2 public safety enterprise health risk management case study juan kelly

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Public Safety Enterprise Health Risk Management Case Study

Juan Kelly

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SUMMARY


A - INTRODUCTION B - METHODOLOGY

Public Safety Enterprise Health Risk Management Case Study A - DISCUSSION

B - RESULTS


A - CONCLUSIONS AND RECOMMENDATIONS B - APPENDICES

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Introduction:

• Health plan sponsors in the United States have fiduciary duty to examine creative cost-containment alternatives

• Due diligence options with respect to risk– Avoid– Transfer– Reduce

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Introduction (continued):• Background

– Historically, entire risk transferred from plan sponsor to health insurance carrier

– Locking in of costs did nothing to dampen volatility at renewal (monthly cost trend)

– Double digit annual percentage increases in cost per employee force employers to shop or cut

– Difficult in light of tight labor market– and retention difficulties generally preclude

employers from cancelling healthcare benefits– Case study examines large police department

experience in Southeast United States

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Introduction (continued):

• Transferring and reducing risk only viable alternatives

• Emphasis on managed health after managed care organizations signed up majority of providers

• Risk management tools– Medical excess stop loss insurance purchased from specialty carriers– Prophylactic health risk appraisals performed by competent health

professionals

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Introduction (continued):

• Principles in the use of these tools

– Health care consumer/provider encounters triggered by medical necessity based on best practices and recognized

– Health care guidelines

– Adequate oversight and formal peer review at each step of the health care delivery system

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Methodology:

• First and foremost, cost-containment initiatives not to stifle productivity and creativity of enterprise members

• Financial decision maker looks at large recent credible claims adjudicated and paid by party responsible for paying claims (carrier, third party administrator or internal source)

• Simultaneously, communications campaign launched to schedule voluntary personal medical interviews

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Methodology (continued):

• Designed as early intervention for employees in need of immediate treatment (e.g., very high blood pressure such as 180/120)

• Individual shock (over $25,000 net of employee cost-sharing) claims incurred and paid over ten month period laddered up to $500,000 using actual distribution

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• Interviews, also referred to as Health Risk Assessments (HRAs) done as follows

– Top management of enterprise must strongly endorse voluntary program for it to be successful – 25-30 minutes per individual

– At work site

– During duty hours

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– Medical history questionnaire

– Four tests

• Blood pressure

• Heart rate

• Blood sugar

• Cholesterol

– Follow-up consults if warranted

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– Steps taken after HRAs completed

• High health risks identified

• Summary deidentified report to financial decision-maker and human resources representatives providing baseline on wellness/morbidity of work force

• Savings associated with early intervention identified

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Discussion on transferring risk:

• Should the enterprise be protected from the cost of shock claims in the aggregate (e.g., recoveries beginning when actual claims have exceeded 125% of expected claims) through reinsurance?

• Which healthcare claims will be insured (e.g., medical, surgical, dental, vision, prescription drugs, mental health, substance abuse)?

• Will surcharges imposed by county and state governments as means of subsidizing cost of indigent care be covered?

• How will immature first year claims and runout from prior periods be recognized?

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Discussion on transferring risk (continued):

• Most importantly, how much risk is the enterprise willing to absorb (up to $500,000) as result of self-insuring individual specific healthcare risk?

• Will an intermediate layer of risk, referred to as aggregating specific, be retained by the enterprise?

• Which medical excess stop loss reinsurers offer creative pooling in setting premiums as well as providing early intervention case management services?

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Discussion on transferring risk (continued):

• Does the medical excess stop loss reinsurer pay the providers treating the shock claimants directly or must the policyholder wait for reimbursement?

• What are the associated fixed costs (per capita) associated with the respective risk transfers?

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Discussion on reducing risk:

• What are the associated fixed costs (per capita) associated with the respective risk reductions achieved by the voluntary HRAs?

• Evaluation of HRA vendors– Charges including travel and vaccine (e.g., influenza) administration– References of medical professionals– Savings by similar enterprises offering HRAs– Feedback from employees undergoing HRAs– Sufficient staffing for multiple sites in multiple states

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Results in transferring risk:

• Studied population (over 10 months) including retired employees and dependents numbered about 3,700– 64 shock claims across gamut of Physician’s Desk Reference– Malignant neoplasms number one diagnosis– Multiple diagnoses for bone fractures, cellulitis, coronary

atherosclerosis, knee sprains, osteoarthrosis, renal failure and spinal meningitis

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Results in transferring risk (continued):

• Example at $250,000 annual individual specific attachment point– Net stop loss premium on paid basis = $176,125– Net stop loss premium on incurred basis = $326,375– Mean = $251,250– Comparison with actual quote from carrier

• $60,000 aggregating specific layer of risk retention• Profit and administrative expense components• Price equals $269,438 (7.24% more)

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Results in reducing risk:

• 362 HRAs conducted over 3 month period (38% of active membership)

• 15% of examinees deemed high risk prompting immediate physician referral

• Net savings with respect to imminent heart failure, diabetes and cardiac arrests approximately $1,000,000

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Conclusions and Recommendations:

• Early HRA results encouraging

• HRA team continuity and follow-up visits should push up voluntary participation in light of care shown by employer, building trust by employees, improving productivity and reducing absenteeism

• Goal of raising annual individual medical excess specific healthcare retention to $500,000 by 2010, saving $250,000 in fixed costs currently

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Public Safety Enterprise Health Risk Management Case study

Appendix 1: Demographics

• 323 active members without dependents on healthcare coverage

• 637 active members with dependents on healthcare coverage

• 305 retired members without dependents on healthcare coverage

• 315 retired members with dependents on healthcare coverage

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Appendix 2: Extract from Actual Shock Claim Distribution

• Retinal detachment claim incurred March 2004, paid $84,119 through November 2004, projected $102,812 through January 2005

• Malignant neoplasm colon claim incurred March 2004, paid $298,955 through November 2004, projected $365,390 through January 2005

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Appendix 2: Extract from Actual Shock Claim Distribution (continued):

• Malignant neoplasm bone claim incurred March 2004, paid $115,493 through November 2004, projected $141,158 through January 2005

• Recurrent depression claim incurred March 2004, paid $37,397 through November 2004, projected $45,708 through January 2005

• Renal failure claim incurred March 2004, paid $377,170 through November 2004, projected $460,985 through January 2005

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Appendix 3: Extract from Per Employee Per Month (PEPM)Specific Stop Loss Rate Development for Paid Claims

• At $200,000 annual threshold, shock claims in excess were $276,125; PEPM rate = $17.48



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Appendix 4: Extract from Per Employee Per Month (PEPM)Specific Stop Loss Rate Development for Incurred Claims




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Merci Beaucoup

2 public safety enterprise health risk management case study juan kelly

Documents

management of enterprise

managed health

health risk assessments

entire risk

health insurance carrier

health plan sponsors

actual distribution

net of employee cost