1 Public Employees Benefits Board 2006 Medical Procurement July 12, 2005 Richard Onizuka, Health Care Policy Washington State Health Care Authority

Purchasing Environment Goals Stay within fiscal limits set by the Legislature in the budget Provide health plans that compare well with other quality employers Ensure adequate access to providers and hospitals for employees and retirees in all counties Encourage the use of quality providers and evidence-based medicine

Purchasing Environment Budget Assumption Washington State Fiscal Growth 2005/2009 Projection: 3.8% Budgeted Health Care Bid Rate Trend 8.5% Employee Contributions 12% Weighted Average

Purchasing Environment

5 CalPERS 2006 Non-Medicare Premium Increase: 8.9% Overall Average Hewitt Association 2006 prediction: Nationally, 12.4% MCO rate increase

6 Overview and Board Action EligibilityBenefits Non-Medicare Premium Medicare Explicit Subsidy

7 Eligibility Rules (Requires Board Action) HCA Recommends Adoption of the Proposed Eligibility Rules under WAC and WAC

8 Benefit Recommendations UMP PPO & UMP Neighborhood Bariatric Surgery

9 Description of Benefit Changes UMP PPO UMP Neighborhood $30 premium rebate (one-time) for healthy lifestyle and use of preventive care services (NEW) √√ Cover routine eye exams once per year (now once every 2 years) √√ Same network benefits in other states as currently provided for services in Washington/Oregon (now 80% for network services in other states) √ no Increase the annual out-of-pocket maximum to $1,500 per individual / $3,000 per family (now $1,125 per individual / $2,250 per family) √√ Separate 16-visit massage therapy benefit (now included with Physical, Occupational and Speech Therapy in 60-visit benefit) √√ Pay 90% for Tier 1 (generic) prescriptions filled at retail pharmacies (now paid at 80%) √√ Enrollee coinsurance $75 per 30-day supply for Tier 1 and 2 (generic and preferred brand name) prescriptions filled at network retail pharmacies (now capped at $50 per 30-day supply) √ √ $100 enrollee co-payment for up to 90-day supply of a Tier 3 (non- preferred brand name) prescription filled through mail order (now $80 enrollee co-payment) √√ Eliminate annual medical / surgical deductible (now $200 per individual or up to $600 per family) no √ UMP Benefit Recommendation (Requires Board Action on Overall Benefit Package) Overall package is cost neutral.

10 Bariatric Surgery HCA does not recommend inclusion of Bariatric Surgery for 2006 Legislative Directive: No Benefit Enhancements if at, or above, budget Bids reflected significant variability Medical evidence is not conclusive Benefit not commonly offered by other employers

Non-Medicare Bid Rate Overview 2006 Non-Medicare Bid Rate Overview Budget Assumption 8.5% Initial Procurement Results: 11.8% Final Procurement Results: 8.0% UMP PPO with Alternatives =.8% UMP NBR with Alternatives = 2.6% MCOs= 14.2%

12 Non-Medicare Average Bid Rate Increases

13 Increase in Average Non-Medicare Contributions 2006 Contribution does not include “switching assumptions”

14 Change in Non-Medicare Bid Rate Subscriber Only (First Tier) Plan Name 2005 First Tier Normalized Bid Rate 2006 First Tier Normalized Bid Rate Employee Contribution change from st Tier CHPWA $ $ $ 16 Group Health Coop. $ $ $ 31 Kaiser Foundation $ $ $ 18 Options Health Care $ $ $ 50 PacifiCare $ $ $ 23 Regence $ $ $ 34 UMP PPO $ $ $ (19) UMP Neighborhood $ $ $ (13)

15 Employee Contributions (Requires Board Action)

Medicare Bid Rate Overview Budget Assumption: 13.5% Procurement Results: 10.2% MCOs= 13.4% UMP= 7.8%

17 Medicare Average Bid Rate Increases

Estimated Medicare Retiree Contribution

19 Increase in Medicare Retiree Subsidies

Medicare Retiree Subsidy (Requires Board Action) Retiree Subsidy: $131.84

and Beyond

22 Data Analysis and Diagnosis Business and HR Priorities Enrollment, costs and demographics Cost drivers and savings opportunities Traditional Tactics Advanced Strategies Large Employer Health Care Strategies Plan Design Types of plans Number of choices Cost Sharing Service-related offerings Pay-related designs Pharmacy Savings/spending accounts Contributions Percentage of cost Salary stratified Indexed to plan costs Tiered for family size Risk-related Opt-out credits (cash) Financing Funding decision – insured, self-insured, minimum premium Gain sharing Employee self-funding – FSA, HRA Vendors Vendor selection Performance measures Clinical capability Operational audits Network strategy Renewal negotiation Maintain a healthy workforce Identification of health risks Health promotion programs Self-care assistance Health risk management Incentives for health awareness – risk appraisal participation Engage employees in behavior change Raise cost awareness through education and cost sharing Education about cost and health conditions Tools about provider cost and quality Availability of savings accounts Focus on high cost population Disease management Case management Maternity programs Advocacy programs Incentives for care management compliance Integrate information and/or care management with disability and worker’s compensation Purchase Highest Quality and Most Cost Effective Care High performance network Collective purchasing Supply chain purchasing National initiatives for quality improvement