BHR's Strategic Priorities Talent Acquisition Provide agencies - - PDF document

UPDATED Salary Policy/Health Ins Presentation - FY14

Thursday, January 31, 2013 2:59 PM

State of South Dakota

Salary Policy & Heath Insurance Presentation

to

Joint Committee on Appropriations January 25, 2013

1

BHR's Strategic Priorities

• Talent Acquisition

Provide agencies with the resources needed to attract and hire the best talent available.

• Talent Development

Help agencies develop and effectively use talent to maximize employee performance and increase agency efficiency and productivity.

• Talent Retention

Provide agencies with the tools and information needed to retain mission-critical talent.

2

South Dakota State Employee Health Plan

Service Partners of Health Plan

Hll!!I!

~lanagement Partners Prior-authorization l\ledical ~lanagement Case -1111zat1on Health creenings Condition ~lanagement Provider etwork Claims Processing Flex.Ible Spending .Accounts Intensin Case ~lanagement

Claims Associates

ubrogation Claims Re"iew Health Fitness Express Scripts Prescription etwork Formula~· & ~lalntenance List Prior-authorization for certain prescriptions Health .Assessment Health .Ad"ising Health Coaching 4

Health Plan Members

25,000 ~------------------------------ 19,881 20,000 t-----.====--------------------------- 15,000 1

I

10,000 5,000 17,271 Latitude Health Plan (S500 Deductible) 7,455 6,555 1,462 1,801

S1 ,000 Deductible

S1 ,800 Deductible

• FY 12

FY 13

5

Health Plan Budget Cycle

Budget Planning Session for a year end that is 24 months away Finalize proposed FYXX Budget Legislature approves FYXX Budget Project claims 18-21 months ahead End FYXX, compare budget to actual *Projections are compared to actual claims on a monthly basis.

6

Your 2012 Aon Hewitt Guide to Health Care Solutions

State of South Dakota (SD) January 2013

AONHwttt

7

Competitive Cost Benchmarks

• Cost Sharing Mix
• Financial Efficiency
• Actuarial Value

AON Hewitt, January 2013 8

Competitive Cost Benchmarks- Cost Sharing Mix

• A measure of employee cost sharing is the

percentage of total health care expenses paid for by the employer versus the employee.

• Estimated out-of-pocket costs are added to the

total health plan costs to determine an estimate

• f total health care expenses.
• Employees share costs through dependent

contributions, deductibles, copayments, and coinsurance.

AON Hewitt, January 2013

9

Competitive Cost Benchmarks- Cost Sharing Mix

Cost Sharing Mix-Overall

D Out-of-Pocket Costs

II

Employee Contributions

a

Employer Cost

Out-of-Pocket Costs*

Employee Contributions

Employer Cost

* Employee Out-of-Pocket Costs

SD

Industry

26.0% 11 .6% 11.0%

9.4%

63.0% 79.1% 10,000-

Fortune Labor

24,999 500 Market HHVI 18.1% 18.2% 24.0%

16.6% 18.5% 18.3% 13.4% 16.8% 63.5% 63.5% 62.6% 66.6%

AON Hewitt, January 2013

10

Competitive Cost Benchmarks- Cost Sharing Mix

Cost Sharing Mix-Overall

a Out-of-Pocket Costs a Employee Contributions a Employer Cost Out-of-Pocket Costs Employee Contributions

Employer Cost

SD State 1 26.0%

21 .7% 11.0%

14.4%

63.0% 64.0% State 2

201% 167% 632% State 3 State 4 State 5 171% 6.1%

17.0% 110% 34% 72.0%

00. 5%

83.0%

AON Hewitt, January 2013

State 6 21.3% 20.6% 58.1%

11

Competitive Cost Benchmarks- Financial Efficiency

• Financial efficiency provides a better

comparative measure than per participants cost- population demographics, richness of plan design, and geographic location are removed.

• Financial efficiency measures how effectively you

are delivering health care to your participants.

• A Fl greater than 100% reflects better-than-

average financial efficiency.

• An Fl greater than 100% indicates your plans are

providing a greater value per dollar spent than

• ther plans.

AON Hewitt, January 2013

12

Competitive Cost Benchmarks- Financial Efficiency

Financial Efficiency--Overall

Financial Index Enrollment 110.0% 100.0% 90.0% 80.0% 70.0% 60.0%

so

105.9% 12,356 Industry 101 .7% 582,048 10,000- 24,999 100.5% 1,513,720

/ --

Labor Fortune 500 Market HHVI 992% 100.0% 100.0% 3,192,410 132,365 6,381 ,193

AON Hewitt, January 2013

13

Competitive Cost Benchmarks- Financial Efficiency

Financial Efficiency-Overall

110.0% 100.0% 90.0% 80.0% 700% 60.0% SD State 1 State 2 State 3 State 4 State 5 State6 Financial Index 105 9%

102 3% 102.0% 93.2%

991% 103 5%

100.1%

AON Hewitt, January 2013

14

Competitive Cost Benchmarks- Actuarial Value

• Actuarial Value is a percentage of total health

care costs expected to be paid by the plan after deductibles, coinsurance, and copays are applied.

• An Actuarial Value of 100% indicates no

participant cost; that is, no copays, deductibles,

• r other out-of-pocket cost.
• The measure shown here is an average across all

plans offered within each category, weighted by the number of participants.

AON Hewitt, January 2013

15

Competitive Cost Benchmarks- Actuarial Value

Actuarial Value

90_ 0% 88.4% 850%

• 81_

9%

81 .8% 80.0%

760% 750%

• 74 0%

700% - 650%

SD

Industry 10,000-24,999 Fortune 500 Labor Market AON Hewitt. January 2013 83.4% HHVI

16

Competitive Cost Benchmarks- Actuarial Value

Actuarial Value By Plan Type

a combined

100%

93.9%

90% 80% 70% 60% 50%

so

State 1 State 2 State 3 State 4 State 5

AON Hewitt, January 2013

State 6

17

FY12 and FY13 Budgets

18

Major Factors Impacting FY12 Budget

• Increase in High Cost Claimants from 271 to 308.
• $5.4 M
• Increase usage and cost of Specialty Drugs.
• $2.0 M
• Change in claims processing.
• $2.8 M (paid 53 weeks)

Total

• $8.5 M*

*

$10.2 M FY12 budget shortfall was offset by minus $1.7 M in additional miscellaneous revenue

19

FY12 Claims by Cost Segment

Average Claim Amount per Group Claimants Claim Count Check Amount Member

No Claims 5,377 $0 $0 Paid Claims <$2K 17,786 165,490 $7,923,683 $446 Paid Claims $2K-$20K 5,689 207,614 $34,019,749 $5,980 Paid Claims $20K

• $50K

505 34,196 $16,233,112 $32,145 Paid Claims $SOK Plus 308 34,359 $39,894,882 $129,529 20

FY 12 Most Costly Conditions Among High Cost Claimants

Condition Oncology Back Condit ions Blood Disorders Injuries & Poisoning Forms of Chronic Heart Disease

Kidney Disease

Newborns with Complications

Other Diseases* *Degenerative Joint Diseases, Respiratory Disease, etc.

Claimants (cost In millions)

$12.9 M

$4.6 M $3.4 M

$3.1 M $2.9 M $2.8 M $1 M $9.1 M

21

FY13 Budget

• Major plan changes were implemented to keep plan

claim cost the same as the previous year.

• Increase in deductible from $300 to $500
• Eliminated copayments for Office Visits.
• Increased copayments for Emergency Room,

Inpatient Hospital, all Global Maternity, and CT/PET scans.

• Intensive Case Management program

implemented.

• Management of ER use.
• FY13 plan changes would have resulted in a break even
• year. However, FY12 claims were $10.2 M higher than

projected creating a budget gap for FY13 before the year even started.

22

Major Factors Impacting FY13 Budget

• Increased claim projections from actuary.
• $9.7 M
• Increased need to carry a higher reserve for claims Incurred But

Not Reported (IBNR).

• $1.9 M
• Increased administration fees from implementation of two new

programs: Intensive Case Management and Emergency Room Management.

• $500,000
• Reduced interest revenue.
• $500,000

Total

• FY13 projected shortfall $12.6 M

23

FY13 One-Time Budget Request

• SB 90 Health Plan Appropriation Request

General Funds $ 7,916,366 Federal Funds $4,925,785 Other $ 8,472,259 Total $21,314,410 One-time employer rate increase Current FY13 employer rate Total $1,615 $6,335 $7,950

24

Employer Health Insurance Contributions

$8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000

so

Employer Health Insurance Contributions

$7,950

• South Dakota FY13

South Dakota FY14

• One TI me Rate Increase
• Employer Contribution

25

Health Plan Full Accrual Financial Statement

state E1111loyee Self Insured Health Plan Full Accrual Basis Financial S mants FY2012 FY 2012 FY 2013 FY 2013 Original Estimate Actual Original Estimate Revised Estimate Revenue Coolnbuoo,.. 10 Plan

~-erPald

$78040.861 S77,896 559 Sl!0,337.566 S80514054 Retiree CXlBRA ard Employee PaXI for Dependenls s 9.ro4,os1 S19,453041 S19,50406 S18 972,174 Federal Early Reurement Re,ns<rance Program $650,000 $0 $0

$0

Adrnristrauve Fee $145,168

$ 47 770

$145,168 S147.000 ltterest Reverue $600,000

$468 447

$600,000 $150,000 Refl.nd of Pnor Years Claims S2 :l00,000 $5,192171 $1,350000 $1500000 Total Reverue $101 ,240,090 $103,157 988 $101,936795 $101 283,228 E.Npenses $91,642,174 $103,238 687 S91,888080 $103520232 $560,000

ssn500

S560,000 $550,000 Adrnristrauon S7 733,751 $7,962083

ss,460 no

$9258 225 Total Expenses $99,925,925 s 11 ,ne.2so $101,898,850 $113 328 457 Clxrenl Year Over/(Underrecolery) $1 ,314165 (S8620262) $37,945

(S

12 045 229) $75,162 S75 162 S ,389,327

s 545100)

S1389327

!

S8 • u11

51427272

3291

cmwbve Olerl{Undem,c;overy) 11 the analysll of he revenues and expe,- &Ince the beglnrang of the proiµm

26

FY14 Health Insurance Increase

Two Components

• Health Plan

Base Rate Request $12.3 M

• Wellness Initiative

$8.1 M Total $20.4 M

27

FY14 Base Rate Request

FINANCIAL PLANNING DOCUMENT Full Accrual Basis Financial statements Revenue CO nbutions to Plan Employer Paid Retiree COBRA, and Employee Paid for Dependents Administrative Fee Interest Revenue Refund of Pnor Years Claims Total RE!\lenue Expenses Claims Employer Life Claims Administration Total Expenses Current Year Over/(Underrecovery) Pnor Year Over/(Underrecovery) Cumulative Over/(Underrecovery)" FY 2013 Estimated S101 105,304

$18,972 174 S147,000 S150,000 $1 .500.000 S121 .874,478 S103,520,232 S550.000

$9 258,225

S113.328,457 $8,546,021

($8 5

100) S921

FY 2014 Planning

S1009M $111 4M $6M S9M S121M

($20.1M) FY2014 Need with No Plan Changes

so

• Cumulative Over/(Underrecovery) 1s the analysis of the revenues and expenses since the beginning or the program

28

FY14 Base Rate Request: Plan Changes

• Increased Member Cost Sharing
• Out of Pocket increases
• Increased premiums for

Dependents, Retirees, and COBRA Member Total

• Implement additional contract

and administrative savings. $4.5 M $1.1 M $5.6 M $2.6 M Total Projected Savings from Plan Changes $8.2 M

29

FY14 Base Rate Request

• Projected Shortfall
• Total Member Cost Sharing
• Increased Member Cost Sharing
• Premium Increase
• Administrative Savings
• FY14 Budget Request
• Health Insurance
• Correctional Health

& lnteragency Billings $4.5 M $1 .1 M

$20.1 M

• $5.6 M
• $2.6 M

$12.3M

$11 ,908,500 $357,550

30

FY14 Base Rate Request

• Member Increases
• Contract Savings
• FY14 Budget Request
• General Funds
• Federal Funds
• Other Funds
• Total

$5.6 M $2.6 M $4.5 M

$2.9 M $4.9 M

$12.3 M

31

FY14 Base Rate Request

FY13 Base Rate FY14 Base Rate Increase FY14 New Base Rate $6,335 $934 $7,269

32

FY14 Base Rate Request

2012 Employer Health Insurance Premium Contributions

$14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0

South Dakota FY13 South Dakota FY14 Montana North Dakota FY14 Rate Increase

• FY 13 Rate Increase
• Employer Contribution

Nebraska Minnesota Iowa Wyoming

33

FY14 Health Insurance Increase

Two Components

• Health Plan

Base Rate Request $12.3 M

• Wellness Initiative

$8.1 M Total $20.4 M

34

FY14 Wellness Initiative

"We've learned that 75% of health care costs result from lifestyle choices made by specific subgroups of workers." Towers Watson

FY14 Wellness Initiative

• Over the past several years, the Health Plan has

attempted to control the "supply" side of the economic formula:

• Direct contracting with facilities
• Engaging the lowest cost provider network available
• Reacting to market changes in pharmaceuticals

using various PBMs

• Managing High Cost Claimants and chronic

conditions

36

FY14 Wellness Initiative

• In the last 2 years, the Health Plan has begun to address

the "demand" side of the economic formula:

• Requiring members to participate in Health

Screenings and Health Assessment to be eligible for lowest deductible plan

• Enhancing management of chronic medical

conditions such as Diabetes, elevated blood pressure and cholesterols, Asthma, Back Pain, etc.

• Using risk focused predictive modeling software to

target management programs

37

FY14 Wellness Initiative

• Incentive program to engage and reward members to

modify unhealthy behaviors:

• Yearlong program with quarterly requirements
• Mandatory initiatives as well as voluntary options
• All employees are eligible to participate on July 1
• If an employee participates throughout the

entire year, $550 reward into health savings account or health reimbursement account.

• If an employee misses a quarterly initiative, not

eligible for $550 reward until the following year.

38

FY14 Wellness Initiative

• Lifestyle Changes Mandatory Options:
• Health Assessment
• Health Screening
• Lifestyle Changes Voluntary Options:
• Weight Management Program
• Smoking Cessation Program
• Chronic Condition Management Program
• Health and Lifestyle Coaching
• Nutritional Eating Webinars
• Maintaining Online Personal Health Record
• Physical Activity Challenge (e.g. Walk This Way)

39

FY14 Wellness Initiative

$550 per Employee Appropriation Request General Funds Federal Funds Other Total

$8.1 M

$ 3.0 M

$1.7 M

$ 3.4 M $ 8.1 M

40

FY14 Base Rate Request

FY14 New Base Rate FY14 Wellness Initiative FY14 New Total Rate $7,269 $608 $7,877

41

FY14 Health Insurance Increase

$14,000 $12,000 Sl0,000 $8,000 $6,000 $4,000 $2,000

2012 Employer Health Insurance Premium Contributions

Dakota FY13 South Dakota FY14 Montana North Nebraska Minnesota Iowa Wyoming Dakota

2012 National Compensation Association of State Governments Benefits Survey

FY14 Wellness Increase FY14 Rate Increase

• FY 13 Rate Increase
• Employer Contribution

42

FY14 Recommended Budget Increase

• General Funds Base Rate Increase
• General Funds for Wellness Initiative

Total General Fund Request Appropriation Request General Funds Federal Funds Other Total

$4.5 M $3.0 M

$ 7.5 M

$7,536,759 $4,454,093 $8,429,418 $20,420,270

43

Employee and Employer Cost Sharing: FY09 - FY14

Employee Cost Sharing Increase vs. General Funds Increase

$3,036,759 FY14

• FY13
• FY12

I s220,ooo

FY11

1,880,186 52,317,100 FYlO -

• FY09 ~

47864

• --,.

$2,107,640 $4,500,000 $5,588,005 $7,916,366

• Proposed Wellness Increase 9%

Proposed General Funds Base Increase 37%

• General Funds Contribution 13%
• Employee Cost Sharing 41%

Employee Cost Sharing General Funds Increase Wellness Increase $13,531,745 $16,593,264 $3, 036, 759

$0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 S10,000,000

44

South Dakota's State Workforce

State Employee Concentrations (All State Government, including Board of Regents)

HAADINC:

8

fAU RMR

131

l'{RIQNS

16

12,609 total employees

BCNNUT

21

COl!SON11

10,238, or 81.2% located in 10 counties 15% in Black Hills 21% in Pierre 40% in 1-29 Corridor

46

Our Workforce at a Glance

• Workforce Demographics*
• Average years of service -12.0 years
• Average age of state employees - 44.4 years

a

Matures (before 1946) - 1.2% or 99 emps

a

Baby Boomers (1946 -1964)- 43.9% or 3,590 emps

a

Generation X (1965 -1980)- 34.7% or 2,837 emps

a

Generation Y (1981 - 2000) - 20.2% or 1,653 emps

• Does not include Board of Regents

47

Years of Service of the Workforce

600% 53.2% 400% 300% 24 0% 20.0% 162% 10.0% 6.5% 00% 0-10 years

11-20 years 21-30 years More than 30 years

48

Age Distribution

30.0% 25 0% 20.0% 15.0% 100%

• 5.0%

0.0%

< 30 years

30-39 years 40-49 years 27.9% 50-59 years

39.6°/o of the

workforce is age 50 or older

60 years+

49

Retirement Eligibility

• 10.6% of the workforce became eligible to retire as of

June 30, 2012

• 25.9% will be eligible within 5 years
• 36.3% will be eligible within 10 years
• Potential serious loss of talent and efficiencies

South Dakota Retirement System

50

Statewide Turnover

150% ~ --------------------------- 14.0% 13 0% 12.0%

11 0%

10.5%

10.0% g 0% 8 0% FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12

51

FY12 Turnover by Role

• Labor & Support

HM Workers Correctional Officers Admin Support Custodial Workers Professional Accountants Engineers Nurses

3.0%

40.4% or456

Program Admin

• Management

52

BHR FY14 Budget Request

• 1 FTE for an additional Human Resource

Manager

• Focus on Talent Management using

Competency-based Human Resources

• Targeted Recruitment and Selection
• Performance Management
• Career/Leadership Development
• Succession Planning

53

State Employee Compensation

Salary Schedules

• Civil Service Schedules
• N Series - includes MOST civil service positions
• T Series - difficult to fill positions in a schedule adjusted to

address market issues

• Exempt from Civil Service Schedules
• E Series - includes MOST exempt positions
• Q Series - difficult to fill exempt positions
• L - Law Enforcement positions (Highway Patrol, DCI Agents)
• M - high level medical positions
• Career Band Schedules

Accountants/Auditors Environmental Scientists Software Engineers Engineers Nurses Technology Engineers 55

Salary Schedule - Example (N)

GRADE

09 10

11

14 15 16

MINIMUM

$9.57 $10.27 $11 .14 $14.33 $15.82 $17.53

5%0F

MINIMUM

$10.05 $10.78 $11 .70 $15.05 $16.61 $18.41

25%0F

RANGE

$10.77 $11 .56 $12.53 $16.12 $17.80 $19.72

JOB WORTH

$11 .96 $12.84 $13.92 $17.91 $19.78 $21.91

MAXIMUM

$14.35 $15.41 $16.70 $21.49 $23.74 $26.29

http://bhr.sd.gov/classification/compensation/salaryschedules.aspx

56

Compensation Systems

• Performance and Compensation Equity

(PACE)

• All state employees not included in the Career Bands
• Career Bands
• Accountants/Auditors
• Nurses
• Environmental Scientists
• Engineers
• Software Engineers
• Technology Engineers

57

PACE

Performance and Compensation Equity

• Across-the-Board Adjustment - Annual

salary increase to all employees used to address the competitiveness of the system

• Movement to Job Worth Adjustment - Up

to 3.5% salary increase for employees to

bring them to job worth within 7 years

• Longevity Pay - Lump sum payment to

employees with more than 7 years experience.

58

Illustration of PACE - Moving

Through the Ran e

M ax1mum o

fR

anae

20% above Job Worth

~

1

• 1•

1

• 1
• 1
• 1
• II

1

• 1
• 1
• 1
• II

Job Worth

II What State can afford to pay

Is

Minimum of Ranae

20% below Job Worth

Reserved for:

• performance
• added duties
• special market

rates 7 years 6 years 5 years 4 years 3 years

2 years 1 year 6 months

24.SO/o in FYOS Today, 18.2%

• f Workforce

{ 31.50/o in FYOS Today, 23.5%

• f Workforce

43.9°/o in FY08 Today, 58.2%

• f Workforce

Longevity Pay

• Annual Lump Sum Payment to Employees with

More than 7 Years Experience

• $100 for 7-9 years
• $10/year of service for 10-14 years
• $15/year of service for 15-19 years (increases in $5

increments for each 5 year bracket)

• Example: Employee with 15 years of service

receives $225 (15 years X $15)

• Provides expression of appreciation for years of

service

60

Career Banding - A Look Back

• Difficulties acquiring talent for high demand

jobs

• Accounting
• Nursing
• Engineering
• Environmental Science
• Information Technology
• Nationwide demand in both public and private

sector

• Constant increase in demand

61

Criteria for Inclusion in Pilot

• Market competitiveness
• Ability to recruit new employees
• Retention and turnover
• Potential retirement impact

62

FY07 Applicant Statistics for Pilot Occupations

Turnover/ Average Applicants Applicants Applicants

not Declined

*Projected

Applicants Qualified or Interview/ to Retirement per list Considered Job Offer consider Nursing/ 19.6% I 24.4% 12.l 9.0% . 5% 6 . Health Engineering

8.8% / 26.0% 8.2 41.2% 9.0% 4.4

Accountants I .7% / 0.4% 13. 61.0% 5.5% 4.9 Auditors IT Specialists 10.6% I 34.5% 10.8 49.0% 10.2% 4.9

* Projected retirement percentages over the next 10 years

63

FY07 New Hire Statistics for Pilot Occupations

Turnover I *Projected Average compa Average compa Job Family ratio for new ratio for current Retirement hires emps Nursing/Health 19.6% I 24.4° /o 98.1 % 102.2% Engineering

8.8% / 26.0% 92.9% 101.2%

Accountants I

.7% I 0.4%

• 3. %
• 96. %

Auditors IT Specialists

10.6% / 34.5% 103.0% 99.8% * Projected retirement percentages over the next 10 years

64

Career Banding and Compensation

• Compensation Structure
• A new compensation structure provides needed flexibilities

to respond quickly to changing market conditions and

rewards for excellence.

• Classification Structure
• A new classification structure clearly defines career

advancement opportunities.

• Performance Management System
• A new performance management system engages

employees and managers, promotes high performance and career development, and ensures accountability.

65

Progress with Career Banding Project

• Classification
• All Classification completed
• Performance Management
• Performance Management system implemented
• Training for supervisors and employees
• Compensation
• 45% of employees in career families are at least 10% behind

the market

• 86.5% behind level target
• 10.2% at level target
• 3.3% above level target
• Reward for Excellence

66

Salary Policy Recommendations

FY14 Proposed Salary Policy

• PACE
• 3.0°/o across the board for all employees in the

PACE system

• Up to 3.5°/o movement toward Job Worth
• Career Bands
• Market Adjustment for all employees in career

bands

a

Accountants and Nurses - 4.0%

a

Engineers, Environmental Scientists, Software Engineers and Technology Engineers - 3.5%

• Up to 4.5°/o Reward for Excellence

Questions?