1. Travis County HRMD FY 2012 Benefits Work Session Employee Benefits Committee HRMD Staff

2. Travis County HRMD Agenda Understand the financial status of the Health Plan Understand coming issues related to PPACA and Retirees Discuss the high-cost drivers of the Plan Discuss the Benefits Committee’s recommendations for Plan Design change

3. Travis County HRMD Financial Status Milliman & Associates completed the actuarial report –Contributions are holding with expenses –Allocated Reserves are adequate –Keeping plan design the same: No increase to County Contributions No increase to Employee Contributions No increase to Retiree Contributions

4. Travis County HRMD Issues on the Horizon Patient Protection and Affordable Care Act (PPACA) –2014: Eligible Temporary and Seasonal Workers must be covered –2018: 40% Excise Tax on “Cadillac” Plans Number of potential early retirees in the next five years

5. Travis County HRMD 2014: Temporary & Seasonal Workers Temporary and Seasonal Workers must be offered Employer Coverage if: –They average over 30 hours per week in any given month If not, $3000 per year Penalty –Pro-rated by month –Only for months that they averaged over 30 hours per week

6. Travis County HRMD Temporary Workers Currently, 323 “05” Temps –Under one year: 82 employees –One to two years: 53 employees –Over two years: 188 employees Receiving Retirement Only Average Hours Per Week –Under 20: 65% –Over 20: 35%

7. Travis County HRMD Temporary Workers 113 Temporaries, who average over 20 hours per week would qualify for health benefits… –If they had a benefited employee “slot” At a PEPM cost to the County of: $696.08 At a PEPY cost to the County of: $8352.96 At an annual cost to the County of: $943,884.48

8. Travis County HRMD Temps under PPACA 68 Temporaries who average over 30 hours per week would qualify for either –Employer Coverage, or At an annual cost to the County of $567,936 –Subsidized Exchange Coverage $3000 Penalty per employee paid by Travis County At an annual cost to the County of $204,000 –Note: this does not include Seasonal Workers or Pro- rated Temps

9. Travis County HRMD 2018: Excise Tax Health Plans that average: –More than $10,200 per individual –More than $27,500 per family 40% Excise Tax on the Overage Currently: –EPO with Trend will be Cadillac –PPO with Trend will likely be Cadillac

10. Travis County HRMD Retirees Current County contribution – ESTABLISHED ANNUALLY –Employee: $696.08 per month –Retiree Under 65: $1,273.45 per month Potential Retirees in next 5 years –Approximately 1500 –If 750 under 65, and County Contributions stay at 2011 Levels: $5,196,330 increase in County Contributions to Health Fund per year Does not include benefits cost of replacing those employees This cost will decrease as early retirees age past 65 Potential Dramatic 5-10 year impact

11. Travis County HRMD Solution? Go on Healthcare Exchanges? –Not Recommended Pass on more cost to employees? –Not Recommended Pass on more/all costs to retirees? –Not Recommended Continue to raise County contributions? –Not Recommended Make smart, incremental Plan Design changes that reward participants for utilizing the Lowest-Cost, Effective Intervention? –Recommended!

12. Travis County HRMD FY 2012 Plan Design Changes Keep all Contributions the Same Keep all Medical out-of-pocket expenses the same Look at Pharmacy Costs and Structure

13. Travis County HRMD Why Pharmacy? From 2009 to 2011: –39% increase in drug ingredient costs Actual numbers: –12 months ending 04/30/09: $6.9 million –12 months ending 04/30/10: $8.5 million –12 months ending 04/30/11: $9.6 million

14. Travis County HRMD Why is our Trend so High? The numbers look really good, don’t they? Tier One – Generics (64% of scripts) –Co-pay is $10 Tier Two – Brands with no generic (33% of scripts) –Co-pay is $30 Tier Three – Brands with a generic (3% of scripts) –Co-pay is $50

15. Travis County HRMD Drug Usage by Dollars TC has a high utilization of very expensive drugs –Employee perception/entitlement –Plan Design Tier One – Generics (64% of scripts) –Health Plan Spend: $1.5 million (16% of costs) Tier Two – Brands with no generic (33% of scripts) –Health Plan Spend: $7.5 million (81% of costs) Tier Three – Brands with a generic (3% of scripts) –Health Plan Spend: $269K (3% of costs) –But: Plan could save about $220K if generic selected –And: Employees could save about $100K if generic selected

16. Travis County HRMD Why are Tier 2 Drugs so Expensive? No Generic Available –Patent still in effect 20 years from the date of FDA application, or 17 years from release Drug Makers can charge whatever the market will bear during Patent period Placement on Tier 2 only means that the Patent hasn’t expired

17. Travis County HRMD Strategy: Implement Formulary Tier One – Generics Tier Two – Preferred Brands Tier Three – Non-preferred Brands –Placement on Formulary of Brand Drugs based on: Availability of Drugs to treat a given condition Effectiveness of Drug Number of Alternatives Available Safety of Drug Cost of Drug

18. Travis County HRMD How will this effect employees? Disruption: No Behavior Change –Employees pay about $210,000 more per year for drugs –Plan saves about $210,000 –Direct cost shift to employees Disruption: Behavior Change to average cost alternative –Employees pay the same for Drugs (no cost shift to employees) –Plan saves about $1.5 million

19. Travis County HRMD Pharmacy Are there other ways to save $1.5 million on drug costs? –Increase Co-pays by $15 Tier One - $25 Tier Two - $45 Tier Three $65 Direct cost shift of $1.5 million to employees

20. Travis County HRMD Strategy: Incent Generic Usage Less than 3000 Prescriptions in past 12 months were Tier 3 Cost the Plan about $268,000 –Cost the employees about $125,000 Saving if generics used: –Plan savings: approximately $220,000 –Employee savings: approximately $100,000

21. Travis County HRMD Implement “Pay the Difference” for Brands with True Generics Plan only covers generic cost if: –The script says “generic substitution acceptable” –The member chooses the Brand anyway Plan cover the Brand as normal if: –The script says “dispense as written”

22. Travis County HRMD Strategy: Institute Pre- Authorization for certain drugs Many drugs are prescribed for off-brand usage Travis County has some very high usage of drug which are FDA-approved for rare conditions Implement a “pre-auth” procedure for drugs that are commonly mis-used

23. Travis County HRMD Strategy: Implement Quantity Limits Co-pays are designed for a one-month supply A one-month supply isn’t necessarily 31 pills –Many conditions have meds dispensed on an ‘as needed’ basis Forces most cost-effective dispensing –Instead of two 75mg pills –One 150mg pill (about half the cost)

24. Travis County HRMD Benefit Committee and HRMD Staff Recommendations Approve No Rate Increases on Health Plan for FY 2012 for County or Participants Retain FY11 Composite Rates –$696.08 for employees –$1,283.45 for Under 65 Retirees –$368.43 for Over 65 Retirees Increased Retiree Budget –By $776,472 for FY12

25. Travis County HRMD Benefit Committee and HRMD Staff Recommendations Approve Change of PBM from Medco to Prescriptions Solutions on October 1, 2011 Implement a Customized Open Formulary administered by Prescription Solutions on January 1, 2012 Implement Quantity Limits on January 1, 2012 Implement Prior Authorization on certain drugs, as recommended by Prescription Solutions on January 1, 2012 Implement a “Pay the Difference” for Brands with true generics on January 1, 2012

26. Travis County HRMD Benefit Committee and HRMD Staff Recommendations Approve Open Enrollment Dates –July 18, 2011 through August 19, 2011 Approve defaulting employees who do not complete Open Enrollment to the CEPO and Basic Life only Approve Date and Time for Employee Hearing –June 15, 2011 at 4:30pm Approve Release of Information to Plan Participants prior to Employee Hearing

27. Travis County HRMD Benefit Committee and HRMD Staff Recommendations Approve renewal of Assurant Dental plan for FY12 –No rate increase –100% Voluntary Approve renewal of Basic Life Insurance –No rate increase –100% County paid

28. Travis County HRMD Implementation Plan Have complete information available to employees and on website by July 1, 2011 –Formulary –Drugs Requiring Pre-Authorization –Quantity Limits List Reserve Clinic days and times for employees to discuss their medications Allow employees to get any needed Pre- Authorizations from October to December 2011 to minimize disruption

29. Travis County HRMD All Employee Meetings Currently on-going throughout County –Many Times and Locations Educate employees about the Health Plan’s high cost items –Pharmacy –ER Visits –Chronic Conditions –Ortho-related Usage Educate about lower-cost alternatives Educate employees about being a Savvy Health Consumer Educate employees about talking to their Doctor

30. Travis County HRMD Other Out-Reach Provide DVD to all Departments of this meeting Encourage Commissioners Court to request that All Employees attend the meetings that are currently being scheduled around the county

31. Travis County HRMD Commercial Break

32. Travis County HRMD Commercial Break

33. Travis County HRMD Discussion & Questions