Health Benefits at Benchmark Universities Presented to Health Benefits Task Force September 5, 2001

Vocabulary  Allowed charge: amount negotiated between health care provider and insurer or health plan as payment in full for service  Balance bill: amount that may be billed to patient by non-network provider in excess of allowed charge  Coinsurance: percentage of allowed charge paid by patient

Vocabulary  Copayment: fixed amount paid by patient for service received  Premium: amount remitted by employer to insurer or health plan, generally monthly, for coverage of each enrolled employee or family

Vocabulary  Primary Care Provider (PCP): physician or other plan-approved health practitioner responsible for primary care and sometimes referrals in a managed care plan  Tiering: system of grouping dependent coverage sets, e.g., parent plus child(ren), employee plus spouse

Benchmark Analysis  Relevant characteristics of benchmarks’ health plans  Benefit designs offered  Analysis of specific benefits  Comparison with in-state public employers  Retiree participation  Total and employee costs  Market basket analyses

Benchmarks  Arizona  California--Los Angeles  Florida  Georgia  Illinois  Iowa  Maryland  Michigan  Minnesota  North Carolina  No. Carolina State  Ohio State  Penn State  Purdue  Texas  Texas A&M  Virginia  Washington  Wisconsin

Benchmarks  9 are integrated with state employee benefit system: Arizona, Florida, Illinois, Maryland, Minnesota (currently), North Carolina, NC State, Washington, Wisconsin  3 others are part of statewide university system: Texas, UCLA, Georgia  Several of remaining are much larger than UK, e.g., Ohio State, Michigan  14/19 have different plan years: major effect in period of high inflation

Benchmarks  Effect of tiering: having fewer tiers tends to suppress full family premium. 6 different tiering systems:  6 use only Employee and Family tiers  4 use Employee, Employee + 1, and Family  4 use same 4 tiers as UK  2 use Employee, Employee + child(ren), Family  2 use Employee, Employee + 1 child, Employee + spouse, and Family  Penn State uses 2 tiers for HMOs and 3 for PPO  17/19 have at least one self-insured plan

Benefit Designs Offered  3 benchmarks offer only PPOs and fee-for-service plans: UNC, NC State, Georgia  6 offer only HMOs and variants with FFS alternative for traveling faculty  Trend to smaller number of alternatives  Market consolidation  Administrative simplification  Innovations: triple option, risk corridor, HMO/PPO hybrid (end of presentation)

Selection criteria for plan comparison  Design most comparable to UKHMO and UKPPO  Available in county of university’s main campus  Available to largest number of employees

Benefit Comparison: Outpatient Physician Visit  UK: $0 PCP copay, $10 specialist  Benchmark range:  $0--2  $5--4 (1 uses $5 PCP/$10 specialist)  $10--8  $15--2

Benefit Comparison: Emergency Department Visit  UK: $50 copay; waived if admitted  Benchmark range:  $25--4  $50--6  $75--3  Other--3

Benefit Comparison: Prescription Drug Copayment  Most use three levels: generic, formulary branded, non-formulary branded  UK: $8/$20/$40  Only 2 benchmarks share a design ($5/$10/$25)  3 do not appear to use formularies; UCLA covers only formulary drugs  3 use coinsurance rather than copayments in HMOs

Benefit Comparison: Prescription Drug Copayment  UK’s non-formulary copay is one of 2 highest (but note potential effect of coinsurance percentage)  New year designs likely to raise copay  Several require member choosing branded drug when generic available to pay difference  Kentucky law requires dispensing branded when prescriber notes “dispense as written”

Benefit Comparison: Inpatient Hospitalization  UK: $100 copay  Benchmark range:  $0--9  $75, $100, $150, $ each  $200--2

Benefit Comparison: Inpatient MH/SA  UK: 100% MH, 20% coinsurance SA, 31 day limit  Benchmark range:  100% coverage--11  Others have copay ranging $75-$200  4 others cover SA at lower level than MH  Day limits--8 others  Other restrictions--4 (lifetime limit, dollar limit, coinsurance)

Benefit Comparison: Outpatient MH/SA  UK: 50% coinsurance; 20 visit limit/yr  6 others have day limits  Most use copays ranging $5-$25  Only other use of coinsurance is 10% with prior authorization, 50% without

Benefit Comparison: Durable medical equipment  UK: 100% coverage  Only 5 others at this level  Most common charge: 20% coinsurance  Several have benefit ceilings

Retiree participation  About half have some retiree participation  Confounding variable is participation in state employee plans  Several offer only Medicare supplementals  Several have varying contribution by length of service  UK among most generous  None contribute to surviving spouse coverage

Cost comparison: Total plan cost  Single HMO mean = $ vs. UK $230  Single PPO mean = $ vs. UK 253  Family HMO mean = $ vs. UK $641  Family PPO mean = $ vs. UK 706

Cost comparison: Total plan cost  Effect of earlier starting plan year in time of rapid health inflation  Effect of tiering: only 4 others use 4-tier system  Several have relatively lower family premium and higher Employee + child(ren)  Most anticipate major increase in 2002

Cost comparison: Employee contribution  Single HMO:  range $0-$49.75  mean $15.16  median $10.42  UK = $21  Single PPO:  range $  mean $40.98  median $39.82  UK = $44

Cost comparison: Employee contribution  Family HMO:  range $0-$432  mean $90.56  median $67.38  UK = $432  Family PPO:  range $0-$497  mean $  median $  UK = $497

Cost comparison: Employee contribution  UK within benchmark range for single employee contribution but far higher for employee contribution to family coverage  Note effect of 3-tier plans: lower family premium but higher for parent with 2+ children  UKHMO employee plus child(ren) still higher than next highest full family HMO premium

Cost comparison: Employee contribution  Problem: reducing family premium to $250 for current enrollees would cost $3.2 million  Likely higher enrollment if lower premium (estimated 1,000)  Would add $2,184,000 to total cost: with probable overall inflation, total of at least $5.5 million recurring  Does not address cost for single parents or couples

Cost comparison: Higher subsidy for dependent tiers  All benchmarks subsidize dependent tiers at substantially higher rates than employee-only coverage. Following HMO computations exclude UK.  Range of single subsidies: $168-$285  Range of family subsidies: $387-$697  Mean of single subsidies: $  Mean of family subsidies: $  Family:single ratio range: 1.93: :1  Family:single ratio mean: 2.34:1

Cost comparison: Higher subsidy for dependent tiers  Cost of increasing dependent subsidy to lowest of benchmark levels (family=1.93:1)  $209 X 1.93 = $ X 1465 enrolled at Family level= $7,091,245

In-State Public Employers  Regional universities  Louisville  EKU  NKU  WKU  Morehead  Murray  State  Federal Employee Health Benefit  LFUCG

In-State Public Employers: Benefits Comparison  Office visit: UK is alone in not charging copay/coinsurance  Emergency Department: 4/10 charge $50 copay; others lower or coinsurance  Inpatient hospital: 6/10 charge $100 copay  Inpatient MH/SA: 3rd most generous  Outpatient MH/SA: least generous

In-State Public Employers: Benefits Comparison  Prescription drugs: ranks 6th of 10 (most to least generous) based on copays  Durable medical equipment: tied with Louisville as most generous  Balance of analysis is incomplete because new year data arriving daily

In-State Public Employers: Cost Comparison  Single employee premium:  mean $14.94  median $6.96  range $0-$75.49 (FEHBP)  UK $21  Family employee premium:  mean $  median $  range $207-$432  UK $432

Market basket analysis--healthy  Reasonably healthy family of four on Family tier coverage  Market basket composition  4 well visits  4 sick visits  1 ED visit  2 maintenance prescriptions  6 other prescriptions

Market basket analysis--healthy  Total out-of-pocket plus family premiums  UK: $5,442  Next highest (Texas): $2,  Mean = $  Median = $

Market basket analysis--healthy  Total cost of services only  Range $125-$430  Mean: $  Median: $  UK: $258 (in middle of range)

Market basket analysis--unhealthy  Family of four on Family tier coverage with significant health problems  Market basket composition –4 well visits –20 sick visits –2 ED visits (one leading to admission) –1 hospitalization –2 maintenance prescriptions –24 other prescriptions –$500 worth of durable medical equipment

Market basket analysis--unhealthy  Total cost (including premium)  Range: $612-$5,846  Median: $2,  Mean: $2,  UK: $5,846 (highest)

Market basket analysis--unhealthy  Total out-of-pocket for services only  Range: $612-$  Mean: $  Median: $  UK: $662 (2nd lowest)

Innovations in benefit design  Triple option (typically)  In-network with referral  In-network without referral  Out-of-network  Triple option appeal: uniform premium, pay more for added options at time of service  Disadvantage: assumes uniform access to network providers

Innovations in benefit design  Risk corridor plan (Minnesota 2002)  Somewhat like MSA without rollover feature (due to federal limits on group size)  High-deductible insured coverage plus  Employer contribution of about 1/2 deductible level  Advantages: greater employee control of provider selection

Innovations in benefit design Risk corridor plan (Minnesota 2002)  Advantages: potential total cost savings if  Unnecessary utilization in prior design  New design motivates more prudent use  Disadvantages:  Uncertain access to group discounts  If premium is lower, potential exposure of enrollees to serious financial problems

Innovations in benefit design  HMO/PPO hybrid  Deductibles and coinsurance percentages for some benefits  Other benefits not subject to deductible and require flat dollar copayments  Typically favors preventive services

Innovations in benefit design HMO/PPO hybrid  Advantages:  May reduce costs without much administrative cost for medical management  Lower expenditures for low users, higher for high users  Disadvantages:  Complexity may confuse members  Shifting more of out-of-pocket expense to less healthy may be perceived as inequitable