Health Benefits at Benchmark Universities
Presented to Health Benefits Task Force
September 5, 2001
Vocabulary
Allowed charge: amount negotiated between health care provider and insurer or health plan as payment in full for service
Balance bill: amount that may be billed to patient by non-network provider in excess of allowed charge
Coinsurance: percentage of allowed charge paid by patient
Vocabulary
Copayment: fixed amount paid by patient for service received
Premium: amount remitted by employer to insurer or health plan, generally monthly, for coverage of each enrolled employee or family
Vocabulary
Primary Care Provider (PCP): physician or other plan-approved health practitioner responsible for primary care and sometimes referrals in a managed care plan
Tiering: system of grouping dependent coverage sets, e.g., parent plus child(ren), employee plus spouse
Benchmark Analysis
Relevant characteristics of benchmarks’ health plans
Benefit designs offered Analysis of specific benefits Comparison with in-state public employers Retiree participation Total and employee costs Market basket analyses
Benchmarks
Arizona California--Los
Angeles Florida Georgia Illinois Iowa Maryland Michigan Minnesota
North Carolina No. Carolina State Ohio State Penn State Purdue Texas Texas A&M Virginia Washington Wisconsin
Benchmarks 9 are integrated with state employee benefit
system: Arizona, Florida, Illinois, Maryland, Minnesota (currently), North Carolina, NC State, Washington, Wisconsin
3 others are part of statewide university system: Texas, UCLA, Georgia
Several of remaining are much larger than UK, e.g., Ohio State, Michigan
14/19 have different plan years: major effect in period of high inflation
Benchmarks Effect of tiering: having fewer tiers tends to
suppress full family premium. 6 different tiering systems: 6 use only Employee and Family tiers 4 use Employee, Employee + 1, and Family 4 use same 4 tiers as UK 2 use Employee, Employee + child(ren), Family 2 use Employee, Employee + 1 child, Employee +
spouse, and Family Penn State uses 2 tiers for HMOs and 3 for PPO
17/19 have at least one self-insured plan
Benefit Designs Offered
3 benchmarks offer only PPOs and fee-for-service plans: UNC, NC State, Georgia
6 offer only HMOs and variants with FFS alternative for traveling faculty
Trend to smaller number of alternativesMarket consolidationAdministrative simplification
Innovations: triple option, risk corridor, HMO/PPO hybrid (end of presentation)
Selection criteria for plan comparison
Design most comparable to UKHMO and UKPPO
Available in county of university’s main campus
Available to largest number of employees
Benefit Comparison: Outpatient Physician Visit
UK: $0 PCP copay, $10 specialist Benchmark range:
$0--2 $5--4 (1 uses $5 PCP/$10 specialist) $10--8 $15--2
Benefit Comparison:Emergency Department Visit
UK: $50 copay; waived if admitted Benchmark range:
$25--4 $50--6 $75--3 Other--3
Benefit Comparison:Prescription Drug Copayment
Most use three levels: generic, formulary branded, non-formulary branded
UK: $8/$20/$40 Only 2 benchmarks share a design
($5/$10/$25) 3 do not appear to use formularies;
UCLA covers only formulary drugs 3 use coinsurance rather than
copayments in HMOs
Benefit Comparison:Prescription Drug Copayment
UK’s non-formulary copay is one of 2 highest (but note potential effect of coinsurance percentage)
New year designs likely to raise copay Several require member choosing branded
drug when generic available to pay difference Kentucky law requires dispensing
branded when prescriber notes “dispense as written”
Benefit Comparison:Inpatient Hospitalization
UK: $100 copay Benchmark range:
$0--9 $75, $100, $150, $300--1 each $200--2
Benefit Comparison:Inpatient MH/SA
UK: 100% MH, 20% coinsurance SA, 31 day limit
Benchmark range: 100% coverage--11 Others have copay ranging $75-$200 4 others cover SA at lower level than MH Day limits--8 others Other restrictions--4 (lifetime limit, dollar
limit, coinsurance)
Benefit Comparison:Outpatient MH/SA
UK: 50% coinsurance; 20 visit limit/yr
6 others have day limits Most use copays ranging $5-$25 Only other use of coinsurance is
10% with prior authorization, 50% without
Benefit Comparison:Durable medical equipment
UK: 100% coverage Only 5 others at this level Most common charge: 20%
coinsurance Several have benefit ceilings
Retiree participation
About half have some retiree participation Confounding variable is participation in
state employee plans Several offer only Medicare supplementals Several have varying contribution by
length of service UK among most generous None contribute to surviving spouse
coverage
Cost comparison:Total plan cost
Single HMO mean = $238.77 vs. UK $230
Single PPO mean = $273.70 vs. UK 253Family HMO mean = $608.76 vs. UK
$641Family PPO mean = $676.32 vs. UK
706
Cost comparison:Total plan cost
Effect of earlier starting plan year in time of rapid health inflation
Effect of tiering: only 4 others use 4-tier system Several have relatively lower family
premium and higher Employee + child(ren)
Most anticipate major increase in 2002
Cost comparison:Employee contribution
Single HMO: range $0-$49.75mean $15.16median $10.42UK = $21
Single PPO: range $0-114.18mean $40.98median $39.82UK = $44
Cost comparison:Employee contribution
Family HMO: range $0-$432 mean $90.56 median $67.38 UK = $432
Family PPO: range $0-$497 mean $221.52 median $187.25 UK = $497
Cost comparison:Employee contribution
UK within benchmark range for single employee contribution but far higher for employee contribution to family coverage
Note effect of 3-tier plans: lower family premium but higher for parent with 2+ childrenUKHMO employee plus child(ren) still higher
than next highest full family HMO premium
Cost comparison:Employee contribution
Problem: reducing family premium to $250 for current enrollees would cost $3.2 millionLikely higher enrollment if lower premium
(estimated 1,000) Would add $2,184,000 to total cost: with
probable overall inflation, total of at least $5.5 million recurring
Does not address cost for single parents or couples
Cost comparison:Higher subsidy for dependent
tiers
All benchmarks subsidize dependent tiers at substantially higher rates than employee-only coverage. Following HMO computations exclude UK. Range of single subsidies: $168-$285 Range of family subsidies: $387-$697 Mean of single subsidies: $224.52 Mean of family subsidies: $526.26 Family:single ratio range: 1.93:1 - 3.13:1 Family:single ratio mean: 2.34:1
Cost comparison:Higher subsidy for dependent
tiers
Cost of increasing dependent subsidy to lowest of benchmark levels (family=1.93:1)
$209 X 1.93 = $403.37 X 1465 enrolled at Family level=$7,091,245
In-State Public Employers
Regional universities Louisville EKU NKU WKU Morehead Murray
State Federal Employee Health Benefit LFUCG
In-State Public Employers:Benefits Comparison
Office visit: UK is alone in not charging copay/coinsurance
Emergency Department: 4/10 charge $50 copay; others lower or coinsurance
Inpatient hospital: 6/10 charge $100 copay
Inpatient MH/SA: 3rd most generousOutpatient MH/SA: least generous
In-State Public Employers:Benefits Comparison
Prescription drugs: ranks 6th of 10 (most to least generous) based on copays
Durable medical equipment: tied with Louisville as most generous
Balance of analysis is incomplete because new year data arriving daily
In-State Public Employers:Cost Comparison
Single employee premium:mean $14.94median $6.96 range $0-$75.49 (FEHBP)UK $21
Family employee premium:mean $314.13 median $259.76 range $207-$432UK $432
Market basket analysis--healthy
Reasonably healthy family of four on Family tier coverage
Market basket composition 4 well visits 4 sick visits 1 ED visit 2 maintenance prescriptions 6 other prescriptions
Market basket analysis--healthy
Total out-of-pocket plus family premiumsUK: $5,442Next highest (Texas): $2,601.88Mean = $1592.44Median = $1505.44
Market basket analysis--healthy
Total cost of services onlyRange $125-$430Mean: $272.50Median: $274.11UK: $258 (in middle of range)
Market basket analysis--unhealthy
Family of four on Family tier coverage with significant health problems
Market basket composition– 4 well visits– 20 sick visits– 2 ED visits (one leading to admission)– 1 hospitalization– 2 maintenance prescriptions– 24 other prescriptions– $500 worth of durable medical equipment
Market basket analysis--unhealthy
Total cost (including premium)Range: $612-$5,846Median: $2,330.00Mean: $2,384.24UK: $5,846 (highest)
Market basket analysis--unhealthy
Total out-of-pocket for services onlyRange: $612-$1465.00Mean: $1064.41Median: $1000.00UK: $662 (2nd lowest)
Innovations in benefit design
Triple option (typically)In-network with referralIn-network without referralOut-of-network
Triple option appeal: uniform premium, pay more for added options at time of service
Disadvantage: assumes uniform access to network providers
Innovations in benefit design
Risk corridor plan (Minnesota 2002)Somewhat like MSA without rollover
feature (due to federal limits on group size)
High-deductible insured coverage plusEmployer contribution of about 1/2
deductible levelAdvantages: greater employee
control of provider selection
Innovations in benefit design
Risk corridor plan (Minnesota 2002)Advantages: potential total cost
savings if Unnecessary utilization in prior designNew design motivates more prudent use
Disadvantages: Uncertain access to group discountsIf premium is lower, potential exposure of
enrollees to serious financial problems
Innovations in benefit design
HMO/PPO hybridDeductibles and coinsurance
percentages for some benefits Other benefits not subject to
deductible and require flat dollar copayments
Typically favors preventive services
Innovations in benefit design
HMO/PPO hybrid Advantages:
May reduce costs without much administrative cost for medical management
Lower expenditures for low users, higher for high users
Disadvantages:Complexity may confuse membersShifting more of out-of-pocket expense to
less healthy may be perceived as inequitable
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