GIC Public Hearing

February 3, 2011

What’s the Problem?

• Budget pressure on state revenues versus state expenditures continues despite some improvements in the economy

• We’re not out of the woods yet

*ProjectedSource: Mercer’s National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April) 1990-2010; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey(April to April) 1990-2010.

Total health benefit cost per employee rises 6.9% in 2010, the sharpest increase since 2004

17.1%

12.1%

10.1%

8.0%

-1.1%

2.5%

0.2%

6.1%

8.1%

11.2%

14.7%

10.1%

7.5%

5.5%

6.4%*6.9%

6.3%6.1%6.1%6.1%7.3%

2.1%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Workers' earningsAnnual change in total health benefit cost per employeeOverall inflation

Disparities in Provider CostsAttorney General’s “Investigation of Health Care

Cost Drivers” and Division of Health Care Finance and Policy hearings 3/16/10

• Provider payment tied to market leverage and geographic isolation

• 10 Massachusetts hospitals get 10% - 100% more than the other 55 for similar work

• Price variations for hospitals and physicians offering similar services are NOT explained by quality of care, complexity of services/sickness of population or whether the hospital is an academic teaching or research facility

What Have Other Employers Done?

• Shifted costs to employees • Implement high-deductible plans

(example: $1,000-$5,000 deductibles before benefits begin)

• Institute co-insurance (example: member pays 20% of the cost of services)

• Eliminated retiree benefits

Among Firms Offering Health Benefits, Percentage of Firms That Report They Made the Following Changes as a

Result of the Economic Downturn, by Firm Size, 2010

*Estimate is statistically different between All Small Firms and All Large Firms within category (p<.05).

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2010.

$706 $686$769

$846 $859

$1,200

$523$479$379

$1,001$1,096

16%22%21%22%20%27%

30%36%

40%

48%

23%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Average deductible among PPO sponsors requiring a deductiblePercent of PPO sponsors requiring no deductible

Average PPO deductible for individual, in-network coverage

Average Annual Worker and Employer Contributions to Premiums and Total Premiums for Family Coverage,

1999-2010

* Estimate is statistically different from estimate for the previous year shown (p<.05). Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2010.

$5,791

$6,438*

$7,061*

$8,003*

$9,068*

$9,950*

$10,880*

$11,480*

$12,106*

$12,680*

$13,375*

$13,770*

Among All Large Firms (200 or More Workers) Offering Health Benefits to Active Workers, Percentage of Firms Offering

Retiree Health Benefits, 1988-2010*

*Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2010; KPMG Survey of Employer-Sponsored Health Benefits, 1991, 1993, 1995, 1998; The Health Insurance Association of America (HIAA), 1988.

National Health Reform

Added benefits and costs effective July 1, 2011

• Dependent expansion to age 26, regardless of dependent’s status

• No copays or deductibles for preventive services

• Projected added premium costs of 1%-2%

What Has the GIC Done to Deal with the Challenges?

2004 - Instituted Clinical Performance Improvement Initiative: members pay lower copays for providers with the highest quality and/or cost-efficiency scores:

Tier 1 (excellent) Tier 2 (good) Tier 3 (standard).

Physicians for whom there is not enough data and non-tiered specialists are assigned a plan’s Tier 2 level copay

Other GIC Initiatives

• Kept premium increases as low as possible (7.91% for FY11 and 3.19% for FY10) – but, deficits caused mid-year deductibles and increased copays

• Introduced additional limited network plans: Harvard Pilgrim Primary Choice Plan and Tufts Health Plan Spirit

The State’s Budget Crisis

• $1.2 – $2 billion structural deficit projected for FY12

• Causes: loss of $2 billion in one time funds, including $1.5 billion from ARRA

• Escalating health care costs• Tax revenues will increase slightly, but not

enough to get us out of recession (and $1 billion less than FY09)

Health Care vs Determinants of HealthGrowth in Massachusetts State Budget Spending FY2001 to FY2011

(Inflation adjusted) Source: Massachusetts Budget & Policy Center Budget Browser

-60

-40

-20

0

20

40

60

80

100

Health Care Primary-SecondaryEducation

Law and PublicSafety

Public Health HigherEducation

Environmentand Recreation

Local Aid

%

House 1’s Requests to State Agencies

• All agencies asked to be part of the solution

• Charge to the GIC – Find solutions to preserve and protect current benefits with more enrollees and no additional dollars

House 1 – Released 1/26/11

• $1,662,466,938 for FY12• $1,645,669,744 for FY11• Variance $16,767,194• Doesn’t include modest rate increases –

still in negotiation; or additional 1,800+ members from MBTA

The GIC’s Philosophy

• Don’t choose a solution that just shifts all the extra costs to the enrollees

• Try to lower costs instead

The GIC’s Approach

• Share responsibility for reducing costs and improving quality– providers, members, health plans, and the GIC

• Maintain comprehensive benefits and choice• Promote value of limited network plans• Adopt only modest employee share increases• Educate members about provider performance• Encourage healthy behavior• Maintain retiree health benefits

Option1 – Change Premium Contribution

• Increase premium contribution ratios by 5% for all actives, retirees, and survivors = $82 million

• Appropriation Act does not get done until June – therefore, we can’t change ratios until it is enacted

• Legislature made a 5% increase last year. Not likely to do it again.

Option 2 – Limit Plan Offerings• Limit plan offerings, such

as:– Drop all broad network

plans– Drop all but one state-wide

plan• Disruption and opposition

from plans, providers, and enrollees (including legislators) would be extreme

• Some plans could go under

Option 3 – Increase copays and/or deductibles

• Increase upfront deductible or go to high deductible plan designs

• Eliminate the fourth quarter carry-over of the deductible– Could save up to $20

millionHowever, • Deductibles very

unpopular• Hurts sicker patients• Doesn’t fit GIC principles

Option 4 – Make the Buy-Out Program More Attractive

• Proposed legislation to add a mid-year buy out enrollment

Option 5: Re-Enrollment with Incentives to Choose Limited

Network, Less Expensive Plans• Counteracts inertia –

most employees do not change plans – 2%-3% per year

• Focuses attention on costs and savings

• Rewards state employees who become part of solution

• Puts market pressure on high cost providers

• Savings depend on migration patterns

Option 5 – Re-enrollment Continued

Some negatives:• Minor inconvenience

for enrollees• Major work effort for

GIC and GIC Coordinators

Commission Vote of 1/27/11

• All state employees required to re-enroll in health insurance

• Overcomes inertia – most employees do not change plans – 2%-3% per year

• Employees may be more likely to consider limited network place

• Incentive offered to join limited network plans

Who Will be Required to Re-enroll?

• All active state employees who reside in Massachusetts and are covered by GIC health insurance

• The GIC will choose a plan for you if you do not re-enroll: Be proactive!

• Municipal members and state retirees and survivors will not need to re-enroll

State Employees Who Enroll in Limited Network Plans

Will receive a three-month premium holiday if you enroll in:

• Fallon Community Health Plan Direct• Harvard Pilgrim Primary Choice Plan• Health New England• Neighborhood Health Plan - NHP Care• Tufts Health Plan Spirit• UniCare State Indemnity Plan/Community

Choice

Provider Access and Plan CostAs of July 1, 2010 GIC Employee/Non-Medicare Plan

# Massachusetts Physicians

# Massachusetts Hospitals

Premium Cost

Fallon Community Health Plan Direct Care

5,000 19 $

Fallon Community Health Plan Select Care

12,700 55 $$

Harvard Pilgrim Independence Plan

24,200 70 $$$

Harvard Pilgrim Primary Choice Plan

17,900 57 $$

Health New England

6,500 15 $

NHP Care (Neighborhood Health Plan)

16,000 63 $$

Tufts Health Plan Navigator

22,400 70 $$$

Tufts Health Plan Spirit

5,800 29 $$

UniCare State Indemnity Plan/Basic

All doctors All hospitals $$$$$

UniCare State Indemnity Plan/Community Choice

All doctors 44 $

UniCare State Indemnity Plan/PLUS

All doctors 70 $$$

Premium Differences From Last Year – Don’t Know This Year’s Yet

Plan Coverage Premium % $/Month

Fallon Direct Individual 25% $84.34 (save $16.56/mo.)

Fallon Select Same Same $100.90

Harvard Primary Choice

Family 20% $235.16 (save $60.79/mos)

Harvard Independence

Same Same $295.95

Premium Differences From Last Year (continued)

Plan Coverage Premium % $/Month

Tufts Spirit Individual 25% $116.77 (save $29.91/mo.)

Tufts Navigator

Same Same $146.68

UniCare Community Choice

Family 20% $196.54 (save $72.59/mos)

UniCare PLUS Same Same $269.13

Weigh Your Options• Find out if you are eligible for the health plan (See your

Benefit Decision Guide)• For the plans you are eligible to join and interested in…

– Review their benefit summaries and monthly rates– Weigh features that are important to you

• Determine if your doctors and hospitals are in the plan’s network and which copay tiers they are in– Be sure to specify the health plan (e.g., Tufts Health Plan Spirit

or Tufts Health Plan Navigator)– Note that if your doctor or hospital leaves the plan in which you

have enrolled, you must select a new doctor or hospital that participates in your current plan for your care.

Once You Choose a Plan

Your choice of plans is for a full year: July 1, 2011 – June 30, 2012

You cannot change plans until the next annual enrollment period unless:

• You move out of the plan’s service area• You become eligible for Medicare, in

which case you must enroll in a Medicare plan

Open Enrollment• April 8 – May 9, 2011• Changes Effective July 1, 2011

State Employees Who Must Re-enroll

• Will be mailed notice beginning of March at home

• Plans will market to you during March• Will receive a guide at home this year instead of

through your benefits office with a special health plan enrollment form

• Other enrollment changes (dependents, buyout, LTD, optional life) on regular forms

• Return forms early to your Coordinator – no later than May 9

UniCare Indemnity Plan/Community Choice

Benefit Changes Effective 7/1/11 - $5,000 out-of-pocket per person calendar year maximum unchanged:

• Co-insurance for non Community Choice (out-of-network) hospitals: pay 20% of allowable charges plus copay– Inpatient admissions– Outpatient surgery– Laboratory services– Facility charges

• Hi-Tech imaging copay at non-Community Choice hospital will increase to $200

Prescription Drug Benefit Changes Effective 7/1/11

• UniCare members: Nexium and Aciphex Proton Pump Inhibitors (PPIs) for heartburn no longer covered; covered options include over-the-counter PPIs, generics, and a brand alternative

• Tufts Navigator and Tufts Spirit members:– Members who receive their maintenance medications

at a retail pharmacy must tell CVS Caremark whether or not they wish to switch to a 90-day supply through either mail order or a CVS pharmacy

– All specialty medications will be provided through CVS Caremark’s specialty drug pharmacy

Open Enrollment for Dependents Ages 19-26

• Definition of dependent under federal health reform: son, daughter, stepson, stepdaughter, adopted child, or eligible foster child

• Dependent must live in health plan’s service area unless enrolled in full time student coverage. Or, family needs to select UniCare State Indemnity Plan/Basic.

• New form – available during open enrollment

Other Federal Health Reform Changes Effective 7/1/11

• $0 copay for preventive services, such as mammograms, scheduled immunizations, routine physical and OB/GYN visits, colorectal cancer screening, and cholesterol screening for adults

• Calendar year deductible will no longer apply to these services

Life Insurance for State Enrollees Effective 7/1/11

• The Hartford awarded new contract as life insurance carrier

• Basic life rates will go down• Optional life rates will

change:– most active employee rates

will stay the same or go down– many retirees’ premiums will

increase – evaluate whether optional life makes sense

Long Term Disability for State Employees Effective 7/1/11

• Benefit Enhancement for disabilities occurring on or after 7/1/11:

• Benefit increasing to 55% of your gross monthly salary - was 50%

Vision Carrier for Dental/Vision Program

• Program for Executive Office managers, legislators, and legislative staff

• Carrier selected at 2/11/11 Commission meeting

• Possible benefit changes

Benefit Decision Guides• Mailed to active state

employees and all retiree/survivor homes week of April 4

• Municipal employees will receive through their benefit office

• Guides will be on the GIC’s website by April 1

Do Your Homework

• Plans will have provider network details on their websites before open enrollment

• Or, call the plans for provider details

No Frills Health Fairs• Because of re-

enrollment for state employees – large crowds expected

• Scheduled in large facilities near state employee worksites

• No wellness exhibits – focus on information to help members choose a plan

GIC Website Resourcewww.mass.gov/gic

• Benefit Decision Guides, newsletters and other publications

• Latest open enrollment news• Information about and links to plans and

their provider directories• Answers to frequently asked questions• Forms to expedite your enrollment

decisions

Please Be Patient

• May be difficult to get through to the GIC by phone during open enrollment

• 50 staff – processing over 100,000 forms, working the fairs, and answering calls