Trends in State Healthcare Benefits and Labor Negotiations. Matt Kramer Commissioner MN Department of Employee Relations October 5, 2006

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1 Trends in State Healthcare Benefits and Labor Negotiations Matt Kramer Commissioner MN Department of Employee Relations October 5,

2 Healthcare Benefits The Healthcare system is broken Employers face rapidly increasing premiums Problems of both quality and cost 2

3 Healthcare purchasing challenges Huge variation in costs and quality Where you go, who you see, how you use healthcare makes a big difference Needed: Information, incentives to select and use healthcare wisely Appropriate recognition and rewards to deliver high quality, efficient healthcare For both employees and providers! 3

4 Joining forces, working in synch Governor s Health Cabinet State now purchases for over 780,000 people at over $4 billion per year Develop common demands, develop common rewards for the market Smart Buy Alliance Partner with the private sector to also implement common, reinforcing purchasing strategies Coalition of coalitions representing nearly 3/5th of all Minnesotans 4

5 State Employee Group Insurance Program (SEGIP) Scope and size Covers all three branches of state government Approximately 115,000 covered lives Costs: now $450 plus million per year Examples in practice Transparency of costs and quality Aligned incentives and accountability Information and assistance AHA (Advantage Health Advisor) 5

6 SEGIP Examples Tiered health benefits design (Advantage) Rewarding higher quality care Health improvement programs and incentives Expanding choices, options, information, assistance 6

7 Tiered Program - Advantage Tiered health benefits plan for state employees 1. Clinic systems placed into 1 of 4 cost levels Based on risk adjusted costs and collective bargaining Risk adjustment - apples to apples comparisons 2. If a higher cost level provider is selected, the user pays more at the point of service Higher copays, deductible, coinsurance 3. Quality information provided via links to MN Community Measurement website 7

8 Advantage s key features Information and incentives to: Employees and families to choose high quality, high value providers Providers to deliver greater value, or lose market share Use healthcare wisely and protect/improve health 8

9 Quality information for Advantage MN Community Measurement Providers, Health Plans, Employers Website comparing how MN clinics perform in providing tests and basic treatments for common medical conditions Asthma, diabetes, children s health, high blood pressure, women s health, depression 9

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11 Health improvement programs and incentives Costs are driven by key chronic conditions Chronic conditions increase with age Avg. state employee age (47) continues to increase Approximately 20% of the SEGIP population account for 80% of total costs 1% account for 24% 5% account for 56% Focused efforts in education and care management can lead to improved member health and cost reductions 11

12 MN s increasing transparency and value-based purchasing Quality measurement and public reporting triple play BHCAG Health Plans evalue8 Clinic groups MN Community Measurement Hospitals Adverse events reporting Information Clearinghouse 12

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17 Most recently: Q-Care Quality Care and Rewarding Excellence Announced July 31, 2006 Help cross the quality chasm Minnesota uniquely prepared ICSI, MN Community Measurement, Adverse Events reporting, 17

18 Q-Care Rapid Transformation Agree on best care Set stretch goals Align measurement, reporting, rewards and incentives Significantly improve in key areas Preventive care Diabetes Cardiovascular Hospital-based care 18

19 Rapid, broad, consistent use across purchasers State government Health Cabinet, Center for Health Care Purchasing Improvement, Interagency agreements Can include local units of government Private sector Smart Buy Alliance Any and all other employers 19

20 Hot Issues on the Horizon in Employment Management 20

21 Retiree Insurance Terms and Conditions of Employment Minn. Stat. 179A.03, subd. 19 provides as follows: Terms and conditions of employment means the hours of employment, the compensation therefor (sic) including fringe benefits except retirement contributions or benefits other than employer payment of, or contributions to, premiums for group insurance coverage of retired employees or severance pay, and the employer s personnel policies affecting the working conditions of the employees. 21

22 Various Retiree Insurance Benefit Provisions 1. Employer contribution at the amount current employees receive for single coverage only 2. Employer contribution at the amount current employees receive for single and family coverage 3. Benefit continues for a fixed duration (age 65) 4. Benefit continues until death of employee 5. Benefit continues until death of employee and the employee s spouse 22

23 Municipal Rights, Powers, Duties 6. M.S Subd. 2b Subd. 2b. Insurance continuation. A unit of local government must allow a former employee and the employee s dependents to continue to participate indefinitely in the employer-sponsored hospital, medical, and dental insurance group that the employee participated in immediately before retirement, under the following conditions: (b) Until the former employee reaches age 65, the former employee and dependents must be pooled in the same group as active employees for purposes of establishing premiums and coverage for hospital, medical and dental insurance. 23

24 State of Minnesota 7. 43A.27 Subd. 3. Retired Employees Subd. 3. Retired employees. (a) A person may elect to purchase at personal expense individual and dependent hospital, medical, and dental coverages if the person is: (d) Until the retired employee reaches age 65, the retired employee and dependents must be pooled in the same group as active employees for purposes of establishing premiums and coverage for hospital, medical and dental insurance. 24

25 Governmental Accounting Standards Board (GASB) Establishes generally accepted accounting principles for state and local governments Other Post Employment Benefits (OPEB) GASB #45 Outstanding obligations and commitments for OPEB similar to pensions Current contribution amount required to pay future obligations Rate subsidy for Retirees Retirees part of active group OPEB obligation difference between contributions and cost Becomes effective in 2008 Bond ratings? 25

26 The Break-up of the AFL-CIO In July 2005, several unions left the AFL-CIO taking with them 5 million represented workers to create the Change to Win Coalition Change to Win Coalition Service Employees International Union (SEIU) Teamsters Laborers United Food and Commercial Workers (UFCW) UNITED HERE Carpenters Farm Workers 26

27 The Largest Affiliated Unions AFL-CIO AFSCME 1.3 million AFT 1.0 million CWA 665,000 IBEW 630,000 UAW 624,000 CTW Coalition SEIU 1.3 million Teamsters 1.2 million UFCW 1.0 million UNITED HERE 435,000 Consequences of Break-up No Raid agreements are gone More aggressive bargaining approaches Use of Card Check for union certification 27

28 Health Insurance In West St. Paul Federation of Teachers v. Independent School District No. 197, West St. Paul, 713 N.W.2d 366 (Minn. App. 2006), the court ruled that: 1. Minn. Stat , subd. 5 prohibited a school district from reducing the value of benefits of its Choice Plan, even though there was no reduction in the value of benefits of the Elect Plan. 2. The court rejected the district s claim that its contract language ( The School Board reserves the right to select the insurance carrier and the policy for any group insurance coverage provided for the teacher. ) allowed it to make modifications in the group health insurance plan without first negotiating with the union. 28

29 Summary Healthcare issues Will dominate labor discussions Must be a shared responsibility Increasingly will drive your expense structure You must involve your employees The employee as the consumer has reached healthcare Employer has the responsibility to train the employee Results will be forthcoming 29