Gallagher Benefit Services, Inc. A Subsidiary of Arthur J. Gallagher - - PowerPoint PPT Presentation

Gallagher Benefit Services, Inc.

A Subsidiary of Arthur J. Gallagher & Co.

West Valley - Mission Community College District

July 1, 2009 Renewal

Benefits Committee Presentation - April 14, 2009

1

Renewal - Overview

• On July 1, 2009, West Valley Mission Community College District will

have the programs listed below renewing:

• Blue Shield HMO
• Blue Shield PPO
• Kaiser Permanente HMO
• Wallgreens Health Initiative Prescription Drug Benefit
• Gallagher Benefit Services has analyzed and is in the process of

negotiating the Blue Shield PPO medical renewal. Also, we have appealed to Kaiser for a concession to the proposed renewal. We anticipate an answer from both carriers the week of April 20.

2

Renewal - Overview

Overview:

• Financial exhibits projected based on March 1, 2009 enrollment
• Current (2008/2009 plan year) annual premium $16.3 M
• Total increase proposed by all carriers was 6.5% -- an increase of $1.1 M

to $17.3 M in annual premium

3

Renewal Summary - Status Quo

Covered CURRENT RENEWAL % ∆ Members PREMIUM PREMIUM

Delta Dental PPO 1,188 $1,299,358 $1,327,230 2.1% Medical and Pharmacy 1,151 $16,272,157 $17,324,216 6.5%

Blue Shield HMO 59 $860,063 $965,421 12.3%

Actives 56 $811,023 $910,374 Retirees 3 $49,040 $55,047

Kaiser Permanente 354 $4,728,916 $5,118,118 8.2%

Actives 232 $3,099,177 $3,354,247 Retirees 122 $1,629,739 $1,763,871

Blue Shield PPO (Includes Pharmacy) 738 $10,683,177 $11,240,678 5.2%

Actives 393 $5,778,892 $6,121,535 Retirees 345 $4,904,285 $5,119,142

4

Renewal - PPO

• Blue Shield PPO medical insured premium rate increase 7.5%

(+$550,000 annually)

• The primary contributing factor to this increase is experience and

utilization specific to WVMCCD

• Walgreens self-funded pharmacy benefit no increase to premium rate
• The primary contributing factor to a no change to the current premium

rates is experience and utilization specific to WVMCCD

5

Renewal - Kaiser HMO

• Kaiser medical insured premium rate increase 8.2% (+$389,000 annually)
• The contributing factor to this increase is a combination of

experience/utilization and Risk Score specific to WVMCCD

• Risk Score is a predictive modeling score that uses a combination of

demographics and pharmacy utilization specific to WVMCCD to predict future medical costs.

6

Summary

Costs:

• Expense for employee medical benefits will increase by 6.5% for

2009/2010 to a total of $17.3 M in annual premium Summary of Cost Drivers:

• Blue Shield PPO demographics, utilization, and claims experience
• Employee average age of 61 (actives and all retirees combined)
• Spouse average age of 60 (actives and all retirees combined)
• Top 5 paid claim categories (total dollar amount) - impatient facility, inpatient

hospital, outpatient facility, professional office visits, and emergency room

• Claim payments exclude Medicare claims where Medicare is primary payer
• 52 individual claims between $10,000 - $199,999
• 1 individual claims in excess of $100,000
• Kaiser demographics and utilization (actives and pre 65 retirees only)
• Plan average age of 39 employee and spouse combined
• Top 3 paid claim categories - inpatient, outpatient, and pharmacy
• Claim payments exclude Medicare claims where Medicare is primary payer

7

Summary - continued

Summary of Cost Drivers continued:

• Percentage of Retirees and Actives
• Blue Shield (HMO and PPO) - 56% Actives / 44% Retirees
• Kaiser - 66% Actives / 34% Retirees
• All Medical - 59% Actives / 41% Retirees
• Plan Design - Medical
• Plan Design and administration - Pharmacy

8

Cost Management Considerations

• Change pharmacy benefit manager (PBM)
• Changing PBM from Walgreens to Envision Rx nets an estimated annual

savings of $260K annually

• Medical plan design alternatives
• Plan design changes to the HMO, Kaiser, and PPO plans can net a range of

savings from 2.5% to 8% on renewal premium rates

• Pharmacy plan design alternatives
• Generics
• Formulary
• Lifestyle medication
• Wellness initiative
• 2% - 3% reduction in annual trend over a 3 year period