1 healthcare group of arizona arizona’s health care and policy laboratory for small business...

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Healthcare Group of ArizonaHealthcare Group of Arizona

Arizona’s Health Care and Policy Laboratory

for Small Business Coverage Options

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The Evolution of AHCCCS Health Care Coverage

•Arizona Revised Statute gives AHCCCS broad authority to provide health care coverage to federally funded beneficiaries, small businesses, and public employees for acute and long term care.

•Started in October 1982, 3 year demonstration waiver approved by CMS for AHCCCS Acute program .

• In 1987, the Waiver request includes a proposal to include long Term Care and the Arizona Long Term Care System (ALTCS) is approved.

•In 1988, small employers in 4 counties are allowed to purchase medical coverage for their employees from AHCCCS Health Plans through Healthcare Group.

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The Evolution of AHCCCS Health Care Coverage

• In 1990 there is Phase-in of behavioral health services for certain Title XIX members.

• In 1993 Healthcare Group services for small employers is expanded statewide.

• In 1997, AHCCCS submits an amendment to cover single adults and children up to 100% of the FPL.

• 1998 there was a 3 year pilot to provide coverage based on a sliding scale monthly premium to uninsured people who do not qualify for Medicaid – Premium Sharing.

• 1998 Arizona implemented it’s version of State Children’s Health Insurance Program (SCHIP) – KidsCare- Covers children under 150% of the FPL.

4

Voter Approved Proposition 204

• In 2001 Arizona voter approved proposition 204 which funded the expansion of AHCCCS and created the opportunity for the state to replace state and local funding for the medically needy population with federal funds.

•Prop 204 replaced a state-only program for the Medically Needy and Medically Indigent (MNMI), which cost $200 M per year from the General Fund and over $30 M in county funds.

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FY 2006/2007 Legislative Changes

HB-2698 Small Businesses Exemptions

•Exempts small business health care coverage from specified insurance coverage requirements, including certain mandates for businesses that employ 2 to 25 persons and that have been uninsured for at least 6 months.

•Exemptions for small businesses health insurance plans include: any surgical services, maternity benefits, coverage of medical foods to treat metabolic disorders, and drug or devices for contraception or outpatient contraception services.

HB- 2177 Tax Credit for Small Businesses and Employees

• A tax credit for individual or a small business that is certified by Dept. of Revenue as meeting the requirements for tax credit.

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FY 2006/2007 Legislative Changes

SB 1442 Temporary Medical Coverage

•Appropriates $6.5 million to AHCCCS to establish the Temporary Medical Coverage Program to provide health care coverage to persons who are citizens and residents and who have been enrolled in AHCCCS at any time within the last 24 months and became ineligible for coverage due to federal disability insurance benefit payment.

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While the rate of uninsured in Arizona has declined significantly since 1997, 17.0% of Arizona residents remained uninsured in 2004.

15%

17%

19%

21%

23%

25%

Arizona 24.5% 17.0%

United States 16.1% 15.4%

1997 2004

Source: U.S. Census Bureau, Housing & Household Economic Statistics Division.

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Assumptions About the Small Business Market

• The small business market is growing.• Extremely price sensitive.• Small business owners to do not see health benefits as

a necessary part of competitive employee compensation.

• Significant employee turn over.• What the small business owner wants in a health

benefit their employees cannot afford.• Small business employers prefer a defined

contribution for any employer participation in health benefit coverage.

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• Designing benefit plans that the small business Market will buy

• Product and Pricing Strategy

• Product Differentiation

• Product Evaluation

Policy Question: Can the Market Work?

Will the small business market respond to differentiated benefits and health coverage products?

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Administrative Administrative EaseEase

ChoiceChoiceBudgetabilityBudgetability

Healthcare Group Business Model

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The ABCs of Healthcare Coverage for Small Businesses

• A = Administrative Ease • Easy to enroll• Easy to deal with

• B = Budget-ability• A health plan that fits into every employees budget

• C = Choice• Choice of health plan benefits• Choice of provider networks• Choice of providers

Our success equation is ……

A + B + C = Success

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Design benefit plans that:

• Address varying health needs

• Address varying incomes

• Address varying consumer needs

• Can be reasonably-priced

• Are meaningful, provide utility and value

• Can be self-sufficient

Product Development Strategy

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CLASSICCLASSIC

SECURE

ACTIVE

Intended for employees with limited health needs beyond routine and preventive care. Little or no co-pays for most physician office visits, diagnostic services and prescriptions. Maternity excluded.

Richest benefit package, intended for:• employees with existing disease or chronic condition • employees wanting the added security of a wide range

of benefits

A variation of the Secure plan, with lower premium and higher co-pays and coinsurance. Maternity excluded.

HCG Healthstyles

HCG HealthstylesHCG HealthstylesHCG HealthstylesHCG HealthstylesDesigned for varying health needs, income, and lifestyles.Designed for varying health needs, income, and lifestyles.

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Healthstyles™ Benefit Grid

Benefit Type(partial list)

Classic

Secure

Active

Physician Services (PCP) $20 copay $0 copay $10 copay

Specialist Services $ 20 copay $20 copay $30 copay

Preventive Care $20 copay $0 copay $10 copay

Maternity Services Included None/Rider None/Rider

Urgent Care $40 copay $20 copay $20 copay

Emergency Care $100/$150 copay $50 copay 20% coinsurance

Inpatient Hospitalization $100 admission 50% coinsurance* 20% coinsurance

Diagnostic Services $0 copay $0 copay 20% coinsurance

Rehabilitation Services $15 copay 20% coinsurance 20% coinsurance

Prescription Medicine $15/$30 copay $0/$20 copay $0/$20 copay

* 100% coverage for first 10 days, thereafter 50% coinsurance.

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Product Evolution

11,6

10

11,5

31

11,4

25

11,3

99

11,2

46

11,3

54

11,2

49

11,2

50

11,0

61

11,0

86

11,1

02

11,0

87

11,0

53

11,0

77

11,1

67

11,3

45

11,5

64

11,2

18

10,000

10,250

10,500

10,750

11,000

11,250

11,500

11,750

12,000

HCG Enrollment21

,109

14,3

10

11,4

76

11,6

68

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

19,000

20,000

21,000

22,000

CY1998

CY1999

CY2000

CY2001

•Broker fees ends •To single plan•Rate increase

Loss of health plan

New HCG Administration

Subsidy

Starts

Product Evaluation

Begins

Healthstyles Benefit Plans Introduced

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Historic Enrollment Trends(1999-2006)

HEALTHCARE GROUP OF ARIZONAHistoric Enrollment (1999-2006)

22,027

15,37615,968

16,451 16,624

17,85018,507

19,06219,552

20,11820,798

21,603

17,291

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

July

Augus

t

Septe

mbe

r

Octobe

r

Novem

ber

Decem

ber

Janu

ary

Febru

ary

Mar

chApr

ilM

ayJu

ne

Month

Mem

ber

s

SFYE 2007 SFYE 2006 SFYE 2005 SFYE 2004 SFYE 2003

SFYE 2002 SFYE 2001 SFYE 2000

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HMO Enrollment by Benefit Plan and Deductible

Total Membership as of July 11, 2006: 22,027

HMO20,473 members

5%

5%

3%

3%

5%

7%

7%

18%

47%

Classic $0 deductible

Classic $500 deductible

Classic $1,000 deductible

Classic $2,000 deductible

Secure $0 deductible

Secure $500 deductible

Secure $1,000 deductible

Active $0 deductible

Active $500 deductible

Members electing a deductible option: 28%

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PPO Enrollment by Benefit Plan


PPO1,554 members

12%

39%

7%

6%

23%

2%

6%

5%

Medallion Plus, Classic Plus and Platinum Plus meets federal requirements for pairing with an optional HSA.

Medallion PPO

Medallion PPO Plus

Medallion Classic PPO

Medallion Classic PPO Plus

Medallion Platinum PPO

Medallion Platinum Plus PPO

Medallion Gold PPO

Medallion Silver PPO

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Original Healthstyles design based on:

• Historical experience with previous HCG benefit plans

• Meetings with small business employers

• Experience of other states

• Characteristics of the working uninsured-Demographic from Kaiser -CAN initiative (St. Luke’s)

Product Evolution

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December 2004Results from Employers and Employee Satisfaction Survey

(n=285)

HCG Product Evolution

Benefit Type YES NO

Wellness programs 78.9% 21.1%Preventive care postcards 41.8% 58.2%Online health information 69.5% 30.5%Mental health benefits 51.9% 48.1%Vision and Dental benefits 88.4% 11.6%Catastrophic benefit plan 87.4% 12.6%Medical discount card 87.0% 13.0%More choice of doctors 65.6% 34.4%More choice of benefit plans 71.9% 28.1%More medical drug coverage 87.7% 12.3%Materials in Spanish 8.4% 91.6%Healthcare Savings Account 44.6% 55.4%

Benefit Type YES NO

Wellness programs 78.9% 21.1%Preventive care postcards 41.8% 58.2%Online health information 69.5% 30.5%Mental health benefits 51.9% 48.1%Vision and Dental benefits 88.4% 11.6%Catastrophic benefit plan 87.4% 12.6%Medical discount card 87.0% 13.0%More choice of doctors 65.6% 34.4%More choice of benefit plans 71.9% 28.1%More medical drug coverage 87.7% 12.3%Materials in Spanish 8.4% 91.6%Healthcare Savings Account 44.6% 55.4%

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Validation of Focus Group/Survey findings:

• Asked Brokers/Producers what they thought

• Actuarial pricing analysis

• Empirical research

• Experience of other states

Product Evolution

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Product Evolution

HMO

Single Plan

1998-2003

April 2004

June-July 2004Employer Focus Groups

HMO

Active

HMO

Secure

Healthstyles HMO

Classic

SB1166

• Solidify relationships with HCG employer groups

• Evaluate employer satisfaction • Validate product design assumptions• Assess unmet need (benefits & services) • Validate future product ideas

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Product Evolution

HMO

Single Plan DESIRED BENEFITS

•Deductible options•Mental Health benefits•Vision benefits•Dental benefits•Expanded provider network•PPO plans•HSA/HDHP option•Wellness

1998-2003

April 2004

June-July 2004Employer Focus Groups

Option

$2,000

Deductible Option

$1,000

Deductible Option

$500

October2004

PPO

Silver

PPO

Gold

Medallion PPO

Platinum, Platinum +

September2005

Vision(Avesis)

Dental(EDS)

January 2006

February2006

Rx

ExpandedFormulary

HMO

Active

HMO

Secure

Healthstyles HMO

Classic

SB1166

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Product Differentiationas of May 2006

Comprehensive Preventive Active

HMO“Healthstyles”

ClassicClassic SecureSecure ActiveActive

PPO“Medallion”

Platinum Platinum Platinum Plus (HSA)Platinum Plus (HSA)

GoldGold SilverSilver

Products are differentiated by covered services, benefit plan features, provider networks, and availability

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Benefit Comparison

Covered Services(partial list)

Healthstyles HMO Medallion PPO

Physician Services (PCP/Spec)

Inpatient - Medical

Outpatient - Medical

Maternity

Acute Ancillary (SNF, HH, Dialysis)

$0 Preventive Care

Inpatient - MH/SA

Outpatient - MH/SA

Formulary Tiers 3 3 3 4 3 3

Rx Benefit Limit None None None None $12,500 $7,500

Classic Secure Active Plat/+ Gold Silver

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Benefit Comparison

Benefit PlanFeatures (Deductible)

Healthstyles HMO Medallion PPO

Number of Deductible Options 3 2 1 3 / 2 3 3

Zero Deductible Option Yes Yes Yes No / No No No

MD Office Visit (E&M) excluded* / -

Preventive Care excluded /

Mammography excluded /

Prescription Drugs excluded / -

Emergency/Urgent Care excluded

Prescription Drugs excluded / -

Out-of-Pocket Maximum No No No Yes Yes Yes

Out-of-Network Benefit (NPPN) None None None 50% 50% 50%

Classic Secure Active Plat/+ Gold Silver

* Health plan assumes first dollar liability for services excluded from deductible.

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HMO Provider Networks

MohaveMohave

CoconinoCoconino

NavajoNavajo

ApacheApache

LaPazLaPaz

YumaYuma

YavapaiYavapai

MaricopaMaricopa

PimaPima

PinalPinal

GilaGila

GrahamGraham

CochiseCochise

Green-Green-leelee

Santa Santa CruzCruz

MohaveMohave

CoconinoCoconino

NavajoNavajo

ApacheApache

LaPazLaPaz

YumaYuma

YavapaiYavapai

MaricopaMaricopa

PimaPima

PinalPinal

GilaGila

GrahamGraham

CochiseCochise

Green-Green-leelee


MohaveMohave

CoconinoCoconino

NavajoNavajo

ApacheApache

LaPazLaPaz

YumaYuma

YavapaiYavapai

MaricopaMaricopa

PimaPima

PinalPinal

GilaGila

GrahamGraham

CochiseCochise

Green-Green-leelee


Geographic differentiation: HMO benefit plans are not available statewide

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PPO Provider Network

MohaveMohave

CoconinoCoconino

NavajoNavajo

ApacheApache

LaPazLaPaz

YumaYuma

YavapaiYavapai

MaricopaMaricopa

PimaPima

PinalPinal

GilaGila

GrahamGraham

CochiseCochise

Green-Green-leelee


AFMC

Medallion Series Benefit PlansMedallion Series Benefit Plans

Platinum Plus (HSA)

Gold

Silver

Platinum

Geographic differentiation: PPO availability varies by county

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Product Month EnrollmentAverage

Income*

Average

EE Age

Percent

Male

Tier 1

EE

Tier 2

EE+S

Tier 3

EE+F

Tier 4

EE+C

December 2004

11,224 $53,743 46.2 53% 58% 23% 16% 4%

April2006 12,215 $53,344 48.1 55% 57% 23% 16% 4%

December 2004

800 $53,397 49.9 48% 72% 23% 3% 3%

April 2006 5,052 $45,458 49.5 51% 61% 25% 9% 5%

December 2004

415 73,864 42.1 51% 72% 17% 7% 5%

April 2006 1,990 $42,835 46.8 53% 61% 22% 11% 6%

ClassicClassic

SecureSecure

ActiveActive

HMO Product DemographicsDecember 2004 to April 2006

*Represents stated income from subscribers on enrollment forms. Not all subscribers supply these data.

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Product Growth (2005-2006)

1%

4%6%

27%

21%

2%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

J-05 F-05 M-05 A-05 M-05 J-05 J-05 A-05 S-05 O-05 N-05 D-05 J-06 F-06 M-06 A-06 M-06

Classic Secure Active PPO HSA Overall Growth

Healthcare Group Growth by Product

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HCG Enrollment by Product

December 2006*25,000 members

anticipated

December 200412,438 members

Classic91%

Secure6%

Active3%

Classic70%

Secure21%

Active9%

PPO0%

Classic60%

Secure25%

Active10%

PPO5%

September 200516,451 members

May 200620,798 members

Classic50%

Secure26%

Active11%

PPO13%

* Expected

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HCG Enrollment by Product and Provider Network


HCG Products22,027 members

Classic57%

Secure26%

Active10%

PPO7%

HCG Networks22,027 members

AFMC7%

Care 1st9%

UPH38%

Mercy46%

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HMO Product MigrationDecember 2004 to April 2006*

100%

87%

80%75%

0%13%

20%25%

0%

20%

40%

60%

80%

100%

Remained in $0 deductible plan Switched to deductible option

December-06 July-05 October-05 April-06

Deductible options were first introduced in October 2004.

By April 2006, 25% of members had switched to a deductible option.

*This period represents the migration behavior of 100% of membership following a complete contract renewal cycle.

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Evaluation Tools:• Financials

• Actuarial Analysis (COG)

• Analytic Dashboard (Rates and Measures)

• Enrollment Reports

• Ad-hoc Analysis

• Risk Profiling (Medical Intelligence)

• Satisfaction Surveys

• Focus Groups

Product Evaluation

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• Actuarial Tool Box» Milliman Health Cost Guidelines (Industry

standard)

» Pricing Models

» Reserving Models

» Ad-Hoc Studies

» National Studies (CMS, Kaiser Family Foundation, etc.)

» Financial and Actuarial Education

» External Actuarial Services

Rate Analysis Tools

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Pricing Strategies

• Small groups are subject to significant fluctuations in premium rates– Community Rated Premiums

• Medical cost risk is spread across a larger group

– Member “Out of Pocket” Costs• Co-pay and co-insurance is used to pass on financial

responsibility and mitigate premium rate increases

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51%40%

59%44%

82%68%

86%68%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Premium Options

Drug Coverage

Co-pays / Coinsurance

Benefit Plans

2005 2004

HCG Member Satisfaction

Member satisfaction with choice of …

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93%

86%

82%

77%

84%

78%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Pharmacies

Hospitals

Physicians

2005 2004


Member satisfaction with choice of …

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80%

73%

87%

88%

84%

87%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

HCG Program

Medical Care

Personal MD

2005 2004


Overall member satisfaction with …

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Our first care is your healthcare

1 healthcare group of arizona arizona’s health care and policy laboratory for small business...

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