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
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. 1
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 2
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 $49,040 $55,047 3 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 3
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 4
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. 5
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 o 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 o Claim payments exclude Medicare claims where Medicare is primary payer 6
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 7
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 8
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