Strategic Benefits Consulting Services Contract. Administrative Committee Cheryl D. Orr, Vice President of Human Capital August 14, 2018

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1 Strategic Benefits Consulting Services Contract Administrative Committee Cheryl D. Orr, Vice President of Human Capital August 14,

2 DART s Vision for Healthcare Benefits To create a sustainable benefits plan offering, that combines innovation, quality of care, member engagement, transparency, and cost savings to both DART and its employees. Quality Cost 1

3 Healthcare Cost Containment Strategies (Prior to 2015) Healthcare costs have risen dramatically over the last 10 years. DART has aggressively addressed these increases by implementing the following changes: Spouse & non-related adults with Employer Plans are ineligible Verified that dependents are, in fact, eligible for coverage Increased: Out-of-pocket maximums Co-pays EPO Rx Changes to approved prescription drug list Increased contributions for spouses, non-related adults & children Surcharge & reduced HRA for: Tobacco Use Employees that don t complete the Health Assessment 2

4 Rising Healthcare Costs are Unsustainable $250,000,000 $200,000,000 $206 million; 25.6% of projected budget $150,000,000 $100,000,000 $44 million; 8.8% of FY17 Budget $142 million $50,000,000 $ DART Medical Costs (1.97%) DART Medical Costs (8.5%) Budget & Finance Committee Briefing May 23,

5 Background - Willis Towers Watson (WTW) DART engaged WTW in August 2015, to bring forward a number of unique and innovative solutions addressing health care from both financial and quality driven perspectives. WTW presented several options to DART for consideration. Ultimately DART engaged WTW to assist in the implementation of two approaches known as ACO & RBR. ACO = Accountable Care Organization (Baylor Scott & White Quality Alliance) RBR = Referenced Based Reimbursement (Open Access Plan OAD) 4

6 Medical Plans Key Dates Willis, Towers-Watson Awarded Contract to Consult on Strategic AUG 2015 Development of Medical Plans for CY2018 and Beyond Willis Recommends RBR/ACO Strategy JAN 2016 *Willis presents recommended Strategy to DART Board FEB 2016 DART Releases DRAFT Scope of Services for Vendor Input/Comments MAR 2016 DART invites Vendors to Conference to discuss DRAFT Scope of Services MAY 2016 *DART Board Briefing - Progress JUN 2016 Issue RFP for TPA Services AUG 2016 TPA Proposals Due and Received SEP 2016 TPA Proposal Evaluation, Clarifications, and Negotiations NOV 2016 *Board Committee of the Whole Briefing Progress NOV 2016 TPA Best & Final Offer/Recommendation of Most Qualified Offer DEC 2016 *Request Board Authorization to Award TPA Contract DEC

7 Medical Plans Key Dates (cont d) Develop/Issue ACO RFP DEC 2016 ACO Pre-Proposal Conference JAN 2017 ACO Proposal Due FEB 2017 ACO Proposal Evaluation, Presentations and Clarifications MAR 2017 ACO Best and Final Offers/Recommendation APR 2017 *Request Board Authorization to Award ACO Contract APR 2017 Strategic Benefits (ACO/RBR) Implementation Starts MAY 2017 ACO/RBR Networks Established MAY 2017 Execute Communication Campaign JUN 2017 Open Enrollment OCT 2017 Strategic Benefits Program Begins JAN

8 Scope of Work (WTW) Review and assess health and wellness programs Innovative Programs Traditional Programs Support DART s implementation of the Strategic and Innovative Approach Assist in Sourcing, Negotiation and Implementation of: Vision Dental Pharmacy 7

9 Strategic Health Benefits Willis conducted a comprehensive review of all of DART s claims data and developed the following recommendations: Innovative Solutions Plan A Accountable Care Organization (ACO) An Accountable Care Organization is a set of health care providers who work together collaboratively and accept collective accountability for the cost and quality of care delivered to a population of patients. Plan B Reference Based Reimbursement RBR Is a method for determining the allowable charge for medical services provided by either a hospital or physician. The reimbursement rate is determined based on Medicare reimbursement rates. This method of reimbursement results in a 15% - 20% savings over a traditional PPO discount. Cost Plus model 8

10 Financial Plan Healthcare Cost Impact of bending the curve $250,000,000 $200,000,000 $206 million; 25.6% of projected budget $150,000,000 $100,000,000 $44 million; 8.8% of FY17 Budget $96 million; 12.1% of projected budget $142 million $33 million $50,000,000 $ DART Medical Costs (1.97%) DART Medical Costs (8.5%) DART Medical Costs (4.25%) Budget & Finance Committee Briefing May 23,

11 The ACO/OPEN ACCESS model will bend the curve downward DART should be able to virtually flatten medical claims cost for the three to five year period following the first year of implementation. Medical inflation should be around 50% of the annual trend (4.25% versus 8.5%) Better price negotiation with providers Better health outcomes achieved through lower hospital readmissions, quality employee healthcare (regular physicals, better adherence to prescription use, fewer uses of ER facilities) 10

12 Contract Extension Willis of Texas, Inc. (an affiliate of Willis Towers Watson) is current Contractor Extend 12 months from 9/7/18 to 9/6/19 Finish Implementation (including plan performance reporting) of Strategic and Innovative Approaches Traditional Benefits Consulting Tasks OPEB Valuation Stewardship Report Total Compensation Report Claims Audit Other 11

13 Reason for Extension Extend the contract with WTW to ensure continued successful implementation of the Strategic and Innovative Healthcare approach. Effective and efficient that the same consultant perform traditional and strategic benefits tasks for DART. Combining strategic and traditional requirements would assure consistency in the provision of both services. Following the award of this contract modification, DART staff intends to begin the process of fair and open competition to contract a Benefit s consultant beyond September

14 Strategic Benefits Consulting Services Time Period Strategic Assistance Traditional Total Phases 1 & 2 Aug 2015 to Mar 2016 $130,000 $0 $130,000 Phase 3 Mar 2016 to Mar , , ,300 6-month Option Period Mar 2018 to Sep , , , , ,800 1,264,800 1-year extention Sep 2018 to Sep , , , , ,300 1,710,300 13

15 Board Request Authorization to execute a contract modification to extend the contract expiration date to September 6, 2019 in the amount of $445,500 for a new total authorized amount not to exceed $1,710,