dentist for coverage.
   – Typically smaller networks.
   – Copay schedules.

Fee-For-Service Dental Plans
• Indemnity
   – Reimbursement based either on a schedule or UCR.
   – No network.
• PPO
   – Network of dentists agreeing to accept a discounted level of payment for covered
     services.
   – Out of Network option, plan design/carrier determines reimbursement level.
   – Typically larger networks.
   – Uses coinsurance.

                                                                                        38
Plan Design Components
• Coinsurance
• Plan maximums
   – Annual Max and Orthodontia Lifetime Max
• Deductibles
• Allocation of services
   – Preventive (Type A/I): Cleanings, Routine X-rays
   – Basic Restorative (Type B/II): Fillings, Periodontics,
     Oral Surgery, Endodontics
   – Major Restorative (Type C/III): Crowns,
     Bridges/Dentures
• Contractual Limitations and Exclusions
                                                              39
HMO- A Sample Plan Design

     Deductible                 $0
     Preventive                 $0
  Basic Restorative    Copay Schedule, ranges
     (i.e. fillings)       from $20-$90
  Major Restorative       Copay Schedule,
    (i.e. crowns)      ranges from $350-$475
    Orthodontia            $2,500-$3,900
  Annual Maximum                None



                                                40
Indemnity Plan Design

   TYPE OF SERVICE         (% R&C)


      A (Preventive)        100%


   B (Basic Restorative)    80%


   C (Major Restorative)    50%


     D (Orthodontics)       50%




                                     41
     Allocation of Services
       Type A, B, C & D covered services
                 Type A                                       Type B                      Type C                  Type D
     Preventive & Diagnostic                                 Restorative                Prosthodontics          Orthodontics

  Oral exams                                            Fillings                     Inlays/onlays         Orthodontic
                                                         Repairs                   
  Full mouth X-rays                                                                    Crowns                 diagnostics
                                                         Periapicals               
  Bitewing X-rays,                                                                     Dentures              Orthodontic
                                                         Pulp capping/
     periapicals                                                                       Bridges                treatment
                                                          pulpal therapy
     & other X-rays                                                                    Implants
                                                         Endodontics/root canal
    Lab and other tests                                                               Endodontics/
                                                         Space maintainers
    Prophylaxis (cleaning)                                                             root canal
                                                         Palliative care
    Fluoride treatments                                                               Periodontics–surgery
                                                         Periodontal maintenance
    Space maintainers                                   Periodontics                 Oral surgery
    Palliative care                                     Rebases/relines              Simple extractions
    Sealants                                            Simple extractions           Surgical extractions
                                                         Surgical extractions
*Percentage indicates plan savings off of MetLife’s      Oral surgery                  By reallocating these
full block of self-funded/insured
                                                         General anesthesia
PPO plans based upon analysis of MetLife’s 2004                                          services, you could
book of business.
                                                         Consultations
                                                                                              save 11%                   42
 Limitations and Exclusions

                                                                                                                                     Lower Cost
                More Robust
                                                                                                                                     Alternatives
        Up to age 19                                                    Fluoride age                                                     Up to age 14
                                                                        Once per 12 months

        Up to age 19                                         Space maintainer age                                                        Up to age 14
                                                                          Once per lifetime

        4 per year                                       Periodontal maintenance                                                               2 per year
                                                                     Combined with cleaning

        1 in 5 years                                       Prosthodontic services                                                       1 in 10 years
        Up to age 19                                                     Sealant age                                                     Up to age 14
                                                                        One per 60 months

        No limit                                                              Fillings                                          1 per 24 months
        90th                                                         R&C Percentile                                                                  80th
        Covered                                                              Implants                                                     Not covered
                                                                         One per 60 months

                                                Potential savings of 3.5 – 5%*
*Range indicates plan savings off of MetLife’s full block of self-funded/insured PPO plans based upon analysis of MetLife’s 2004 book of business.          43
Note: Options may be subject to state regulations.
Vision

• Well liked, lower cost benefit
• Keys:
  – Access to providers
  – Level of coverage
• Strategy
  – Leverage program




                                   44
Wellness
Typical Wellness Program Elements


                         Health
                       Screenings


          Life Style
          Variables                 Fitness




                       Employees


                                     Weight
           Tobacco                  Control/
          Cessation                 Nutrition


                         Stress
                       Management

                                                46
Wellness Observations
• Employers are at various stages of wellness
  initiatives
   –   Walking programs
   –   Smoking cessation programs
   –   Onsite biometric screenings
   –   Lunch & Learns
   –   Health Risk Assessment
   –   Health Coaching
   –   Creation of wellness committee
   –   Hiring an outside health promotion firm
   –   Incent program participation




                                                 47
Population Health


• Programs to increase health
  awareness
• Tools to control chronic
  conditions
• Access to information
• Take proactive control over
  future costs and directly
  reap the rewards




                                48
Population Health Management


      Worried Well Users
                                                           Chronically Ill Users
      •   Health Risk Assessment
                                                           • Health Risk Assessment
      •   Long-term health and nutrition needs
                                                           • Disease-specific information and online expert
      •   Fitness reports and information
                                                             advice
      •   Preventative health advice
                                                           • Treatment options
      •   Use online Q&A resources
                                                           • Disease management tools
      •   Family health/family history info
                                                           • Alternative medicine
                                                           • Online chat/communities of interest

Percent of        100%                           55%       20%                       5%
 Enrolled
                                                           At Risk/Diagnosed Users
                                                           • Health Risk Assessment
                     Casual Health Users
                                                           • Disease-specific information and online expert
                     • Health Risk Assessment
                                                             advice
                     • Health and nutrition
                                                           • Online chat and communities of interest
                     • Fitness and recipes
                                                             offerings
                     • Latest health news reports
                                                           • Prescription drug, nutrition, and OTC remedies
                     • Preventive data related to family
                                                           • Medical management tools
                       history
                     • Family/child health information
                                                                 April 11
                                                                                                              49
    What Do Health Risks Cost Your
    Organization?

                                                                                   Additional Cost
   Approximately 70% of all health                                                Per High Risk
    care costs result from preventable
    illness.                                                        Risk Factor    Employee
    Modifiable risk factors include:                               Smoking        $1,429/yr
          nutrition
                                                                    Inactivity     $495/yr
          weight control
          exercise                                                 Weight         $271/yr
          cholesterol
          blood pressure
                                                                    Depression     $889/yr
          safety & mental well-being                               High Stress    $586/yr
                                                                    Hypertension   $148/yr
Journal of Occupational and Environmental Med., May 2002
Health Enhancement Research Organization 2000, 2002
Center for Health Promotion. The Dollar (and sense) Benefits for Having a
Smoke-Free Workplace. Lansing, Michigan Michigan Tobacco Control Program
2000


                                                                                                     50
Components of a successful wellness
program
•   Support from management
•   Cost driver analysis
•   Budget Tolerance
•   Confidentiality
•   Company culture
•   Effective communication
    – Marketing/branding
    – Posters, newsletters, payroll stuffers
    – Communicated at benefits fair
•   Proper Incentives
•   Ease of program use




                                               51
Questions




            ???
                  52

								
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