BCSD Insurance Committee Meeting 01/20/2014

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Reynold Victor Bryant
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1 BCSD Insurance Committee Meeting 01/20/2014

4 Quick Overview HSA - Health Savings Account Employee owns Funded by Employee, Employer, or both Employee self-directs expenditures Federal Government sets Rules HRA Health Reimbursement Arrangement Employer is plan sponsor Funded only by Employer Employer determines expenditure qualification Employer sets Rules per Federal Gov t guidelines Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 4

5 HSA and HRA plans HSA a tax-exempt trust or custodial account that you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA. HRA A health reimbursement arrangement (HRA) must be funded solely by an employer. The contribution cannot be paid through a voluntary salary reduction agreement on the part of an employee. Employees are reimbursed tax free for qualified medical expenses up to a maximum dollar amount for a coverage period. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 5

6 General Features of HRAs/HRAs Eligibility Health Reimbursement Accounts (HRAs) Employees whose employers offer this benefit. Employers are not restricted by size. Health Savings Accounts (HSAs) Individuals with qualifying high deductible health insurance plan. Ineligible individuals may keep previously established accounts but cannot make contributions. Definition of qualifying health insurance Integrated HRAs are permissible Self-only deductible must be a minimum Considered integrated if employee of $1,250, with a maximum out-of-pocket of is also enrolled in the primary $6,350. group health plan coverage. Standalone HRAs are not permissible. $2,500, with a maximum out-of-pocket of Family deductible must be a minimum of HRAs paired with individual market $12,700. coverage are considered Standalone. Contributions Only by employer. By employer, the account owner, or both. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 6

7 General Features of HRAs/HRAs Annual contribution limits Health Reimbursement Accounts (HRAs) None required. Employers set their contribution levels. Qualifying expenses Most unreimbursed medical expenses, though employers may impose additional limitations. May be used for long-term care and health insurance premiums, if the employer allows. Allowable nonmedical withdrawals None Health Savings Accounts (HSAs) The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. For 2014: Self-only HDHP coverage can contribute up to $3,300, Family HDHP coverage can contribute up to $6,550. HSA catch-up contributions up to $1,000 are eligible for those age 55 or older. Most unreimbursed medical expenses. May be used for premium for long-term care insurance, COBRA, health insurance for those receiving unemployment compensation under federal or state law, and Medicare and other health care coverage if owner is 65 or older (other than premiums for a Medicare supplement policy, such as Medigap). Permitted, subject to income tax and 20% penalty except in cases of disability, death or attaining age 65. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 7

8 General Features of HRAs/HRAs Carryover of unused funds Health Reimbursement Accounts (HRAs) Permitted, although some employers limit amount that can be carried over. The employer is not permitted to refund any part of the balance to you. These amounts may never be used for anything but reimbursements for qualified medical expenses. Health Savings Accounts (HSAs) Full amount may be carried over indefinitely. Portability At discretion of employer, though subject to COBRA provisions. Yes Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 8

10 FREQUENCY PPO $500 Plan Deductible Deductible only Dollars Frequency Cumulative % Bin Frequency Cumulative % $ % % $ % % $ %More % $ % % $ % % $ % % $ % % $ % % $ % % $ % % More % % $500 Ded Plan Frequency Cumulative % 120% 100% 80% 60% 40% 20% 0% DEDUCTIBLE MET Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 10

11 FREQUENCY PPO $500 Plan OPM Sum of Coinsurance + Deductible Dollar Frequency Cumulative % Dollar Frequency Cumulative % $ % $ % $ % $ % $ 1, % $ 1, % $ 1, % $ 1, % $ 2, % $ 2, % $ 2, % $ 2, % $ 5, % $ 5, % More %More % $500 Ded Plan Frequency Cumulative % $- $500 $1,000 $1,500 $2,000 $2,500 $5,000 More COINSURANCE & DEDUCTIBLE MET 150% 100% 50% 0% Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 11

12 FREQUENCY PPO $500 Plan OPM (including copays) Sum of Copayment + Coinsurance + Deductible Dollar Frequency Cumulative % Dollar Frequency Cumulative % $ % $ % $ % $ 1, % $ 1, % $ 1, % $ 1, % $ % $ 2, % $ 2, % $ 2, % $ 2, % $ 5, % $ 5, % More %More % $500 Ded Plan 60 Frequency Cumulative % 150% $- $500 $1,000 $1,500 $2,000 $2,500 $5,000 More COINSURANCE & DEDUCTIBLE MET 100% 50% 0% Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 12

13 FREQUENCY PPO $500 Plan Rx Deductible $500 Ded Plan 1/1/2013 to 12/31/2013 Rx Deductible Dollars Frequency Cumulative % Bin Frequency Cumulative % $ % % $ % % $ % % $ % % $ % % $ % % More %More % $500 Ded Plan Rx Deductible Frequency Cumulative % $- $10 $20 $30 $40 $50 More RX DEDUCTIBLE MET 150% 100% 50% 0% Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 13

14 FREQUENCY HDHP Deductible/OPM Sum of Coinsurance + Deductible Dollars Frequency Cumulative % Bin Frequency Cumulative % $ % % $ % % $ 1, % % $ 1, % % $ 2, % % $ 2, % % $ 5, % % More %More % $2500 Ded Plan 30 Frequency Cumulative % 150% $- $500 $1,000 $1,500 $2,000 $2,500 $5,000 More COINSURANCE & DEDUCTIBLE MET 100% 50% 0% Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 14

16 Claim Cost Sharing How much did employees pay via plan design requirements (deductibles, coinsurance, etc )? And how much did the plan pay? Plan Year 7/2007-6/2008 7/2008-6/2009 7/2009-6/2010 7/2010-6/2011 7/2011-6/2012 7/2012-6/2013 7/ /2013 Total Allowed $779,030 $1,338,222 $1,101,537 $973,246 $912,589 $797,427 $370,750 Plan Liability $ $647,101 $1,148,461 $928,272 $761,728 $738,742 $624,802 $299,129 Plan Liability % 83% 86% 84% 78% 81% 78% 81% Member Liability $ $131,929 $189,761 $173,265 $211,518 $173,847 $172,625 $71,621 Member Liability % 17% 14% 16% 22% 19% 22% 19% Source: Wellmark Quarterly Reports Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 16

17 Plan Consolidation Too many choices can create undue risk selection and excessive administrative work, communication, etc. Too many choices can also encourage a vendor to become conservative in rating (because of the potential for adverse selection and greater risk). Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 17

18 Plan Consolidation Provide choice at point of service rather than annual enrollment. Regain critical mass in key areas: Data, pricing, administration, & risk Simplify where complexity is yielding no current advantage Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 18

19 Plan Consolidation Choice, for the sake of choice, is not less expensive to provide or administer. Choice can increase risk and undermine critical mass/economies of scale. Strategically designed choice, however, can be different. Examples: Plan Design choices between plans or within a plan. Dependent Carve-out Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 19

20 Plan Changes Rx Deductible Generic utilization on the PPO $500 plan is 73.6%, (compared to Wellmark s book of 82% and the HDHP of 79.5%) PPO $500 plan has $50 Rx deductible for singles, $100 for families Consider raising Rx deductible to $100 singles and $200 for families Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 20

21 Plan Changes Rx Copays PPO $500 plan copays are $10 Tier 1 $25 Tier 2 $40 Tier 3 To help steer generic utilization, increase Tiers 2 and 3 copays or have prescriptions subject to coinsurance. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 21

22 Plan Changes Out-of-Pocket Maximum (OPM) PPO $500 OPM is $1,000 Singles and $2,000 Families Starting July 2014, office visit copays will apply towards OPM Consider increasing the OPM Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 22

23 Plan Changes Coinsurance On PPO $500 plan, coinsurance is 90/10% In network 80/20% Out of network Consider increasing coinsurance to 80/20% In network 70/30% Out of network Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 23

25 Health Insurance Bids What would be the key reasons to go to market in 2014? Improve the transfer of risk (better contract). Cost of claims (network pricing). Network Accessibility (choice of doctors/hospitals/etc.). Service problems (at either the employer or employee level). Fiduciary responsibility (check rates). Other? Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 25

26 RFP Update RFPs were due 01/16 Carriers that provided quotes Coventry Health Alliance UnitedHealthcare Carriers declining to quote CoOportunity - Infrastructure not capable to provide quotes at this time. ISEBA not able to provide a quote within timeline given. Copyright Mark J. Becker & Associates, LC., All Rights Reserved 26

27 RFP Update MJBA will go through quotes and provide analysis of results Flush out any differences in quoted plan designs Outline costs/rates Discuss at Feb. 11 meeting Copyright Mark J. Becker & Associates, LC., All Rights Reserved 27

29 Next Steps RFP results Feb. 11 th Medical renewal MJBA will meet with Wellmark to discuss renewal on Feb. 4 th Determine if plan changes are needed after renewal and RFPs are analyzed Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 29

NEXT : Eligibility guidelines of a Health Savings Account.

NEXT : Eligibility guidelines of a Health Savings Account. Issue 1 What is a Health Savings Account (HSA)? A health savings account is a special tax-advantaged account owned by an individual where contributions to the account are to pay for current and future