Understanding the Proposed MI Health Benefits Program Kate A. Kohn-Parrott October 15, 2009

MI Health Benefits is one of many transformational reforms needed to make Michigan viable again  Consolidates the planning, delivery and administration of health benefits for Michigan’s public employees and retirees –Streamlines administrative services –Leverages economies of scale –Continues to provide high-quality health benefit programs while managing overall cost

The program is a pro-worker, pro-taxpayer solution  Reinforces the state’s commitment to provide fair and competitive benefits  Engages public employees and public employers in the design of health benefit plans  Preserves collective bargaining  Recognizes the importance of investing in the health of public employees

The program is a pro-worker, pro-taxpayer solution  Gives the public sector a stronger voice in crafting innovative health care programs  Encourages the use of best medical practices  Allows participants to choose the medical providers that best meet their needs  Balances the needs of employees with the responsibility of public employers to spend taxpayer dollars wisely

The program would be available to all public employers in the state Approximately 400,000 public employees and more than 200,000 retirees could be eligible “From the local school bus driver to the Governor”

The proposal includes a model for governance and collective bargaining State Agency Supports Board; responsible for plan management & administration; develops and presents plan designs/proposals L 13-Member MI Health Benefits Board Bargaining Unit Public Employer Board appointed primarily by the Governor, with recommendations from interested groups and constituents All board members have an equal voice in the process All board members accountable to legislative parameters Board designs/approves health care plans that meet diverse needs of public sector with total premiums that satisfy certain financial metrics Plans use concepts of value-based insurance design, focus on wellness and prevention, and encourage use of evidence-based care Bargaining units and public employers negotiate on o Which plans to accept o Premium share o Eligibility Bargaining Unit Negotiations

Importantly, this program will deliver annual savings of $700 million to $900 million $400 Million - $600 Million $100 Million – $200 Million $65 - $75 Million Annual Savings Accrue to All Participating Public Employers

Administrative simplification could save $65 million - $75 million per year by minimizing...  Costs paid to purchase administrative services (ASO charges)  Access fees paid to health plans or third-party administrators (TPAs)  Fees paid to brokers, consultants and insurance agents  Internal overhead costs incurred to manage and administer benefit plans

Unparalleled economies of scale will produce annual savings of $100 million - $200 million  Pooling employers that are not currently pooled  Increasing the size of existing purchasing pools  More effective purchasing of medical services and supplies, such as prescription drugs  Taking maximum advantage of cost-effective plans  Shifting fully insured policies to self-insured coverage  Minimizing payment of retention reallocation fees  Beyond health care: dental, vision, life, disability

High-quality health benefits will be sustained while saving $400 million - $600 million per year  Adoption of programs that optimize health  Managing prescription drug utilization  Employing value-based insurance design protocols  Compliance with best-practices in the delivery of medical care  Availability and use of “clinical advocates”  Simplified claims processing  Attacking fraud

Dispelling the myths  Myth: This program will reduce benefits and increase cost sharing  Fact: The proposal recognizes the value of investing in employee health and providing fair, competitive benefit programs while controlling cost –Employees or their representatives will have a voice in designing the benefit programs and offerings –Lower overall cost translates to lower employee cost –Helps retain jobs and benefits

Dispelling the myths  Myth: Destroys collective bargaining  Fact: Preserves collective bargaining on the selection of plans to be offered, premium cost share and eligibility; retains union voice in benefit plan design while changing the way benefit plan design is bargained for some

Dispelling the myths  Myth: Medical provider selection will be limited  Fact: Given the size of the program, it is expected that most medical providers will opt to participate; employees will select the health care providers that best meet their needs

Dispelling the myths  Myth: Value of pooling maxes out at 20,000 participants  Fact: There are two kinds of pooling: purchasing pooling and risk pooling –The leverage from purchasing pooling continues to grow as the size of the pool increases –While the value of risk pooling maxes out when the demographics of the pool emulate the general population –The MI Health Benefits Program will gain most of its economies from purchasing pooling

Dispelling the myths  Myth: Michigan should wait to see what happens on Capitol Hill  Fact: The federal plan will focus on coverage for the un- and under insured while retaining employer-based health care –MI Health Benefits Program is an employer program –Employers will still be expected to provide and pay for health care benefits for their employees –Michigan cannot wait any longer to take action

Dispelling the myths  Myth: Puts state government between patients and their doctors; mandates use of “clinical advocates” with wide-ranging powers  Fact: Nothing could be further from the truth –Clinical advocates work ONLY for the patient, ensuring the correct diagnosis and regimen of care –Clinical advocates make recommendations--they do not approve or reject treatment plans –HIPAA protects employee medical data

Dispelling the myths  Myth: The state can’t compete with private insurance companies  Fact: The state is not trying to compete with private insurance carriers –Rather, the state, in concert with the MI Health Benefits Program Board, will determine the available health plans and will then contract with private insurers to negotiate discounts and process claims

Dispelling the myths  Myth: The program will limit competition  Fact: Once the plan designs are finalized, a competitive Request for Pricing (RPF) process will take place –All carriers and third-party administrators (TPAs) will have an equal and fair chance to bid on the business –Competition will remain an important factor in managing costs going forward

False information (more myths) on the streets of Lansing... and elsewhere?

Public employers with lower cost can opt-out of the program

It’s an employer program... not a government-run plan

The program will generate savings... not increase financial liability

Communicating the correct message... understanding the facts PRESCRIPTION FOR SUCCESS Michigan Health Benefits Program TAXPAYER SAVINGS $700 Million - $900 Million per Year

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