Hospital Benefit Plans & Strategies Report
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Transcript of Hospital Benefit Plans & Strategies Report
2010 Hospital Benefit Plans and Strategies Report
2
INTRODUCTIONIntroduction For purposes of clarification, in this booklet we will refer to health-
care (as one word) when discussing the term in relation to the
industry and utilize the term health care (as two words) in refer-
ence to the type of coverage.
We have moved into new territory. The Patient Protection and
Affordable Care Act is now law, and much of the regulation
addresses reform of the healthcare system. These new regula-
tions will impact your employee medical benefit plans and your
business. Gallagher Healthcare Practice Group has extensive
information discussing the impact of reform on your organiza-
tion, and we would be happy to share this information with you.
However, this report, while containing information about strategic
program initiatives that may also be of use to your organization
as the health system reforms, is focused on helping you as an
employer manage the conflicting interests of your employees
and your organization’s fiscal health as it relates to your medical
benefits program.
We initiated this project on behalf of hospital and health system
plan sponsors to better understand current benefit and opera-
tional strategies as well as future plans. This is the second year of
our analysis so we can look at current medical program compo-
nents as well as benefit trends since last year.
MethodologyData was compiled from 142 client benefit plans of Gallagher
Benefit Services (GBS) and UMR in April 2010. This represents
a 14.5 percent increase over 2009 when 124 plans were
reviewed. In addition 62 supplemental survey responses were
received, representing an increase of 19 percent over the 42
responses received in 2009.
The survey was conducted on an organizational basis, with
only one recipient per hospital, and data was reviewed for
validity and completeness of response. When respondents
chose not to answer a question or indicated the question was
“not applicable,” the base size used was that which applied to
the specific question. When the accuracy, completeness or
validity of the data was in question, it was not used.
When an employer offered more than one medical or pharmacy
program option, the prevalent plan (plan with the highest enroll-
ment) was selected for inclusion in the data set.
Plan options that include a higher level of benefits for employees
who use domestic facilities and/or providers are noted as such.
In this report...
In this report .....................................................................2
Methodology ....................................................................2
The participants ................................................................3
The respondents ..............................................................3
Key findings .....................................................................4
Managing costs with plan design ...................................5
Managing costs with techniques unique to healthcare
providers ..........................................................................7
Population health risk management ................................9
Making better decisions ...................................................9
A closer look at plan design ..........................................10
About Gallagher Benefit Services, Inc. .........................12
About UMR ....................................................................12
3
15.5% 27.5%
47.2%
9.9%
There are 142 hospitals in 35 states and the D.C. participating in the dataset.
The participantsThe plan design analysis represents benefit plan
data from 142 hospitals and health systems across
the country. Thirty-five states and the District of
Columbia are represented, up from 31 last year. The
biggest concentration of participants continues to
be from Texas, with Wisconsin, North Carolina, New
Jersey, California, and Georgia representing the
largest next five. This year 67 hospitals are located
in the South, 39 in the Midwest, 14 in the Northeast
and 22 in the West.
The average group size in 2010 was 2,117
employees, up four percent from 2009, and the
average number of plans offered was exactly 3 (it
was 2.88 in 2009). Once again 75 percent of the
plans renewed in the first quarter of the year, so
their data represents 2010 plan design. The other
participants renewed later in the year, so their data
reflects 2009 plan design.
11.3% 43.5%
33.9%
11.3%
The respondentsSupplemental survey responses were received from 62 hospi-
tals across the country, with the largest concentration from the
Midwest and South. Over half operate a single acute care
hospital, and four of the respondents operate 10 or more facili-
ties. Academic facilities represent just over 20 percent of the
respondents.
One-third of the 2010 respondents employed 1000 or less
employees, 45 percent employed between 1000 and 5000
employees, with the remaining 21 percent employing over 5000
employees. Eighty-seven percent of respondents employed
primary care physicians and 77 percent employed specialists,
up from less than 70 percent last year. Twenty-seven percent of
the respondents have union employees, about the same as
last year.
There are 62 hospitals in 25 states responding to the survey.
4
CO
ST
S
KE
Y F
IND
ING
S
0%
10%
20%
30%
40%
50%
60%
70%
80%
AggregateSpecific
Stop Loss
Yes
No
Key findings • Healthcare employers increased employee
cost sharing in 2010, using significant plan
design changes rather than premium
contribution increases to do so. Prevalent
plan individual deductibles were up as much
as 36 percent over last year, and family
deductibles were up 33 percent, but only for
non-domestic providers. Contribution
amounts did not seem to shift significantly, so
the healthcare employers chose to increase
cost sharing from those who used the plan
more and did not use domestic facilities,
rather than from everyone across the board.
• New this year were questions on the use of
stop-loss insurance against the risk of budget-
busting catastrophic claims. We found that
nearly 80% of the respondents use this
financial risk management tool, although not
all cover domestic claims under the insurance
contract and many set their own domestic
claim reimbursement schedules lower than
their commercial contracts, both of which
serve to lower the premium cost.
• While benefits for preventive services have become richer
and more comprehensive (a good thing), a disconcerting
trend from last year continues: less than half of the
respondents are offering Health Risk Appraisals or Health
and Wellness Incentives to their employees. This
indicates that many healthcare facilities are still providing
sick care insurance for their employee medical benefit
programs and not a longer term focused health and
wellness approach. Interestingly, this is a common
complaint among those who championed reform about
the system overall.
• Those organizations that use domestic staff to deliver
aspects of existing health, wellness and chronic disease
management programs are still in the minority. As the
Center for Medicare and Medicaid Studies continues to
push healthcare reform toward integrated delivery with a
health and wellness focus, more healthcare organizations
may realize the wisdom of using the medical benefit plan
program as a platform to gain competencies for the future
(not to mention medical program cost-containment).
• Use of online benefit enrollment seems to be on the rise
among healthcare employers.
-10%-5%0%5%
10%15%20%25%30%35%40%
Ind OOPFam OOPInd DeductFam Deduct
Percent change from 2009
Domestic
Out
In
5
CO
ST
S
0%
15%
30%
45%
60%
<60%60-69%70-79%80-89%>90%
Employer Contribution
Single
Family
NO76%
YES24%
Offer CDH
Managing costs with plan design Multi-tiered benefit plans Once again open access PPO plans are the plan of
choice for most hospital facilities and employees.
PPO plans were the prevalent plan for 83 percent of
the participant organizations, the same as last year.
Within these plans, the network plan design features
an average individual deductible of $758 and a
family deductible of $1841. The employees’ coin-
surance obligation average 21 percent, up from last
year’s 19 percent. Once again three-quarters of the
respondents pay for between 70 and 90 percent of
the cost of coverage for employees in the prevalent
plan. Fifty-nine percent of the participants this year
offer employees more comprehensive benefits if
they use domestic facilities or providers, up from 51
percent last year. On average, for the domestic
plan, the individual deductible is reduced to $323
and the family deductible is reduced to $1001,
about the same as last year’s averages. The
employees’ coinsurance obligation under the
domestic plan averaged four percent, again about
the same as last year. While the domestic program’s
deductible and coinsurance features are about the
same as they were last year, the domestic option
must seem even more attractive to employees since
deductible and coinsurance obligations have
increased for nondomestic services.
Consumer-driven health plans Once again healthcare respondents who offer high-deductible,
consumer-driven health plans are in the minority (24 percent
this year as compared to 29 percent of last year’s respondents)
and they offer these plans as an option to more traditional
programs. Of those 15 respondents offering consumer-driven
plans, four also include an employer-funded Health Reimburse-
ment Account, and 6 offer Health Savings Account access.
When a respondent contributed employer funds to the HRA or
HSA, the most common amount was between $250 and $500
for single coverage and between $500 and $1000 for family
coverage, the same as last year.
5%
10%
15%
20%
25%
30%
35%
40%
45%
HDHP w/HRAHDHP w/HSAHDHP only
If so, do you offer a cash account?
6
Incentives Forty-seven percent of responding hospitals (about the same
as last year) use incentives within their benefit structure to
encourage healthy behavior and participation in health
management programs. Of these, 58 percent use premium
contribution reductions (about the same as last year) and two-
thirds offer assistance in meeting deductibles (about double
last year’s results).
There can be any number of criteria that must be met in order
for employees to receive the incentives. Almost all (93 percent)
who offer incentives do so if the employee completes a health
risk appraisal, this is up from about 50 percent last year. In addi-
tion, three-quarters of respondents specifically indicated a
requirement of having a biometric screening in conjunction with
the Health Risk Appraisal. Other criteria included participation
in specific health and wellness activities (seventy percent of
respondents who offer incentives this year as compared to 48
percent last year), participation in disease management
programs (over 50 percent this year as opposed to about 40
percent last year), or being tobacco free (also over 50 percent
this year as opposed to about 40 percent last year).
NO53%
YES47%
Offer Incentives?
0% 20% 40% 60% 80% 100%
Non-smoker
DM participation
HW participation
Biometric Results
HRA participation
Incentive Criteria
0% 16% 32% 48% 64% 80%
Other
Premium reduction
Deductible assistance
Incentives
7
0% 9% 18% 27% 36% 45% 54% 63% 72% 81% 90%
% of billed charges
DRG
Per diem
ASC case rate
% of Medicare
Other
Facility Domestic Reimbursement Methodology
Managing costs with techniques unique to healthcare providersDomestic reimbursement methodologies This year about 57 percent of our respondents indi-
cated that they set their own domestic facility
reimbursement rates rather than running claims
through existing provider network contracts, up
from 49 percent last year. This approach gives
hospitals additional control over the cost of the
employee medical plan, eliminates fluctuation in
revenue from employees when carrier changes are
made and, when reimbursement is set at a rate
lower than typical payment contracts, results in
lower out-of-pocket expenses for employees. In
addition, the facility that uses a reimbursement
schedule which is less than existing contracts can
also have a positive impact on the cost of any stop-
loss insurance purchased for the program. Once
again, the majority of hospitals that set their own
domestic facility rates did so on a simple percent of
billed charges basis. The percentage used,
however, varies greatly. Nearly a quarter of our
respondents use a percentage equal to or greater
than 90 percent of billed charges, while over a third
(37 percent) use between 50 and 70 percent of
billed charges. Sixty percent of the respondents
indicate that their methodology includes some
margin for profit while the other 40 percent are
offering services at cost to their employees.
About a third of respondents set their own domestic
professional reimbursement as well, up from about
20 percent last year. Again the most common meth-
odology was to use a percent of billed charges
(used by half of those who set their own profes-
sional reimbursement methodology); however,
billing as a percentage of Medicare (25 percent) or
using a combination of approaches (17 percent)
were also used. One respondent used the RBRVS
schedule.
0% 6% 12% 18% 24% 30% 36% 42% 48% 54% 60%
% of billed charges
RBRVS fee schedule
% of Medicare
Professional Domestic Reimbursement Methodology
0%
5%
10%
15%
20%
25%
>40%40-49%50-59%60-69%70-79%80-89%>90%
Average Domestic Reimbursement
8
Po
pu
lati
onPharmacy
Once again more than half of all respondents indicate that they
provide incentives for their employees to use owned or in-house
pharmacies (57 percent, up from 53 percent last year). Using a
PBM negotiated contract to set prescription drug prices remains
the most common pricing strategy for these domestic pharma-
cies, but one in five of the respondents has used more
aggressive GPO or Medicare 340B pricing contracts to which
they have access.
Managed careThis year, 42 percent of the
respondents indicate that
they are using domestic
staff as part of the delivery of
health and wellness
programs. This is an
increase from 34 percent
last year. At these organiza-
tions, domestic personnel are most likely to be involved with the
wellness program (74 percent), smoking cessation program
(64 percent), or an employee assistance program for behavioral
health issues (50 percent).
On-site clinicsUse of on-site clinics by health systems
and hospitals remains low. This year
33 percent of respondents indicate
that they are using an on-site clinic (up
from 29 percent last year). Once again
the majority of those who have on-site
clinics requires employees to pay
something for their use and about sixty
percent of the respondents allow
dependents to also use the clinic. As
was the case last year, only half of the respondents generate
claims and track clinical activity and cost at the clinic. Over 80
percent of the respondents indicate that there is a registered
nurse on staff at the clinic while three-quarters report physicians
or LPNs on staff and half use physician’s assistants.
Financial risk managementNew to our report this year is information on the use of stop-loss
insurance contracts in self-funded medical plans. Seventy-nine
percent of the respondents purchase individual stop-loss
coverage to protect them against the effects of a single cata-
strophic claim. Of those who purchase stop-loss insurance 57
percent use an attachment point equal to or greater than
$250,000 and 70 percent also cover domestic claims under the
policy. When domestic claims are covered, a little more than
half cover the claims at 100 percent, while the others receive
less than 100 percent reimbursement for domestically gener-
ated catastrophic claims. Three-quarters of individual stop-loss
coverage include medical and prescription drug expenses.
Only 23 percent of respondents also purchase aggregate stop
loss coverage.
0% 7% 14% 21% 28% 35% 42% 49% 56% 63% 70%
PBM contract schedule
340B
GPO
Acquisition Plus
Other
Pharmacy Pricing Strategies
NO21%
YES79%
Do you purchase individual stop loss coverage?
NO77%
YES23%
Do you purchase aggregate stop loss coverage?
NO67.2%
YES32.8%
Do you have an on-site clinic?
NO58.1%
YES41.9%
Are domestic clinicians/staff personnel involved in the delivery or management of any of your care management programs?
9
Po
pu
lati
on
Making better decisionsPlan sponsor data analysisEffective population health risk management requires capturing data about claims, biometric indicators, and self-
reported health status. A robust engine to analyze the data and create predictive models is essential for turning the
data into useful information and concrete action steps. This year’s respondents use engines from actuarial organiza-
tions like Medstat and Ingenix, from their claims administrator or, in the majority of cases, from their broker consultant.
In all cases it is important to make sure that the engine has been developed by a team that includes actuaries, clini-
cians and information technology experts.
Employee and dependent toolsThe respondents’ use of tools for their employees and their dependents remains quite similar to last year: about 90
percent have provider directory assistance; about 70 percent provide a library of health and wellness information,
about 60 percent provide employee self-service and about 15 percent make available provider quality information. The
one significant increase in use was for online enrollment, which increased from 49 percent of our respondents last
year, to over 60% this year.
Population health risk managementEmployers, including hospitals, are focusing more on
proactive health and wellness management. An effec-
tive approach will include a high level of preventive
service benefits, tools to help employees determine
what areas of health and wellness they need to focus
on individually, and chronic condition management.
Preventive careThis year half of our respondents indicate that they
cover routine in network preventive care at 100 percent,
up from just over 40 percent last year. Preventive visits
allow individuals face-to-face interactive dialog with
caregivers, and the blood work usually associated with
these visits can provide additional biometric data.
Health and wellness initiativesWhile quantitative biometric data has proven to be very
useful in identifying individual health and wellness
needs, studies at the University of Michigan Healthcare
Management Resource Center (Baunstein, Yi, Hirsch-
land, McDonald, Edington. Am. J. Health Behavior.
25(4):407-417, 2001) indicate that self-reported data is
even more useful. Unfortunately, less than half of our
respondents offer a formal health risk assessment tool
to their employees. Many do, however, offer general
support for some well-known health and wellness chal-
lenges: for the second year in a row over 80 percent of 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Depression
CAD
CHF
COPD
Asthma
Hypertension
Diabetes
Conditions targeted with disease management
2010
2009
respondents offer smoking cessation programs, over
half offer obesity reduction and about half offer well-
ness coaching services.
Disease managementChronic disease management programs were most
likely provided by a third party and, according to this
year’s respondents, use of these programs is up across
the board. Over 60 percent of respondents have
disease management programs targeted at diabetes,
hypertension, asthma, chronic obstructive pulmonary
disorder (COPD) and congestive heart failure (CHF).
Last year only one of these (diabetes) was targeted by
more than half of the respondents.
1010
A C
LO
SE
R
LO
OK
A closer look at plan designPlan prevalenceOnce again 83 percent of the prevalent plans
were PPO plans. We defined a PPO plan as a
program where services can be obtained from
any license provider; where services obtained
from a specified group of providers, which
usually includes the domestic facility and
related providers, are covered at a higher
benefit level; and where there are no primary
care “gatekeepers.”
This year HMO plans were presented 6 percent
of prevalent plans, and POS plans comprised
11 percent of prevalent plans. Again there was
one indemnity program.
We defined an HMO program as one where
services must be obtained from a specified
group of providers, which usually includes the
domestic facility and related providers; and
where no benefit is payable for services outside
the network unless for true emergency treat-
ment. We defined a POS plan as one where
services can be obtained from any license
provider; where services obtained from a spec-
ified group of providers, which usually includes
the domestic facility and related providers, are
covered at a higher benefit level; and where
specialists within the specified group of
providers must be accessed through a primary
care physician who is also within the specified
group of providers.
PO
SH
MO
PP
O
Benefit Domestic In-Network Out-of-Network
Annual Deductible/Family $1,001 $1,841 $3,661
Annual Deductible/Individual $323 $758 $1,496
Annual Out-of-Pocket Limit/Individual $4,308 $6,335 $12,773
Annual Out-of-Pocket Limit/Family $1,866 $2,700 $5,582
Brand (Formulary/Preferred) ($) $33 $41 $41
Brand (Formulary/Preferred) (%) 23% 26% 28%
Brand (Non-Formulary/Non-Preferred) ($) $48 $65 $64
Brand (Non-Formulary/Non-Preferred) (%) 33% 39% 37%
Coinsurance 92% 79% 56%
Generic ($) $10 $12 $14
Generic (%) 12% 20% 26%
Lifetime Plan Maximum $2,028,571 $2,261,062 $2,165,179
Office Visit/Exam ($) $19 $24 $31
Office Visit/Exam (%) - 28% 42%
Benefit Domestic In-Network Out-of-Network
Annual Deductible/Family $267 $435 $1,710
Annual Deductible/Individual $150 $187 $830
Annual Out-of-Pocket Limit/Individual $3,417 $4,304 $9,150
Annual Out-of-Pocket Limit/Family $1,857 $2,354 $5,000
Brand (Formulary/Preferred) ($) $25 $37 $53
Brand (Formulary/Preferred) (%)
Brand (Non-Formulary/Non-Preferred) ($) $30 $64 $60
Brand (Non-Formulary/Non-Preferred) (%)
Coinsurance 96% 90% 60%
Generic ($) $5 $13 $40
Generic (%)
Lifetime Plan Maximum $1,833,333 $2,166,667 $2,625,000
Office Visit/Exam ($) $17 $22 $50
Office Visit/Exam (%) - 20% 36%
Benefit In-Network
Annual Deductible/Family $107
Annual Deductible/Individual $36
Annual Out-of-Pocket Limit/Individual $3,336
Annual Out-of-Pocket Limit/Family $1,583
Brand (Formulary/Preferred) ($) $36
Brand (Formulary/Preferred) (%)
Brand (Non-Formulary/Non-Preferred) ($) $57
Brand (Non-Formulary/Non-Preferred) (%)
Coinsurance 97%
Generic ($) $16
Generic (%)
Lifetime Plan Maximum $3,000,000
Office Visit/Exam ($) $28
Office Visit/Exam (%)
PO
SH
MO
PP
O
p\graphics\GBS\HospitalGroup/HG_EB_2010.indd
© 2010. No part of this document may be reproduced without permission.
About Gallagher Benefit Services, Inc. Arthur J. Gallagher & Co. (AJG) prides itself on being a national risk management and insurance
consulting leader in the highly specialized Healthcare employer industry. AJG continues to
differentiate itself with incomparable industry expertise, outstanding market leverage, and supe-
rior client service. As a division of AJG, Gallagher Benefit Services (GBS) focuses on all aspects
of compensation and benefit program strategies, analysis, products, and implementation. Since
Healthcare employers have unique requirements, we organized the Gallagher Healthcare Prac-
tice Group in 2003 to address the complexities and ever-changing issues inherent to the
Healthcare industry. Gallagher Healthcare personnel possess the experience and expertise
necessary to meet the unique challenges in this market.
Matt Warner
Area Vice President
Healthcare Practice Group
561.801.7011
About UMR UMR is the country’s largest third-party administrator of health benefits, providing customized
solutions, cost-effective networks and compassionate service for self-funded medical, dental,
vision and disability plans. Serving more than 425,000 hospital members, UMR offers flexibility,
scale and cost savings necessary to help hospitals design customized employee health plans
to meet their unique needs as both employer and health care provider. In addition, UMR offers
a variety of programs to help clients manage their benefit Plans and control costs, including care
management, pharmacy benefits administration, reinsurance products, claim recovery manage-
ment, claim repricing and provider data management services, and non-network claims
cost-containment.
Tony Anastasia
Vice President
Hospital Market
952.992.4731