Cambridge Advisory Group Report

8/8/2019 Cambridge Advisory Group Report

1/12

Milwaukee County Health Plan

June 2010


2/12

Table of Contents

age Recent History 3 Financial Considerations 5 Underlying Risks and Costs 6-8

Health Care Reform 9 Considered Changes 10&11 Conclusion 12

Milwaukee County Health Plan 2


3/12


4/12

Present Situation Health Benefits Advisory Committee convenes to examine several key

issues: Understand 2009 surplus and the sustainability of related improved large

. Enhance necessary controls and ongoing oversight requirements to establish

monitoring of budget levels and monthly costs performance of the health

plan.

from both an actuarial and clinical perspective. Quantify the potential costs and/or savings to the County due to Health Care

Reform. Consider possible adjustments to design and vendors to strengthen

competitiveness of benefit levels, quality administrative service and addresshealth management requirements for improved outcomes. Review ConsumerDirected Health Plan options and need to redirect wellness and diseasemanagement initiatives.



5/12

Financial Considerations roug pr p an costs are runn ng . m on a ove u get on

an annualized basis. This is a preliminary analysis subject to variance and volatility by year end due to:

date. Later in the year and increasing number of participants will reach theirout of pocket maximums thus increasing the Countys cost as the year

continues. Offset to Count s costs are claimants who exceed individual sto -loss of

$300,000 as the year goes on. Number of claimants projected to incur costs above $50,000 by year end is

expected to exceed 2009s total of 200 by up to 25-30%. This increase inlarge claims is the reason for, and explains the present projected budget

e c .



6/12

Underl in Costs Risksand Liabilities a ms are e ng ncurre n a ea t care mar et p ace w c s one o

the five most costly in the country from a unit cost standpoint and by providers with no discernable superior clinical quality or outcomes

ounty s emograp cs are a ove nat ona norm. Average age of 46 of active workforce verses norm of 42. This number

worsens when includes early retirees (a disproportionate number of claimants exceeding $50,000) who receive benefit levels equal to activeemp oyees.

Member to employee ration of 2.45 to 1 verses norm of 2.1 to 1. The Countyprovides coverage to a greater number of lives (e.g. family size) than mostemployers.

- ,expected norm of 175-225. The 2009 plan year was the only one over thelast four years to fall within the normal range. This is the apparent reasonfor the unexpected budget surplus. 2010 appears to project a numberexceeding 225.



7/12

,Liabilities

-

167. This has been driven by below norm use of lower cost generic equivalentsand mail order service as well as above norm use of high cost specialty drugs. Inaddition, the use of specialty drugs has been above norm at physician offices andretail pharmacies as compared to the lower cost mail order option.

An active employee contribution rate of approximately 5-7% versus national norm

of 20-25% and an employee cost charge (e.g. copayments, deductibles,

12-15% on HMOs and 20-25% on PPOs. Participants paying less than nationalnorms for plan designs richer than national norm.

A retiree o ulation which a s no contribution if hired before 1994. Existinindividual lifetime maximums may be nullified under Health Care Reform. Nooverall cap of the plan (still allowable under Reform) exists. Also, all retirees hiredafter 1994 are allowed to buy in on a fully contributory basis. This results in


s gn can a verse se ec on. e orm w o er ese par c pan s a onaoptions.

7


8/12


9/12

Health Care Reform e ounty aces potent a su stant a exposure, requ r ng ongo ng

analysis around Health Care Reform. Proper calculation of costs andliabilities must consider:

, ,elimination of lifetime limits, per participant fee for comparativeeffectiveness research, inclusion of preventive care at 100% and individual

mandate provisions. Waitin to calculate additional effects on taxes to insurers which areexpected to be passed on to plan sponsors and cost of excise tax on

Cadillac plans which projects to apply to the County, based on its costsand historic healthcare trend.

Need to gain regulatory clarification around Health Care Reform potential

o se s an or revenue s reams or e av ora ea an a ouse coverepopulations.



10/12


11/12

Considered Changes gn cant y e ay cons ere mp ementat on o onsumer recte

Health Plan (CDHP) option. CDHP designs often create an unintended consequence whereby participants

dela or avoid needed services for chronic care in order to maintain accountbalances.

The covered population needs support, resources and time to grow intoeducated consumers who historically have had access to established neededclinical arrangement resources.

The local health care delivery system needs to alter its behavior and costlevels for CDHP to be appropriate for the Countys covered population.

Health Care Reform will cause the need to focus existing limitedadministrative resources which would be unreasonably burdened by a

' .



12/12

Conclusion ee to ma nta n ocus an wor o ea t ene t v sory omm ttee

based to understand the non-sustainability of present cost escalationlevels.

ocus eve opment o appropr ate ntegrate ea t managementstrategies and programs which leverage resources among County's

vendors. ont nue negot at ons w t an e co to mprove t e r

accountability to the County and their performance regarding unit costfor medical and pharmacy services.

ons erat on o a ternat ve p an prov s ons, management strateg es an vendors to positively affect escalating. Actively recognize and work on the costs, needed resources and possible


revenue streams t e to ea t are e orm.

12

Documents

Cambridge Advisory Group Report