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1 STATE OF LOUISIANA OFFICE OF GROUP BENEFITS STUDY COMMISSION MEETING 0 THE ABOVE-ENTITLED MEETING WAS HELD AT THE CLAIBORNE BUILDING, ROOM - B&C, BATON ROUGE, LOUISIANA, COMMENCING AT :00 A.M., ON WEDNESDAY, OCTOBER 0, 00. REPORTED BY: LYNDA D. HABIG CERTIFIED COURT REPORTER 0 ASSOCIATED REPORTERS, INC. () -0

2 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 APPEARANCES Angéle Davis, Office of the Commissioner of Administration Aubrey Temple, Chair, OGB Planning and Policy Board Mike Baer, Active State Employees Dr. Patsy S. Jenkins, Superintendent of Schools Richard O'Shee, Department of Insurance Representative Tank Powell, House of Representatives Senator Jay Dardenne, Senate Senator Lambert Boissiere, Senate Dr. Daniel H. Johnson, Jr., Medical Care Services Forest Benedict, Higher Education Clark Cossé, LHA Allen Reynolds, Department of Civil Service 0 ASSOCIATED REPORTERS, INC. () -0

3 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 I N D E X PAGE Welcome and Introduction Review of 00 Study Commission Office of Group Benefits Today Operation Assessment Proposed Work Schedule Adjourn 0 REPORTER'S CERTIFICATE REPORTER'S NOTE 0 ASSOCIATED REPORTERS, INC. () -0

4 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 * * * WELCOME AND INTRODUCTION * * * MS. DAVIS: Well, good morning everyone. We're going to take this opportunity to go around and introduce ourselves and our affiliations to the entire group. I'm glad you all have agreed to help us with our second Group Benefits Study Commission. We look forward to working with you to develop recommendations for our future Office of Group Benefits. In a few moments after we introduce ourselves, I will take an opportunity to review the schedule in the executive order as well as what the last study commission did. So why don't we start with Dr. Jenkins. DR. JENKINS: Good morning. I'm Patsy Jenkins from Rapides Parish. I am Superintendent of Schools in Rapides Parish and president of the Louisiana School Superintendents Association. MR. COSSÉ: I'm Clark Cossé, and I represent the Louisiana Hospital Association. MR. BAER: I'm Mike Baer somehow or another ASSOCIATED REPORTERS, INC. () -0

5 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 representing state employees. MR. BREXLER: I'm Jim Brexler, and I run the Health Care Services Division, which is the Charity Hospital System. for Louisiana. SENATOR DARDENNE: Jay Dardenne. I'm the Chairman of the Senate Finance Committee. MR. DAVIS: Angéle Davis, I represent the Commissioner of Administration. MR. TEMPLE: Aubrey Temple, Chairman of the State Group Benefits Board. MR. O'SHEE: Richard O'Shee, Deputy Commissioner of Insurance over the Office of Health Insurance. MR. BENEDICT: Forest Benedict, Vice President of HR for LSU. REPRESENTATIVE POWELL: Representative Tank Powell representing the House. MR. REYNOLDS: ASSOCIATED REPORTERS, INC. () -0

6 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 Allen Reynolds. I'm Director of Civil Service. MS. DAVIS: Kip, do you want to introduce yourself and your key folks that you have with you? Oh, certainly. Good morning. I'm Kip Wall, CEO, Office of Group Benefits. I have with me here today Steve Eschbach, who is our consulting actuary from Milliman USA out of the Denver Office. With him is Mr. Dave White who is a reimbursement provider expert within their office. Sneaking out the back door back there is Ms. Cheryl Shilling who is coordinator and facilitator from the Office of Group Benefits for this project, and I will point her out. If there is anything you need before, after or during any of these meetings, Cheryl is the contact person and will be glad to accommodate you. MS. DAVIS: Thank you, Kip. And, yes, Cheryl has done an excellent job of getting us ASSOCIATED REPORTERS, INC. () -0

7 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 prepared for our first meeting. She put together these lovely binders that we have in front of us. Within your binder in the lefthand pocket there is an agenda that we're going to follow for this meeting. MR. TEMPLE: I'd like to introduce Hubert Lincecum (phonetic). He's the vice chairman for State Group Benefits, and he's going to stand in for me when I'm not at these meetings. * * * REVIEW OF 00 STUDY COMMISSION * * * MS. DAVIS: And then we have Dr. Culotta who also serves on the Office of Group Benefits Policy Board. So the scope of this executive order is to take a look at things that we did not have the opportunity to address in the last study commission and the areas that needed further work in the last study commission. One of the very first things that we did say that we would do in the last study commission is to conduct an internal operational assessment of the organization. We did hire through the RFP process a ASSOCIATED REPORTERS, INC. () -0

8 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 consultant to do the preliminary consulting work on that. Milliman received that contract. They have completed their internal operational assessment. That is found in the navy blue book that is at each of your places. And you'll have an opportunity to receive an executive summary from Milliman on the results of that assessment. The Study Commission executive order also calls for us to identify and evaluate best practices comparing us with other organizations, and this has also been done as a part of the assessment that Milliman provided for us. Identify and evaluate best practices and pharmaceutical benefits. We will have guest speakers come in to make presentations and recommendations to us in a subsequent Study Commission meeting. Analyze future impact of providing health benefits on the state budget. This will be an issue that we will explore in depth. We have retained the services of Milliman who is the actuary for the Office of Group Benefits who will be providing us with the necessary information that we need for the ASSOCIATED REPORTERS, INC. () -0

9 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 proper review. We will evaluate provider reimbursement methodology and rates. This is something that we've been working closely with Clark Cossé's group. So I'm sure that Clark will be instrumental in helping us with those discussions. We will explore the competitive medical management systems, which is disease management systems, and how that could benefit the Office of Group Benefits. We actually did put an RFP out for disease management systems. I believe that we are ready to make an award on that. So Kip is going to bring us up to date on where we are with that today. And we did contract with Covington & Burling to explore the Medicare buy-in which was the recommendation of the last study commission, but we did not have the opportunity to complete the work, so the results were not reported in the last study commission. And I believe that we should expect that report -- Before the end of the work of the Commission. A draft is due in our office this ASSOCIATED REPORTERS, INC. () -0

10 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 week. MS. DAVIS: 0 0 During the course of the Study Commission, that work will be presented to the Study Commission so that the Study Commission can evaluate the work and the recommendations that are being made and make a decision as to what we want to do. And of course as are in all executive orders, our recommendations and information will be made available in public hearings. What I would like to do right now is just review the 00 study commission recommendations. Many of these recommendations did receive legislative support and were actually passed with the help of Senator Dardenne, Representative Powell and Representative LeBlanc and Representative Murrey and many others who supported the Office of Group Benefits bill that we passed in the session before last. Active vesting of retiree health, state contributions toward active coverage, providing plan choice, uniform premiums plan designs, claims administration, medical ASSOCIATED REPORTERS, INC. () -0

11 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 management, or disease management, plan procurement. Plan governance, continued evaluation of the plan and additional benefit improvements. Retiree vesting schedule, most of you are already familiar with this. We did implement this. As a result of implementing this, we have enrolled additional employees. This says,000 additional employees. I'm not sure if all of those we can contribute to the vesting schedule, but it certainly is a significant number of them we can contribute to the vesting schedule. Schedule of state contribution increases in the state's contributions towards the premiums. We are right now, as you can see, the state contributes percent towards the premium, and next year we will contribute percent towards the premium. Plan choice, we still have a PPO plan statewide. We have an EPO plan statewide. Region, we did a pilot program where we have offered Blue Cross/Blue Shield of Louisiana and FARA/Best Care. HMO plan choice, on your handouts you do not have Vantage, so you need to make that correction ASSOCIATED REPORTERS, INC. () -0

12 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 on your handout. But we do have Ochsner and Vantage offered as an HMO choice. And I believe that Ochsner is offered in Baton Rouge, New Orleans, Shreveport -- North Shore. MS. DAVIS: Why don't you just say it. North Shore. MS. DAVIS: Okay, and the North Shore, and Vantage is offered in Monroe. LSU System employees, we entered into an arrangement with the LSU System to conduct a pilot program. We'll be hearing a little bit more about that pilot program from Forest who is serving on our Study Commission, but it is a consumer healthcare-driven model, and it's going to help define contributions. Uniform premiums and plan design, Kip is going to talk to us a little bit more about this and the direction the program is moving towards. Claims administration, again we have a complete assessment that was done on ASSOCIATED REPORTERS, INC. () -0

13 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 the claims administration, and Kip is going to bring us up to date in his presentation that he gives today. Medical management or disease management, this is the RFP I mentioned in my opening remarks. We are targeting the three diseases that are the most significant throughout our member population, heart disease, pulmonary disease, diabetes. The disease management program should essentially aid the plan in reducing our costs. Plan procurement, we've had several discussions about plan procurement. We haven't finalized anything. We have a couple of not RFP's but an invitation to -- Notice of intent to contract. MS. DAVIS: -- Notice of intent to contract -- thank you, Kip -- out on the street, and we're awaiting the results of that. Kip is going to give us a little bit more information on that. Current plan of government, governments subsidy, this is also part of the ASSOCIATED REPORTERS, INC. () -0

14 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 omnibus bill that we passed in the session before last. We relied on -- and I guess how it works for all practical purposes, the Office of Group Benefits, Kip makes recommendations to the Commissioner of Administration, the Planning and Policy Board makes recommendations to Kip, and everything goes through legislative oversight. New Study Commission, this is where we are right now, established by Executive Order 0-, and I believe 0- was amended to include the director of Civil Service. These are some of the additional benefit improvements that we've been working on that some of them were discussed during study commissions, some of them are recommendations of the study commissions, some of them are recommendations of Kip and I, just to make the plan more attractive for our state employees and to provide additional and real benefits to our state employees. We now have a flexible spending account. We have an additional life insurance option, and Tank has worked hard on that. We have dental/vision discount programs that are ASSOCIATED REPORTERS, INC. () -0

15 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 common throughout other private and public sector programs. We have optional insured dental plan programs that are available. The medical spending account, we now have participants. I'm a little bit disappointed in this. I think this is very low. I think that we need to work very hard to make sure that our members are aware of this, and we're going to have to do a little bit of grass roots marketing because plan members can save so much money by using a medical spending account. The dependant care spending account, I'm a little bit disappointed in that as well. I think that even though we have just started these programs, I think that the participation is very low, and I think that we need to do a better job of communicating exactly what the programs entail and how plan members can save money by enrolling in these programs. These are administered by the Fringe Benefit Management Company. Additional life insurance, Kip is going to tell us a little bit more about this. We have approximately,00 members enrolled. ASSOCIATED REPORTERS, INC. () -0

16 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 It's offered by Prudential. It's age rated, and there is additional coverage for one, two and three times the current coverage up to $00,000. Dental/vision discount program, this is something that I really pushed for because I wanted our employees to have a benefit, and when I left state government and went into the private sector, I felt that I had very rich plan benefits with IBM, and I really wanted to do something in the area of dental and vision for our employees, and we have implemented this. And I'm getting a lot of positive responses to this, and plus I was able to get my dental coverage because my COBRA ran out with IBM. We have approximately -- this is the optional insured dental plan. Approximately,00 members enrolled. I think that's low as well. And if there are any questions or comments from any of the Committee Members, I'll entertain them at this time. REPRESENTATIVE POWELL: Is Prudential going to go forward with our plan with such a low participation, ASSOCIATED REPORTERS, INC. () -0

17 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 optional life? MS. DAVIS: Have you heard? Do you have a report on it? They will go forward, Tank, but they will not guarantee the rates based on low participation. REPRESENTATIVE POWELL: And I'm just really surprised that we have such low participation. I think it has something to do with the delivery system. Many of the agencies chose not even to have it presented to their employees. I called four times before the House of Representatives presented the plan, and I was presented the plan four days before the closing of the time, enrollment period. But that was a wonderful plan, and it's hard for me to believe only,00 people chose to participate. MR. TEMPLE: That might be a point for us to review is just what is the delivery. You know how do we deliver information to our employees statewide, and what is the responsibility for ASSOCIATED REPORTERS, INC. () -0

18 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 the HR folks? This is something I've had a problem with over the last four or five years. Not because Forest is sitting here, but LSU has always been forceful and been involved in trying to communicate to their folks. But I think we have similar agencies that don't do as good a job, and, therefore, their employees suffer as a result of that. MR. BAER: Well, I think we do the employees a disservice. I mean, this was a plan that you could be diagnosed to die within ten days, and if you were working, you could participate in it, if you were uninsurable, if you have diabetes, if you have heart trouble, and I just -- REPRESENTATIVE POWELL: Only if you were covered under the life insurance plan. MR. BAER: That's correct, and we had to do that or we would have wiped out the basic plan because our rates were so low on this optional plan. Can we do some type of -- I remember back during the constitutional convention we ASSOCIATED REPORTERS, INC. () -0

19 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 talked about the same thing as far as veto sessions and other things, and what the members came up there with was an opt out plan. Instead of saying everybody opt in, what you say is if you don't want to be part of it, get out. Just sign a piece of paper. MR. BENEDICT: Well, I think you have a problem with that when you're asking to pay a premium. That would be difficult, I think, to -- MR. BAER: Well, if the state is paying the majority of the premium -- REPRESENTATIVE POWELL: Yes, but this was volunteered. The employee had to pay the premium a hundred percent. MR. BENEDICT: Yes, I don't think you can require an employee, you know, to take that. One of the problems with the design of this is, you know, the first basic plan is not an age-rated plan. So -- and I think that you're trying to integrate that basic plan with the optional plan. You're trying to put two plan designs ASSOCIATED REPORTERS, INC. () -0

20 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/ together that don't fit together, and so for a person who's years old, to pay cents a thousand for coverage, actually you pay half of that, so you pay, and in the market I can go out and buy it for what,? REPRESENTATIVE POWELL: Seven cents. MR. BENEDICT: Seven cents, so, you know, that's, I think, one of the biggest problems with why. REPRESENTATIVE POWELL: But, you know, if they had understood it, if you buy cents, you dollar average down, and -- MR. BENEDICT: And, of course, if you're over 0 in that deal, it's a heck of a deal because you can't buy insurance any cheaper than that. REPRESENTATIVE POWELL: I think mine was cents or something like that. MR. BENEDICT: So I think maybe this is not the forum for that, but I -- that's one of the challenges for that particular plan ASSOCIATED REPORTERS, INC. () -0

21 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 design. MR. BAER: 0 0 Don't we have all state employees in the cafeteria? No, we do not. MR. BAER: We do not? And let me address a couple things including that comment. On the opt in/opt out, I think that's something that is appropriate for this Committee to consider. We've talked about it in the health insurance as well as the life insurance. As I understood, if Mike is describing what we've discussed, it is that everyone would be rolled into the health insurance program, and they have to sign a form to get out. We have declined to pursue that because if we do that, then some plan members are not going to be aware of it. You'll be surprised how many state employees don't get good information, and the administrative -- we were concerned about the administrative problems caused by ASSOCIATED REPORTERS, INC. () -0

22 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 rolling these people in and getting them on the books, then having to take them off the books because it's got to be done at the agency level, sometimes field agency level, then at our level, and it's going to have to cycle back completely through the system. MR. BAER: Do you do premium only on this, too? MS. DAVIS: Even more important than that, the premium comes out of their paycheck a month ahead of it going into effect, and so whenever you're talking about taking money out of someone's paycheck, you have to be very sensitive to -- MR. BAER: Well, the Civil Service is what, 0 percent of our people, and they -- pretty much that's the place you come back, to a centralized point. Civil Service is only about, I'm sorry, Angéle -- it's,000 of our,000. MR. BAER: ASSOCIATED REPORTERS, INC. () -0

23 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 That's all? 0 0 No, less than that. It's less than that. It's about 0/0. School board employees and Civil Service people, and we fight a daily battle -- well, maybe not daily but at least once or twice a month we have plan members who have gotten into a cafeteria program, whether it's ours or one administered by a school board, and they want to get out. And they cannot understand. I wrote a letter to a guy from Jena last week where I'm from explaining to him that he couldn't get out. He had insurance through his wife since the beginning of the year. He's gone to work offshore. He wants out. MS. DAVIS: And this is not even through the State. This is through -- Right. This is not our program. They don't understand it, and they get violently angry when you tell them, and you cannot convince them it's an IRS regulation. MR. BAER: ASSOCIATED REPORTERS, INC. () -0

24 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 So they want to quit the insurance program? 0 0 Right. He can be covered now offshore through his employer cheaper than through the LaSalle Parish School Board. He wants out. He's just seeing dollars out of his pocket, and it's -- MR. BAER: Well, Kip, if it's a choice between having some people moan and groan at you about wanting out and keeping,000 people covered, I think we would much rather have you have to field those phone calls than the other way because the problem I see is I know how cafeteria works. I do flex spending. I put $,000 in this year because of illnesses, ended up using $,000 so far. It looks like I may give the government some of my money. My insurance is covered that way. When I had dependant care back in the '0s, that's the way I did my dependant care. And except for guessing how much you're going to spend on medical that year that's not insurable, it's probably the greatest thing in the world. In ASSOCIATED REPORTERS, INC. () -0

25 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 my case, it saves me a third of my -- the federal government is paying a third of my cost. And I'm not ruling it out. We'll be glad to follow to the extent possible the wishes of this Committee if they're finalized, but keep in mind that a lot of those employees are not going to want in this program because they have health insurance coverage. SENATOR HOLLIS: That's right. They have other options. MS. DAVIS: This is what we can do. We can ask Kip to give us the pros and cons of the opting in and opting out in an executive summary at our next meeting, and then also what we do want to do is we want to task someone with the delivery method for the plan products and services because I think that's very important, and we do keep having problems with ensuring that the agencies are actually providing the information necessary to the employees to make the correct choices. ASSOCIATED REPORTERS, INC. () -0

26 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 REPRESENTATIVE POWELL: And let me say on the optional life. I may have sounded like I thought it was State Group's problem, but in fact it's the HR people. I went to the meeting in Hammond. The State Group did a great job, but those HR people just sit there passing the day, and they didn't even go back and present it to some of their employees because I've been telling people that this plan was coming, and it went by, and they said, "It wasn't offered to us." So that's part of the problem on delivery. MS. DAVIS: And we'll address the like as well because I'm not exactly sure if there is any extensions that we can get or what we can do with a life insurance company, but we need to look into that because I agree with you that enrollment is very low. So next we're going to move on to Kip. Kip has a presentation for us. * * * OFFICE OF GROUP BENEFITS TODAY * * * I'm going to stand up and move ASSOCIATED REPORTERS, INC. () -0

27 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 around. I just feel more comfortable doing that. MR. BAER: A moving target. That's right. It's hard to hit a moving target. I welcome Senator Boissiere who has joined us. Put his name on the record. And I appreciate this opportunity to speak to you. I face a dubious task when I'm out talking to stakeholders and other groups. I've got a lot of improvements that I could show. I mean, this agency is not the agency it was three years ago, and, you know, I credit the employees in the office who have undertaken a lot of additional work and have worked to improve the operations, the legislature and the administration who have funded this program and made it financially strong. But at the end of the day and after I say all the good things, after I tell all the good news, the bottom line to the people who pay the bills and the people who consume the services is what's going to happen in the ASSOCIATED REPORTERS, INC. () -0

28 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 future. And that's the negative. That's the one thing that undermines everything we've done because we are facing double digit health insurance inflation in the foreseeable future. 0 0 We're not alone. It's happening in other private industry. It's happening in other states, and we have gathered the lowhanging fruit. From this point on there will be no gain without pain, and that's why we're having this group meet and others and are soliciting input so that we can make informed decisions. Just as a quick review, we operate a self-funded life and health benefits program for state employees and participating school boards. We are not an insurance company. We are an employer-sponsored health plan. Total membership, we insure or provide health benefits to almost a quarter of a million lives in the state of Louisiana. We're somewhere right up there with Blue Cross and Ochsner as far as health benefits administered. We have state agencies that ASSOCIATED REPORTERS, INC. () -0

29 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 participate, school boards. Of those, are parish or city school boards. The remainder are charter schools. We offer three options at this time depending on availability in a particular area. The PPO is our traditional indemnity program. It is available statewide. The EPO is available in some form statewide at this point. Part of it is being administered by Group Benefits. Part of it is being administered by third parties. We'll go into that a little bit more later on, and then we do have HMO options available. Basically, in the southeastern corner of the state, in Monroe, we are at a point in the cycle where we have to rebid HMO contracts. That process is underway at this time. I'll talk about that a little bit more. If you have any questions at any point, don't hesitate to ask them. This is important. I'm talking about enrollment. Demographics in health care, demographics are your destiny. They are going to drive where you are going to be at the end of the day. I don't dispute that you can affect an outcome through management, ASSOCIATED REPORTERS, INC. () -0

30 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/ through benefit design, other factors, but demographics are your ultimate destiny. You can see that females in the different plans outnumber males by almost a two to one margin. The fact is, for the most part females are going to have higher healthcare costs because of births and pregnancies, and so that's going to drive our experience. One of the toughest challenges I face when I'm out speaking to plan members is, "Why does my brother-in-law have cheaper insurance?" Well, it could be any of a thousand reasons. They may work for an employer who doesn't provide retiree health benefits, so that could make it cheaper. They could be working in an agency or entity which has a lot of younger people, mostly male. I mean, if they work for a cement contractor, that's going to generally be younger male employees. They're going to have a different rate. So this is part of what's impacting us and driving our cost. Average age by network, and this is an important concept you need to understand because it's going to impact us in the future. ASSOCIATED REPORTERS, INC. () -0

31 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 Look at the PPO. If you are aware of the work of the last study commission, we were concerned about the death spiral looking at the whole program. We have addressed that to some extent or should I say to the extent possible through the benefit side, vesting and other measures. Now, we still have this PPO. This is just by enrollee. That means state employee. That doesn't mean spouses, children. I'm going to get to that next, but the numbers remain common. We still have a higher age in our PPO than we do in our other plans, and what we have got to do in order to continue this program and be successful is we have got to pool these resources. We cannot isolate our people in different plan designs. The EPO has attracted a younger, healthier population. It has a plan design similar to an HMO. You have a copay with very limited deductibles, and you don't have a gatekeeper like you do in a standard HMO. It actually is a richer benefit design, but we did not attract a lot of people out of the PPO. Some of it is because we don't have wide ASSOCIATED REPORTERS, INC. () -0

32 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 dispersion with PPO because we cannot contract the rates we need statewide, but a lot of it is there is a reluctance for some of the older plan members in the PPO to experiment. They've been in the PPO, they've been there all their life, and they're not going to move, and so they remain there. And so one of our big challenges is how do we keep our risk pool together because if we start segregating them up, you can tell what's going to happen here. Costs are going to continue to increase, and eventually you're are going to have just a product that is no longer affordable. Now, this includes spouses. The same chart, the same type of information, but it includes spouses and dependants, in the PPO, about years younger than the average private sector employer, somewhere along in there, to years. MR. ESCHBACH: Four to five years old older. Did I say younger? MR. ESCHBACH: ASSOCIATED REPORTERS, INC. () -0

33 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 Yes. 0 0 Four to five years older, I'm sorry, than the average private employer group. But then look at the EPO and the HMO. Same information, same challenge. Enrollees by enrollment class. Now, these are our premium tier breakdowns. You'll see that about -- now, this is just employees. About percent of our employees are in single coverage. Families, about percent. I think that is employee children at percent and employee spouse at percent. Keep in mind that the big cost drivers in this group will be this percent over here because those are probably employee spouses. Those are primarily empty nesters age 0 and above, a very high-cost group, and the family group. When you bring in the spouse and the children, the demographics change a little bit, and you see how the cost factors play out there. This is basic information. We process. million claims a year. We receive over 0,000 claims every day in our office that we have to pay. A little bit of good ASSOCIATED REPORTERS, INC. () -0

34 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 news here. We are now -- Hubert, it should be over what, 0 percent on our EDI? MR. LINCECUM: Yes. And we are approaching 0 percent. We were just able to work out an agreement with Arkansas Blue Cross/Blue Shield. They're the Medicare processor for Louisiana. They're shipping claims to us EDI, and EDI is electronic delivery of claims. So we're over 0 percent, pushing 0 percent. Now for the most part over the next year we will have a concentrated program. We will have a dedicated employee in the agency who's working with hospitals and other providers to get them online as well. Current year budget, $,000,000, and another very good point for us is that at the close of business June 0th we had a surplus for the first time since -. It was a very miniscule surplus because what we did, we spent every dime we could get our hands on, but in effect we paid down our IBNR by almost $,000,000. IBNR is basically your ASSOCIATED REPORTERS, INC. () -0

35 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 loss reserve, what we owe in the future. So we reduced our IBNR by almost $,000,000. We believe at this time with the deficit reduction act sponsored by the administration, passed by the legislature, by the end of this year we will have a net debt balance. Net debt balance meaning we will have enough money on hand to offset our liabilities so that we will not impact the state's CAPRA and the state's borrowing expense. Here is where the money goes, $,000,000 each year of HMO's primarily to Ochsner. Vantage in Monroe is a small regional HMO, and they have,000 to,000 lives probably. Health plans, $0,000,000. That's going to hospitals, that's going to doctors, ancillary services, labs and others, DME. Drug plans, $00,000,000. We need to make a point here. The year before this, and this being 00, in , our gross expense was $,000,000. We changed our plan design, went to a coinsurance design. That went down to $00,000,000, but that was ASSOCIATED REPORTERS, INC. () -0

36 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 strictly from cost shifting. We cost shifted more expense back to the plan member. We are now on track now. This year we're anticipating spending $0,000,000 on drugs. About a 0 percent trend. That's consistent with industry. Mental health and substance abuse services. We're going to talk about that a little bit more. It's always a challenge. That is capitated, meaning we contract on a per employee, per month basis for that with a company called Magellan. Life insurance claims, $,000,000. Administrative costs, $,000,000. Now, here it is in a pie chart, and as we go through this, you need to conceptualize this because we're going to come back to it. Basically, as we go forward and we face the inflationary factors that are present out there, we're either going to have to make this pie larger, or we're going to have to slice it differently. And as I said, neither one of those alternatives are going to be without some grief. Annual cost per employee. This is a ASSOCIATED REPORTERS, INC. () -0

37 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 breakdown in comparison. On the medical side, EPO,,. Again, it's counter intuitive because it is a richer plan of benefits than the PPO. The EPO has a $00 deductible only for services that aren't covered by a copay. Most services are. The PPO plan has a $00,000 deductible, $,000 out of coinsurance. But because you've got a healthier group in your EPO, your costs are lower. Total,,. MR. BOISSIERE: You don't have a cost for the HMO? We can figure that out. We didn't include that, but we could figure that out. This is some information that was given to me by a group recently, and I just included it. It's not too reasonably specific, but it does give you an overview. I mean, if misery loves company, it could be worse. We could be in Nebraska or Maine. These are for state employee contributions. But again, any of this information has to be looked at with the background behind it. Mississippi, for example. Their maximum out- ASSOCIATED REPORTERS, INC. () -0

38 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 of-pocket expense on their plan is $,0 as compared to our $,00. They do have all the state employees in their plan because they pay 00 percent of the premium. They provide no coverage toward spouses and dependents. So there is a lot of variation in here, and, you know, the anomalies can generally be explained. But just looking at it, we're not out of the ball park on our per employee cost. Prescription payments, this is something that I've spoken about earlier. This begins at September th of last year. It shows our prescriptions experience after the change in benefit design. It's climbing, and it's going to continue to climb. Our consultants tell us OGB will have a budget of $,000,000,000 by 00. That's two years away. Keep in mind that if you take our budget and combine it with DHH, combined we're looking at over $,000,000,000. That's almost one third of the state budget. Also, keep in mind that currently the experts are predicting that healthcare costs will double in the next five to ten years. So we're talking about a significant challenge ASSOCIATED REPORTERS, INC. () -0

39 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 for the State of Louisiana and how we're going to meet that challenge. We'll talk a little bit now about our partners. AdvancePCS is our PBM, our pharmaceutical benefits manager. They will be here next week to talk to you, and as I'll explain at that time, they are going to present to you some of the options they presented to us as far as plan design changes. Now, AdvancePCS is the largest PBM in the company. They cover several million lives. So they know what's going on around the country. The options that they are going to present to you are ones that we have not adopted for one reason or another, primarily because of the impact in our opinion on plan members is not worth the savings generated. But nevertheless, it's a policy issue, and it's something appropriate for you to consider. We're also going to have Express Scripts here next week. Express Scripts bid one of the multi-state PBM programs where several states participated. They have a little bit of different design. At this point, we have not chosen to move to Express ASSOCIATED REPORTERS, INC. () -0

40 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/ Scripts, again, because the plan design changes to us don't justify the change at this point. But it is something appropriate for you to consider, and if you want to make recommendations or give advice, that's fine. Magellan. Magellan is our mental health and substance abuse contractor. If you have had a chance or if you in any way get to keep up with what's going on in the healthcare industry, you will know that for now Magellan is one of the largest managed mental health providers in the country. They are like an HMO for mental health and substance abuse services. They are now facing financial difficulties. Like many other companies in the late '0s, they bought up a lot of their competition. Now they're having problems servicing their debt. They have been delisted by the New York Stock Exchange. Their creditors at this time have not renewed their line of credit, and so we're dealing with that internally now. If this company fails, it will be drastic because we are statutorily mandated to provide mental health and substance abuse benefits, and we have no ASSOCIATED REPORTERS, INC. () -0

41 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 mechanism internally to do that on short notice. MedPlans. MedPlans is our outsourcer for claims adjudication. We basically process our claims into the system internally. MedPlans, which is located in Missouri, won the bid for claims adjudication through competitive bidding, accesses the claims and provides us assistance in overflow. As I mentioned, we see spikes during the year, winter months, other times. We need help with backlogs. We offset that to MedPlans. MedPlans also recently was the highest bidder in the competitive bidding process to outsource some of our customer service functions. One of the biggest complaints we always hear is when I call up the Group Benefits office I can't get through. Well, we're going to put more people on the phones. We're going to bring MedPlans in to provide us with additional telephone resources in order that we can better service our members. My goal is to get to a two- to three-minute response time on the telephone, and so we're pursuing that. ASSOCIATED REPORTERS, INC. () -0

42 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 Fringe Benefits handles our cafeteria plan for us. Competitively bid. They do this cross country, well known. OHP, Ochsner Health Plan, provides HMO services, again, in the southeastern primary corner of the state. This year they added Shreveport. Vantage, who is not up here, provided services in Monroe. BestCare/FARA provides EPO products in Baton Rouge, Houma, Thibodaux, Lafayette, Lake Charles and Alexandria. They are a third-party administrator. This is a self-funded plan. Blue Cross/Blue Shield, they're providing EPO services here in Baton Rouge. MS. DAVIS: And Vantage. Yes, Vantage, which is the HMO in Shreveport. Again, this is a presentation I make to a number of people, one of the quotes in predicting that healthcare costs will double in the next five years. And that's a prediction from a business insurance article expecting the prices to go up more in 00 than in 00. ASSOCIATED REPORTERS, INC. () -0

43 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 Benefit modification proposal. These are proposals that are being considered for the upcoming plan year beginning July, 00. We are looking at developing a pilot program for the surgical treatment of morbid obesity. We are trying to work with LSU and other payers on developing this program. At this point, we have not been able to reach a contractual arrangement, but we are going to continue to pursue that. Increased maximum cost for prescriptions to $0. Currently, if a plan member goes to a drugstore and buys a drug or gets a prescription filled, they pay for half the cost, 0 percent of the cost of that drug up to $0. So if the drug costs $0, they pay $0 and we pay $0. If the drug costs $0, they pay $0, we pay $0. What we are going to do in order to offset some of the cost increases we're seeing, next year we'll increase that per script max to $0. Currently, under the program, we have a cap. After a plan member spends $,000 on copays or coinsurance out of their pocket, they can obtain generics for free and brand name drugs for a $ copay. Next year we will ASSOCIATED REPORTERS, INC. () -0

44 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 increase that $,000 cap to $,00. MR. BAER: Now, cafeteria plans work on a calendar year, but you all work on a fiscal year? Yes. MR. BAER: That's got to be awful hard for anybody who belongs to a split spending period. Well, now, our cafeteria plan is on a fiscal year, but some of the participating agencies are on calendar years. MR. BAER: I thought the federal government required it to be on a calendar year basis for income tax purposes. In fact, I'm 0 percent sure. I'm going to talk about that in a little bit. Right down at the bottom here we're trying -- I don't know if it's going to address what you're talking about, but we are ASSOCIATED REPORTERS, INC. () -0

45 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 working on that. We are also researching coverage for genetic testing. As many of you are aware, there have been great advances made in the number of tests, the reliability of the tests, validity of genetic testing. We would like to bring some of these benefits to our plan members. So when they're looking at -- MR. TEMPLE: Kip, you brought up an interesting point there. If we're talking about a calendar year problem that's associated with agencies, if you've got agencies handling it different ways, then you get some employees that's going to be very impacted by that, and it needs to be rectified. I mean, how are we going to address these questions as they come up? MS. DAVIS: We're taking notes, and what I'll do is I'll go through and try to handle this as much as we can administratively or appropriately. I mean, if there is a point you want discussed or researched, please let us know as ASSOCIATED REPORTERS, INC. () -0

46 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 we're going through. MR. TEMPLE: That's why I wondered. All right. Institute proviso, that once a person retires here she will always be treated as a retiree for all future purposes. Due to changes in the law, many retired state employees can now return to active employment without penalty. We think that's great. We think that's good. The problem is when they start flopping back and forth, that has a fiscal impact on us. Also it's an administrative nightmare. So we already pursue this at this point, but what we're going to do is we're enacting a rule to make it absolutely clear. Once you are a retiree, you will always be treated as a retiree. You will always be an obligation of the agency from which you retire, period, end of story no matter whether you come back to work, how many times you come back to work or any other. MR. BAER: What about everybody that joins the three years of drop? ASSOCIATED REPORTERS, INC. () -0

47 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 If they're retired? MR. BAER: 0 0 Well, what happens is, let's take me for instance. The law mandates that the Secretary of the Senate, duration term date ends at age 0. So at age 0 I was told to go into drop. I went into drop for three years and kept right on working. I'm on active benefits again now. Of course, during that time they didn't think -- you know, I couldn't give them anything, but I wasn't ready to retire. Now I'm getting supplemental benefits built up in the retirement system (inaudible). I don't know what LASER (phonetic) it, but you take for instance Bob Keaton also who works in our shop, he retired but he's back working. Well, and that's who this is applying to. If you retire, if you file papers with LASER (phonetic) or Teacher's Retirement saying you are retiring and that is processed, you will be a retiree. MR. BAER: But on the retirement side of it -- ASSOCIATED REPORTERS, INC. () -0

48 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 and Lambert, you will know this -- there are certain mandates that are put on state employees of when they've got to take it to get their drop program, right, Lambert? A lot of people take drop and never retire, at least not for several years. This isn't going to impact -- this is a terminal accounting, and it's a premium issue for us, a revenue issue for us. So this won't impact that. The next item, and this is something that's going to be of great benefit -- Mike, we're going to have to research that issue about the calendar year, but we are hoping to align the plan year with the deductibles. What happened is several years ago in the early '0s when we were having the last inflationary cycle in health care, agencies were getting hit with mid year premium increases which was impacting their ability to plan their budgets. So they asked Group Benefits, according to legend, at that time to move to a fiscal year basis for better payment purposes. Because there is a cost to this, ASSOCIATED REPORTERS, INC. () -0

49 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 they did not move the deductibles. If you move the deductibles forward, then either plan members are only going to get their deductible for six months and have to incur an additional deductible, or the program has to assume the cost of the deductible. We are presently planning to assume the cost of the deductible from the period of January, 00, through June 0th, so basically they're getting -- the plan members will get a deductible, one deductible, for months so that we can align the plan year deductibles with the fiscal year. MR. BAER: How much is that going to cost us? Steve? MR. ESCHBACH: As I recall, it's about $0 million for medical and about $ million for drugs. But it will be made up from our existing funding. Other considerations that are underway at this time, change wellness benefit to allow a maximum benefit of $00 ASSOCIATED REPORTERS, INC. () -0

50 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/ during the qualifying, not just one fiscal year. This is basically the way the plan document had been written in the past is you got $00 for a wellness physical. We're changing that so that if a doctor sends in any bill during the year that is coded as wellness, then that's going to apply. That allows plan members to use wellness services throughout the year and not just through just one office visit, or they may use it for one office visit. Either way it doesn't matter. I'll talk a little bit more about this as we go forward. We're currently soliciting program proposals for EPO and HMO on a statewide and regional basis. As I mentioned earlier, it's now at a point in time when we have to go back out and bid our HMO contracts. So we're testing the whole universe. We're asking for EPO and HMO services on a statewide basis, on a regional basis, on a self-funded basis, and on a fully-insured basis. So we're going to know what's out in the market. And then we hope -- MR. BENEDICT: ASSOCIATED REPORTERS, INC. () -0

51 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 What's your rationale on a self- funded HMO? 0 0 Go back to those graphs that I showed you earlier. We cannot isolate our people into different groups. If you look at the age difference between the PPO and the HMO, and you see that we're losing the benefit of those younger, healthier people who are captivated in that HMO. MR. BENEDICT: And the advantage of being in managed care at least to start with -- and I'm getting the efficiency of that -- in terms of the lower premium. So if I join managed care, as a member of that I'm not getting the advantages anymore. You're going to spread the risk; you're going to take that savings and put it into the plan? We are going to keep our risk pool so that we don't have our risks segregated into younger, healthier and older, sicker. MR. BENEDICT: I hope we can talk about that as a ASSOCIATED REPORTERS, INC. () -0

52 OFFICE OF GROUP BENEFITS STUDY COMMISSION - 0/0/0 0 0 committee. That's a pretty significant decision. We've got a lot of plan members. I don't know what your enrollments are in Baton Rouge. What is it, 0 percent? Close to it. MR. BENEDICT: In HMO's. So that's a very significant decision. Well, if we pay -- oh, absolutely. We don't dispute that. Keep in mind as we go out -- last time we only had three HMO's bid on this contract. One of them is GulfSouth, and they've since gone out of business. Now we're opening it up, so the problem can be exaggerated beyond its effect now. We can have more HMO's and a further segregation of our business. And if you're not careful you're going to definitely impact your PPO and leave it segregated and unaffordable. MR. BAER: So you are going to be spreading the risk? ASSOCIATED REPORTERS, INC. () -0