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Creative Solutions to the Health Care Crisis. Jim Miller Sales Manager-SET SEG MASA September 27,2006. How do you approach the crisis?. Dilemma- “a situation in which somebody must choose one of two or more unsatisfactory alternatives” Modify- “to change partially in character, form, etc”

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creative solutions to the health care crisis

Creative Solutions to the Health Care Crisis

Jim Miller

Sales Manager-SET SEG

MASA September 27,2006

how do you approach the crisis
How do you approach the crisis?
  • Dilemma- “a situation in which somebody must choose one of two or more unsatisfactory alternatives”
  • Modify- “to change partially in character, form, etc”
  • Solve- “to find the answer to a problem”
dilemma
Dilemma
  • “Any situation requiring a choice between unpleasant alternatives”
  • Alternatives
    • Pay full health insurance with no financial control with rates increasing every year
    • Establish a cap on health insurance contributions
      • Cost shifting to employees
      • Does not address root cause of problem
      • Rates will increase every year
modify
Modify
  • “To change partially in character, form, etc”
  • Change the current plan:
    • $100 deductible to $200
    • Super Care to Choices PPO
    • $5/10 Rx to $10/20 Rx
  • Partially addresses problem
    • Rates will continue to increase
solve
Solve
  • “To find an answer to the problem”
  • Identify the problem
    • Individual accountability for health care utilization.
      • Medical care treated as a free commodity
    • Employer accountability
      • MESSA’s large “Pooled rating” does not give school an incentive to lower medical cost
    • Strategy to lower actual claims amount
      • Wellness plans
individual accountability
Individual accountability
  • Current MESSA plans have created an atmosphere of medical care as a free commodity
    • Super Care and Choices plans pay virtually every expense with little or no employee involvement
      • $5 co-pay for office calls
      • $5/10 co-pay for Rx
  • Paid in full benefit buys union loyalty
modify7
Modify
  • “To change partially…………..”
  • To partially change the MESSA system
    • Change from $5/10 Rx to $10/20 Rx
      • Does help address the free Rx thinking
    • Change from Super Care to Choices PPO
      • Does help by directing employees to lower cost PPO providers
      • About 70% of all BCBSM is a PPO
      • MPSRS BCBSM is a PPO
    • Fails to address the root causes of the rising cost
      • Increased claims and utilization
solve8
Solve
  • “To find an answer to a problem”
  • What is the problem?
    • Budget-rising cost
    • MESSA Super Care 1
      • 10 years ago
        • Family $542/month, $6,504/year
      • Current
        • Family $1,435/month, $17,220/year
creative solutions
Creative Solutions
  • What can schools do to “Solve” the problem of:
    • Individual accountability
    • Employer accountability
    • Lower health insurance claim totals
  • The problem will be “Solved” when the health insurance costs are manageable
individual accountability10
Individual Accountability
  • What can a school do to make the employees more accountable for their use of health care benefits?
    • Redesign the Rx benefits
    • Redesign Hospital and Doctor benefits
    • Introduce Consumer Driven Health Care
individual accountability11
Individual Accountability
  • Design health insurance benefits that direct employees to the lowest cost
    • Prescriptions-about 1/3rd of all health claims
    • Design a plan that encourages the lowest cost
      • $5 generic,$10 brand-No
      • $10 generic, $20 brand-Good
      • 80% $5 minimum, $20 maximum-Good
      • $5 generic $20 formulary $40 brand-Better
      • $0 OTC,$5 generic, $20 formulary, $40 Brand-Best
    • See yellow handout
individual accountability12
Individual Accountability
  • Prescriptions, other options
    • Maximum Allowable Cost (MAC)
      • Member must pay the difference between brand and generic + co-payment (MESSA $10/20)
    • Eliminate life style Rx (One or all)
      • Impotency Rx
      • Weight loss Rx
      • Stop smoking
    • 50% life style Rx allowance
individual accountability13
Individual Accountability
  • Redesign hospital and doctor benefits
    • Increase ER co-pay from $50 to $100
      • Discourage ER abuse (20% of visits not required)
    • Increase office call co-pay
      • $10, $20
    • Increase Chiropractic co-pay
      • $10, $20, $30
    • Eliminate Massage Therapy
      • Can be over utilized
individual accountability14
Individual Accountability
  • Total benefit design that will encourage individual accountability with a standard plan
    • PPO plan
    • $100/200 deductible, $100 ER co-pay, $20 O/C co-pay, $30 Chiropractic co-pay
    • $0 OTC, $5 generic, $20 formulary, $40 brand Rx
  • This plan will reduce the current MESSA Choices rates plan by about 20%
    • Match “Community Standards”
individual accountability15
Individual Accountability
  • Did the re-designed plan achieve goal of encouraging individual accountability?
    • Plan design that utilizes deductible in areas that are vulnerable to over utilization will help achieve the goal
    • Re-design of the Rx plan with major emphasis on the employee selecting OTC and generic Rx will help achieve the goal
      • Goal is to get generic usage in the 60% range versus the 40% range and increase OTC
individual accountability16
Individual Accountability
  • Health Savings Accounts (HSA)
    • School purchases a High Deductible Health Plan (HDHP)
      • Common deductibles-$1,250 single, $2,500 family
    • School and/or employee funds the deductible claims with an HSA account at a bank
    • Any funds remaining in the HSA at years end remains with the employee
    • Each year the HSA is funded
individual accountability18
Individual Accountability
  • How HSA achieves Accountability
    • Encourages employees to use their health plan wisely because balances in the HSA remain with employee
    • It is in the best interest of the employee to use OTC or generic Rx instead of brand Rx
    • It is in the best interest of the employee to use an Urgent Care facility rather than an ER
    • Remaining balances can then pay future medical bill tax free (example in retirement)
hsa cost example
HSA Cost Example
  • Current family SC 1(Area 7) $1,435
  • BCBSM family HDHP (Area 7) ($ 795)
  • Savings per month $ 640
  • Annual savings $7,680
  • School funded $2,500 deductible ($2,500)
  • Net annual savings per family $5,180
    • See BCBSM HSA handout
individual accountability20
Individual Accountability
  • Has the HSA concept helped solve the problem of individual accountability?
    • It is in the best interest of the employee to use the lowest cost health care alternative
    • Health care is no longer considered a free commodity as it is under the current MESSA system
individual accountability21
Individual Accountability
  • Health Reimbursement Arrangement (HRA)
    • School purchases a High Deductible Health Coverage (HDHC)
      • Common HDHC plans are $1,000, $2,500, and $5,000 deductible plans
    • School owns the funds deposited in HRA used to fund deductible
    • Remaining funds may or may not be returned to employees HRA account
hra self funding
HRA Self funding
  • Current family SC 1(Area 7) $1,435
  • BCBSM family HDHP (Area 7) $ 795
    • $2,500 family deductible plan
  • Savings per month $ 640
  • Annual savings $7,680
  • Est. deductible claim expense $1,250
  • Estimated savings to school $6,430
individual accountability23
Individual Accountability
  • Has the HRA achieved the goal of individual accountability?
    • If entire balance remaining in employees HRA stay in the account then the employee is encouraged to use the plan wisely
    • If the school keeps the balances in the HRA then the individual accountability goal is not achieved
      • The school is simply self-funding high deductible health coverage
employer accountability
Employer Accountability
  • Current “Pooled” rating system
    • All schools regardless of size or individual usage of benefits pay the same health insurance rate in a geographic region (7 rating areas for MESSA)
    • Health insurance loss information not available to any size MESSA group
    • No incentive for any one school to reduce their health insurance claims
employer accountability25
Employer Accountability
  • Standard health insurance practices
    • Smaller groups are combined for rating purposes
      • BCBSM combines groups with less than 100 enrolled into eight “Area Pools” throughout Michigan
    • Larger groups, over 100 enrolled have their rates determined by their own usage of benefits
      • Encourages wise use of benefits by each employer
employer accountability26
Employer Accountability
  • Groups over 100 utilize an Experience Rated System (ERS) for rate determination
    • A self-funded system is also available
  • Pending legislation would allow small districts to Pool together to meet minimum size to utilize ERS
    • Also would require MESSA to release claim data
employer accountability27
Employer Accountability
  • Advantages of the ERS system for a school
    • Transparency-the carrier must provide detail loss data
      • School can see what benefits are being used or abused and design plans to address the problem
      • School can identify the types of illnesses the employees have and address the problem
      • School can determine which Rx are being used and develop a Rx benefit to encourage wise use
how ers works
How ERS Works
  • Claims $2,500,000
  • Provider discounts (30%) ($ 750,000)
  • Claims paid $1,750,000
  • Claims over $50,000 ($ 100,000)
  • Net claims $1,650,000
  • $50,000 stop loss and Adm. $ 300,000
  • Total claims and administration $1,950,000
  • Current premium (rates) $1,950,000
  • Projected expenses +10% $2,145,000
why ers
Why ERS?
  • If your school district can reduce their claim cost then they save
    • Can the school through benefit design reduce their benefit cost?
    • 10% to 15% reduction in claims is possible
  • School receives detail claim information to use to make good management decision
    • Individual employees names will not be disclosed
control claim cost
Control Claim Cost
  • “Individual Accountability”
    • Well designed use of deductible and Rx co-pays
    • Introduction of HSA or HRA
  • Employer Accountability
    • ERS system
    • Claim information, “transparency”
      • Identify claim areas to be addressed
control claim cost31
Control Claim Cost
  • Disease Management programs
    • The carrier must be very aggressive and work with employees with major and chronic conditions. The school must demand accountability by the carrier for these plans
      • 30% of individuals account for 85% of claims
      • 15% of individuals with chronic conditions spend 40% of the total health care dollars
control claim cost32
Control Claim Cost
  • Conflict
    • MESSA plan buys union loyalty with paid in full benefits
    • Controlling claim cost can be a major conflict with MEA/MESSA philosophy
  • The goal of Controlling Claim Cost is to assure that health insurance will be available in the future for everyone
control claim cost33
Control Claim Cost
  • Wellness Plans
    • 50% of injury, disease, and premature death is preventable
    • 64% of Americans are overweight
    • Lifestyle risk factors account for 25% of medical costs
  • If a school has an ERS system they have an incentive to invest some dollars in a Wellness plan to reduce their claim cost
creative benefit designs
Creative Benefit Designs
  • HRA-Significant savings versus MESSA
  • School purchases a Flexible Blue 2 plan from BCBSM (or other high ded. plan)
    • $1,250 single and $2,500 family deductible
    • Third Party Administrator administers deductible claims
    • Deductible balance left over remains with school
    • See HRA cost example
hra cost example
HRA Cost Example
  • Current family SC 1(Area 7) $1,435
  • BCBSM family HDHP (Area 7) $ 795
    • $2,500 family deductible plan
  • Savings per month $ 640
  • Annual savings $7,680
  • Est. ded. claim expense(50%) $1,250
  • Estimated savings to school $6,430
creative benefit designs36
Creative Benefit Designs
  • HSA-Significant savings versus MESSA
  • School purchases a Flexible Blue 2 plan from BCBSM
    • $1,250 single and $2,500 family deductible
    • HSA established
    • Balances remain with employee
    • Major emphasis on employees using the plan wisely
    • See HSA cost example
hsa cost example37
HSA Cost Example
  • Current family SC 1(Area 7) $1,435
  • BCBSM family HDHP (Area 7) $ 795
  • Savings per month $ 640
  • Annual savings $7,680
  • School funded $2,500 deductible $2,500
  • Net annual savings per family $5,180
creative benefit design
Creative Benefit Design
  • WRAP Concept
    • School purchases a higher deductible health plan, BCBSM Flexible Blue or a Community Blue plan at a much lower rate
    • School selects a Third Party Administrator to administer claims within the deductible to bring plan benefits up to selected level
      • SET SEG has partnered with EHIM because they receive BCBSM EOBs direct from BCBSM and can adjudicate the claim to the pre-arranged level, example- MESSA Choices or any other level
creative benefit design39
Creative Benefit Design
  • WRAP Concept
    • The school is self-funding the deductible
    • The school’s risk is limited to the deductible amount
    • If the employees do not use the entire deductible then the balance remains with the school
    • Experience indicates that about 50%-60% of the deductible is used by employees
creative benefit designs40
Creative Benefit Designs
  • WRAP a Flexible Blue 2 plan with a self-funded Rx plan
    • School purchases a BCBSM Flexible Blue 2 plan
      • Single deductible-$1,250, Family-$2,500
      • Deductible claims administered by TPA
      • Balances remain with school
    • School self-funds the Rx plan with a co-pay such as the $0-OTC, $5/20/40 plan
creative benefit design wrap cost example
Creative Benefit DesignWRAP Cost Example
  • $2,500 ded. plan, family, Area 2 $ 675
  • 50% ded. usage (estimate) $ 104
  • Adm. fee for deductible claims $ 15
  • Self-funded Rx $0 OTC,$5/20/40 $ 200
  • Total $ 994
  • MESSA Choices, family Area 2 $1,355
  • Saving per year $4,332
creative benefit design42
Creative Benefit Design
  • WRAP a BCBSM Community Blue 4 PPO plan with self funded Rx
    • School purchases a BCBSM Community Blue 4 plan
      • Single deductible- $500, Family-$1,000
      • Deductible claims administered by TPA
      • Balances remain with school
  • School self-funds the Rx plan with a co-pay such as $0 OTC/ $5/$20/$40
creative benefit design43
Creative Benefit Design
  • WRAP a BCBSM Community Blue 4 PPO plan with an insured BCBSM Rx
    • School purchases a BCBSM Community Blue 4 plan
      • Single deductible- $500, Family-$1,000
      • Deductible claims administered by TPA
      • Balances remain with school
    • School purchases an insured Rx plan from BCBSM
    • Very limited self-funded risk
creative benefit design44
Creative Benefit Design
  • WRAP a higher deductible Community Blue 14 plan with an insured Rx or self-funded Rx
    • School purchases a BCBSM Community Blue 14 plan
      • Single deductible- $1,500, Family-$3,000
      • Deductible claims administered by TPA
      • Balances remain with school
    • Rx insured or self-funded
    • See blue handout-WRAP choices
creative benefit design45
Creative Benefit Design
  • Cafeteria plan format
    • Instead of making a shift for all employees to a new concept, establish a cafeteria plan
      • Each employee can select from one of two or three choices, example:
        • Plan 1- Community Blue 1 no deductible $5/10 Rx
          • Contribution required
        • Plan 2- Community Blue 2, $100/200 deductible $10/20 Rx-
          • Paid in full
        • Plan 3- HSA, School funded deductible,
          • Paid in full
    • See Cafeteria Plan handout
slide46

Cafeteria Plan Example

Health Insurance

Core Plan

Option 1

Option 2

Option 3

BCBSM

PPO

Plan 2

w/$10/20 Rx

BCBSM

PPO

Plan 1

w/$5/10 Rx

BCBSM

Flexible Blue

HSA

No Health

Insurance

Core Plan

Paid in Full

Available Buy-up

Employer Contributes

$2,500 to HSA

Cash Payment

$__________

Other Benefits

Self-funded

Dental Plan

Self-funded

Vision Plan

Life Insurance

(Insured)

Long-term Disability

(Insured)

Note: 2 health plans can be offered to groups of 11 to 24 enrolled. 3 health plans can be offered to groups with more than 25 enrolled.

creative benefit design47
Creative Benefit Design
  • Investigate other health insurance carriers
    • Aetna
    • United Health Care
    • Self-funded TPA
  • These new carriers can match the Creative Benefit Designs offered by BCBSM
a strategic plan
A Strategic Plan
  • Incorporate the three main components of “Solving” the health care crisis
    • Individual accountability
    • Employer accountability
    • Reduce health insurance claims
  • Use the Creative Benefit Designs to work towards a solution
example of a strategic plan abbreviated
Example of a Strategic Plan(Abbreviated)
  • Goal of the plan
    • Over a 3-5 year period to move away from MESSA to a health plan that will:
      • Create more individual accountability by having individuals more involved in health care decisions
      • Change RX plan to encourage lowest cost alternative
      • Introduce Consumer Directed Health Care
      • Start an Experience Rated System
        • Years 4-5 investigate self-funding health and Rx
strategic plan
Strategic Plan
  • Introduce Wellness plan year one
    • Each year further develop plan to help reduce claims
    • Create incentives to encourage participation
  • Work with insurance partner to develop meaningful reports to be able to monitor progress
    • Very important issue in selecting insurance partner
strategic plan51
Strategic Plan
  • Benefit implementation
    • Year one-
      • Enroll Administrators/Support staff in Community Blue 4 with a WRAP plan up to current Choices plan.
      • Offer HSA plan as an option, cafeteria plan, with school funding the deductible
      • Introduce a Wellness Plan to all employees and “How to Use Your Health Plan Wisely”
    • See “How to Use Your Health Plan Wisely” handout
strategic plan52
Strategic Plan
  • Year 2-3
    • Introduce same concept to teacher group through negotiations
    • Limit school contribution to MESSA plan to the premium level of the Administrative Support plan
    • Cost sharing by teacher group will help to create interest in other options
strategic plan53
Strategic Plan
  • Year 4-5
    • Move all employees to an ERS or Self-funded system
    • Develop full cafeteria plan with 3 or 4 plan choices
    • Aggressive claims management system with an active Case Management program
    • Aggressive Wellness Plan to reduce claims and promote healthy employees
results
Results
  • Turned a “Dilemma” into an opportunity to develop a “Solution”
    • Changed the way individuals purchase health care
    • Changed the way the school purchases health care
    • Established efforts to reduce actual health insurance claim costs
    • Utilized creative benefit designs to achieve the objective