Negotiating Health Insurance

Summer Leadership ConferenceAugust 5, 2008

Dr. Joan HughesUniServ Rep., Unit # 11

2

Agenda:

I. Realistic Goals: Maintain & Improve

II. Insurance Negotiations History

III. Negotiations Strategies

IV. E-MEHIP: the NEW Option for Locals

3

Insurance is $ Insurance savings based on insurance plan

costs (NOT salary costs)

If total plan for 400 teachers = $4,500,000 then 1% savings or shift = $45,000 whereas

If total salary account for 400 teachers = $19,000,000 then 1% of increase = $190,000

4

I. Realistic Goals:

1. What are our team goals for improving and/or maintaining insurance?

2. What do we anticipate the Board will want?

5

Association Goals

1. Maintain Current Plan & Premium Contribution– Best plan for the $– Good comprehensive coverage– Experience factors– Rate renewals– Trends in comparable employee groups

6

Association Goals

2. Minor Improvements: Add a rider Improve drug plan (expanded formulary; drop step

therapy and/or mandatory generic substitution) Improve network Add coverage for state mandates if self insured

7

Association Goals

3. Major Improvements & Changes Changing your plan design or platform (leaving

PPO plan as primary plan option) Changing your carrier Moving to a standalone Rx plan

(cont’d)

8

Association Goals

3. Major Improvements & Changes (cont’d)

Changing your funding mechanism (fully insured vs. self insured)

Moving to E-MEHIP – new statewide PPO plan

9

Assess Your Current Insurance

How is your plan funded?1. Self-Funded: The employer holds the risk &

pays for administrative services only (ASO) to manage the benefits. The employer protects against huge losses by reinsuring w/individual stop loss and aggregate stop loss. State mandated minimums do not apply. Reserve accounts are established.

Positive Cash Flow

10

Assess Your Current Insurance

How is your plan funded? 2. Fully Insured: Employer purchases group

insurance contract & pays premiums for specific benefits and services. State mandates apply & plan is under purview of State Insurance Commissioner. Rates are determined by the insurer. Insurance company holds the risk.

Pre-Pay

11

Health Insurance Plan

Cost ComponentsFully or self-funded, the cost components

are similar: Incurred and paid claims Expected claims Trend Reserve factor Margin (profit)

12

What will it cost to keep my current coverage?

Value of the insurance benefit is part of total compensation package.

Determine increased costs during contract.

Share total annual premium info with members.

13

Balancing Act

How do we want our insurance benefits to look in three years and what is it worth to us to achieve that goal?

14

Will we need an Insurance Consultant?

Degree of plan/cost change drives need for consultant

Major Minor

Platform change/ Co-pay increase/Carrier change Premium

only increase Adversaries vs. partners Hourly vs. retainer depends on individual local

15

II. Insurance Negotiations History

2007-2008 Insurance premiums climb Teacher contributions move up at

~ 1% per year on PPO’s 20% = the line in the sand PPO’s last neg. season:

15.04%; 15.88%; 16.68%

16

Insurance Negotiations History

2007-2008 Platform changes – Comp plans & HSA’s

appear as plan options in effort to protect PPO’s

New co-pays appear; specialist Dr.; out-patient surgery; imaging or hospital services co-pay

Increases in existing co-pays, Dr., ER, inpatient admissions, & urgent care

17

Insurance Negotiations History

Rx– Most systems have public sector

formularies with 3 tiers– $15 differential needed between tiers to be

cost effective & impact patient choice ($5, $20, $35; $10, $25, $40)

– Dosages are standard

18

2008-09 Statewide Insurance Goals

No employee premium contribution @ 20%+ No caps on employer contributions

w/employees paying excess No mandatory generic drug substitutions Have E-MEHIP as an option for local choice

19

III. Negotiating Strategies

1. Cost Savings: Expenses are reduced or eliminated from plan expenses

2. Cost Containment: Feature added to prevent future growth of expenses (e.g. utilization review; step therapy; prior authorization)

20

Negotiating Strategies (cont’d)

3. Cost Shift: Expense paid by the plan or Board that is totally, or in part, moved to the employee

4. Reduce/Eliminate benefits

5. Improve Benefits and options

21

Association Strategies

Based on informed decisions – cannot afford surprises

Information becomes critical

Need to monitor business of the plan during contract life

22

Association Strategies

What is our BATNA? (Best Alternative to a Negotiated Agreement)

What happens to insurance issues in interest arbitration?

INSURANCE = $

23

IV. Enhanced MEHIP(E-MEHIP)

The new insurance option created by CT state statute.

Municipal Employees

Health Insurance Plan

24

E-MEHIP

Healthcare coverage offered by state of CT for municipal employees and their families.

Large group rates and pooling of claims and risks.

Administrative economies of scale. No commercial advertising.

25

E-MEHIP

Must be the exclusive health insurance offering. Choice of 3 plan designs:

PPO; HMO; and Comprehensive PPO. Choice of 3 insurance carriers:

Anthem BX/BS; HealthNet; & Oxford/United

Health Care. Caremark (formerly Pharmacare) is the Rx

provider.

26

E-MEHIP (think 9 square spreadsheet)

$$$ PPOAnthem

PPO HealthNet

PPO Oxford/United

$$$

$$ HMOAnthem

HMOHealthNet

HMOOxford/United

$$

$ Comp. PPO

Anthem

Comp. PPOHealthNet

Comp. PPO

Oxford/United

$

27

E-MEHIP (think 9 square spreadsheet)

Each square is its own plan with spreadsheet, plan details, networks, and costs.

Once the employer takes E-MEHIP, then all employees can select which “square” or plan they want. They receive that plan’s benefits and pay the accompanying rates.

28

E-MEHIP

There is no “negotiating benefits” within the 9 square spreadsheet to change any aspects of the plan.

There may be negotiating of the premium contribution and other “gaps” if the Board is willing.

29

E-MEHIP

A self-funded plan administered by MERCER, as a TPA (Third Party Administrator).

COBRA will be handled by MERCER.

30

E-MEHIP

If a town/Board of Education contracts E-MEHIP, then there is a 3-year commitment. No “shopping” plans on a yearly basis.

As enrollment increases, rates decrease. Information available for financial impact on

towns.

31

Why the 800 lb. gorilla?

For some locals, it may be MOVE or BE MOVED.

32

Rx Plan

Can be self-funded stand alone Rx option Note: Step Therapy removed Have formulary listing

33

Retirees – a big

Retirees getting health insurance from the Board would pick a square from E-MEHIP options.

Retirees who are Medicare eligible go to state Medicare supplement plan.

34

How do rates work?

-10% -7.5% -5% -2.5% Base rate +2.5% +5% +7.5% +10%

Carrier establishes base rate which lowers as more people/towns enroll.

Experience of group determines which band of rates, group goes to for first year.

Experience determines movement up one; down one; or stay the same for following year.

Nine rate bands available – see attachment.

35

More than just a Teachers’ Association question.

Who is covered by your plan? Administrators? Secretaries? Paras/Aides? Janitors? Superintendent/Central Office?

and/or All municipal employees?

36

How will decision to move to E-MEHIP be made?

Voluntary – coordinated work and bargaining among a municipality’s unions

Mandatory – every group for itself; rate impact of group(s) leaving town plan force movement of other groups

(cont’d)

37

How will decision to move to E-MEHIP be made?

Partial – move either insurance or Rx Delayed – not move in during first year –

wait and see (change of carrier language becomes critical: “equal to or better standard”)

38

How should our local prepare to consider E-MEHIP and is our position + or - ?

Work with your field rep Compare current spreadsheet of benefits to

closest E-MEHIP Plan (http://www.mehip.org/enhUser/snoEnhBP.aspx)

Consider networks of carriers Consider cost impact (need current renewal)

39

Watch for more CEA information

E-MEHIP plan details & booklets E-MEHIP improvements Talk to your UniServ rep.

Thank you!