The 7 Health Plan Metrics Every HR Professional Must Know

Transcription

1 The 7 Health Plan Metrics Every HR Professional Must Know To manage your company s health plan wisely Presented by Nicole Pfeiffer, SPHR, SHRM-SCP, GBA, CMS

2 THE BORING BIO STUFF Nicole Pfeiffer is a Vice President of Employee Benefits for Cottingham & Butler. Nicole offers consultative advice to business decision-makers regarding their employee benefit plans. Nicole has been with Cottingham & Butler since April Prior to Nicole s role in Employee Benefits, she worked as the Vice President of Human Resources and Director of Marketing for the firm. Prior to joining Cottingham & Butler, Nicole worked for Procter & Gamble in a Business Development role. Specific Experience Specializes in Employee Benefits Consulting Experience in Human Resources and Marketing Nicole Pfeiffer SPHR, SHRM-SCP, GBA, CMS Vice President Employee Benefits Education MBA from The University of Iowa Tippie School of Management BS in Mathematics and BBA in Business Admin from the University of Iowa Designations: SPHR, SHRM-SCP, GBA and CMS Speaking Engagements State of IL SHRM Annual Conference 2014, 2015, 2016, 2017 State of IA SHRM Annual Conference 2015, 2016, 2017 State of WI SHRM Annual Conference 2016, 2017 Various Regional and Local SHRM Events Volunteerism Board of Director s Past President for the Dubuque Women s Leadership Network Board of Director s Past President for the Dubuque March of Dimes 2

3 TODAY S AGENDA We ll take a dive into seven different metrics by discussing the calculations and implications of each metric. Each of these data points will help you determine the physical condition of your health plan. Once you know your numbers, you ll be able to craft a plan to drive better financial sustainability with your health care costs. 7 Metrics What you will learn: 1. Participation Rate 2. Dependent Ratio 3. Demographic Index 4. Medical Claims Cost per Member 5. Rx Claims Cost per Member 6. Employer Plan Cost Percentage 7. Employer Contribution Percentage 1. How to Calculate 2. How to Compare - Benchmarks 3. Strategies for Improvement 4. Potential Savings

4 BENEFITS FRAMEWORK Costs Coverage Consumption Cost Sharing Compliance Creating Efficiency ACA Expertise and Tools Regular Compliance Communications DOL, FLSA, COBRA, HIPAA, FMLA, ADA Enrollment Solutions Employee Communications Technology Solutions

5 HOW CONFIDENT ARE YOU IN UNDERSTANDING THE COST METRICS THAT IMPACT YOUR BENEFIT PLAN?

6 7 METRICS: A FRAMEWORK FOR ANALYZING YOUR BENEFIT PLAN Metric What it tells you Coverage How many people are on your health plan? Participation Rate Whether you may be covering too many employees relative to benchmark averages Dependent Ratio Whether you may be covering too many dependents Metric What it tells you Consumption What is the average spend per person? Adjusted average medical claims per member Adjusted average rx claims per member The total amount of money spent on medical claims by an average member without regard to plan design and contributions The total amount of money spent on rx claims by an average member without regard to plan design and contributions Demographic Index The impact of demographics on average costs Metric What it tells you Cost Sharing What is the employer share of costs? ER Plan Cost Share Percentage The percentage that employees are paying for deductibles, OOP max, Copays and Coinsurance ER Contribution Percentage The percentage of total plan costs that are paid for by the employer

7 WHAT YOU NEED TO GET STARTED Enrollment information Demographics Claims costs Fixed Costs Employee contributions Plan actuarial value 7

8 Our Benefits are:

9 METRIC #1: PARTICIPATION RATE Participation Rate: = The number of employees that are covered The total number of benefit eligible employees INSIGHT: Will show if current program is over or under incenting employees to join plan

10 METRIC #1: PARTICIPATION RATE Participation Rate: 90% = INSIGHT: Will show if current program is over or under incenting employees to join plan

11 METRIC #1 PARTICIPATION RATE 92.0% 90.0% 88.0% 86.0% 84.0% 82.0% 80.0% 78.0% 76.0% 74.0% 72.0% 90.0% ABC Company 79.0% All Industry Benchmark Company ABC is providing benefits to 90% of eligible employees Company ABC is covering a significantly higher percentage of employees than benchmark High participation is often driven by overly generous benefit programs and lower contributions compared to the local market. Lower than average participation is often driven by high contributions and a less generous benefit program compared to the local market. Primary Ideas for Reducing Participation Cost Impact of Moving to Increase employee/family contributions Benchmark** Decrease plan of benefits Maximize waiting periods -$1,692,309 Terminate coverage on last day worked Offer a pay in lieu or opt out program Provide education to employees on alternatives available to them * Benchmark based on Kaiser (KPP) 2016 Annual Study ** Calculated by taking the number of enrolled employees divided by the number of eligible employees outside of a waiting period

12 Is Your Company Name =

13 METRIC #2: DEPENDENT RATIO Dependent Ratio: = Total number of plan participants Total number of covered employees INSIGHT: Will show if you are covering more or less dependents per employee than benchmark

14 METRIC #2: DEPENDENT RATIO Dependent Ratio: 2.5 = INSIGHT: Will show if you are covering more or less dependents per employee than benchmark

15 METRIC #2 DEPENDENT RATIO For each covered employee, Company ABC is covering 1.5 dependents This is above benchmark average of 1.1 dependents per employee High dependent ratios are often driven by too many ineligible dependents, very low family contributions, and demographics of your workforce ABC Company All Industry Benchmark Low dependent ratios are often driven by eligibility provisions, high family contributions, and demographics of your workforce. Primary Ideas for Reducing Dependent Ratio 1. For Eligible Participants Raise family premiums Implement spousal surcharge or working spouse carve out Eliminate non-mandated member coverage Cost Impact of Moving to Benchmark** -$2,215, For Ineligible Participants Conduct a thorough eligibility audit (between 3-9% ineligible) Institute tighter eligibility checking at time of enrollment and regular checks on those that have status changes (spouses) * Benchmark is based on ADP & Mercer 2016 Surveys ** Calculated by taking the number of members enrolled on the health plan divided by the number of enrolled employees

16 WHAT ARE THESE DEMOGRAPHIC DIFFERENCES? age gender

17 METRIC #3: DEMOGRAPHIC INDEX Demographic Index: = The weighted average expected cost index based on participant age and gender (where 1 is the average) INSIGHT: The impact of your organizations demographics on average costs and also used to adjust metrics for apples to apples benchmark comparison.

18 Cost Per Participant Per Year METRIC #3: DEMOGRAPHIC INDEX $12,000 Employee Demographic Distribution The impact of demographics on cost. $11,000 $10,000 $9,000 $8,000 $7,000 Male Weighted average expected cost index based on participant age and gender (1 is average). $6,000 $5,000 $4,000 $3,000 $2,000 $1, Age Female Poly. (Male Average) Company A s demographics are 27% above benchmark. We would expect this company s costs to be 27% above average based solely on their demographics. Breakdown Participants 900 Males 90 Average Age 48 Females 810 Demographic Factor 1.27

19 METRIC #3 MEMBER DEMOGRAPHIC INDEX Demographic Index is based solely on the demographics of a population and is used to adjust consumption metrics to ensure apples-to-apples benchmarking This metric is dramatically impacted by industry, dependent ratio, and age distribution of group ABC Company All Industry Benchmark Primary Ideas for Reducing Demographic Index There are not many recommendations for changing this index. It is a function of the demographics of those on your plan and their dependents. Can not make hiring decisions and terminations based on age or gender. Knowing this index on your plan will make you wiser about your costs relative to benchmark. Communicate alternatives for people with other healthcare options Cost Impact of Moving to Benchmark** -$3,209,965 * Benchmark based on data from Society of Actuaries ** Calculated using member gender, date of birth, and enrollment selections

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21 METRIC #4: ADJUSTED AVERAGE MEDICAL CLAIMS PER MEMBER Adjusted Average Medical Claims Cost Per Member: ( ) / = Total allowed claims before cost sharing Total number of covered members Demographic Factor INSIGHT: Will provide data on how your members consumption of healthcare compares to the national average utilization patterns in medical.

22 METRIC #4: ADJUSTED AVERAGE MEDICAL CLAIMS PER MEMBER Adjusted Average Medical Claims Cost Per Member: $4511 = $11,098,722 / 86.1% ( ) / INSIGHT: Will provide data on how your members consumption of healthcare compares to the national average utilization patterns in medical.

23 METRIC #4 DEMOGRAPHICALLY ADJUSTED MEDICAL CLAIMS PER MEMBER $4,550 $4,500 $4,450 $4,400 $4,350 $4,511 $4,344 This metric provides a high-level comparison of claim spend, but does not specifically identify the cost drivers. Further analysis is required to identify primary cost drivers and strategies to positively impact those areas. $4,300 $4,250 ABC Company All Region Benchmark Primary Ideas for Reducing Medical Consumption Eliminate unnecessary utilization through plan design: claim auditing for invalid and duplicate claims, non-true emergency penalties, CDHPs Optimize care mix using programs to promote appropriate level of care: telemedicine, transparency programs, health advocacy vendors, onsite clinics, ACOs Minimize per unit pricing through better payment methodology/networks: network/carrier RFP, performance networks, multiple networks based on geography, referenced based pricing Improve member health through wellness and disease management: biometric screenings, disease management programs, mandatory review calls, coaches, wellness incentives, compliance penalties, tobacco surcharges Cost Impact of Moving to Benchmark** -$410,949 *Benchmark based on HCCI 2015 Annual Study Regional Benchmarks adjusted for trend **Calculated using the total paid claims divided by the actuarial value, demographic index, and member count

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25 METRIC #5: ADJUSTED AVERAGE RX CLAIMS PER MEMBER Adjusted Average Rx Claims Cost Per Member: $1626 = $4,000,000 / 86.1% ( ) / INSIGHT: Will provide data on how your members consumption of healthcare compares to the national average utilization patterns in RX.

26 METRIC #5 DEMOGRAPHICALLY ADJUSTED RX CLAIMS PER MEMBER $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 $1,626 ABC Company $1,051 All Region Benchmark This metric provides a high-level comparison of RX claim spend, but does not specifically identify the cost drivers. Further analysis is required to identify if generic utilization is favorable, if high dollar brands are being used, or if specialty drugs are lone cost driver. Primary Ideas for Reducing RXD Consumption Eliminate unnecessary utilization through plan design: prior authorization, exclude compounds, exclude lifestyle, new drug waiting periods, tablet splitting, dispensing limits, CDHPs Optimize drug mix using programs to promote appropriate level of care: mandatory generics, coinsurance versus copays, step therapy, performance formularies, therapeutic incentive programs Minimize per unit pricing through better payment methodology/contracts: mandatory specialty pharmacy, performance networks, PBM contract RFP, coalition purchasing, drug importation Improve member health through wellness and disease management: free rx for disease management compliance Cost Impact of moving to benchmark** -$1,414,807 *Benchmark based on HCCI 2015 Annual Study Regional Benchmarks adjusted for trend **Calculated using the total paid claims divided by the actuarial value, demographic index, and member count

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28 EMPLOYER AND EMPLOYEE COST SHARING MEDICAL & RX BENEFITS ABCompany Plan 1 ABCcompany Plan 2 Large Employer National Employer Midwest Employer Average Average Average Median Deductible In-Network (Single/Family) $1,000 / $2,000 $2,000 / $4,000 $600/$1,500 $1,500/$3,000 $750/$1,500 Out-of-Network (Single/Family) $2,000 / $4,000 $4,000 / $8,000 $1,200/$3,000 $3,000/$6,000 $1,500/$3,000 Median Out of Pocket Maximums In-Network (Single/Family) $3,000 / $6,000 $4,000 / $8,000 $3,000/$6,000 $4,000/$7,500 $3,000/$6,000 Out-of-Network (Single/Family) $6,000 / $12,000 $8,000 / $16,000 $6,000/$12,000 $6,350/$12,000 $6,000/$12,000 Office Visit Copay In-Network $30 / $60 N/A $25 / $40 $25 / $50 $25 / $40 Out-of-Network 40% N/A 40% 40% 40% ER Copay $150 N/A $150 $100 $150 Coinsurance In-Network (Plan Pays/Employee Pays) 80% / 20% 100% / 0% 80% / 20% 80% / 20% 80% / 20% Out-of-Network (Plan Pays/Employee Pays) 60% / 40% 100% / 0% 60% / 40% 60% / 40% 60% / 40% Rx Copays Retail: Generic/Formulary Brand/Non- Formulary Brand $10 / $25 / $40 / $100 20% after deductible $10 / $30 / $50/$100 $10 / $35 / $55 / $100 $10 / $30 / $50 / $100 *Mercer Survey 2016

29 METRIC #6: EMPLOYER PLAN COST SHARING PERCENTAGE Employer Plan Cost Sharing Percentage: = 1 - (amount employees pay for deductibles, coinsurance and copays) Total claims + fixed stop loss reimbursements INSIGHT: Shows the split between what the plan pays versus what the employees pay through deductibles, coinsurance, and copays when medical services are purchased. This percentage gauges how rich of a plan design you have. Commonly referred to the plan s Actuarial Value.

30 METRIC #6: EMPLOYER PLAN COST SHARING PERCENTAGE Employer Plan Cost Sharing Percentage: = 86.1% INSIGHT: Shows the split between what the plan pays versus what the employees pay through deductibles, coinsurance, and copays when medical services are purchased. This percentage gauges how rich of a plan design you have. Commonly referred to the plan s Actuarial Value.

31 METRIC #6: EMPLOYER PLAN COST SHARING PERCENTAGE 87.0% 86.0% 85.0% 84.0% 83.0% 82.0% 86.1% 82.0% Using the plan designs in place today, C&B was able to calculate the actuarial value of the plan(s) offered to employees. This includes the value of deductibles, copays, OOP, and any seeding to HSA/HRA funds that may be done by employer. Said another way, it is a plan grade comparison. 81.0% 80.0% 79.0% ABC Company All Industry Benchmark Primary Ideas for Lowering Plan Cost Share Shift plan design to benchmark level deductibles, out of pockets, copays & coinsurance Family Ded & OOP 2X the single OON Ded & OOP 2X in-network ER copay minimum of $250 or Ded & OOP Full Replacement CDHP 4 tier Rx design Rx Specialty $250 copays or 50% coinsurance Cost Impact of Moving to Benchmark** -$1,078,480 Benchmark based on combination of 2016 Mercer Benefits Survey ** Calculated using Actuarial Value Calculator and employer plan document

32 How do you?

33 METRIC #7: EMPLOYER CONTRIBUTION PERCENTAGE Employer Contribution %: = (Total plan costs employee contributions ) Total plan costs INSIGHT: Shows the percentage of total plan costs that are paid for by the employer.

34 METRIC #7: EMPLOYER CONTRIBUTION PERCENTAGE Employer Contribution %: 84.6% = ($16,362,051 $2,515,889 ) $16,362,051 INSIGHT: Shows the percentage of total plan costs that are paid for by the employer.

35 METRIC #7: EMPLOYER CONTRIBUTION PERCENTAGE 86.0% 84.0% 82.0% 80.0% 78.0% 76.0% 74.0% 72.0% 70.0% 68.0% 84.6% ABC Company 74.9% All Industry Benchmark Employee contributions from payroll will generally subsidize a sizeable portion of an employer s overall health plan costs. Having a high or low cost share can indicate that contributions levels are not market level, or that the plan s spend is abnormally high or low. Primary Ideas for Reducing Contribution Percentage Price-to-Market meaning contributions are at benchmark levels: No Free Plans, Employee cost share is greater for families than singles, industry level employee contributions and vary contributions by class Price-to-Risk meaning contributions vary by certain employee risks: contributions based on biometrics, tobacco surcharges, spousal surcharges, and compliance surcharges Set Defined Contribution meaning all plans have equal employer costs Cost Impact of Moving to Benchmark** -$1,596,865 * Benchmark based on combination of 2016 Kaiser and Mercer Surveys ** Calculated taking one minus the employee contributions divided by total plan spend (claims + admin)

36 SUMMARY OF METRICS FOR COMPANY ABC 3C's Benchmarking Summary Metric ABC Company Benchmark Impact of Moving to Benchmark Metric Status Summary of Levers Participation Rate 90.0% 79.0% ($1,692,309) Unfavorable Restrict plan eligibility through plan design Incent alternatives for people with other healthcare options Dependent Ratio ($2,215,386) Unfavorable Enforce plan member eligibility through audit capabilities Demographic Index ($3,209,965) Unfavorable Incent alternatives for people with other healthcare options Demographically Adjusted Allowed Medical Claims Per Member $4,511 $4,344 ($410,949) Unfavorable Eliminate unnecessary utilization through plan design structure Optimize care mix using programs to promote appropriate level of care Minimize per unit costs through better contracting / payment methodology Demographically Adjusted Allowed RXD Claims Per Member $1,626 $1,051 ($1,414,807) Unfavorable Improve member health through wellness and disease management Employer Plan Cost Sharing Percentage (based on actuarial value) 86.1% 82.0% ($1,078,480) Unfavorable Shift plan design to benchmark level deductibles, copays, & coinsurance Promote consumerism with limited first dollar coverage (i.e. no copays) Price-to-Market meaning contributions are at benchmark levels Employer Contribution Percentage 84.6% 74.9% ($1,596,865) Unfavorable Price-to-Risk meaning contributions vary by certain employee risks Set Defined Contribution meaning all plans have equal employer costs *Calculations completed using actual client/prospect enrollment and financial information.

37 IN CONCLUSION Today, we shared background information, calculations, benchmarks, and levers for change with the 7 metrics Focusing on the overall success of your health plan using these 7 metrics will enable you to make more strategic employee benefit decisions Many of the calculations in the areas of coverage and cost share are simple and give great perspective into what is going on within a health plan The metrics on consumption can become complicated. It is more statistically significant for groups over 500 lives. C&B regularly performs consulting projects for large groups focused on consumption We welcome the opportunity to assist groups who have an interest in actively managing their health plan metrics

38 HOW CONFIDENT ARE YOU IN UNDERSTANDING THE METRICS THAT IMPACT YOUR BENEFIT PLAN?

39 THANK YOU! NICOLE PFEIFFER SPHR, SHRM-SCP, GBA, CMS Vice President, Employee Benefits