The 7 Health Plan Metrics Every Company Should Know Manage your Company’s Health Care Plan Wisely
Presented by | Jamie Bishop, Vice President, Employee Benefits 78th Annual TCA Convention March 2016
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Today’s Agenda As Transportation companies continue to manage the driver recruiting with the increasing costs of health insurance we utilize seven different plan metrics to analyze benefit plans. The 7 Health Plan Metrics are designed to assist with the following: 1) Benchmark – How does your plan compare 2) Diagnose – Get to the root of any inefficiencies/cost drivers 3) Design ‐ A strategic plan of Appropriate cost containment strategies
Jamie Bishop, GBA Vice President, Employee Benefits
Let’s get started.
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Is This Your Current Benefits Program? wellness program requirements
RISING COSTS preexisting conditions exclusions
waiting period restrictions
approved clinical trials new rules for employee eligibility preventative coverage at 100%
Employer ACA reporting Competitive Plan Design Network discounts Reinsurance Fees
TREND
PCORI fees Cadillac tax preparation
RX tracking to the OOP Max
changes to FSAs
Large Claimants
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A High Level Benefit Overview – 3 C’s
C
C
C
Compliance
Costs
Creating Efficiencies
ACA Human Resources DOL ADA FLSA HIPAA COBRA FMLA
COVERAGE X CONSUMPTION X COST SHARE
Enrollment HRIS Payroll Feeds On-Line Systems Open Enrollment Employee Communications ACA Reporting
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7 Metrics: A Framework for Analyzing your Benefit Plan Coverage
Consumption
Cost Sharing
How many people are on your health plan?
What is the average spend per person?
What is the employer share of costs?
Metric
What it tells you
Participation Rate
Whether you may be covering too many employees relative to benchmark averages
Dependent Ratio
Whether you may be covering too many dependents
Metric
What it tells you
Average claims per member
The total amount of money spent on claims by an average member without regard to plan design and contributions (absolute cost of benefits)
Demographic Index
The impact of demographics on average costs
Admin Cost Percentage
View of the overall administrative costs
Metric
What it tells you
ER Plan Cost Share Percentage
The percentage that employees are paying for deductibles, OOP max, Copays and Coinsurance
ER Contribution Percentage
The percentage of total plan costs that are paid for by the employer
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Metric #1: Participation Rate
Participation Rate =
# of employees covered # of benefit eligible employees
INSIGHT: Will show if current program is over or under incenting employees to join plan
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Metric #1: Participation Rate • Company A is providing benefits to 90% of eligible employees
Participation Rate 95%
• Company A is covering a significantly higher percentage of employees than benchmark
90%
90% 85% 79%
80% 75% Company A
Benchmark
• High participation is often driven by overly generous benefit programs compared to competition and workforce demographics • Lower than average participation is often driven by high contributions and a less generous benefit program vs. the local market.
*C&B Proprietary Book of Business
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Metric #1: Participation Rate A Sample of Key Levers for Participation: 1. Review of eligibility processes and eligibility language • Create longer waiting periods (limited with ACA) • Review termination provisions 2. Adjust Employee Contributions 3. Manage you Member Population
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Metric #2: Dependent Ratio
Dependent Ratio: =
Total number of plan participants Total number of covered employees
INSIGHT: Will show if you are covering more or less dependents per employee than benchmark
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Metric #2: Dependent Ratio • For each covered employee, Company A is covering 1.28 dependents.
Dependent Ratio
• This is above benchmark averages of 1.15 dependents per employee.
2.4 2.28 2.3 2.2
2.15
2.1 2 Company A
• High dependent ratios can be driven by ineligible dependents, low family contributions, and demographics of your workforce.
Benchmark
• Low dependent ratios are often driven by eligibility provisions, high family contributions, and demographics of your workforce. *C&B Proprietary Book of Business
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Metric #2: Dependent Ratio A Sample of Key Levers for Managing the Dependent Ratio: 1. For Eligible Participants • Adjust contributions • Review spousal surcharge or carve out 2. For Ineligible Participants • Conduct a thorough dependent eligibility audit (between 3‐9% ineligible) • Create tighter eligibility paperwork requirements at time of enrollment
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Metric #3: Average Claims Per Member
Average Claims Cost Per Member: =
Total allowed claims before cost sharing Total number of covered members
INSIGHT: Will provide data on how your members consumption of healthcare compares to the national average utilization patterns in medical and prescription drugs.
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Metric #3: Average Claims Per Member Demographically Adjusted Medical Allowed Claims per Member $5,000
$4,156
$4,000
$3,893
$3,000 $2,000
• Company A’s annual cost per member for medical and Rx is greater than the benchmark.
$1,000 $0 Company A
Benchmark
Demographically Adjusted Rx Allowed Claims per Member $1,000
$872
$807
Company A
Benchmark
• Individuals in Company A are consuming more care (either in quantity and/or price) than benchmark averages.
$800 $600 $400 $200 $0
*C&B Proprietary Book of Business
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Metric #3: Average Claims Per Member A Sample of Key Levers for Reducing Claims per Member: 1. Detailed review of Claims Utilization Data: a) Inpatient – length of stay, costs of stay b) Emergency Room, c) Urgent Care d) Imaging 2. Prescription Drug Claims Review 3. Large Claims Analysis 4. Out of Network Claims Review 5. Telemedicine
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Metric #4: Demographic Index
Demographic Index: = The weighted average expected cost index based on participant age and gender (where 1 is the average)
INSIGHT: The impact of your organizations’ demographics on average costs and also used to adjust metrics for apples to apples benchmark comparison.
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Metric #4: Demographic Index Employee Demographic Distribution
$12,000
• The impact of demographics on cost.
$11,000 Cost Per Participant Per Year
$10,000 $9,000 $8,000 $7,000
Male
$6,000 Female
$5,000 $4,000 $3,000 $2,000 $1,000 20
25
30
35
40
45
50
55
60
Age
65
• Weighted average expected cost index based on participant age and gender (1 is average). • Company A’s demographics are 27% above benchmark. We would expect this company’s costs to be 27% above average based solely on their demographics.
Breakdown Participants 179 Average Age 48 Demographic Factor 1.27 *C&B Proprietary Actuarial Index Calculator
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Metric #4: Demographic Index Summary of Key Levers for Altering Your Demographic Index: There is very little that you can do to adjust the demographics and in Trucking we are seeing an older demographic. Understanding the demographics of your group and creating benefit plans to best fit is important.
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Metric #5: Administrative Cost Percentage
Administrative Cost Percentage: =
Total fixed costs Total plan costs
INSIGHT: The fixed costs as a percentage associated with the plan
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Metric #5: Administrative Cost Percentage A Sample of Key Levers for Lowering Your Administrative Costs – Self Funded: 1. Effectively Purchasing Stop Loss • Decision to purchase or not purchase certain stop‐loss coverages • Purchasing the proper contract level to include run‐in and/or run‐out 1. Effectively Purchasing Partner Services • Third Party Administration or Administrative Services Only contracts • Pharmacy Benefit Management Services and Outcomes 2. Affordable Care Act Alternative Fee Calculations
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Metric #6: Plan Cost Sharing Framework
Total Allowed Medical & Rx Claims
Employee Spending • Deductibles • Copayments • Coinsurance •Out of Pocket Maximums
Employer Plan Spending • Paid Medical Claims •Paid Prescription Claims
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Metric #6: Employer Plan Cost Sharing Percentage
Employer Plan Cost Sharing Percentage: = Total Allowed Claim Costs ‐ (amount employees pay for deductibles, coinsurance and copays) Total claim costs
INSIGHT: Shows the split between what the plan pays versus what the employees pay through deductibles, coinsurance, and copays when medical services are purchased. This percentage gauges how rich of a plan design you have.
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Metric #6: Employer Plan Cost Sharing Percentage Employer Plan Cost Share Percentage 87%
86%
86% 85% 84% 83%
82%
82% 81% 80% Company A
Benchmark
• On average, Company A is paying a higher share for medical bills than benchmark. • This is driven by plan design parameters which create the percentage of medical and prescription claims that employees have. • Plan Cost share is conceptually the same % as a plan’s actuarial value, thus it is a grade of plan value.
*C&B Proprietary Book of Business
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Metric #6 – Employer Cost Sharing
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Metric #7: Employer Contribution Sharing Percentage Employer Paid Claims and Administration
Employee Contributions
Employer Contributions
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Metric #7: Employer Contribution Percentage
Employer Contribution %: = (Total plan costs – employee contributions ) Total plan costs
INSIGHT: Shows the percentage of total plan costs that are paid for by the employer.
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Metric #7: Employer Contribution Percentage Employer Contribution Percentage 78%
• On average, Company A is paying a higher share of plan costs than benchmark.
77%
76% 74%
73%
72% 70% Company A
Benchmark
• This is driven by employee premium rates and suggests that Company A’s employee premiums are too low in relation to the benefit plans that are offered. • Low EE contributions drive participation, which in turn drives costs and risk for self‐ funded employers.
Benchmark Source: Mercer 2013
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Metric #7: Employer Contribution Percentage A Sample of Key Levers for modifying Employer Contribution 1. Ensure premiums are at benchmark levels within each covered class 2. Manage to a set Employer/Employee split 3. If you offer more than one plan option: a) Determine how you are contributing as to not create adverse selection. b) Be sure to continue to manage enrollment by plan and adjust as needed
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7 Metrics Health Plan Benchmarking – In Conclusion
Coverage: 1) Plan Participation 2) Dependent Ratio
Consumption: 3) Cost per Member 4) Demographic Index 5) Admin Cost
We have shared with you the background, information, calculations, benchmarks and levers for the 7 Health Plan Metrics. We hope they assist you in preparing: • Action‐oriented recommendations • Quantified savings – depending on the level of data you receive • Longer‐term trend strategic initiatives
Cost Sharing:
• Integrated model of savings
6) Plan Cost Share % 7) Contribution Share %
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Thank you! Contact us for additional detail Today’s Presenter: Jamie Bishop
[email protected] 563‐587‐5394 563‐564‐2130
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Adjournment Follow the Annual Convention at #2016TCA 2017 Annual Convention Gaylord Opryland March 26-29, 2017 Nashville, Tennessee
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