Health Benefits at Benchmark Universities

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


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


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


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


Total out-of-pocket plus family premiumsUK: $5,442Next highest (Texas): $2,601.88Mean = $1592.44Median = $1505.44


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


Total cost (including premium)Range: $612-$5,846Median: $2,330.00Mean: $2,384.24UK: $5,846 (highest)


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


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


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


HMO/PPO hybridDeductibles and coinsurance

percentages for some benefits Other benefits not subject to

deductible and require flat dollar copayments

Typically favors preventive services


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

Health Benefits at Benchmark Universities

Documents

employee children

family2 use employee

uk2 use employee

enrolled employee

employee spouse

state employee benefit

family tiers4 use employee

health care provider