1. Public Employees Benefits Board April 23, 2002

2. 2003 PEBB Procurement Bid Alternatives

3. 3 Legislative Budget Assumptions Office visit copayment increase to $15 10% reduction in drug benefit

4. 4 2003 PEBB Bid Alternatives Pharmacy Benefit Alternatives assumes a 30-day supply at retail & 90-day supply with mail order Option 1: TiersRetail Cost ShareMail Order Cost Share Formulary generic, all insulin & disposable diabetic supplies $10 $20 Formulary brand $25 $50 Non-formulary brand $40 $80

5. 5 2003 PEBB Bid Alternatives Pharmacy Benefit Alternatives assumes a 30-day supply at retail & 90-day supply with mail order Option 2: Includes $50/individual deductible TiersRetail Cost ShareMail Order Cost Share Formulary generic, all insulin & disposable diabetic supplies $10 $20 Formulary brand $25 $50 Non-formulary brand $40 $80

6. 6 2003 PEBB Bid Alternatives Pharmacy Benefit Alternatives assumes a 30-day supply at retail & 90-day supply with mail order Option 4: Bidders are invited to submit a proposal of their own design that aligns with the PEBB philosophy of providing pharmacy benefits as well as producing the necessary 10% cost savings.

7. 7 Additional 2003 PEBB Bid Alternatives Option 1: Out-of-Pocket Maximum Current design = $750/person, $1500 family Bid Alternative B = $1500/person, $3000/family Option 2: Hospital Inpatient Co-Pay Current design = $200/day, max $600/year Bid Alternative = $250/day, max $750/year

8. 8 Additional 2003 PEBB Bid Alternatives Option 3: Ambulatory Surgical Center Copay Current design = $100 copay Bid Alternative = $150 copay Option 4: Ambulance Service Current design = Air Ambulance $100 Bid Alternative = Air Ambulance $200

9. 9 Additional 2003 PEBB Bid Alternatives Pharmacy Benefit Alternatives assumes a 30-day supply at retail & 90-day supply with mail order Option 3: Includes $100/individual deductible TiersRetail Cost ShareMail Order Cost Share Formulary generic, all insulin & disposable diabetic supplies $10 $20 Formulary brand $25 $50 Non-formulary brand $40 $80

10. Uniform Medical Plan

11. 11 2003 UMP Benefit Changes Medical –Developing three alternative approaches, all with the same overall employee impact Pharmacy –Legislative budget targets 10% reduction in prescription costs

12. 12 2003 UMP Benefit Changes Approach #1 based on legislative budget notes –85% coinsurance for most services from preferred providers (currently 90%) –Enrollee out-of-pocket limit is also increased proportionally (currently $1,125 per year) Concerns –Higher coinsurance may discourage needed care

13. 13 UMP Benefit Changes Approach #2 - Leave coinsurance at 90% but make other changes to achieve same premium impact –Evaluate possible out-of-state networks –Increase annual out-of-pocket limit, hospital copayments, deductible, or other enrollee cost-sharing –Consider expanding services covered in full (i.e. maintain or increase access to preventive care) Concerns –Impact on particular categoreis of enrollees, such as those with high medical costs

14. 14 2003 UMP Benefit Changes Approach #3 - Offer enrollees choice of two UMP benefit designs –Higher premium choice would maintain current UMP benefits –Lower premium choice would have higher deductible, coinsurance, and other enrollee cost-sharing –Current PEBB risk adjustment process would be used to mitigate “adverse selection” Concerns –Communication challenges –Enrollee understanding of plan choices

15. Quality, Access, and Affordability

16. 16 Plan Report Card Access –Network Value –Statewide Coverage –Unique Coverage –Capacity/Stability –Consumer Assessments Quality –Prevention standards (HEDIS) –Consumer Satisfaction (CAHPS) –TEAMonitor Audits Affordability –Medicare and non-Medicare employee contribution Overall Performance

17. 17 Non-Financial Incentives Publicize outcomes by plans, providers and facilities Use consumer data and performance measures Produce support tools and educational materials Use quality data and consumer surveys Use information to make choices Use information to demand quality care

18. 18 Leapfrog Seattle-Tacoma-Everett  100% of invited hospitals responded to the survey (25 hospitals out of 25)  13 (57%) have at least one Leapfrog patient safety practice Specifics: –Computer Order Entry: None have fully implemented CPOE  12 say they plan to implement CPOE by 2004 –ICU Staffing: 3 have fully implemented the IPS practice  12 say they plan to staff intensivists by 2004

19. 19 Leapfrog Seattle-Tacoma-Everett  Evidence-based Hospital Referral: -4 meet the coronary artery bypass recommended annual volume -9 meet the coronary angioplasty volume recommendation -8 meet the abdominal aortic aneurysm repair volume recommendation -5 meet the carotid endarterectomy volume recommendation -3 meet the esophageal cancer surgery volume recommendation -5 meet Leapfrog specifications for the Neonatal ICU

20. 20 Incentive Systems Dimensions –Financial vs. non-financial –Informational vs. market-driven Incentive Models Success –Incentives based on risks –Limited number of reliable, acceptable, & meaningful metrics

21. 21 RFP, Contracting & Auditing Post Award –Contract compliance Negotiations –Link measures to value Pre-Bid and RFP –Entrance Standards Auditing standards Performance Standards Comparative rankings Trending reports Benchmarks Link to purchasing standards

22. 22 2003 PEBB Procurement Next Steps: RFP: –Scheduled for release May 3rd –Bids due to HCA by June 12th –Bid evaluation through end of July –Board meeting July 30, 2002 Materials Review: –On-line enrollment –Actives - all materials on PEBB website –Decision Support Tool (Select-A-Plan)