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PEBB Meeting - August 6, 2002 1
Public Employees Benefits Board Meeting
August 6, 2002
Procurement Overview &
Medical Benefit Decisions for 2003
PEBB Meeting - August 6, 2002 2
PEBB Value Based Purchasing
Jeff Thompson, M.D., M.P.A.
Health Care Authority
PEBB Meeting - August 6, 2002 3
Value Based Purchasing
• Communicated our Value Expectations in the Request For Proposal
• Improved Data Driven Metrics to Assure Quality and Access are Commensurate with Cost
• Increased Emphasis on Access and Quality • Improved Affordability using the Value Based
Equation
Value = Quality, Access & Cost• Employed Measurable Performance Expectations
in Contracts that Can Be Used to Evaluate Performance
PEBB Meeting - August 6, 2002 4
Value Based Purchasing 2003 Snap Shot
Evaluation
Weights
Access 30%
Quality 20%
Price 50%
0
10
20
30
40
50
60
70
80
90
100
HCA 2002Standard
Plan A Plan B Plan C Plan D Plan E Plan F Plan G
Perc
ent
Access
Quality
Price
1
54
3
6
2
PEBB Meeting - August 6, 2002 5
Procurement Overview & Results
MaryAnne Lindeblad
Assistant Administrator,
Public Employees Benefits Plan
PEBB Meeting - August 6, 2002 6
Summary of 2003 Renewals
• Key Facts from PEBB Renewals
• Surveys of other commercial renewals and trends
• Other Purchasers’ Experience
PEBB Meeting - August 6, 2002 7
Key Facts– PEBB Renewals
• Plans’ Financial Position– 6 of 8 insured plans report 2001 loss ratios in
excess of 100% (up from 2 of 9 in 2000)
• Experience Trends and Rating Trends– Experience trends have exceeded the rating
trends used in developing 2002 premiums, as a result...
PEBB Meeting - August 6, 2002 8
Key Facts– PEBB Renewals
• Rating Trends Have Increased– Medical trends range from 7% to 25%
(compare to 7.5% - 17% last year)– Prescription drug trends range from 16.1% to
30% (compare to 15% - 22% last year)
PEBB Meeting - August 6, 2002 9
Other Renewals and Trends
• Mercer survey of commercial renewals
– as of 7/15: 312 renewals, avg. increase of 22.1%
• Milliman survey of HMO’s serving the commercial market:
– Average expected increase of 17% for 2003
• Hewitt survey of initial 2003 premium increases:
– Average increase of 22%
PEBB Meeting - August 6, 2002 10
Other Purchaser’s Experiences• CalPERS 2003 Renewals
– Average 25% increase (range of 15% to 40%)– Two plans dropped from program (350,000
members must switch plans)– Large self-insured increases (22% for PERSCare
and 19% for PERSChoice)
• Other states’ initial bid increases range from 14% to 19%, some with significant benefit reductions
PEBB Meeting - August 6, 2002 11
Procurement Results Budget CY 2003
Non Medicare Non Medicare Premium Increase Non Medicare Premium Increase With Alternatives With Alternatives
Managed Care Organizations (MCOs) 9% 22%
UMP 13% 15%
MCOs and UMP 11% 20%
Budget CY 2003
Medicare Medicare Premium Increase Medicare Premium Increase With Alternatives With Alternatives
Managed Care Organizations (MCOs) 20% 28%
UMP 11% -3%
MCOs and UMP 16% 11%
PEBB Meeting - August 6, 2002 12
Procurement Results
• Six managed care choices• At least one managed care plan and UMP in every
county• One plan expanding into six additional counties• Five counties with one managed care plan - five in
2002• One plan with frozen enrollment• Eliminating one plan - fewer than 5% of members
will have to change providers
PEBB Meeting - August 6, 2002 14
Proposed PEBB Medical Benefit Design Changes for 200310% Reduction in Prescription Drug Expenditures*
Three tier pharmacy benefit
Retail = 30 day supply Co-Pay GHC/Options Kaiser
Formulary generic, all insulin and diabetic supplies $ 10 $ 10 $ 10
Formulary brand name $ 25 $ 30 $ 25
Non Formulary brand $ 40
Mail Order = 90 day supply Co-Pay GHC/Options Kaiser
Formulary generic, all insulin and diabetic supplies $ 20 $ 20 $ 20
Formulary brand name $ 50 $ 40 $ 50
Non Formulary brand $ 80
*Group Health/Options & Kaiser proposed optional benefit designs to achieve a 10% expenditure reduction
PEBB Meeting - August 6, 2002 15
Employee Contributions CY03State Index Rate $262
Subscriber & Subscriber & Plan Name Subscriber Spouse Child(ren) Full Family
Kaiser Foundation $12 $33 $21 $42
Group Health Coop. $30 $69 $52 $91
PacifiCare $40 $91 $71 $121
Options Health Care $44 $98 $77 $131
Regence Care $54 $118 $94 $158
Premera Foundation $67 $144 $117 $194
Uniform Medical Plan $36 $82 $63 $109
Average Employee Contribution: $74
PEBB Meeting - August 6, 2002 16
Medicare Retiree Subsidy CY03
• Medicare retiree explicit subsidy $92.74 per member per month– Established in Legislative Budget– CY02 subsidy $85.84 per member per month– RCW 41.05.085 established subsidy, limits
subsidy to no more than 50% of the premium; Board authority to establish amount of any subsidy for spouses and dependents.
PEBB Meeting - August 6, 2002 17
2003 Medicare Retiree Contributions
(after subsidy)Estimated 2003
1st Tier Rate Increase Percent of Plan Name Retiree Pays from 2002 Enrollment
PacifiCare $84.14 10% 11%
Kaiser Foundation $89.25 16% 4%
Group Health Coop. $113.53 40% 29%
Options Health Care $125.41 20% 1%
Regence Care $182.53 16% 2%
Premera Foundation $275.38 42% 7%
Uniform Medical Plan $132.62 -10% 46%
PEBB Meeting - August 6, 2002 18
Proposed UMP Benefit Design Changes for 2003
Presented to the Public Employees Benefits Board
August 6, 2002
PEBB Meeting - August 6, 2002 19
Overview of Proposed Changes for 2003
• Out-of-state network
• Standard Coordination of Benefits (COB)
• Rx benefits cut 10% from current design
PEBB Meeting - August 6, 2002 20
Out-of-State Care: Current Benefits
Providence Preferred network in parts of Oregon (most Oregon claims)
Elsewhere:
• Services are covered at 80% of the UMP allowed charge (based on regionally-adjusted fees)
• Providers may balance bill patients for charges above the UMP allowed amount
• Enrollees pay 20% coinsurance for preventive care services
PEBB Meeting - August 6, 2002 21
Out-of-State Care: Proposed for 2003
Beech Street network to be offered outside of Washington and Oregon• Large national PPO
3,300 hospitals
345,000 professional providers
50,000 ancillary providers
• Providers reimbursed based on Beech Street contracted rates; UMP pays 80% benefit
• May not balance bill UMP patients
• Preventive services (as listed in the UMP Certificate of Coverage) covered in full
PEBB Meeting - August 6, 2002 22
Out-of-State Care: Proposed for 2003
Services from non-Beech Street providers will be paid at the non-network rate (60% of UMP allowed charge)
Exceptions (to be paid at 80%):• Emergency care
• Areas in U. S. where Beech Street network isn’t adequate
• Foreign providers
Medicare retirees’ services are subject to Medicare’s maximum fees, so won’t be enrolled in Beech Street
Oregon (whole state) will be served by Prov Preferred network; non-network claims will be paid at 60% except where there are access problems
PEBB Meeting - August 6, 2002 23
Coordination of BenefitsCurrent:
• Nonduplication of benefits
• Frequently results in little or no UMP payment on medical claims with Medicare primary
Proposed for 2003:
• Standard Coordination of Benefits (consistent with COB approach used by PEBB MCOs)
PEBB Meeting - August 6, 2002 24
Non-Duplication of BenefitsCurrent UMP COBMedicare Allowed Charge $100.00
Medicare Payment 70.00
Balance $ 30.00
UMP Allowed Charge $100.00
Normal UMP Payment 90.00
UMP Payment $ 20.00 Normal UMP Benefit minus Medicare Payment
Enrollee Responsibility $ 10.00
Standard COB – UMP Proposal 2003Allowed Charge $100.00
Medicare Payment 70.00
Balance $ 30.00
Normal UMP Payment $90.00
UMP COB Payment $30.00
Enrollee Responsibility $ 0
PEBB Meeting - August 6, 2002 25
Overview of Proposed Changes to UMP Prescription Drug Benefit
• More restrictive pharmacy network
• Incentive formulary design
• Higher mail order copays
• Changes to cost-sharing cap per retail prescription
PEBB Meeting - August 6, 2002 26
More Restrictive Pharmacy Network
Non-network pharmacies in Washington State include:
• Walgreen's• Albertson's• Some independent pharmacies
PEBB Meeting - August 6, 2002 27
Mail Order and Retail Prescription Benefits
• Up to a 90-day supply per prescription
• Subject to annual prescription drug deductible of $100 per individual or $300 per family (no change)
• Retail coinsurance percentages (no change):Tier 1 80%
Tier 2 70%
Tier 3 50%
PEBB Meeting - August 6, 2002 28
Incentive Formulary Design(replaces current voluntary formulary)
Current (2002) Proposed for 2003
Tier 1 Generic drugs,insulin & disposable
diabetic supplies
Generic drugs,insulin & disposable
diabetic supplies
Tier 2 Single-sourcebrand name drugs
Formularysingle-source
brand name drugs
Tier 3 Multisourcebrand name drugs
Non-formulary brandand all multi-sourcebrand name drugs
PEBB Meeting - August 6, 2002 29
Mail Order Copayments
Current (2002) Proposed for 2003
Tier 1 $5 $10
Tier 2 $30 $40
Tier 3 $40 $80
PEBB Meeting - August 6, 2002 30
Cap on Enrollee Cost-share for Retail Prescriptions
Current:• $75 maximum for up to
a 90-day supply
• Applies to all drug tiers
Proposed for 2003:• $50 maximum for up to
a 30-day supply
• $100 maximum for up to a 60-day supply
• $150 maximum for up to a 90-day supply
• No cap for Tier 3 drugs or prescriptions filled at nonparticipating pharmacies
PEBB Meeting - August 6, 2002 31
Other Proposed Changes in Prescription Drug Coverage
• Elimination of coverage for over-the-counter drugs
• Brand name antihistamines (and antihistamine/decongestant compounds) will be covered in Tier 3; generic antihistamines will be covered in Tier 1
PEBB Meeting - August 6, 2002 32
Next Steps
• 2003 Open Enrollment is October 21st through November 30th
• 16 benefit fairs - extending hours 11 a.m. to 6 p.m.
• On-line enrollment
• Decision support tool updated for 2003
• All materials for actives available via web
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