The University of Alaska Holistic Healthcare Cost Containment - - PowerPoint PPT Presentation

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The University of Alaska Holistic Healthcare Cost Containment Strategy

Kristen A. Russell, FSA, MAAA President & Founder Fall River Consulting Group LLC

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Agenda

Section Title

1 Fall River Background 2 Review of Fall River Trend BusterTM Strategy 3 Detailed Review of Each Strategy Element a) Mine Your Data b) Engage Through Plan Design c) Member Health Promotion d) Create Savvy Healthcare Consumers e) Communicate Constantly f) Other Savings Opportunities 4 Creating a Long Term Plan

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Section 1: Fall River Background

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Fall River Background

We are a boutique actuarial consulting firm in Denver, CO 5 W-2 Employees and 4 Independent Contractors Actuarial consulting for insurance companies, other benefits consultants, and large employers Benefits consulting and insurance brokerage for smaller employers Employer clients include hospitals, schools, non-profits, technology, and professional services firms

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Kristen Russell Biography

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• Ms. Russell is a member of the American Academy of Actuaries and a

Fellow of the Society of Actuaries Bachelors degree in Actuarial Science from Drake University Over 16 years of experience in the employee benefits and health actuarial fields Spent over a decade leading actuarial and underwriting areas within insurance companies, pricing plans and handing out over ten thousand renewal increases Consulted to insurance companies and large employers at a national actuarial & clinical consulting firm Launched Fall River Consulting Group LLC four years ago to help employers get more proactive about containing healthcare costs

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Stacy Davenport Biography

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• Ms. Davenport has been in the HR and Benefits industry for

approximately 20 years She has a Bachelors degree in Human Resource Management from Regis University Spent over a decade in human resources leadership roles and earned her PHR certification Worked for five years as an employee benefits consultant and producer for a regional brokerage firm, helping small and mid-sized firms implement cost saving benefit strategies In 2008 became an independent benefits consultant

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Section 2: The Fall River Trend BusterTM Strategy

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Six Elements

Mine Your Data Engage Through Plan Design Member Health Promotion Create Savvy Healthcare Consumers Communicate Constantly Craft a Long-Term Strategy

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Mine Your Data

When you don’t know what’s driving up your healthcare costs, it’s hard to reverse it. The claims experience data provided by a TPA and PBM is a treasure map showing how to better manage your claims, but it doesn’t do any good sitting on a shelf… Fall River takes charge of the claim management process for large employers, using our actuarial expertise to identify problematic cost drivers and benefit designs that are experiencing excess utilization, and reporting back regularly.

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Engage through Plan Design

Employees are typically no more concerned about spending your healthcare dollars wisely than a teen-aged girl shopping with Dad’s money. We help firms evaluate how their plan designs can be enhanced to engage employees in the actual cost of health care so they are incented to spend your money wisely, and also to steer them toward the desired health behavior.

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Member Health Promotion

Two-thirds of our healthcare dollars spent on conditions preventable or treatable by lifestyle (Centers for Disease Control and Prevention). Wellness programs can achieve 300-600% ROI over 3 years, but most are haphazardly designed or only attract participation

• f already healthy members.

We have experience designing outcome based incentive structures that incent the least healthy members to participate the most.

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Create Savvy Healthcare Consumers

Consumers can estimate the price of a Honda Accord within 3%, but are 56% off on a four day hospital stay (Harris Interactive survey). Employees cannot make wise decisions with your healthcare dollars unless they have the knowledge and tools to be informed consumers. Fall River helps employers create an education strategy to teach members how to:

Seek care in the most appropriate setting Become an active partner in their treatment plans Find out which of their drugs have generic alternatives and how to find the lowest cost source for those prescriptions

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Communicate Constantly

Studies show that adults need to see or hear new info seven times to absorb it. Employees need to hear things in different ways too: Face-to-face education (WIN conducting today with Wellness Breaks, but consumer education could be added) Online information and email reminders and encouragement Print information sent home to reach spouses – e.g. a wellness print newsletter in addition to an online newsletter We also keep you updated on the latest benefit strategies, wellness ideas, and compliance updates via our Fall River Journal employer newsletter.

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Craft a Long Term Strategy

Some employers make changes designed to save costs on a

• ne time basis (e.g. raising copays) that don’t necessarily

change the underlying behavio.r Others roll out “flavor of the month” initiatives but don’t stick with them. We recommend instead laying out benchmarks of where the healthcare plan needs to go. Then, craft a plan to get there, including Year 1, Year 2, and Year 3 activities and targets.

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A recent Towers Perrin/Watson Wyatt study revealed:

The average large employer experienced a 6% healthcare cost trend; Those who took focused, proactive steps to manage their healthcare costs averaged only 0.5% increases; and Those who did little to nothing to tackle their costs instead paid 10.5% increases on average.

Which group would you rather be in?

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What does 1% or 2% mean to the University of Alaska?

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For illustrative purposes, assuming approximately $61.5M in annual medical and prescription costs, the University could realize the above savings by reducing trend.

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Industry Trend Studies

Segal’s 2010 Trend Survey indicates that PPO plans are expecting a 10.8% trend. At this rate, your healthcare costs will double in 6.75 years. AON’s latest Trend Survey is projecting 11.0% for PPOs. Both project Rx trends to be over 10% as well. Buck Consultants is projecting trend to be 11.0% also. Mercer’s 2009 employer survey indicates a lower trend

• f just under 9%. Even at that rate, healthcare costs will

double in less than 8.5 years.

The most expensive thing to do is NOTHING.

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Section 3: The Fall River Trend BusterTM Strategy for the University of Alaska

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3a): Mine Your Data

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Top Concerns Identified in Data

Medical Trend Highly Utilized Benefits Low Member Cost Share Anti-selection Large Claimants Pharmacy Utilization Neglected Data

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Medical Trend

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At the end of PY 2007/2008 Premera reported that medical claims increased by 4.3% PMPM for the plan year. At the conclusion of PY 2008/2009, Premera reported an increase in medical claims of 18% PMPM, significantly above the average increase as compared to the norm.

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Trend Analysis Results

Medical Trends Composite

Period Ending 24/24 18/18 12/12 9/9 6/6 3/3

11.4%

6/30/09 N/A

11.7% 18.0% 20.1% 21.5% 21.5% 17.8%

3/31/09 N/A 9.8% 9.9%

16.7% 19.3% 21.4% 13.9%

12/31/08 N/A

15.0%

6.5% 5.9%

14.0% 16.8%

10.3%

9/30/08 N/A N/A 5.0% 3.3% 1.0% 11.2%

3.1%

6/30/08 N/A N/A

15.5%

3.1%

• 0.1%
• 7.2%

6.0%

3/31/08 N/A N/A N/A

27.3%

9.8% 8.5%

18.2%

12/31/07 N/A N/A N/A N/A

41.7%

11.3%

N/A

9/30/07 N/A N/A N/A N/A N/A

96.6%

N/A

Trends in bold and underlined are above the composite trend of 11.4%.

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Regression Analysis Results

Number of Months Trend Value from Regression (ie the slope of cost increases) 12 Months 46.78% 15 Months 31.03% 18 Month 21.95% 21 Months 22.81% 24 Months 21.41% 27 Months 12.79% 30 Month 12.09% 33 Months 14.28% 35 Months 18.28%

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Highly Utilized Benefits

Data revealed utilization patterns above the norm in many key areas Quick review of various reporting to identify trends Focus on trend and patterns

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Premera’s Norm Compared to UA

25 University Of Alaska Norm City State % of Total City State % of Total FAIRBANKS AK 45% ANCHORAGE AK 29% ANCHORAGE AK 25% FAIRBANKS AK 14% JUNEAU AK 5% JUNEAU AK 7% NORTH POLE AK 4% WASILLA AK 4% EAGLE RIVER AK 3% EAGLE RIVER AK 3% WASILLA AK 2% SITKA AK 3% PALMER AK 2% PALMER AK 2% BETHEL AK 1% NORTH POLE AK 2% SOLDOTNA AK 1% DILLINGHAM AK 2% SITKA AK 1% VALDEZ AK 2% ESTER AK 1% CHUGIAK AK 1% KETCHIKAN AK 1% KOTZEBUE AK 1% AUKE BAY AK 1% KETCHIKAN AK 1% KODIAK AK 1% BARROW AK 1% VALDEZ AK 1% WRANGELL AK 1% CHUGIAK AK 1% SOLDOTNA AK 1% KENAI AK 1% KENAI AK 1% DILLINGHAM AK 1% CORDOVA AK 1% HOMER AK 0% METLAKATLA AK 1% NOME AK 0% SAN ANTONIO TX 1% All Other AK 4% All Other 24%

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Service Categories >1% of Total Paid Claims

26 Service Category Paid Claims % of Total Paid Claims % Change Current Current Prior Office Visits

$2,940,000

12% 14% 2% Outpatient Surgery

$2,743,000

12% 12% 10%

Physical/Occupational Therapy $2,090,000

9% 9%

12%

Rad Office

$2,071,000

9% 10%

• 3%

Path Office

$1,481,000

6% 7%

• 3%

Office Surgery

$1,348,000

6% 5% 21% IP Surgery - Primary Surgeon

$1,248,000

5% 5% 16%

Miscellaneous Medical - Supplies $1,064,000

4% 2%

111%

Miscellaneous Medical - Services

$956,000

4% 3% 33% OP Psychiatric

$807,000

3% 4% 9% Physical Exams

$678,000

3% 3% 19% Therapeutic Injections - Supplies

$659,000

3% 3% 25% Cardiovascular

$648,000

3% 2% 49%

Chiropractor $636,000

3% 3%

19%

Rad OP Professional

$518,000

2% 2% 21% Outpatient Anesthesia

$499,000

2% 2% 18% Consults

$398,000

2% 2% 16% Emergency Room Visits

$396,000

2% 2%

• 1%

Massage Therapy $317,000

1% 1%

32%

IP Surgery - Anesthesia

$295,000

1% 1% 4% Hospital Visits (excl MH and CD)

$274,000

1% 1% 13% Incurred Period: 7/1/2008 - 6/30/2009 Paid Through: 9/30/2009

Table 1 - Service Category Comparison between PY 2008/2009 and PY 2007/2008 Table 1 - Service Category Comparison between PY 2008/2009 and PY 2007/2008 Table 1 - Service Category Comparison between PY 2008/2009 and PY 2007/2008

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Top Two - Office Visits and Outpatient Surgery Significant increases in Miscellaneous Medical- Supplies and Services, as well as Cardiovascular, Chiropractic and Massage Therapy. Emergency Room utilization decreased 13% increase in professional services category

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Chiropractic Increased 19%

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Premera’s norm - 6.8 visits UA’s average – 9 visits 62 members received 30 or more visits during the reporting period 86% of visits appear to be unrelated to surgical or inpatient follow-up

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Chiropractic Visits Detail

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Range Member Count Visit Count Average per Member 50+ 15 1,021 68 46-49 2 95 48 41-45 13 551 42 31-40 32 1,132 35 25-30 40 1,073 27 21-24 57 1,281 22 11-20 259 3,696 14 2-10 833 4,136 5 1 207 207 1 TOTAL 1,458 13,192 9

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Physical and Massage Therapy

Premera’s norm - 8.7 visits UA’s average – 11.6 visits 174 members received 30 or more visits during the reporting period 77% of visits appear to be unrelated to surgical or inpatient follow-up

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Physical and Massage Therapy Visits Detail

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Range Member Count Visit Count Average per Member 50+ 59 4,240 72 46-49 20 954 48 41-45 20 862 43 31-40 75 2,642 35 25-30 67 1,818 27 21-24 70 1,568 22 11-20 346 5,049 15 2-10 946 4,717 5 1 299 299 1 TOTAL 1,902 22,149 12

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Miscellaneous Medical Supplies

32 PY 2008/2009 PY 2007/2008 Description Svcs Paid Description Svcs Paid RITUXIMAB 100 MG 21 $159,004 IRINOTECAN, 20 MG 22 $148,620 TRASTUZUMAB 10 MG 62 $151,012 RITUXIMAB 100 MG 16 $114,250 CYCLOPHOSPHAMIDE, 100 MG 19 $94,965 TRASTUZUMAB 10 MG 33 $85,586 DOCETAXEL, 20 MG 20 $89,503 DOCETAXEL, 20 MG 23 $44,849 INJECTION, OXALIPLATIN, 0.5 MG 20 $88,534 INJECTION, PEMETREXED, 10 MG 2 $23,250 DOXORUBICIN HCL, 10 MG 15 $88,514 LEUPROLIDE ACETATE (FOR DEPOT SUSPENSION), 7.5 MG 9 $21,194 INJECTION, BEVACIZUMAB, 10 MG 23 $74,496 INJECTION, OXALIPLATIN, 0.5 MG 3 $14,316 INJECTION, PEMETREXED, 10 MG 6 $60,000 CARBOPLATIN, 50 MG 6 $12,207 IRINOTECAN, 20 MG 9 $50,637 LEUPROLIDE ACETATE IMPLANT 1 $6,821 GEMCITABINE HC1, 200 MG 14 $49,775 HYALURONAN OR DERIVATIVE, SYNVISC, FOR INTRA-ARTICULAR INJECTION, PER DOSE. 14 $6,036 TOTAL 209 $906,440 129 $477,129

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Medical Supplies

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Premera manages drugs covered under the medical benefit (J-Code billing) through medical necessity review. Biotechnology Initiative has received national recognition for its comprehensive approach and was described in Health Affairs, Sept/Oct 2006. Premera is not able to integrate management of medical and pharmacy drugs as effectively since PBM is no longer Medco. Installation of the iCES Claims Editor in 2007 adds ability to set dose limits to detect office billing errors as well as dosing in excess of standard practice.

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Inpatient, Outpatient, and Professional Services

34 Utilization Category PY 2007/2008 PY 2008/2009 2008/2009 Norm Inpatient Paid Claims Per Member Per Month $62

$81

$75 Admissions Per 1000 Members 45.0 45.9 56.8 Days Per 1000 Members 174.2 226.9 265.2 Average Length of Stay 3.9

4.9

4.7 Paid Claims Per Admission $16,541

$21,116

$15,867 Outpatient Paid Claims Per Member Per Month $71

$87

$80 Visits Per 1000 Members ² 779 1024 1093 Paid Claims Per Visit $1,101

$1,014

$882 Services Per 1000 Members 3597 4464 4720 Services Per Visit 4.6 4.4 4.3 Paid Claims Per Service $239

$233

$204 ER Utilization: Paid Claims PMPM $6 $6 $6 ER Utilization: Visits Per 1000 Members 109 105 159 ER Utilization: Paid Claims Per Visit $655

$668

$463 Professional Provider Paid Claims Per Member Per Month $181

$205

$157 Services Per 1000 Members 17466

17,159 14,826

Paid Claims Per Service $124

$143

$127 Medical Total PMPM $329

$388

$334

Incurred Period: 7/1/2008 - 6/30/2009 Paid Through: 9/30/2009

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Upward Trend in Most Categories

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Emergency Room Visits

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Emergency Room Dx Description Visits Paid OPEN WOUND OF FINGERS, WITHOUT MENTION OF COMPLICATION 29 $15,808.61 ACUTE UPPER RESPIRATORY INFECTIONS OF UNSPECIFIED SITE 26 $12,469.35 OTHER ACUTE PAIN 20 $21,266.84 ACUTE PHARYNGITIS 20 $7,091.90 UNSPECIFIED OTITIS MEDIA 20 $5,342.46 ABDOMINAL PAIN, UNSPECIFIED SITE 19 $19,951.96 HEADACHE 12 $9,342.86 FEVER, UNSPECIFIED CHILLS WITH FEVER 11 $11,438.42 VOMITING ALONE 11 $10,680.62 ASTHMA, UNSPECIFIED WITH ACUTE EXACERBATION 11 $8,197.00

• Top 10 Reported Symptoms
• PMPM Significantly Above Norm

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Provider Visits Paid % of Total FAIRBANKS MEMORIAL HOSPITAL 414 $360,419 53% PROVIDENCE ALASKA MEDICAL CENTER 180 $90,390 13% MAT SU REGIONAL MEDICAL CENTER 32 $32,650 5% CENTRAL PENINSULA GENERAL HOSPITAL 29 $22,670 3% BARTLETT REGIONAL HOSPITAL 58 $21,112 3% ALASKA REGIONAL HOSPITAL 30 $18,509 3% PROVIDENCE VALDEZ MEDICAL CENTER 14 $18,150 3% ALASKA NATIVE MEDICAL CENTER 26 $14,464 2% YUKON KUSKOKWIM REGIONAL HOSPITAL 19 $7,664 1% BRISTOL BAY AREA HEALTH CORPORATION 26 $7,343 1% SOUTH PENINSULA HOSPITAL 8 $7,154 1% PROVIDENCE KODIAK ISLAND MEDICAL CENTER 9 $5,336 1% SITKA COMMUNITY HOSPITAL 13 $4,700 1% KETCHIKAN GENERAL HOSPITAL 10 $3,573 1% ALASKA VA HEALTHCARE SYSTEM AND REGIONAL OFFICE 5 $3,566 1% PROVIDENCE SEWARD MEDICAL AND CARE CENTE 2 $3,435 1% VALLEY HOSPITAL MEDICAL C 2 $2,984 0% CHILDRENS HOSPITAL AND REGIONAL MED CENTER 3 $2,815 0% DAUGHTERS OF CHARITY HEALTH 1 $2,700 0% BASSETT ARMY COMMUNITY HOSPITAL 19 $2,698 0% All Others 119 $48,717 7% GRAND TOTAL 1,019 $681,046 100%

Top 20 Emergency Room Providers

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Major Diagnostic Categories

Major Diagnosis Category Inpatient Utilization All Claims Admits per 1000 Members Days per 1000 Members Average Length of Stay Paid PMPM Total Paid Claims % of Overall Total

Musculoskeletal System 2.89 11.99 4.14 $63.99 $7,426,798.89 16.49% Neoplasms 4.14 17.78 4.30 $43.54 $5,053,877.47 11.22% Health Status & Services 3.93 37.63 9.58 $39.69 $4,606,458.19 10.23% Circulatory System 4.55 18.82 4.14 $34.74 $4,032,038.77 8.95% Ill-Defined Conditions 1.14 2.48 2.18 $34.56 $4,011,414.20 8.91% Incurred Period: 7/1/2008 - 6/30/2009 Paid Through: 9/30/2009

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“Health Status & Services” includes maternity, cancer screening, and general exams. “Ill-Defined Conditions” includes fever, convulsions, chest pain, abdominal pain.

Research has shown that the Major Diagnostic Categories that are most closely related to lifestyle behaviors are:

• Neoplasm (Cancer)
• Circulatory
• Respiratory
• Digestive
• Genito-urinary
• Low birth rate, premature births
• Musculoskeletal
• Endocrine/Metabolic

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Priority Health Recommendations

The July 2009 Health Risk Assessment Aggregate Report Identified the following priorities based on Health Risk Assessment Results (ie no biometric or claims data):

Fitness Promotion Weight Management Good Nutrition Osteoporosis Sleep Blood Pressure Reduction

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Correlates with data shown in Major Diagnostic Categories

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Low Member Cost-Share on Medical Benefit

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Type of Responsibility Member Responsibility % of Total Allowed Deductibles $1,590,760 3% Coinsurance $2,951,055 5% Amounts Over Benefit Maximum/Limitations $0 0% Total $4,541,829 8%

Premera’s Norm is 14%. National Average is 15 to 20%

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Premera’s Top Two Plans

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1st Most Popular 2nd Most Popular: Deductible: $1,000 Deductible: $200 Office Visit Copay: $25 Office Visit Copay: Ded & Coinsurance Coinsurance: 20%/50% Coinsurance: 20%/40% OOPM: $5,000 OOPM: $3,000

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PMPM average for the Deluxe plan is almost double that of the Standard plan and five times the Economy plan 48% of the claims on the Deluxe plan and more than 30% of the claims on the Standard plan were in excess

• f $50,000 pointing to a catastrophic illness burden

concentrated in the Deluxe plan. The illness burden between plans outpaces the age/gender differences by plan

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Anti-selection

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Plan Enrollment by Type

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Anti-Selection Evidence

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2008/2009 Medical Claims PMPM

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Large Claims – Above Norm

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According the Center for Disease Control, chronic diseases which are largely preventable and attributed to lifestyle choices, accounted for 5 of the 6 leading causes of disease in the United States.

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Number of Claimants Increasing

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Claimants with Claims % of Total Claimants Above PY 07/08 PY 08/09 $10,000 10.01 % 11.03 % $25,000 3.52 % 3.77 % $50,000 1.18 % 1.49 % $75,000 0.58 % 0.89 % $100,000 0.34 % 0.60 % $150,000 0.15 % 0.30 % $250,000 0.03 % 0.12 %

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Pharmacy Utilization

2008 strategies yielded positive results:

PY2007/2008 7.8% versus -6.7% in PY 2008/2009. An increase in the generic dispense rate combined with a decrease in the brand dispensing rate contributed to the positive change. Note this is a one time change; true trends are still on the rise

There is still room for improvement:

The generic dispensing rate – 55% – is below industry average of 62% Mail order utilization – 41% of scripts are maintenance drugs that are filled at retail instead of mail order Medication adherence ratio is low

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Caremark estimates that for every 1% increase in Generic Dispensing Rates 1% in Gross Pharmacy Costs are saved

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Medication Adherence

Chronic Condition Number Optimal Number Sub-

• ptimal

Estimated Savings Per Conversion to Optimal New Users Who Dropped After First Fill Asthma/COPD 126 345 $276 137 Diabetes 182 125 $2,253 20 Heart Failure 6 $2,998 Hyperlipidemia 500 291 $314 53 Hypertension 687 366 $1,304 70

How much would be saved if even 30% were converted to

• ptimal?

$300,000

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Medication Adherence, Cont’d.

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Reported Reasons for Medical Non-Adherence

24% 20% 17% 14% 10% 15% Forgot Side Effects Cost Decided didn't need Difficulties in filling Rx Other

Note: Based on a national study by Caremark, not UA data.

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Year-end reporting for plan and disease management just produced by Premera Quarterly reporting and analysis is needed to quickly identify and target utilization categories that are increasing $60 Million Plan – Regular review and analysis is imperative to manage costs The analysis needed is beyond the time available to in house staff Fall River will provide a proposal for continual year round data analysis and recommendations

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Neglected data

Refer to Attachment 1 – List of Premera and Caremark Reports

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3b): Engage Members Through Plan Design

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Top 5 Recommendations

Rx Plan Changes Address Highly Utilized Benefits Consumer Driven Design Possibilities Value Based Benefit Designs Redesign Incentive Structures

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Rx Plan Changes

Implement plan design changes proposed by Caremark and presented to committee:

Performance Step Therapy Eliminate Dispense as Written “Escape Clause” Specialty Guideline Management Consider Copay Changes

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Rx plan changes

Implement Caremark’s Additional No- Charge Services

No Additional Cost to University Not Intrusive Standard Practice in Market

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Rx Plan Changes

Two other possibilities:

Changing member cost sharing from copays to coinsurance Raise out of pocket limit from $800 to $1000 or more Little price impacts on day one but may create better incentives over time

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Refer to Attachment 2 – Pharmacy Options

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Address Highly Utilized Benefits

Implement Visit Limits on Chiropractic, Massage, Physical Therapy and Hospitalization Current analysis suggests 26 visit limit on each of Chiro, massage therapy, and physical therapy Consider member being able to recertify for another 26 visits for physical therapy Additional data drill down needed, but preliminary savings estimates are around $400,000

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Consumer Directed Healthcare

Brief discussion of HDHPs and HSAs Review Health Reimbursement Arragement Concept

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Consumerism – Studies that Prove Concept

Consumerism is about increasing healthcare efficiency – not avoiding care CIGNA recently published the results of their study

• ver several years which analyzes the healthcare

behavior trends and cost trends of 440,000 members under CIGNA coverage in either a Consumer Directed Health Plan (CDHP), an HMO, or a PPO

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Consumerism Continued

Patients with chronic diseases, such as diabetes and hypertension, costs were reduced by 20% and 18%, respectively, while there was no change in their treatment trend, suggesting the cost-saving devices were better choices and not a choice to simply neglect healthcare needs In just the first year of the study, a 10% reduction of pharmacy expenses was observed, along with a 5% increase in preference for generic pharmaceuticals Preventative care was 8% higher for individuals covered in the CDHP

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Refer to Attachment 3 – Consumerism Article

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Health Reimbursement Arrangement Design Possibility

Add plan with high deductible and coinsurance Members have account to draw expenses from to cover part of deductible Additional HRA funds available with incentives for completing defined wellness initiatives

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Value Based Benefit Designs (VBBD)

According to the Center for Health Value Innovation, as published in their book “Leveraging Health,” there are three major levers employers can use:

Condition Management Provider Guidance Individual Health Competency

The goal in each of these areas is to address the problems of:

Access Avoidance Relevance

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Value Based Benefit Designs (VBBD)

Condition Management:

In national study, 17% of those who did not comply with optimal medication for chronic condition cited cost as the primary reason Recommend benefits designs that would remove these access barriers

Provider Guidance:

Physician report cards are available on a limited basis in Alaska; part

• f communication strategy is to educate members to use these

Getting care in appropriate setting (PCP and urgent care vs. ER) should be part of communication campaign

Individual Health Competency: Wellness Initiatives

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Value Based Benefit Designs (VBBD)

Eliminate cost sharing barriers and encourage desired member behavior, such as participating in Disease Management or completing wellness initiatives: Waive deductible for active Disease Management participation Waive all Rx copays (or set to $5) for all drugs for certain disease states Provide deductible credits to those meeting wellness targets Caremark able to administer a number of different designs currently Premera piloting programs and can begin basic VBBD administration by 2010, but July 2011 is the first realistic implementation date

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Medical Plan Design Options

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Refer to Attachment 4 – Medical Plan Design Options

Review attachment detailing medical plan options

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Redesign Incentive Structures

Providing incentives and rewards sends an important message - the

• rganization is committed to improving employee health and will share

the rewards that these changes will bring Numerous studies support the value of providing incentives, depending

• n the structure some have achieved participation rates in excess of 80%

According to a 2009 Towers Perrin survey, 45% of survey respondents have, will or are considering introducing or increasing penalties for nonparticipation in wellness or health promotion activities.

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Incentive Strategies – Legal Requirements

Incentives that are conditioned upon an individual satisfying a standard related to a health factor must meet HIPAA’s 5-point compliance standard:

1. The reward must not exceed 20% of the value of the healthcare plan 2. Members must be able to qualify at least annually 3. Standard must be reasonably designed to improve health and prevent disease 4. The program must allow a reasonable alternative standard for obtaining the reward to any individual for whom it is unreasonably difficult due to a medical condition to meet the original standard (i.e. if the member can’t quit smoking then they must have access to an alternative method of obtaining reward). 5. All plan materials must use specific language as defined by HIPAA that clearly discloses the terms of the program, ability to qualify annually, and the availability of an alternative standard.

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Incentive Strategies – Legal, Cont’d.

Fall River recently obtained a general legal opinion at its own expense to clarify recent EEOC guidance as it pertained to incentive programs and the ADA. Legal guidance was that it may no longer be defensible to condition the entire benefit on compliance, and that Health Risk Assessment and other wellness incentives need to be reasonable in amount to be considered “voluntary”. It is our belief that all of our recommendations would meet the requirements of HIPAA and the ADA. However, this is an area of developing law and due to the potential risks, we highly recommend that the University seek its own legal counsel before implementing any new incentive structures.

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Employee Premium Strategies

Gordian, a provider of wellness services, strongly encourages its clients to integrate incentives into employee premiums or member benefits, and has seen participation rates rise to between 70 percent and 90 percent with this method. A case study completed by WELCOA also demonstrates the impact of integrated premium incentives. The case study discusses how the City of Holland, Michigan engages 85% of its employees in organization-wide wellness offerings by linking employee health care costs to wellness program participation ultimately resulting in lower medical claims and healthier employees.

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Employee Incentive Strategy

Review attachment detailing incentive strategies

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Refer to Attachment 5 – Incentive Options

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3c): Member Health Promotion

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Why is it Important?

Overwhelming evidence in industry research that wellness programs return their investment many times over. Center for Disease Control and Prevention reported that wellness programs average over 300% ROI over a three to five year period. Cardiovascular disease, stroke, cancer, and diabetes are all linked by common risk factors, behaviors and/or health habits associated with physical inactivity and poor nutrition.

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Key Areas

Wellness Benchmarking Survey Nurse Line Disease Management

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Wellness Benchmarking Survey

Review handouts

Wellness Inquiry WIN for Alaska Cost Benefit Analysis

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Wellness Benchmarking Survey

A thorough review of the WIN for Alaska services provided for the University showed the following strengths:

Meaningful success stories within the IHP program Familiarity with the Alaska market Significant onsite presence through a variety of wellness programs and fitness events A great deal of customization geared specifically to the UA program and local events Flexibility in scheduling and coordination of space

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Wellness Benchmarking Survey

Key Areas for Improvement:

Increase the amount of available coaching, improve current participation rates and reduce no-shows Stratify members based on HRA and bio screens and target more aggressive communications at highest risk individuals HRA results should be shared with disease management vendor with consent of participant

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Wellness Benchmarking Survey

Key Areas for Improvement Continued:

Space should be identified for the IHP program so participant confidentiality is respected and resources aren’t wasted in identifying open office space ROI analysis tied to medical and Rx claims data, essential in evaluating program effectiveness, should be completed annually

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Refer to Attachments 6 and 7

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Wellness Program - Evaluation Tool

Worksheet to evaluate program and identify areas for improvement Use for ongoing planning

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Refer to Attachment 8 – Self Evaluation of Key Wellness Program Elements

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Reintroduce Nurseline

Premera shared positive outcomes from recent case study; however confidentiality prevented getting details in time for presentation Important uses of Nurseline:

Triage to determine best place to receive care Access in rural areas – may replace some physician contact where that is difficult to obtain Education for consumer initiatives such as self care

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Reintroduce Nurseline - Pricing

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Vendor Comments Pricing Estimates

Premera Included unlimited calls. Can attempt general reporting; cannot guarantee accuracy because member data is not routinely collected based on individual health plan. $0.99 PEPM ~ $50,000 Annually WIN for Alaska Will provide reports, facilitation and customization to Alaska participants. ~$36,000 Annually (Up to 125 calls per month) $20 per each call exceeding monthly limit $9,000 one-time setup fee Sirona Health We conducted a general inquiry with an

• utside vendor. The University’s name

was not released. Sirona is URAC accredited and does business in Alaska. Online client reporting portal with 150 standard reports. ~$30,000 Annually (Up to 120 calls per month) $21 per each call exceeding monthly limit $2,500 one-time setup fee

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Retool Disease Management Strategy

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Review DM vendor comparison and consider a switch to Accordant Need more clinical outcomes reporting Need greater integration between vendors to

• ptimize value of DM and wellness

Include Value Based Benefit Design to further incent DM participation

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Disease Management Vendor Analysis

Compared Premera (Healthways) program with Caremark (Accordant) program, with emphasis on:

Program components Member outreach Reporting ROI methodology Pricing

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Refer to Attachment 9 – Disease Management Analysis

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Disease Management – Clinical Outcomes

Only detail reporting was for Diabetes, CHF, and CAD (even when Asthma and

• ther programs in place), and is greatly delayed (reviewing CY 07 stats in Nov 08)

Hospital admissions and ER visits were down for diabetes and CHF but both were up for CAD Categorization of members by how well they are managing disease indicated several concerns:

All CHF patients had an ER or hospital visit in the past year, meaning that’s the only way Premera found them 0% of diabetics are classified as “Managing Condition Effectively” without an elevated risk of exacerbation

% of Opt Outs increased in most programs Savings calculation seems to indicate that claims dropped dramatically in 2006 after the 2005 baseline year, and then increased quite a bit again in 2007. Appears to be taking credit for reversion to the mean. Need additional reporting and on a more timely basis. Accordant offers this service.

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Disease Management Integration

Incent integration of HRA results and biometric screens with DM vendor (members will need to provide consent) Use value based benefit designs to further incent active Disease Management engagement

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3d): Create Savvy Healthcare

Consumers

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Top 3 Recommendations

Conduct Knowledge Survey Incorporate Consumerism into More Communication Vehicles Develop and Proactively Educate Members On Top 10 Topics

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Knowledge Survey

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Refer to Attachment 10 – Consumer Knowledge Survey

Consumerism is about teaching members to use the same smart shopping skills they have in other areas of their lives Focus messages on how these skills and tips will help the member save on their own out of pocket costs Surveys have shown that members don’t always believe they are responsible for helping to control healthcare costs Some members don’t realize there are tools and resources that are available Distribute consumer survey, ideally a series of surveys, to assess current member knowledge of healthcare system and tools Tie completion of surveys to incentive rewards

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Incorporate Consumerism into More Vehicles

Use results from Consumer Knowledge Survey to develop education topics for communication pieces

Electronic WIN e-newsletter Print newsletter Ad hoc emails Flyers and Posters Enrollment guide

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Proactively Educate - Top 10 Topics

Develop “Top 10” based on:

Survey results High utilization areas Wellness initiatives HRA and biometric screening results Member resources and tools Consumer or industry trends

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Top 10 - Some Suggestions to Start With

Getting care in the most appropriate setting – ER versus, urgent, versus self-care or PCP How to use Premera and Caremark member websites for cost and quality Pharmacy – generic versus brand. Different pricing from pharmacies. Where can you compare costs, and how much can you save?

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Top 10 Suggestions Continued

Promote SAFER

Speak up – About medical history and medications Ask questions – Question tests and procedures Find the facts – Ingredients, uses, warnings, etc. Evaluate your choices – Get a second opinion Read the label - Follow directions!

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Compare Cost of Emergency Care

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Example from Premera’s member website

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Find Physicians –Certified or Not?

Example from Premera’s member website

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Health Challenges

Example from Premera’s member website

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Symptom Checker

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Example from Premera’s member website

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Compare Generic and Brand Costs

Example from Caremark’s member website

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3e): Communicate Constantly

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Communication Tips

Use branding to maintain a consistent look, feel, and tone Keep communications easy to read, understand, and act upon Utilize a calendar to align communication with special health events and to keep your communication fresh Use a variety of print media such as brochures, fliers, posters, banners, newsletter articles, bulletin boards, and post cards. Utilize the web, intranet, e-mail, voicemail messages, and audio visual productions as well as emerging forms of electronic media such as Twitter. Spread by word of mouth at staff meetings and organization events. Use existing channels of communication – what works best in your company Remember to communicate results in addition to activities and events.

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Top 3 Recommendations

Add Print Newsletters Ensure Communications are Targeted to Employees and Dependents Increase Visual Communication

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Print Newsletters

WIN for Alaska – Uses WELCOA newsletter including:

Personalization Front/Back Masthead—Full Color Personalization Front Left Column – 125 word article Personalization set up Home Mailing—Postage Home Mailing—Folding & labeling Home Mailing—Labeling Set up, etc

Approximately $3,500 per mailing including postage

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Target Dependents with Communications

Dependents represent 43% of claims Spouses are often key decision maker for family health decisions Add print newsletters sent home Incent spouses to get added to electronic newsletter

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Percentage of Claims by Relationship

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Increase Visual Communication

Even the best program design will not succeed if nobody knows about it or how to get involved Employees who do not get involved in the program should be doing so because they choose not to participate, not because they did not know about how, when, or where to participate Use posters, flyers, table tents in stairwells, staff lounges and throughout campus where appropriate Campus HR, JHCC, WIN for Alaska can all help distribute visual communications

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3f): Additional Savings Opportunities

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Additional Savings Opportunities

Dependent Eligibility Audit Change New Hire Waiting Period Opt Out Credit / Extra Spouse Contribution Medical Tourism

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Dependent Eligibility Audit

According to a recent Towers Perrin survey 18% of employers plan to tighten and/or increase the enforcement of dependent eligibility provisions in 2009 or 2010. Hewitt reports that 40% of its clients are currently doing dependent eligibility audits, and that next year they expect 50% of their clients to do so. A Mercer US National Employer-Sponsored Health Plans Survey study determined that anywhere from 5% to 15% of a plan’s covered dependents are not eligible. Vanderbilt University (Nashville, TN) recently conducted a dependent eligibility audit that removed 6% of dependents and saved $650,000. Ford and Chrysler recently dropped 86,000 ineligible dependents.

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Dependent Eligibility Savings Estimates

Potential Savings in Dependent Eligibility Audit Equivalent Rates/ER Counts 2% 4% 6% Spouse $594/$493 2582 $305,684 $611,369 $917,053 Children* $280/$232 2848 $158,724 $317,447 $476,171 Total "Premium" Saved $464,408 $928,816 $1,393,224 Conservative Assumption: 50% Lower Risk $232,204 $464,408 $696,612 * COBRA rate for Children represents all children in each family; assume each child/children unit contains 1.75 children on average.

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Change New Hire Waiting Period

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Category Member Count 10/2008 – 9/2009 Savings Methodology Estimated Per Person Savings Estimated Savings to Implement 30 Day Waiting Period New Hires 300 1 month of employer share of total medical, dental, vision costs $1,023 PEPM (average across all tiers) $300,000 Annual Savings Term < 30 Days 45 In addition to above, these members can’t elect COBRA, saving potential high risk members continuing (assuming 6 months on average) Assuming COBRA election rate of 15%, twice the claims

• f typical

members $40,000 of Annual Savings

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Extra Spouse Contribution

According to a Towers Perrin survey employers are increasingly revisiting spousal and dependent coverage in their efforts to control rising costs. Some employers are charging higher premiums for working spouses who have access to other health care coverage. The University could consider requiring that employees pay an additional premium, such as $50 per month, if their spouse enrolls on the University plan when coverage is available through the spouse’s employment. Might be more time intensive to administer but could be based on the honor system.

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EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Opt-out Credit

Many employers have implemented or are considering giving employees an opt-out credit if they waive coverage Opt-out credits are typically lower than the actual cost of the plan but enough to provide an incentive for employees to consider alternate coverage - $500 to $1500 a year perhaps May be received more positively than an Extra Spouse Contribution and have largely the same effect Single employees may have equity concerns – why don’t they get a credit for not having a family? Tilting employer contribution more towards employees and less toward families may create the same net effect – family members reconsider whether they should take other coverage – in a simpler way

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Medical Tourism

Consider encouraging domestic medical tourism because in some cases the cost of services are much less in Seattle or other major US cities than in Alaska. For example, the University could have an option where the airfare, hotel, and other reasonable accommodations (meals per diem, rental car, etc) are reimbursed for the member and one companion for certain types of surgeries, or for procedures that hit a certain dollar threshold. We would suggest that the overall travel cost reimbursement be limited to 50% of the differential in medical costs to ensure the University still benefits from the savings and offsets the cost of administering the incentive. This option would require additional exploration with Premera to review which procedures would be incentivized along with what could be administered efficiently.

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Section 4: Craft a Long Term Strategy

EXPERT EMPLOYEE BENEFITS & ACTUARIAL CONSULTING

Lay out Utilization Targets and Long Term Strategy

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Refer to Attachment 11 – Long Term Strategy Document

www.fallriverconsulting.com

Questions?