1. SEGBP Governor’s Taskforce Evaluation February 20, 2001

2. 1 Table Of Contents s Taskforce Directives For Health Plan s Current & Emerging Health Plan Environment s Taskforce Recommendations for Health Plan

3. 2 Taskforce Directives For Health Plan s Identify And Evaluate Options For The Delivery Of Health Benefits To Participating Employees, On An Actuarially Sound Basis s Identify And Evaluate All Reasonable Options To Improve The Efficiency And Cost Effective Administration Of SEGBP, Including Program Oversight, Internal Administration And Privatization s Conduct Public Hearings To Receive Input From SEGBP Plan Members, Stakeholders And Others s Examine and Evaluate The Future Impact Of Providing Health Benefits On The State Budget

4. 3 Current Health Plan Environment

5. 4 Emerging Health Plan Environment s Pressure On Health Plans To Raise Premiums In Order To Increase Profits s Tougher Provider Negotiations With Health Plans For Higher Reimbursement s Consumer Demands For Easier And Broader Access To Care s Medical Needs And Demands Of 77 Million Baby Boomers

6. 5 Taskforce Recommendations s Taskforce Recommendations for Health Plan: –Active Vesting of Retiree Health –State Contributions Toward Active Coverage –Provide Plan Choice –Uniform Premiums/Plan Designs –Claims Administration –Medical Management –Plan Procurement –Plan Governance –Continued Evaluation Of Plan

7. 6 Active Vesting Of Retiree Health s Issues: –High Cost –Not An “Earned” Benefit –Up To 75% State Subsidy s Solution: –Introduce Vesting Schedule For Years of Participation in SEGBP: s 5-9 Years Participating in SEGBP > 17.5% s 10-14 Years Participating in SEGBP > 35.0% s 15-19 Years Participating in SEGBP > 52.5% s 20+ Years Participating in SEGBP > 75.0% –Must Be Pension Eligible –Must Be Enrolled in Active Plan Prior to Retirement –Grandfather Current Plan Participants

8. 7 Active Vesting Of Retiree Health (Cont.) s Rationale: –Reduce State Cost –May Incent & Increase Active Enrollment –Private Sector Already Limiting Retiree Coverage –Other States Are Considering s Other Considerations –Retiree Liability Disclosure Obligation –Medicare Buy-In Possibilities for Those Not Eligible –Use Medicare To The Fullest Benefit Of Program To Reduce Expenses s Fiscal Impact –Civil Service Liability Calculated as $6 Billion –Preliminary Estimate $12 Billion Liability for all Participants

9. 8 State Contributions Toward Actives s Issues: –State Subsidy Not Competitive (50% Vs. 75%) –Low Participation in SEGBP (Only 54% of Civil Service) –Availability Of Cheaper Alternatives –Aging/Sicker Population –Possible “Death Spiral” For Self-Insured Plan s Solution: –3 Year Phase In Of Higher State Contribution For Employee Only Coverage s Year 2002 > 55.6% s Year 2003 > 65.3% s Year 2004 > 75.0% –Target Cost of the Statewide Plan Offered

10. 9 s Solution (Cont.): –Comprehensive Survey Of Estimated 80,000 Non- Participating Population (Do they have Spousal Coverage, Individual Coverage, or are they Uninsured?) s Rationale: –More Consistent With Other States –Increase Plan Enrollment –Stabilize Plan –Improve Recruitment and Retention s Fiscal Impact –Year 2002 $20 Million (55.6% active employee only) –Year 2003 $60 Million (65.3% active employee only) –Year 2004 $140 Million (75.0% active employee only) Plan Contributions (Cont.)

11. 10 Plan Choice s Issues: –Two Plans (PPO/EPO) With Significantly Different Per Capita Value –No Differentiation In Employee Contribution –One Subsidizes The Other –Both Plan (PPO/EPO) Relatively Generous –Limited Choices of Available Options in Areas of LA –Current Use of Charity Hospital System by Uninsured State Employees

12. 11 s Solution/Alternative: –Keep EPO (Until Additional Choices are Available) –Establish Separate Premiums –Consider Other Coverage Options (HMO, POS, MSA, Flexible Spending Accounts) –Consider Impact of Expansion of Medicaid and LaCHIP –Consider Reorientation of “charity care” in LSU HCSD to low cost insurance option Plan Choice (Cont.)

13. 12 s Rationale: –EPO Has Ultra-Generous Benefits / No Cost Controls –More Equitable Cost-Sharing –EPO Not A Competitive Requirement –Potential Use Of LSU Healthcare Service Division / Louisiana Children’s Health Insurance Program / Medicaid s Fiscal Impact –Neutral (Savings from Increased Employee Contribtutions are Offset by Cost of Offering) Plan Choice (Cont.)

14. 13 Uniform Premiums/Plan Design s Issues: –Sense That Cost May Vary By Sub-Group –Different Participation “Rights” (e.g., Local Entities) –Differences In Employment Market Benefit Demands s Solution/Alternative: –Relative Cost Data Currently Being Collected –When Data Available, Consider: s Charging Group Specific Premiums s Changing The Price Of Admission (Group With In/Out Discretion) s Whether Procurement Autonomy Makes Sense –Groups That Opt to Leave the Program, Take Their Run-out Claims

15. 14 s Rationale: –Cost And Benefit Equity –Fulfillment Of Attraction & Retention Needs Of Diverse Employment Markets s Fiscal Impact –Not Yet Assessed Uniform Premiums/Plan Design (Cont.)

16. 15 Claims Administration s Issues: –Current RIMS System Inadequate In Key Areas –Problems Recruiting Adequate Staff –Insufficient Technology Funding From State s Solution/Alternative: –Conduct In-Depth Assessment Of Claims System –Define Best Practice –Consider The Feasibility Of Outsourcing Claims Administration Where Makes Economic Sense –Compare Comprehensive Outsourcing Claims Administration Cost to Cost / Future Cost of In-house Processing

17. 16 s Rationale: –Effective Claims Administration Critical To Cost Management –LA is One of Two States That Handle Own Claims Administration –Reflects Continued Commitment To Modernization –Outsourcing May Be Only Option Due To: s Capital Investment of IT s Compliance to Changing Regulation s Recruitment and Retention of Skilled Workforce s Fiscal Impact –Not Yet Assessed Claims Administration (Cont.)

18. 17 Medical Management s Issues: –Cost Avoidance Vs. Cost Shifting –Focus On: s Reducing Inappropriate Utilization s Improving Quality Of Care –Past Initiatives Relatively Low Key s Solution/Alternative: –Endorse Recently Implemented SEGBP Data Development Strategy –Endorse Recently Implemented Utilization Review Vendor Selection Decision

19. 18 s Solution/Alternative (Cont.): –Evaluate Other Utilization Management Opportunities: s Acute Care Management s Chronic Care Management s Large Case Management s Diagnostics Management s Health Promotion/Disease Prevention Outreach –Assure Compliance with Statutory Requirements s Rationale: –Significant Potential ($25 million annual savings), Difficult Realization –Emerging Technology To Support Actions –ROI Of 2x to 5x Program Expense Medical Management (Cont.)

20. 19 Plan Procurement s Issues: –Efficiencies and ROI Of Current Procurement Practices –Desire To Identify “Best In Class” Administration –RFP Model Too Rigid s Solution/Alternative: –Make Procurement Process More Flexible –Consider An “Invitation To Negotiate” Model

21. 20 s Rationale: –Achieve Goal Of Contracting With “Best In Class” –Recognize That Buying Administrative/Managerial Services Not The Same As Buying Widgets –ITN Process Allows More Hands-On Validation Of Service Capabilities s Fiscal Impact –Minimal Plan Procurement (Cont.)

22. 21 Plan Governance s Issues: –Current Structure Is Too Large And Unwieldy –It Takes Too Long To Get Things Done –Board Too Involved In Day-To-Day Administration s Solution/Alternative: –Change Function of Board –Proposed Function of Board: s Policy Making Board, Not A Management Board s Review and Make Recommendations s Does Not Set Premiums or Plan of Benefits s Does Not Approve RFPs –Legislative Oversight –CEO Should Report to Commissioner of Administration

23. 22 s Rationale: –Increased Proactive Decision Making –Increased Accountability For Plan Performance –Increases Efficiencies In Plan Controls s Fiscal Impact –Not Yet Assessed Plan Governance (Cont.)

24. 23 s Annual Review of Health Plan Components Including: –COST s Benefit Expense s Administrative Expense s Risk Management –QUALITY s Access Of Care s Care Management s Health Management s Satisfaction s Program Management s Resolution to Continue to Formally Evaluate Health Plan by Governor Appointed Study Commission Continued Evaluation Of Health Plan

25. 24 Questions g:\library\worklife\docs.99\1007ra-shrp ? ? ? ? ? ? ? ? ?