UA Choice Mike Humphrey Director of Benefits October 2007

Employer Responses Shifting Costs Employees Managed Care Reducing Cost Changing Delivery Plan Change & Wellness Programs

Employers Responses Shift the Cost (“squeezing the balloon”) Benefit cutbacks – higher deductibles Benefit cutbacks – higher deductibles Employers contribute less toward the plan cost Employers contribute less toward the plan cost Employee charges for coverage are increased Employee charges for coverage are increased Change the Delivery System Managed Care, Open & Closed Networks Managed Care, Open & Closed Networks High Performance Networks High Performance Networks Reduce the Cost (“deflating the balloon”) Contract with Medical Providers to take less Contract with Medical Providers to take less Wellness initiatives Wellness initiatives Disease management Disease management

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University Health Care Trends Beyond 2007 Are they sustainable?

What will the projected increases do to employee charges

So What Can Be Done

Health & Wellness Current UA Support Programs In Place

UA’s Health Programs Case Management – for the seriously ill Disease Management – for the chronically ill Health Risk Assessment Wellness/Life Style Coaching On Site Wellness Programs Pharmacy Program Management

Disease Management Principles and Goals Improve the health and increase the quality of life of UA employees and dependents Support the physician / patient relationship Improve employee productivity Reduce total health care costs

UA’s Disease Management Program 2006 Program Diabetes Heart Failure Coronary Artery Disease 2007 Program Diabetes Heart Failure Coronary Artery Disease Low Back Pain OsteoporosisOsteoarthritis Hepatitis C Urinary Incontinence Pressure Ulcers Atrial Fibrillation Inflammatory Bowel Disease Irritable Bowel Syndrome Fibromyalgia Acid Related Disorders

UA Disease Management Opportunity Analysis 2006 Program Number of participants – 431 Costs avoided – $493, Program Number of participants – 2,100 est. Costs avoided – $723,000 est.

Preventable claims cost Group Level health care expenditures Source: Anderson, et. al., (2000, Sept/Oct). The Relationship Between Modifiable Health Risks and Group-Level Health Care Expenditures, AJHP, 15(1), p Depression Stress Blood Sugar Smoking Obesity Blood Pressure Sedentary Life N = 46,026 X 6 years

Health risks push costs up Yet preventable through lifestyle change Average annual per capita excess health costs when risk is present. Goetzel, R et al. The Relationship Between Modifiable Health Risks and Health Care Expenditures, Journal of Occupational and Environmental Medicine. 1998;10:

Effect of Single Risk Factors Percent Higher Annual Health Plan Costs Health Plan Cost Source: Goetzel RZ, et. al. (1998, October). The relationship between modifiable health risks and health care expenditures: An analysis of the multi-employer HERO health risk and cost database. JOEM, 40(10):

Effects of Health Risks on Absenteeism Percent Higher Absenteeism Source: Serxner, S., et al., (2001). The impact of behavioral health risks on worker absenteeism. JOEM, 43(4), Sick Leave Absenteeism

UA’s Phase 1 “Virtual” Program With WebMD Referrals

WIN for Alaska Health In Action Program

UA’s On Site Wellness Program With WIN For Alaska – Goals Increase awareness of health risks Reduce the number of health risks Increase participation in healthy behaviors Provide a supportive environment for lifestyle changes Increase employee satisfaction and morale

UA’s Phase 2 Program With WebMD & WIN For Alaska Virtual Site-based

UA Choice Pharmacy Program

Current UA Choice Standard Plan

PharmaCare’s Observations PharmaCare (Caremark) reviewed last years prescription drug utilization and performance The factors most impacting plan cost are Member Utilization – the number of medications Product Mix – name brand vs. generic Plan Design – name brand vs. generic cost Of these three key areas, plan design offers the greatest opportunity for impact.

PharmaCare Summary 44% of participants are utilizing the plan PharmaCare standard book of business approximately 33% take advantage of the plan. This high utilization is reflective of the rich benefit offered. Within the Standard plan, 84% of UA’s utilizing population can be found. They process 70% of total Rx’s and account for almost 75% of the total plan cost. They process 70% of total Rx’s and account for almost 75% of the total plan cost.

UA Choice Utilization – Fiscal Year 07

July 1, 2007 to June 30, 2007 Product Mix Univ. BoB: Retail: $61.55 Mail: $ Univ. of Alaska: Retail: $63.72 Mail: $ Univ. BoB: Brand Rx: $ Generic Rx: $24.07 Univ. of Alaska: Brand Rx: $ Generic Rx: $25.59

PharmaCare Recommendations Increase the promotion of generics Move to a uniform three tier plan design for all plans (Deluxe, Standard and Economy) Update the plan copays and coinsurance Implement 30 day supply limit for specialty med to prevent waste Add standard prior authorization and quantity limits Addition of a member educations program designed to highlight the true cost of the prescription program (Script Summary)

PharmaCare Recommendations Expand Brand / Generic copay differential 3,200 Brands w/gen alternatives 3,200 Brands w/gen alternatives Avg cost savings $100 per generic Avg cost savings $100 per generic Change preferred name brands to a coinsurance percentages to help plans keep pace with inflation Addition of 3 rd tier non formulary brand to increase generic and preferred name brand use

Recommendations Plan Design Generic $5.00 Lower generic copay results in direct cost, but should encourage more generic use Lower generic copay results in direct cost, but should encourage more generic use Preferred Name Brand 80/20% Help increase the use of name brands with the best discounts Help increase the use of name brands with the best discounts Non-Preferred Name Brand 70/30% Steer participants away from medications with little discount Steer participants away from medications with little discount Combined savings to the Pharmacy Plan $578, over 12.3% $578, over 12.3%

PharmaCare Recommendations Implement 30 day supply (DS) limits for specialty medications to prevent waste Relocate distribution center to Seattle Estimated waste = $160,000 Estimated waste = $160,000 PharmaCare reports – 42% of patients using the specialty pharmacy say they are better able to manage their condition and their medications PharmaCare reports – 42% of patients using the specialty pharmacy say they are better able to manage their condition and their medications

PharmaCare Recommendations Adjust $500 individual pharmacy out-of-pocket maximum to $1,000 for specialty medications 1% to 5% reduction plan cost = $66,000 - $330,000 annually 1% to 5% reduction plan cost = $66,000 - $330,000 annually

PharmaCare Recommendations Implement Industry Standard Prior Authorizations and Quantity Limits Over a dozen eligible Prior Authorization classes Cosmetic Acne/Skin/Dermatological – YTD Spend $83,000 Cosmetic Acne/Skin/Dermatological – YTD Spend $83,000 1% to 3% savings opportunity = $66,000 to $199,000 total plan cost 1% to 3% savings opportunity = $66,000 to $199,000 total plan cost Quantity Limit options for three growing classes of meds = $.10 pmpm Implement without the option to grandfather existing patients Implement without the option to grandfather existing patients $.10 pmpm x 9500 mbrs = $950 month x 12 = $11,400 savings opportunity $.10 pmpm x 9500 mbrs = $950 month x 12 = $11,400 savings opportunity

PharmaCare Recommendations Total annual pharmacy plan costs avoided (saved) $950,000

Proposed FY 09 Health Plan Changes This is a link to an Excel file named FY 09 health plan

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