06072011 HEALTH CARE PRESENTATION6/7/2011
Agenda
Health Care Goals
Experience/Projections
Health Care Fund Update
Health Care Initiatives/Results
Health Care RFP
Next Steps
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alth Care Goals
• Offer affordable, quality health care as part of a total compensation
package
• Control costs by managing the health care trend and reducing the
GASB 45 liability
• Maintain a healthy and productive workforce
• Achieve best prices for goods and services
• Focus on health risks that are significant cost drivers
• Promote a culture of change and accountability
• Promote health awareness, education and involvement of enrollees
in their health and wellness
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perience /Projections
2010 Trend
• Experienced a 10% increase in trend
201 1 Plan Changes
• Plan Changes
• Grandfathered Status
• Removal of Lifetime Limits
• Removal of Annual Limits for Essential Benefits
• Dependent coverage extended to age 26 (if no access to other
group coverage)
• Contribution Strategy - No changes
2011 Projection
• 10% Trend
4
6/x/2011
2
6/7/2011
Health plan claims cost trend -
historical and forecasted
Health plan trend on rise
VA BEACH
HISTORICAL AND PROJECTED TOTAL INCURRED CLAIMS PEPM
r ____.- _____- ___ ~, ~ -
6650 ~ ~, ~ j ~ _. _.
5600- ._. I ~O.Ox UMM
s 1 8.0% trend
i- --- ~- ~- - ~ - ---- ~-- r - -
n 6550 _ l-. __ ~_._- _. _~. -~. ~. _
E ~ ~ ~ ~ ~
U 5500 --.-.
~'
50.50 .___--
- - - j - ~ - - ~ ~ - -
-, i,
I _
_ I _ ~ __~
60001 _. -.___-.~------
'~"aJ 2003 ~4"d° 2004 a"as 2005 Jen°B 2006~'"~ 2007 '~'"~ 2008 ~"~ 2009'1n-10 IO'10-fO1M Forecast
~vEaM i_mm aEF ,° -e,. n~"a -i°.. ,_~~e _._.. r...„r
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Health Care Fund Update
Total Fund Equity
- 06/30/2009 - $31 .5M
• City S l 4.4M / 45.7%
• Schoolf S17.1M / 54.3%
- 06/30/2010 - $30.7M
• City $1 2.7M J 41 .4%
• Schools S18.OM / 58.6%
- 06/30/201 1 -Estimated $25.8M
• City $9.2M / 35.7%
• SchoolsS16.6M / 64.3%
- 06/30/2012 -Estimated $3-8M
Enrollment as of 7/1 /Z071 -Schools 61. S% /City 38.5%
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and Condition Management
scalar Disease Management Program
Disease Management Program
~ry Disease Management Program
in Pregnancy" Prenatal Program
Programs
Incentive Tracking Program (FIT)
aenings and Vaccinations
~cer Screening Initiatives
Shot Clinics
~Ith Screenings
>onal Flealth Protile
~ Education
Classes
Support Services
^Care Management
^Employee Assistance Program
^Tobacco Cessation Program
Weight Management
^Eating for Life
^Maintain Don't Gain
^Weight Watchers
(~"~ ..
New I n itiatives
Programming
Created and implemented reduced copay benefit for diabetics, helping
to make diabetes medication more affordable and therefore encourage
better medication compliance
Increased offerings for Health Screenings (cholesterol, blood pressure,
BMI) including onsite opportunities and quarterly health fairs
Implemented Al c screenings to follow up with employees at risk for
diabetes and encouraged physician follow-up
Implemented Special Events program encouraging employees to have a
wellness initiative integrated into their staff programs. Examples
include: Public Works Annual Picnic (800 employees), Public Works
and Public Utilities Health and Safety Fair (1 700 employees), Library
all staff training day (250 city employees)
Offered more onsite opportunities including health education classes,
health screenings, and Weight Watcher programs
Expanded flu shot coverage to spouses covered by our health plan and
part time employees
Coordinated with Occupation Health to offer Care Management onsite,
price weekly, to work with high risk employees
6/7/2011
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6/7/2011
Newlnitiatives --continued
Education
Provided educational material and classes on diabetic resources and
reduced copay benefit
Created new quarterly Retiree Wellness Update
Provided quarterly Health Fairs throughout the city
Included online wellness resources in 201 1 Wellness Guide
Researching prenatal fitness program to offer in 2012
Provided educational seminar on Health Equity plan
Provided Benefit Seminar Series
• "You The Smart Patient"
• "Understanding the Alphabet Soup - FSA & HRA"
• "Medicare and You"
NeW ~ n ItIatlVes -- continued
Process Change/Implementation
• Developed and utilize Dependent Certification form for 201 1
• Provides continued dependent audit procedures
• Requires certification of dependent status
Developed and utilize Medicare Eligibility Certification Form for
retirees
• Provides notification of eligibility for retirees and spouses eligible
for Medicare due to disability
Created a system for employees to submit Fitness Incentive Tracking
program facility requests
Enhanced Wellness Ambassador designation process
Worked with technology in online program registration for the
following programs: Maintain Don't Gain, Weight Watchers and Flu
Shots
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W ~ n ItIatIVeS -- continued
Collaboration
Participate on eValue8 Strategic Partnership through Virginia Business
Coalition on Health for health plan/employer/provider collaboration
Enhanced collaboration with Occupational health
Enhanced collaboration with Optima Case Management
Participate on the Virginia Business Coalition on Health (VBCH)
Wellness Collaboration committee
Recognition
Recognized in 2009, 2010 and 201 1 by American Heart Association as
"Gold Start! Fit-Friendly Company"
Recognized in 1997, 2004 and 201 1 by the Virginia Business Coalition
on Health, receiving the "Wellness in the Workplace" award.
City and Schools Cancer Screenings
90.0% __ - -I
' 80.0%
70.0% ~ ~~
60.0% I
i
50.0% ^ 2007 '
40.0% ! ~ 2008
30.0% ~ ~~ 2009 ~
20.0% ^ 2010
10.0%
0.0% ~ ~I
Cervical Cancer Mammography Prostate Cancer Colorectal
Screening Screening Screening Cancer
Screening
I
iz
6/7/2011
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6/7/2011 ~,
Health Stratification History - c>yands~t,oois
~-~
2007 % Member3
39.8% 20.5% 19.8 % 13.8 % ti.2'ro
2010 X Membsn-
41.9% 20.7% 18.8% 129% 5.7 %
2007 Members Acdvsly Engaged wlth Health Coach
178 164 28S 738 467
1.676 3.676 5.4 % 21.5 % 30.2%
2010 Members Aedwly Engaged with Health Coach
430 445 654 913 765
4.1 % 8.876 13.8 % 28.1 % 54.0
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Health Care RFP Results
- Request for Proposal Issued for 2012 Plan Year for fully and self-
insured options
- Proposal Requested from:
• Aetna
• Anthem BCBS
• CIGNA
• Optima
• United Healthcare
• Made available to others through advertising
- Proposals Received from:
• Anthem BCBS
• Optima
• All others declined to bid stating non-competitive in market
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Health Care RFP Results -- ~oinc~nuea
- Criteria for Selection
The most comprehensive discounts and administrative fees
• High quality standards of customer and member service
• Quality networks with competitive financial arrangements
• Network access to as many employees/retirees and their
dependents as possible
• Minimal provider disruption and consistent network approach
• Proven medical management and disease management programs
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Financial Analysis
Backaround -claims cost
- Impact of the RFP on claims cost
• To determine the impact of changing medical vendors, Mercer
conducted a vendor discount analysis on in-network medical
claims costs
o Based on home zip codes for City/VBCPS employees enrolled in the health plan
o Utilized Mercer's NetPic tool
o Compares vendors' discounts achieved in areas where City/VBCPS employees
reside
o Does not consider expected improvement or erosion in vendors' future
discounts
~ City/VBCPS claim costs are projected to 2012 based on incurred
claim data paid through December 2010 and do not reflect any
plan design changes
• Pharmacy and administrative fees are included for completeness
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6/x/2011
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6/7/2011
Financial Analysis
Self-Insured Results
- Best financial proposal for self-insured health plan is Optima
- Optima produces the lowest medical, pharmacy and
administrative costs
- Switching to Anthem would increase plan costs by
approximately$7.1 million or 5.9%
- In addition to Optima having the lowest projected medical spend
based on known provider discounts in the market, Optima
administrative fees are also lower when compared to Anthem
- Optima has achieved 99.8% accuracy in claims payments.
Anthem would not agree to the claims audit as requested .
- Over the term of a three year contract, Optima administrative
fees are approximately $3M less than Anthem
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Financial Analysis
Fully insured options
- Anthem and Optima fully insured rates are guaranteed for 1 year
only
- The most competitive fully insured quote was from Anthem
- Anthem's fully insured quote was $2M greater than the
projected self insured Optima costs
- Anthem was asked to guarantee the fully insured rates for more
than one year and declined
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6/~/zoil
Fully Insured vs. Self Insured
Considerations
- Financials
~~ Expected increase to current costs by moving to fully insured
arrangement ($2M in first year)
+ Unfavorable impact to cash flow in year one (pay run out claims
from 2011 in addition to paying full premiums)
• Reduced administrative expenses (no premium tax, carrier profit
or overhead charges)
- Plan design changes
Plans would be subject to any state mandates as well as any
carrier changes
- Health care reform
• Plan would lose grandfathered status
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RFP Award
- Health RFP Committee selected Optima under a self insured
arrangement
• Lowest cost option
• Flexibility in plan design
• No internal switching cost
o Communication
o Information technology
• Proven reliable partner
• Proven track record of improving the health status of our
members
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6/7/2011
Next Steps
- Plan Year 2012 - No plan design, carrier, or contribution changes
• Adoption of ordinance for 2012 health care (City) -June J4, 1011
• Consolidated Benefits Office finalize materials for open
enrollment - Ju/y Z9, ZO11
• Open Enrollment -October 10 -October 30, 2011
- Claims audit for 2010 -August/September 2011
- Council/Board Briefing for Health Care Strategy for 2013/2014 -
August/September 207 J
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