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VALUE PURCHASING Today’s Agenda Examine opportunities for public employers to self-insure their benefit program through group purchasing Review the advantages.

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Presentation on theme: "VALUE PURCHASING Today’s Agenda Examine opportunities for public employers to self-insure their benefit program through group purchasing Review the advantages."— Presentation transcript:

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2 VALUE PURCHASING Today’s Agenda Examine opportunities for public employers to self-insure their benefit program through group purchasing Review the advantages of self-insurance through either traditional or allocated balance model consortiums Provide information on the Jefferson Health Plan, an allocated balance model consortium

3 VALUE PURCHASING Issues affecting plan costs Technological advances Usage patterns Aging population Varying practice patterns Advertising Annual Inflation 10% - Medical 8% - Prescription Drug Government Regulation – Affordable Care Act (ACA) Federally required benefit enhancements Federally required taxes to support ACA

4 VALUE PURCHASING Issues affecting plan costs Claims drive plan costs - more than 90% of costs are for claims Anything designed to control costs must affect claims Plan Design Fewer Claims Costs will continue to rise Inflationary pressures Advancing Technology Greater Demands on an aging population You cannot control some outside forces but you can control your benefit plan

5 VALUE PURCHASING Advantages of Self Insurance Lower operating costs Eliminates insurance company profits Avoids some Federal and State taxes Control of plan design Effective Claim Processing – dedicated to your risks Management of risk with stop loss No insurance premiums No insurance company profits or dictates No insurance for claims Employer is responsible for the benefits promised by the program

6 VALUE PURCHASING Self-Insured employers pay less for their benefits Savings on state and federal taxes on insurance premiums Reduced administrative costs Retain surpluses in good years and maintain reserves for poor experience years Minimize risk, profit and insurance charges Viewed from a long term perspective, self-insured employer’s pay less for their benefits

7 VALUE PURCHASING Consortium Purchasing Manage risk through shared risk and self-insurance Provide more stable plan costs Provide more flexibility to consortium members Offer programs and services under specific Ohio Statutory Authority for Ohio based public entities

8 VALUE PURCHASING Consortium Purchasing Participation in a consortium affords the small employer the advantages otherwise available only to the largest employers Generally, there are two types of consortia Community Pool Programs Allocated Balance Pool Programs

9 VALUE PURCHASING Consortium Purchasing Community Pooled Programs combine the experience and reserves of all members in a single pool owned by the program Allocated Balance Pooled Programs combine the large claims experience of all members in a single pool and fully vest the ownership of reserves in individual member accounts

10 VALUE PURCHASING Consortium Purchasing – Community Pooled Features Plan Design-Determined by Pool Network Options-Determined by Pool Deductible-Determined by Pool Costs- Determined by Pool (Average Costs) Reserves-Owned by Pool Interest Income-Owned by Pool Moratoria-Determined by Pool Rebates-Held by Pool Reporting-Pool only Ability to impact costs-Determined by Pool

11 VALUE PURCHASING Allocated Balance Model Consortium Allows member organizations to retain control of surpluses in good experience years Separate Reserve Accounts for each member organization Monthly statements and daily transaction reporting on member reserve accounts allows tracking of experience throughout the plan year Excess reserves can be held in the consortium and earn returns for the member organization, or used as moratoria against monthly accruals

12 VALUE PURCHASING Jefferson Health Plan – Allocated Balance Pooled Features Plan Design-Member decides Network Options-Member decides Deductible-Member choice Costs- Based on your experience/Pool Blend Reserves-Owned by Member Interest Income-Retained by Member Moratoria-Member decides Rebates-Retained by Member Reporting-Online Access to Account Ability to impact costs-Member controls plan design

13 VALUE PURCHASING Jefferson Health Plan – Consortium Purchasing Formerly known as OME-RESA, has been in operation since 1985 Organized as a Public Employer Group Insurance Trust under Council of Government Rules (Section 167) Each participating organization is a voting member Membership elects a Board of Directors, consisting of representatives from the member organizations Over 100 separate member organizations today Approximately 12,000 employees Approximately 30,000 plan participants

14 VALUE PURCHASING Jefferson Health Plan – Consortium Purchasing Leverages purchasing power of members to reduce cost of benefit plans Provides same purchasing efficiencies available to the largest employers to all size members of the consortium Negotiates the “best” contracts and passes through 100% of the savings Provides fixed annual funding rates to members Full disclosure of plan income and expenses to member group

15 VALUE PURCHASING Jefferson Health Plan – Internal Pool Member chooses a specific deductible Deductibles range from $35,000 to $150,000 Deductible pooling charge included in monthly funding rates Member group is subject to reimbursement for plan participant’s cumulative claims above the deductible Reimbursements are credited to the member group’s trust account Standard rates at each deductible, not based on member claims No lasers or exclusions permitted Aggregate Protection

16 VALUE PURCHASING Jefferson Health Plan – Consortium Purchasing Focus on reducing Plan Payments to providers Get the best provider network for your employees, based on member group location and claims best access to providers best discounts on services lowest network fees 100% pass-through of network discounts to group

17 VALUE PURCHASING The Jefferson Health Plan offers members access to several national and regional networks CIGNA OCHIP Aetna FrontPath HealthSpan Paramount HealthSmart The Health Plan United Healthcare Medical Mutual of Ohio

18 VALUE PURCHASING The Jefferson Health Plan offers members access to several national and regional claims administrators Meritain, Boardman Self-Funded Plans, Cleveland The Health Plan, St. Clairsville Paramount Health Care, Maumee Healthsmart (formerly Klais), Akron United Healthcare or UMR, Westerville Employee Benefit Management Corp., Dublin Medical Mutual of Ohio or Mutual Health Services, Cleveland Aetna

19 VALUE PURCHASING The Jefferson Health Plan members can retain their own plan designs or convert to another of their choosing Deductibles Co-pays Co-insurance levels Out-of-Pocket limits Provider Networks PPO Plans HMO Plans POS Plans CDHP, HDHP and HSA Plans

20 VALUE PURCHASING Jefferson Health Plan – Affiliated Vendor Partners MetLife – Life Insurance Carrier Gilmore, Jasion & Mahler – Auditor Vision Service Plan – Vision Carrier Sun Life – Reinsurance Carrier Alere – Wellness & Disease Management U.S. Bank – Consortium Banking Institution CVS Caremark – Pharmacy Benefit Manager Johnson Investment Counsel – Investment Manager ValueOptions – Employee Assistance Program – New Sept. 1

21 Key Underwriting Financial Indicators Ins. Comm. Filings for 2013 AdministrationProfitPremium Dollars used for Benefits Aetna11.14%5.90%$0.83 Anthem BC/BS7.28%10.24%$0.81 Aultcare10.47%-.02%$0.89 The Health Plan6.54%2.39%$0.91 Medical Mutual12.94%2.04%$0.85 Paramount10.07%-5.35%$0.95 United10.55%5.48%$0.84 Average Carrier9.86%4.48%$0.86 JHP FY %0.0%$0.94

22 VALUE PURCHASING The Jefferson Health Plan – Consistent Renewals To help produce more consistent renewals, the member’s plan experience is combined with that of the overall consortium in a process called “blending” “Blending” means that the overall cost of claims on a member’s plan is shared on a credibility adjusted basis with the experience of the other members in the consortium This provides stability to renewal rates, because the consortium’s entire population is used to develop a part of a member’s renewal Pooling claims experience with other similar employers decreases rate volatility since claims are spread on a credibility basis over a large population of plan participants

23 VALUE PURCHASING Jefferson Health Plan Trend Rates Consortium FY14 Market Rate 1 Medical (w/o Rx) 8.0%10.8% Prescription Drugs 6.0%6.4% Dental 4.0% Vision 3.5%3.7% High Deductible Plans (with Rx) 8.0%9.1% 1 Annual Segal National Survey of Managed care Plans (2013)

24 VALUE PURCHASING The Jefferson Health Plan Advantages Financial Security with over $100 million in reserves Group purchasing power with over 30,000 lives More predictive, more stable funding levels with pooling of large claims experience Availability of Moratoria, interest on reserves, and “no interest” loans Online access to reserve account and monthly financial statement Health Care reform guidance and support Member can work with insurance agency advisors

25 VALUE PURCHASING Important Questions to ask about a consortium Length of time in business Size of consortium Governance of consortium Strength of reserves Ownership of reserves Rate setting policies and methodologies Risk sharing techniques and availability of Moratoria Member control over plan design Member choice of networks or plan administrators Entry and exit requirements Buy in requirements, if any

26 VALUE PURCHASING QUESTIONS?


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