Recommendationfor Medical Plan Changes

University Benefits Advisory CommitteeMarch 5, 2007

Why Change?• HealthNet claims trends over the last three years in excess

of budgeted levels and national trends: 16% in FY2004, 23% in FY2005 and 21% in FY2006;

• HealthNet claim expenses doubled between 2001 and 2006;

• University has absorbed increases exceeding budgets by $5 million during these years without passing on as additional costs to employees;

• 2005-06 claim expenses exceeded budget by almost $3 million;

• Have not marketed the medical plan in nine years since we implemented with HealthNet in April 1998;

• Commitment to continuing to provide access to quality healthcare options while maintaining affordability to both employees and to Pace.

Why Change?• 2007 POS renewal rates increased 21.7%• 2007 POS employee per check contributions would have

been –Individual Pre 2004 - $49.67 ($20.92)Individual Post 2003- $52.50 ($43.22)Employee +1 - $232.73 ($191.61)Family - $312.30 ($257.12)

• 2006 rates ( ), POS and HMOs, were frozen pending medical plan decisions for implementation July 1, 2007

Why Change?

• Healthcare increases are rising three times faster than cost of living;

• Health care premiums, nationally are expected to increase by 9 to 12% in 2008;

• Using a conservative 10.5% increase for 2008 POS Premiums would increase.

What we would expect for 2008?

Coverage

HealthNet POS

Annual Premium

1/1/2006

HealthNet POS

Annual Premium

1/1/2007*

HealthNet POS

Projected Annual Premium

1/1/2008

Individual-Post 2004

$6,915.12 $8,399.04 $9,280.94

Employee + 1 $13,138.56 $15,958.80 $17,634.47

Family $17,630.64 $21,414.96 $23,663.53

*Rate Increases for employees absorbed by Pace as of 1/07

HealthNet Plan Expenses FY2000-2006

Fiscal Year* Paid Medical Claims

PaidDrug

Claims

PaidVendorClaims

Total Claims

Plan Expenses

TotalClaims/Plan

ExpenseAnnual

Increase %

2000/2001 3,276,389 1,269,089 82,9954,545,478

830,439 5,375,917  

2001/2002 3,710,444 1,438,456 171,3985,148,900

887,540 6,036,441 12.29%

2002/2003 3,857,746 1,581,436 193,9635,439,182

924,047 6,363,229 5.41%

2003/2004 4,221,943 2,005,824 221,5856,449,352

917,746 7,367,098 15.78%

2004/2005 5,405,610 2,138,308 308,7387,852,656

1,181,971 9,034,627 22.63%

2005/2006 6,217,956 2,571,969 1,024,2619,814,186

1,114,134 10,928,320 20.96%

Medical Plan Expenses FY2000-2006

Fiscal Year*

Total Claims/PlanExpense

HMOsUniversityExpense

HMOsPlanIncrease %

TotalUniversityMedicalPlan Costs

TotalMedical Plan Increase %

2000/2001 5,375,917 1,526,682 6,902,599  

2001/2002 6,036,441 1,757,711 15.13% 7,794,152 12.92%

2002/2003 6,363,229 2,064,255 17.44% 8,427,484 8.13%

2003/2004 7,367,098 2,217,509 7.42% 9,584,607 13.73%

2004/2005 9,034,627 2,258,765 1.86% 11,293,392 17.83%

2005/2006 10,928,320 2,257,368 -.06% 12,650,223 16.76%

Medical Plan Review

• Began work in March 2006• Selected C&B Benefits Consulting as a result of a

competitive RFP process to assist with this medical plan review and outline the strategies for review– Plan design changes– Contribution Strategies– Consolidation of carriers– Product Offering changes– Carve out of medical plan options – Funding arrangements

Medical Plan Review

• Objectives for New Medical Plan– Ensure continuation of comprehensive medical plan– Give Faculty and Staff Choice and Freedom to go out of network– Access to quality networks, providers, facilities– Affordability– Cost containment for Pace at 2006-2007 budget levels (reduce $3

million of University’s excess, unplanned medical plan expense)– Quality medical management excellence– Quality Client Service and Claims Payment Processes

Medical Plan Review AnalysisAnalysis of demographics of Pace University participants and

retirees demonstrated the following:– The average age for the entire Pace active population is

44– The average age for the HealthNet POS plan is 48

(compared to non Pace HealthNet members whose average age is 32)

– The average age for all other Pace HMOs is 42– The average contract size for the Pace HealthNet POS

plan is 1.26 members per contract;– The average contract size for the all other Pace HMOs is

1.88 members per contract;– 87% of all HealthNet POS claims and services

are in-network

Medical Plan Review Process• July 2006

– Request for Information sent to 13 medical carriers;

• October/November 2006– Medical Plan Subcommittee and Benefits Advisory recommended

to accelerate the timetable of the medical plan implementation to July 1, 2007 while freezing employee contributions to medical plan through June 30, 2007;

• November 2006– President approves recommendation– Employees notified of deferred medical plan open enrollment;

• December 2006– Formal request for proposal sent to three finalists, Aetna,

HealthNet and Oxford/United Healthcare

Medical Plan Review Process• January 2007

– Medical Plan Subcommittee meets with finalists to review medical plan management, claims processing; quality of providers and customer service;

– Employees notified of status of medical plan update and announcement of their role in the process;

• February 2007/March 2007– Campus focus groups held -94 employees attend;– 30% response to on-line survey conducted to gauge

satisfaction with plan and tolerance level to change;– Meetings with subcommittee to help shape

recommendations– Finalize recommendations

-Draft - Recommendations

1. New Plan Administrator

2. Funding Option

3. New Plan Design Platform

4. New Contribution Strategy

5. Annual Medical Waiver Option

Plan Administrator

• Oxford/United Healthcare is currently the strong candidate to replace all current medical plan offerings:– Larger network of providers both locally and nationally;– Employees would have access to the Freedom Network of Oxford as well

as United HealthCare providers through United Health Care Choice Plus;– Had the highest match of current providers/hospitals in comparison to

HealthNet and Aetna;– Yields higher financial savings based upon consolidation of medical

plans;– Guarantees premium rates 18 months (until December 2008);– Improved utilization of technology and quality medical management in

comparison to HealthNet;– National Centers of Excellence including Sloan Kettering, Mayo Clinics,

St. Jude

Plan Administrator

• Oxford/United Healthcare is ranked 9th by New York State Insurance Board and is ranked better than Aetna and HealthNet in areas such as complaints, decision reversals, satisfaction, etc.

• Received highest accreditation outcome demonstrating levels of service and clinical quality that meet or exceed NCQA’s (National Committee for Quality Assurance) rigorous requirements for consumer protection and quality improvement in the following categories. – Access and Service – Qualified Providers – Staying Healthy– Getting Better– Living with Illness

Provider/Hospital MatchPercentage Match

 

Empire Professional

Empire Institution (Facilities)

Oxford HealthNet HIP Aetna

Aetna 84% 100% 88% 81% 94%  

Oxford 86% 100%   86% 93% 89%

HealthNet 75% 96% 84% 85% 89% 85%

Funding Option

• Fully Insured *– Consolidation with one carrier; risk unknown for experience with HMOs– Risk is assumed by carrier– Easier to budget since responsibility is limited to monthly premium paid;– Need to comply with all state mandates

* Still under discussion and review

Current Plan DesignCarrier HEALTHNET All HMOs

Type of Plan 100/70 POS

  In-Network Out-of-Network In Network Out-of-Network

Deductible N/A $300/$600 N/A N/A

Coinsurance 100% 70% 100% N/A

Out-of-Pocket Max (includes ded)

$1,000/$2,000 $1,800/$3,600 N/A N/A

Office Visit Copay $15 Deductible & Coinsurance

$15 N/A

Specialist Copay $15 Deductible & Coinsurance

$15 N/A

Hospitalization 100%Deductible & Coinsurance

100% N/A

Emergency Room Copay $15 $15 $50 N/A

Prescription Drug Copay $10/$20/$30Non API pharmacy subject to Ded. &

Coins.$10/$20/$35 N/A

POS - Point of ServiceHMO – Health Maintenance Organization

Proposed Plan Design – 3 choices*Carrier OXFORD/UNITED HEALTHCARE

Type of Plan 100/70 POS 90/70 POS EPO

  In NetworkOut-of-

Network In NetworkOut-of-

Network In NetworkOut-of

Network

Deductible N/A $300/$600 $250/$500 $500/$1,000 N/A N/A

Coinsurance 100% 70% 90% 70% 100% N/A

Out-of-Pocket Max (includes ded)

N/A $1,800/$3,600 $1,250$2,500 $2,000/$4,000 N/A N/A

Office Visit Copay$10 Deductible&

Co-insurance$20

Deductible&Coinsurance

$20N/A

Specialist Copay$15 Deductible

& Coinsurance$20

Deductible &Coinsurance

$20N/A

Hospitalization 100%Deductible&Coinsurance

Deductible&Coinsurance

Deductible&Coinsurance

100% N/A

Emergency Room Copay

$100 $100 $100 $100 $100N/A

Prescription Drug Copay

15/$25/$502X Mail

15/$25/$502X Mail

15/$25/$502X Mail

15/$25/$502X Mail

15/$25/$502X Mail

N/A

•Plan design options still being finalized•POS - Point of Service; EPO – Experience Rated HMO

Current Contribution Strategy

• Pace pays 85% for individual coverage (special phase-in for pre 2004 hires)

• Pace pays 65% for dependent coverage• Current POS employee per check contributions

(since Jan. 2006) –Individual Pre 2004 - $20.92

Individual Post 2003- $43.22

Employee +1 - $191.61

Family - $257.12

Projected Per Paycheck Contributions in 2008Coverage Current POS

Contribution

(since 1/1/06)

2007 POS

Contribution*

2008 POS

Contribution

Projected

Ind-Pre 2004

$20.92 $49.67 $57.95

Individual-Post 2004

$43.22 $52.50 $57.95

Employee + 1

$191.61 $232.73 $257.17

Family $257.12 $312.50 $345.09

*Rate Increases absorbed by Pace as of 1/07

Proposed Contribution Strategy I• Current employees:

– University would contribute 100% the full cost of individual coverage for the EPO;

– Employees electing a POS plan would pay the difference (i.e., buy up).

– University would continue to contribute 65% for dependent coverage for the EPO;

– Employees electing a POS plan would pay the difference (i.e., buy up) for dependent coverage.

•Contribution strategy not yet finalized•POS - Point of Service; EPO – Experience Rated HMO

Proposed Contribution Strategy II

• Reviewed contribution strategy based upon the following salary ranges:– <40,000– $40,001 to $80,000– $80,001 to $150,000– $150,001 to $220,000– > $220,000

•Contribution strategy not yet finalized•POS - Point of Service; EPO – Experience Rated HMO

Proposed Contribution Strategy III• University would set contribution rates to provide

incentive to enroll in EPO or POS I plans – this strategy would allow us to stay within 2006-07 budget parameters

• Employees can elect POS options but pay a bit more; rates still competitive for a attractive plan designs

• Individual coverage: 85% EPO; 80% for POS I; 77.5% for POS II

• Dependent coverage: 65% EPO; 60% for POS I: 57.5% for POS II

•Contribution strategy not yet finalized•POS - Point of Service; EPO – Experience Rated HMO

Annual Medical Waiver Option• Provide a cash incentive of $750/year to

employees to waive medical coverage at Pace University;

• 160 employees currently have waived medical coverage;

• Assume additional 75 employees will waive (to increase to 15% opt out rate)

• Net savings is approximately $182,290

Retirees• Current Retirees:

– Have access to either the EPO or 90/70 POS plan at no or minimal cost for individual coverage;

– If current retirees wish to elect the 100/70 POS plan, they would pay the difference (i.e., buy up)

• Future Retirees:

– Have access to all of the medical plan options including the 100/70 plan;

– Will contribute at the same premium cost share level as immediately prior to retirement

• Comments – send to yramirez@pace.edu• For Network Provider searches:

- Oxford Freedom Network www.oxhp.com

- United HealthCare Choice Plus Network www.uhc.com