Sustainable and Quality Sustainable and Quality Health CareHealth Care

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• Large institutional expenditure

• NMU efforts to control costs

o MUCH, Inc.

o NMU Health Center

o NMU Injury and Evaluation Center

o Wellness activities

• How we compare within State

• Federal Health Care Plan impact

• Retiree health care

• Emerging issues and future direction

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• Goalo Northern’s employee health benefits program was

established to provide employees with competitive, quality, and sustainable health care coverage at a reasonable cost for both the employee and the employer. The plan will promote a healthy status, quality of life, and environment that positively impacts the employee’s ability to perform at optimal productivity.

o A healthy environment will assist in meeting business objectives Improved work culture and employee satisfaction Improved retention and recruitment Reduced injury rates resulting in costs savings Decreased absenteeism and replacement costs Reduced health care costs Reduced disability costs

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• Large institutional expenditureo Cover approximately 1,000 NMU faculty and staffo Self-insured plan (pay actual claims) plus administrative

feeso PPO coverage through Blue Cross Blue Shieldo Group plan guaranteed hospital and physician discounts

through collaborative agreement with MUCH, Inc.o Provides health care, prescription drug coverage, case

management, wellness benefitso Total health care costs have grown from $5.9 million to

$11.9 million over past ten yearso Employees average required contribution for health care

has grown from $750 per year to $1,358 per year over the past eight years

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5

6

$750

$767 $8

33 $900 $1

,000 $1,0

75 $1,1

75 $1,2

75 $1,3

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FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

Annual per Employee Health Care Contribution

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3.0%

7.6%

9.4%

8.5%

6.2%

6.0%

6.0% 6.

7% 7.0%

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

Percent Increase in Employee Costs

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MUCH, Inc.MUCH, Inc.NMU Health CenterNMU Health CenterInjury and Evaluation ClinicInjury and Evaluation ClinicWellness effortsWellness efforts

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• Mission

o To leverage the knowledge, resources, and influence of its members to improve the value of employee benefit plans and services through better quality and contained costs for educational institutions, their employees, retirees, and dependents. 

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• Why was MUCH organized?

o Use the:

combined strength

purchasing power

presence of the public universities in Michigan

Partnerships with other coalitions and employer groups throughout Michigan

to bring about constructive increases in the value of health care benefit plans and services through better quality and lower cost.

Key: Group purchasing power to lower costs Key: Group purchasing power to lower costs

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• Programs and Goals of MUCH - focus on market-driven health reform initiatives (including some in partnership with other purchasers and health coalitions)o Value-Based Purchasing: (Utilize data and information, quality

management, incentives, collaboration, and education)o Aggregate Buying Powero Education/Communication (Learning about health care benefit

plans and services in a rapidly changing environment)o Networkingo Data recovery and analysiso Outcomes measurementso Provider rate negotiationso Plan Designs and Carve-Outso Public Policy

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• NMU’s medical facility provides high quality, on-campus health care to students and staff, including an on-site pharmacy

• The center offers a wide variety of services, similar to those offered by a family doctor

• Health Centero Serve students, faculty, and staffo Leverage center to lower employee health costso Enhances dispensing of generic prescriptions (over 70%)o Education to employees on cost of drugs and health procedureso Primary care serviceso Staff consists of 1.75 MDs; 0.84 PA; 2 RNs; 1 Pharmacist; 1 Lab techo 19,000 visits per year (students, faculty, staff, spouses, and older

dependents)o 26,000 scrips filled

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• Services Available

Care is provided by highly qualified board certified physicians specializing in internal medicine and family practice.

• Referrals to medical specialists

• Medical Services• Routine Acute Care:

AllergiesMinor injuriesRespiratory infections ColdsMononucleosisSore throatsEaracheRashesSport injuries

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• Gynecological Exams:Contraceptive needsPap smearsVaginal infectionsMenstrual problemsPregnancy

• Nursing ServicesAllergy shotsNurse consultTravel clinic ImmunizationsTB skin tests

• Primary Care for Medical Illnesses:AcneDepressionMigraine headacheAsthmaDiabetesPanic attacksBack painEating disordersUrinary tract infectionCoronary Artery DiseaseHypertension

• Physical Examinations:Annual adult medicalPre-EmploymentTravel abroadCholesterol checksSports physicals

• Other services include:o Regular lab work to facilitate care and referral lab work o Educate university population on health care, options,

and costso Health crisis prevention (e.g., meningitis)o Travel visits/Student Study Abroad (assist in determining

necessary vaccines, medications, CDC cautions, region specific information, and other)

o Housing exemption medical reviewo CDL for employeeso Measles policy coordinationo TB screening for international studentso Animal labs - Student medical review; medical historyo Olympic athlete physicals

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• Injury Evaluation and Care Clinico Provides the university community with the evaluation

and primary treatment of sport and physical activity related injuries

o Utilizes internal center to assist in controlling costso Provides experience to students in the program

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• Plan benefits provide for preventive care coverage and are covered at 100%

• HR and Recreational services work to provide wellness education and activities on campus for employees

• Looking to expand areas in wellness: o Studies indicate organization can achieve significant returns

on investment (in the range of 3.5 – 5.8:1 for every dollar spent)

o Incentivize with potential decreased health contribution cost for compliance in health maintenance plans integrated incentives for healthy behaviors can result in

significant increases in participation and thus, a more sustainable return on investment

o Improved health status and quality of life leads to improved work culture, satisfaction, improved productivity, and lower health care costs

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Federal act impact on Federal act impact on NMUNMU

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• PPACA became law March 23, 2010

o Regulations are fluid and are changing regularly

• Imposes new mandates on self-insured and fully-insured group health plans sponsored by private and public colleges and universities

• Distinguishes between “grandfathered plans” and “non-grandfathered” plans

• NMU’s plan is “grandfathered” – exempt from some new requirements unless plan changes are made

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• “Grandfathered” plans are plans that were in existence on or before March 23, 2010o The “grandfathered plans” protection applies where there

is no change to existing coverage This status will be difficult to maintain

o Changes to existing coverage include but are not limited to: elimination of benefits within the plan increase in percentage cost-sharing increase in fixed co-pays and deductibles decrease of employer contribution amount by more than 5%

below contribution on March 23, 2010

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• Several of these mandates must be made beginning with plan years starting on or after September 23, 2010 o NMU plan year that begins January 1, 2011 o Referred to as “near-term” benefit requirements, and

apply to all plans (grandfathered and non-grandfathered plans)

o Third-party administrator (BCBSM) for health care is implementing these near-term benefit requirements for our health plan to ensure compliance

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• Near –term benefit changes must be made by NMU for our plan year that begins January 1, 2011 such as:

o Extending dependent coverage up to age 26

Dependent eligibility is no longer limited by financial dependency, marital status, or enrollment in school

o Dependent eligibility (includes both married or unmarried children – not spouse or child of eligible dependent)

Removal of pre-existing condition exclusions for children up to age 19

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• Required near–term benefit changes must be made by NMU for our plan year that begins January 1, 2011 (continued):o Removal of lifetime limits

Plans may establish “restricted annual limits” on essential health benefits until 1/1/14

Annual limits allowed on non-essential health benefits Must allow those who have reached the limit to re-enroll in

the plan

o Prohibiting rescissions (retroactive cancellation of an insurance policy) with limited exceptions

o No reimbursement from flexible spending accounts (FSAs) for non-prescribed over-the-counter drugs

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• NMU’s health plan is considered to be “grandfathered” and is, therefore, not subject to other “near-term” benefit changes including:o Covering newly eligible dependents that currently have

their own employer-sponsored coverageo Cover emergency services without prior authorization

and as if services were provided in-network (NMU policy)o Pediatrician as child’s primary care physician (NMU

policy)o New appeals process (BCBS first; Internal appeals

process needs to be modified – NMU policy)o Permit choice of health care professionals (NMU policy)o Cover immunization and preventive services without

cost-sharing (NMU policy)

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• Year 2011:o W-2 Reporting

Aggregate cost of employer-provided health care for plan year must be included on employees’ W-2 forms (voluntary in 2011; mandatory in 2012)

Aggregate cost of employer provided health care to be reported each year going forward

The reporting value (under current rules) is for informational purposes only and will not be taxable

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• Year 2012:o 1099 forms must be filed for most vendors paid more

than $600o Communication and standardization—

Uniform Summary: prior to early 2012, federal regulations will develop standardized processes and formats for compiling and communicating benefits, plan changes, and rights

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• Year 2013:o Exchange notification: active and retired employees must be notified of the

existence of their state health care exchanges (eligible in 2014 – provide employees and retirees) Exchange established by State to permit individuals and small employers (100 or

fewer) to purchase qualified health insurance coverage Only includes qualified health plans; must provide essential health benefits package;

only qualified individuals can purchase through the exchange. Individuals may receive a premium tax credit (employees who are offered coverage through employer are not eligible for premium tax credit, unless employer plan does not provide coverage equivalent to essential benefits package).

Beginning in 2017, a State may permit large employers (with more than 100 employees) to purchase health insurance through an Exchange

o Flexible spending accounts (FSAs): employee contributions are limited to $2,500

o Long-term care program enrollment: employees may be auto-enrolled in a new federal long-term care plan

o Payroll taxes: employee share of the Medicare hospital tax will increase by 0.9 percent for individuals with incomes greater than $250,000 (joint filers) or $200,000 (single filers)

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• Year 2013 (continued):o Comparative effectiveness fee:

$1 fee per covered life to pay for comparative effectiveness research

pay for research to improve health care outcomes by developing and disseminating evidence-based information to patients, providers, and decision-makers about effectiveness of treatments relative to other options – goal to help lower costs

For self-insured groups, this fee is remitted by the plan sponsor, which in most cases is the employer

The fee goes up to $2 per covered life for policy years ending during the 2014 fiscal year

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• Year 2014:

o Exchange eligibility: exchanges open to small employers. States may open to large employers beginning 2017.

o “Early retirees” (pre-age 65) will have the ability to purchase on the exchange as an alternative to employer-sponsored retiree health

o Individual Mandate: Individuals required to maintain “minimum essential coverage” or pay a penalty. “Minimum essential coverage” would include enrollment in an employer-sponsored plan.

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• Year 2014 (continued):o Free choice vouchers:

All employers offering health care coverage will be required to provide “free choice vouchers” to qualified employees to purchase insurance through the State health care exchange. Employees qualify for free choice vouchers if employee premium

contributions are at least 8 percent but less than 9.8 percent of income and the employee’s income is at or below 400 percent of the federal poverty level

• Year 2018o Excise tax (“penalty”) on employers if annual value of

health employer plan values exceed federal thresholds (nondeductible tax is 40% of the annual value of health employer plan value that exceeds the threshold)

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• Employer Penalties: o PPACA does not mandate an employer to offer health

insurance to employeeso Penalties may apply to an employer with at least 50 full-

time equivalents (FTEs) (Defined as 30+ hours per week)o Penalties apply depending on whether or not an employer

offers coverage and if employer is giving premium credits to at least one full-time employee

o No penalties imposed on employer with respect to an employee who is provided a free choice voucher

• Reporting to IRS: reporting is required to identify employees with coverage through their employers

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• Probable increase in employer and employee cost due to mandated benefits, eligibility, and taxes on services such as medical devices and some services

• Eliminates flexibility to design/manage your own plan by imposing one-size fits all requirements on all employer-sponsored plans

• Imposes regulatory requirements that will add administrative burden and expense

• Excise tax could be big cost impact• Workload on Human Resources, IT, Accounting, and legal

departments for legal and regulatory compliance

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• Mandates that employers become “agents” of the government to administer new federal voucher program by having to report to government monthly and annually

• Required distribution of uniform plan summary with specific information – this is to be determined by HHS – fines will be imposed for failure to comply

• A loss of “grandfathered” plan status imposes additional mandates

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NMU summary of NMU summary of coveragecoverage

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• MPSERS retirees are covered through State plan• Non-MPSERS employees (all employees hired after 1995)

do not receive a retiree health care benefit from NMUo Have option to purchase at actual cost of group plano Due to changes in accounting, this may not be feasible

into the future• Health insurance exchanges will provide retirees more

options to purchase coverage beginning in January 2014

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• Recent cost historyo Health care costs continue to escalate faster than rate of

inflationo Employer costs have increased at 6% to 9% per yearo Required employee contributions have continued to climb

(from $750 average in 2002 to $1,358 average in 2010)o Employee share is now at approximately 11% “premium”

cost and 14% of total health costs

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• Current labor contractso Negotiated employer/employee contribution rateo Average co-pay employee “premium” contribution is

approximately 11.2%o Contribution, including co-pays, is approximately 14% of

total costs on an annual basiso Prescription drug co-pays $10/$20

• Current Plano Self-insuredo Stop loss agreement for excess claimso Guaranteed discount rate on medical claims through

MUCH agreemento Discounted administrative and network access fees

through MUCH

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Plan benefitsPlan benefits

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• Health benefit plan features, particularly deductibles, office visit co-pays, and prescription drug co-pays varied from plan to plan and institution to institution. However, they generally fell within certain ranges.

• Employer Health Plan “Premium” Contributions (Michigan, Wisconsin, and Minnesota) – (single coverage):o Minimum contribution percentage: 43%o Maximum contribution percentage: 100%o Mean contribution percentage: 87%o Median contribution percentage: 93%o Michigan average contribution percentage: 89%

NMU is at 89%

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• Deductibles:o Ranged from $0 to $7,000 (in-network and out-of-

network)o Individual coverage deductibles were generally $500 or

lesso Family deductibles were generally $1,000 or less

• Fixed-dollar co-pays for office visits ranged from $0 to $42• Prescription drugs:o Co-pays for generic drugs ranged from $4 to $10 for a 30-

day supplyo Co-pays for Tier 2 and 3 drugs ranged from $0 to $50

• Many university’s have multiple plans and some vary based on employee group

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• Co-pays Office Visitso Range from $10 to $25 and 10% to 25% o Majority at $10 to $15

• Lifetime maximumso Range from $2 million to no maximumo Majority at $2million to $5 milliono Note: Maximums go away with health care reform near-term change – NMU was

at $5 million)

• Co-pay Emergency Roomo Range from $50 to $100o Majority at $50

• In-network deductibleso Range from $0/$0 to $1,500/$3,000o Majority are $50 to $250 for single plans and $100 to $500 for family planso Universities that had $0 deductible plans also offered plans at lower cost with

higher deductibles

• In-network Coinsuranceo Range from 0% to 10%o Universities also offer other plans that have % co-pays > 0%

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• In-network out-of-pocket maximums:o Range from $0 to $5,000o Majority at $500 to $1,000 for single plans and $1,000 to $2,000

for family plans

• Employer required contributions (“premium”) percentage:o Average at 10.9%o Range from 0% to 29.6% (most at 0% is for a lower cost plan

and have higher % for higher cost plans)

• Prescription co-pays:o Range from $5 to $15 for generic and R$20 to $30 for brand;

also two universities 10% for generic and 20% for brando Majority at $10 for generic and $20 for brando Some have third tier non-formulary co-pay

Plan benefitsPlan benefits

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• Future–Shared Responsibility: The University and employees have a shared responsibility

o The University to provide a quality health program at a reasonable cost to the employer and employee – high productivity; quality of work and personal life

o Employees to work with University to implement measures that contain costs to ensure the long-term sustainability and integrity of quality health care

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• Constraints on funding – declining State support

• Growth in the cost of health care at a rate several times the rate of increase in the cost of living

• Public and political pressure to reduce public sector employee benefits and/or greater sharing of costs between employer/employee is widespread

• Pressure to control costs as funding continues to decline

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• The combination of these conditions has raised the question about the long-term sustainability of the employer funded health care benefit plans

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• Structure needed that allows for greater flexibility to change program on regular basis:o Move towards contract language that allows for plan changes to

adapt to changing market conditions, trends in health care, and long-term sustainability of quality health care for employees

o Move towards 20% employee contribution on plans that are being pushed publicly and politically (subject to regulatory constraint)

o Adjust co-pays to create incentive to control costso Offer plans that allow benefits and incentives for healthier

lifestyleso Enhance wellness programso Adjust deductibles to match market trends and to allocate

greater costs to those who utilize the benefit the mosto Any changes could result in loss of “grandfathered” statuso PPACA phased-in requirements will add costs to plan and

administration of plan48

NMU Health PlanNMU Health Plan

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