2013 ANNUAL RENEWALS OF THE UN HEALTH INSURANCE PROGRAMME VANBREDA HEALTH PLAN

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1 2013 ANNUAL RENEWALS OF THE UN HEALTH INSURANCE PROGRAMME VANBREDA HEALTH PLAN Summary The claims experience of the Vanbreda International health insurance plan has not be favourable for the plan year 2012 and the premium increase needed to enable the plan to cover the expected programme costs for the plan year beginning 1 July 2013 to 30 June 2014 is expected to be in the double digits. The increase in the claims experience can be accounted for by increased utilization by members and medical inflation. However, a small percentage of members (4%) active as well as retired staff and their dependants seek care in the United States for planned or non-emergency treatments even though the Vanbreda plan is not designed or priced for primary use in the United States, where health care costs are very high. These claims account for 11% of the total programme cost. Claims for care in the United States increased in the plan year by 27%. In order to reduce the premium increase to only 9.85%, a number of changes are being implemented related to planned or non-emergency hospitalization and selected outpatient treatments (chemotherapy, haemodialysis and radiological treatment) received in the United States effective 1 July These are detailed below. These changes will not apply for medical care received outside of the United States. Staff members and retirees who do not wish to be subjected to these changes and who intend to seek medical care in the United States on a regular basis should consider enrolling in either one of the two US plans, Aetna and Empire Blue Cross, effective 1 July Both plans provide international coverage. In addition, a benefit improvement is also being introduced that will reimburse the cost of eye examinations every 12 months at the present reimbursement rate from the current 24 months. General background All plans administered by UN Headquarters, including Vanbreda, are self-funded programmes. Unlike in fully insured plans, the UN's contract with Vanbreda calls for the provision of administrative services only. The contract also allows the UN to use the company s eligibility, claims processing and medical review expertise, as well as benefit from discounted services that the company has negotiated with medical providers in their direct-billing network. In exchange for such services, the UN pays Vanbreda a fixed administrative fee per primary subscriber to the plan (i.e., active or retired staff member) regardless of the number of family members covered. The participants claims that are paid out by Vanbreda are reimbursed by the UN from the premiums collected.

2 Under this arrangement, all the benefits and risks are borne by the UN. Vanbreda does not benefit from the level of claims paid to participants. Costing of the insurance programme The UN s health insurance programmes are experience-rated. This means the premiums each year are based on the cost of medical or dental treatment received by UN participants in the prior year, plus the expected effect of higher utilization and medical inflation, and the appropriate allowance for administrative expenses. The underlying elements in the increasing cost of health insurance for participants are therefore: Level of growth in utilization of services and medications; Increases in prices for services and medications ( medical inflation ); and Expenses that are incurred in high-cost health-care markets. In a year following a period of heavy utilization, premium increases are likely to be relatively high. Conversely, if utilization in the prior year has been moderate, the premium increase in the subsequent year will likely be moderate. The yearly premiums are calculated to meet medical expense and administration costs in the forthcoming 12-month contract period. For the Vanbreda plan, the underlying cost of medical expenses represent about 93 per cent of the premium, and administrative expenses make up the remaining 7 per cent. Each year, the expected overall costs of the programme are first expressed as premiums and then borne collectively by the participants and by the Organization in accordance with the 50:50 cost-sharing ratio set by the General Assembly claims experience Since January 2010, Vanbreda premiums have been rather stable except for a 1% increase implemented in January The period however saw a double-digit increase in total claims paid by the plan. This included a 38% increase in high cost file (i.e., reimbursements of over US$100,000) and a 27% increase in claims for services incurred in the United States. Given these trends plus the expected trend until the end of the plan year in June 2014, the total cost of the Vanbreda programme will exceed the total premiums collected by almost 11.97%. What this means is that premiums effective 1 July 2013 will need to increase by this percentage unless changes are made to the plan design. The Vanbreda plan is not designed to be primarily used for medical services in the United States, where health care costs are extremely high, especially if they do not involve medical emergencies. This is why the Vanbreda premiums are much lower than those of the US plans. Based on data provided by Vanbreda, 4% of claimants consistently use the plan for services in the United States. In the plan year, these claimants represented 11% of the total claims paid. On average, the amount claimed by those who sought care in the United States was three times the average amount claimed by the majority of members who received care outside of the United States.

3 The majority of the utilization in the United States involved planned care, treatments, and prescription drugs that are readily available in other countries at lower costs and comparable quality. Most of these members also had the option to be covered under a US plan. Since the Vanbreda plan is self-insured, the premiums are heavily driven by the level of claims reimbursed, and the issue of care in the United States by a small majority of the plan members need to be addressed to avoid an almost 12% increase in premiums starting July For the plan year , there will be no increase in the administrative fee per primary subscriber to be paid to Vanbreda by the UN. These fees are negotiated on an annual basis. Changes effective 1 July 2013 The following changes have been considered and endorsed by the Health and Life Insurance Committee, a joint staff-management subsidiary body of the Joint Negotiation Committee. Premiums will increase by 9.85% from the current rates. Contribution rates will however remain unchanged except for those staff members whose contributions are currently capped at 85% of the premium amount. The following plan design changes will also go into effect on 1 July 2013: Changes for all participants (1) Eye examinations will now be covered every 12 months at the current reimbursement rate. This improvement is intended to harmonize the benefits provided in the Vanbreda plan with those offered under the US-based medical insurance and MIP plans. Changes only affecting staff seeking care in the United States (2) Prior approval from Vanbreda medical consultants for planned or non-emergency hospitalization and select outpatient treatments (chemotherapy, haemodialysis and radiological treatments) in the United States will be strictly enforced. Prior approval is based on the medical necessity of the treatment. Approval for the United States will solely be given if the medical consultant agrees that care can only be rendered in the United States. Otherwise, Vanbreda will provide prior approval for the treatment to be received at the duty station or suitable alternative locations outside of the United States. This will apply even if staff members, retirees or their dependants request prior approval for hospitalization and treatments in the United States only when they have already travelled to the United States from their duty stations or country of residence. There will be no changes to the coverage in case of emergency hospitalizations and treatments incurred in or outside of the United States. The Vanbreda medical consultants will consider a medical emergency as hospitalization and medical treatments, including follow-up visits, which are undertaken due to an unplanned, sudden and acute illness or injury and which, for medical reasons, cannot be

4 delayed or postponed. In the case of a woman who goes into labour after her 32 nd week of pregnancy, the delivery and care rendered to the newborn child in the US will not be considered a medical emergency as it relates to the pre-approval requirement for care in the United States. (3) Failure to secure prior approval from Vanbreda for planned or non-emergency hospitalization and the abovementioned select outpatient treatments in the United States will result in the suspension of the Major Medical Benefits Plan (MMBP) component used for claims reimbursement. Currently, the MMBP allows up to 96% reimbursement of reasonable and customary charges once the annual out-of-pocket limits are met; the MMBP reimburses at 80% the balance 20% of reasonable and customary charges not covered by the Basic Medical Benefit Plan (BMBP). Suspension of this benefit will result in subscribers being fully responsible for 20% of the reasonable and customary charges incurred in the United States, as well as any excess amount of the reasonable and customary rates. More details on the MMBP can be found in Annex VII of the information circular ST/IC/2012/16 available in the Information Circular section of iseek or on the Health and Life Insurance Section (HLIS) website at There will be no change to the application of the MMBP for services received outside the United States. (4) Increase of the individual/family annual deductible for services received in the United States only from $200 per insured person to $1,200 per person, and from $600 per family to $3,600 per family. This increase will likewise adjust the out-of-pocket (OOP) maximums for major medical services received in the United States to $2,200 per person and $6,600 per family. There will be no changes to the annual deductible amounts and out-of-pocket maximums for services received outside of the United States. Staff members and retirees currently enrolled in the Vanbreda plan, especially US nationals and permanent residents, who intend to seek medical care in the United States on a regular basis should consider enrolling in either one of the two US plans, Aetna and Empire Blue Cross, effective 1 July Both plans provide international coverage. Additional information on these plans is available on the HLIS website at The 2013 information circular is also being prepared and will be posted on the website as soon as finalized. Steps to take if you would like to switch to a US plan Staff members who are payrolled by UN Headquarters (i.e., international staff in peacekeeping and special political missions) and currently enrolled in the Vanbreda plan who would like to switch to a US plan can do so by using the 2013 annual campaign form available on the HLIS website. The completed and signed form can be sent by to the address insurance-unhq@un.org on or before 27 June 2013.

5 Staff members who are payrolled by Offices Away from Headquarters and the regional commissions can switch to a US plan by using the 2013 annual campaign form and submitting the completed and signed form to their local human resources office so that their Vanbreda coverage is terminated and new coverage under the US plan established. The local human resources office will liaise with UN Headquarters to ensure staff and dependants information are sent to the relevant US insurance carrier by the Health and Life Insurance Section in New York. Please note that switching to a US plan will change the amount of your contributions for medical health insurance. The premium and contribution rates for the US plans are available on the HLIS website at In addition, the US dental plan is separate from the medical plan. If dental coverage is desired, the dental portion of the 2013 annual campaign application form should be properly completed. FINAL REMINDER Staff members, retiree and their dependants who reside in the US are not eligible for Vanbreda coverage. The sole exception to this arises in the case of a dependent child attending school or university in the US who is required by the educational institution to enroll in its health insurance plan. In this case, the student s health insurance plan at the school or university will be the primary insurance and the Vanbreda plan will be secondary. All claims for the child should be first submitted to the school or university plan and any unreimbursed portion can be submitted to Vanbreda which will adjudicate the claim based on the provisions of the plan. Staff members who do not meet the requirements stated above will be required to switch to a US plan. Staff members covered under the Vanbreda worldwide plan should not seek medical care in the US because the plan does not offer adequate medical protection owing to the annual reimbursement limit of US$250,000 and the high cost of medical care in the US that is not reflected in the Vanbreda premiums. Medical treatment obtained in the US will be subject to all restrictions and limitations of the Vanbreda plan and staff members will be responsible for payment of all amounts that exceed the benefit limits and annual maximum reimbursement. They therefore put themselves at financial risk by not switching to a US plan that would provide adequate coverage. UN Health and Life Insurance Section 31 May 2013