Fiscal Year 21Department Budget

Employee Total CompensationBureau of Human Resources

February 18, 2020

BHR Partners to Achieve Other’s Goals

• Organization Effectiveness

• Total Rewards

• Compliance

D.SeeleyCommissioner

T. SteckelDir. Benefits

E.ZellerDir. HR Centers of

Excellence

OPENDir. Human Resources

M.Deyo-AmendeCood. Special

Projects

M.BarnettLegal Counsel

2

No Budget Change is Recommended

3

93%

92%

91.4%

91.6%

91.8%

92.0%

92.2%

92.4%

92.6%

60

65

70

75

FY 2018 FY 2019

FTE Utilization

Budgeted FTE Utilized FTE

2.8%

15.5%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

Turnover

BHR Turnover

FY 2019 FY 2018

18.1%

31.9%

44.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

Jan 2020 5 Years 10 Years

BHR Retirement Eligibility$295,389

$7,121,983

BHR Funding

General Funds Federal Funds Other Funds

4

Executive Branch Employees

1/3 of Employees Have 15 or More Years of Service

6%

24%

22%

22%

23%

3%

Age

18 - 24

25 - 34

35 - 44

45 - 54

55 - 64

65 +

23%

21%

23%

25%

8%

Years of Service

< 3

3 - 6

7 - 14

15 - 29

30 +

5

13.5%

12.4%

10.5% 10.8%

12.2%

14.4%13.5% 13.3% 13.5%

13.9%

12.0%

14.6% 14.3%

2.8% 2.7%

4.2%5.0% 4.9%

4.4% 4.1%3.6% 3.3% 3.0% 3.2%

3.4%2.8%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Statewide Turnover Unemployment

Turnover Rises As Unemployment Drops

6

Pay Reported as Second Highest Reason for Leaving

Reason for Exit Percent Responding Primary Reason

Retirement, Family Obligations, etc. 37%

Pay 17%

Job Location 7%

Lack of Advancement Opportunities 6%

Work Environment 5% 382

157

72

FY19 Internal Movement

Promotions

Transfers

Demotions

8.4% of employees

changed jobs within state

7

State Faces Significant Retirement Risk

14.4%

27.9%

41.0%

DENR, 22.60%

BOA, 39.90%

BOA, 58.90%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Today Five Years Ten Years

As of Jan 1, 2020

Statewide Highest

8

9

Compensation

10

Governor’s Budget Recommends No Increase

Governor Noem has recommended no salary policy increase for FY21 based upon revenue projections.

Recruitment and

Retention

Culture of State

Government

Work Environment

Type of WorkPersonal and Professional

Development

Career Advancement

Compensation and Benefits

Many Factors Impact Attraction and Retention

11

Market Analysis and Pay Ranges Best Comparison

Market Minimum Market Value Maximum

80 - 90% of market value

50th Percentile of market data

110 - 125% of market value

Illustration of a pay range

ArtificialMinimum

Currently69 - 78%

of market value

12

92 95

855

1,508

1,610 1,590

830

493

123

17 14 4 1 10

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Position In Range

2.2%35.3% 62.5%

97.8% of State Employees Paid Below Market

13

666 People in SDSEHP and Medicaid in FY19

73

438

123

543

0

100

200

300

400

500

600

Adults Children

Medicaid Recipients in SDSEHP

Dec-19 FYI 2019

14

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Single Parent OneChild

Pregnant Motherwith One Child

Family of four

Medicaid Income Threshold

Income Threshold

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

Single Parent One Child Pregnant Mother withOne Child*

Family of four

Count of Employees below Medicaid Threshold

Count of Employees below Threshold

*female employees only

15

16

Benefits

Fully Employee Paid• Dental Insurance (8,920)• Vision Insurance (8,379)• Accident Insurance (5,392)• Hospital Indemnity Insurance (3,699)• Short-Term Disability (4,836)• Supplemental Life Insurance (5,626)• Dependent Life Insurance (2,902)

17

Employer and Employee Share Benefits Package Cost

Account Base Plans Available• Flexible Spending Accounts (1,097)• Health Reimbursement Arrangements (1,945)• Health Savings Accounts (9,236)

Fully Employer Paid• Life Insurance ($25,000)• Fee for Account Based Plans• Health Plan Opt Out Payment• HSA Seed Money• Vacation, Sick, Holidays

Employer and Employee Paid• Health Insurance

Health Plan27,000 lives

Auditors

CVS/Caremark

Segal Group

BHR & Governor’s

Office

Health Management

PartnersDAKOTACARE

Staywell

Dialog Direct

KEPRO

18

Managing SDSEHP Requires Complex Partnership

Self-funded Plan• Avoids insurers built-in profit margin • Allows for greater flexibility in plan design• Employer assumes the risk

Direct Contracts• Lower inflation risk• Recognizes geographically dispersed employee base• Requires higher levels of administrative effort

19

SDSEHP Designed to Save Money and Control Costs

Total covered employees, pre-65 retirees, spouses, dependents, and COBRA participants on January 1, 2020*

*As of January 1, 2020, there were 425 opt outs.

12,781

4,272

9,814

26,867

0

5,000

10,000

15,000

20,000

25,000

30,000

Employees Spouses Dependents TotalMembers

20

Coverage by Type

Covered Employee and Dependent Count Nearly Equal

70%30%

Health Plan Enrollment

High Plan Low Plan

53

13

435

499

67 37

31

50

29

501

19 147

86 64

127

86

16547

89 41

3,026

103

735

2674,354

57

47

93

382538

16

38

49

111

29

15 26

52921,422

126

6

794

2,166

243

245 25

205

16

58

0

42

309

29

141

37

66

90

2,840

982

90

Chart includes covered employees, pre-65 retirees, spouses, dependents, and COBRA participants; there are 673 members of the health plan who live outside South Dakota. 21

Dispersed Workforce Complicates and Raises Costs

22

$0.M

$5.M

$10.M

$15.M

$20.M

$25.M

$30.M

$35.M

$40.M

$45.M

$0-$499.99 $500-$4.9K $5K-$19.9K $20K-$49.9K $50K-$99.9K $100K-$999.9K $1M-$1.99M $2M or >

14,093 8045 2,472 631 289 199 < 5 < 5

Empl

oyer

Cos

tM

illio

ns

Number of Members w/Claims within Employer Cost Range

Health Plan Cost Distribution

The Plan Spent $718 Per to Cover 86% of Members

Less than 1% of Covered Drive 34% of Medical Cost

$30.3

$35.0

$43.3

$82.6

$84.6

$84.4

0% 20% 40% 60% 80% 100%

FY2017

FY2018

FY2019

High Cost Claimant Spending by Fiscal Year

HCC ALL OTHERS

In Millions

139

171

206

27,005

27,311

26,985

0% 20% 40% 60% 80% 100%

FY2017

FY2018

FY2019

Number of High Cost Claimants by Fiscal Year

HCC Count All Others

23

24

Top 5 Diagnosis Categories Account for 68% of HCC Spend

57$11.4M

26$5.4M

24$4.9M

14$4.6M

9$3.2M

Cancer

Diseases of the circulatory system

Diseases of the nervous system andsense organs

Diseases of the musculoskeletal systemand connective tissue

Infectious and parasitic diseases

FY19 High Cost Claimant Spending Analysis

25

SDSEHP FY19 Top Contributors to Rx Trend

Overall drug class Net CostContribution to Net

Trend CVS BoB

Analgesics -Anti-inflammatory $6,641,429 3.90% 1.20%

Anti-cancer $3,071,236 2.90% 0.80%

Antidiabetics $4,787,412 2.20% 1.50%

Specialty Drugs Top Contributors to Rx Trend

Oncology $3,552,396 4.10% 0.90%

Rheumatoid Arthritis $6,152,789 3.20% 1.00%

Psoriasis $2,001,535 2.70% 1.30%

Specialty Drug Users and Costs Higher than Peers

SDSEHP Key Rx Metrics FY19 FY19 SDSEHP FY19 Peer

Total Prescriptions 225,994

Generic Dispensing Rate (GDR) 87.00% 86.80%

Average Monthly Utilizers as % of Members 31.50% 41.70%

Specialty Utilizers as % of Members 1.20% 0.90%

Specialty % of Total Net Cost 55.10% 45.40%

Specialty % of Total Prescriptions 1.30% 1.00%

% Specialty Member Cost Share 3.40% 2.40%26

BoB Rank State Rank Drug Name Specialty Class Total Net Cost

% of Specialty

Cost Total Utilizers Total Rxs Net Cost per Rx

1 1 Humira Rheumatoid Arthritis $4,424,928 24.14% 84 763 $5,799.38

10 2 Copaxone Multiple Sclerosis $1,186,619 6.47% 22 204 $5,816.76

2 3 Enbrel Rheumatoid Arthritis $1,052,924 5.74% 30 227 $4,638.43

3 4 Stelara Psoriasis $1,002,155 5.47% 16 57 $17,581.66

7 5 Gilenya Multiple Sclerosis $965,501 5.27% 12 122 $7,913.95

4 6 Tecfidera Multiple Sclerosis $865,711 4.72% 13 114 $7,593.96

30 7 Rebif Multiple Sclerosis $802,323 4.38% 10 108 $7,428.92

5 8 Revlimid Oncology $547,889 2.99% 4 36 $15,219.13

8 9 Cosentyx Psoriasis $529,432 2.89% 10 73 $7,252.49

236 10 Rydapt Oncology $415,282 2.27% 2 15 $27,685.49

Total $11,792,764 64.34% 203 171927

10 Drugs Account for 64% of Specialty Costs

60% 63% 58%

45%

0%

10%

20%

30%

40%

50%

60%

70%

SD FY17 SD FY18 SD FY19 Staywell Bookof Business

Perc

ent C

ompl

etio

n

28

Wellness Participation Remains Strong

29

76%

57%51%

75%

45% 44%

0%

20%

40%

60%

80%

100%

Weight Cholesteral Blood Pressure

At ri

sk (m

oder

ate

& h

igh)

Risk Factor

Past Current

Risk Factors Decrease for Many

30

50%44%

6%

54%

41%

5%

0%

20%

40%

60%

80%

100%

Low risk (0-2 risks) Moderate risk (3-5 risks) High risk (6+ risks)

Past Current

Numbers with Multiple Risks Falling

FY19 Estimated Cost Avoidance

Avoidable Health Care Cost

Avoidable Indirect Cost

Total Change All Repeat Participants

(N=10,247)Total Change per

Repeat Participant

Total Increase (Decrease) -$1,645,500 -$2,382,400 -$4,028,000 -$393

31

Better Wellbeing Avoids Higher Spending

FY19 Plan Changes• Deductible Increases• HDP OOPM Increase• HDP Add Coinsurance for Brand Name Drugs

FY20 Plan Changes• Deductibles Increases• OOPM Increases• Increase Rx Co-pay, Except Generics• LDP Rx Deductible Increase• LDP Rx OOPM Increase

32

Past Plan Changes Focused on User

Must complete wellness qualifications to earn any Health Savings Account (HSA) seed money.

33

FY21 Change Focused on Improving Health

SDSEHP Deductible Rising Faster than National

$300

$500

$750 $850

$1,000

$1,500

$2,000

$1,800

$2,000 $2,200

$643 $736

$871

$1,153

$1,188

$1,838

$2,086

$2,349 $2,486

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

SD Low Deductible SD High Deductible Average Deductible* Average High Deductible*

34*National data from the Kaiser Family Foundation Employer Health Benefits 2019 Annual Survey

Sout

h D

akot

a

Sout

h Da

kota

Sout

h Da

kota

Sout

h Da

kota

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Deductible-Low Indiv Deductible-High Indiv Deductible-Low Family Deductible-High Family

Deductible

South Dakota Public/Private 10K-20K EE Regional Public/Private all sizes Government-all sizes National

35*Segal/Medical/Rx Benefit Benchmarking Report January 2020

Low Deductible Plan Not Aligned With Market

36

Sout

h Da

kota

Sout

h Da

kota

Sout

h Da

kota

Sout

h Da

kota

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

OOPM-Low Indiv OOPM-High Indiv OOPM-Low Family OOPM-High Family

Out of Pocket Maximum (OOPM)

South Dakota Public/Private 10K-20K EE Regional Public/Private all sizes Government-all sizes National

*Segal/Medical/Rx Benefit Benchmarking Report January 2020

Out of Pocket Max Higher than Market

37

$0

$4,000

$8,000

$12,000

Nebraska Minnesota Iowa South Dakota Wyoming

Low Plan-Individual Coverage*

Employer Contribution Employee Contribution

$0

$4,000

$8,000

$12,000

Nebraska Minnesota South Dakota

High Plan-Individual Coverage*

Employer Contribution Employee Contribution

*Segal Medical/Rx Benefit Benchmarking Report January 2020

SD Contributes More for Individual Coverage

38

$0

$10,000

$20,000

$30,000

$40,000

South Dakota Iowa Minnesota Nebraska Wyoming

Low Plan-Family Coverage*Employer Contribution Employee Contribution

$0

$10,000

$20,000

$30,000

South Dakota Nebraska Minnesota

High Plan-Family Coverage*

Employer Contribution Employee Contribution

*Segal Medical/Rx Benefit Benchmarking Report January 2020

Family Contribution Lower than Other States

39

$0

$2,000

$4,000

$6,000

$8,000

Minnesota Iowa Wyoming Nebraska South Dakota

Low Plan-Individual Coverage*

Employee Contributions Out of Pocket Costs

$0

$2,000

$4,000

$6,000

Minnesota Nebraska South Dakota

High Plan-Individual Coverage*

Employee Contributions Out of Pocket Costs

*Segal Medical/Rx Benefit Benchmarking Report January 2020

Employee Costs Highest Among Neighbors

40

$0

$5,000

$10,000

$15,000

$20,000

Minnesota Iowa Wyoming Nebraska South Dakota

Low Plan-Family Coverage*

Employee Contributions Out of Pocket Costs

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

Minnesota South Dakota Nebraska

High Plan-Family Coverage*

Employee Contributions Out of Pocket Costs

*Segal Medical/Rx Benefit Benchmarking Report January 2020

Covered Families Pay Much More

• Contracting with vendors

• Claims volatility

• Risk mitigation

• Intro of new, very expensive specialty drugs

• Medical inflation more than 2x greater than overall inflation

41

Plan Faces Several Challenges

Location Melanoma Rate /

100k

Regional Rank

Oral / Pharyx

Regional Rank

Colon Regional Rank

Prostate Regional Rank

Non-Hodgkins

Lymphoma

Regional Rank

United States 30.1 12.0 40.5 97.1 18.3

Iowa 25.4 7 12.9 3 44.3 3 103.7 6 19.8 3

Minnesota 53.9 1 12.4 4 38.7 5 104.5 5 21.1 1

Montana 53.2 2 11.6 6 38.9 4 112.2 2 17.7 4

Nebraska 40.4 5 12.0 5 44.3 3 108.7 4 17.6 5

North Dakota 31.8 6 13.1 2 45.1 1 114.8 1 16.2 7

South Dakota 44.1 3 13.3 1 44.4 2 111.9 3 20.0 2

Wyoming 43.2 4 10.1 7 34.1 6 102.6 7 16.3 6

SD Has Higher Rates of Some Cancers

42

43

ONE-TIME INCREASE OF

$82.50

RECOMMENDED ONE-TIME

INCREASE OF $232NO PLAN CHANGES

RECOMMENDED PLAN CHANGES AND RATE

INCREASE OF$8,470+$82.50 $10,071+$232 $738

Employer Rate $8,552.50 $10,303 $10,071 $10,809Actual Estimated Estimated Estimated

FY 2019 FY 2020 FY 2021 FY 2021

Total Revenue $130,118,610 $149,517,701 $148,046,488 $156,830,840

Total Expenses $145,846,524 $149,516,154 $157,323,087 $156,823,087

Current Year Over/(Underrecovery) ($15,727,914) $1,547 ($9,276,599) $7,753

Prior Year Over/(Underrecovery) $15,836,221 $108,307 $109,854 $109,854

Cumulative Over/(Underrecovery)**/Reserve Level $108,307 $109,854 ($9,166,745) $117,607

IBNP/Allowable Reserve Level $15,544,100 $16,128,000 $17,208,000 $17,208,000(Incurred But Not Paid included in claims amount)

**Cumulative Over/(Underrecovery) is the analysis of the revenues and expenses since the beginning of the program.When this line is zero we have collected enough to pay all liabilities for this program that would be paid out in the next fiscal year. Any amount above zero is considered reserve.

5% Expense Increase Expected in FY21

FY19-FY21 Slide Update 02-06-20

ONE-TIME INCREASE OF $82.50RECOMMENDED ONE-TIME INCREASE OF $232NO PLAN CHANGES RECOMMENDED PLAN CHANGES AND RATE INCREASE OF

$8,470+$82.50$10,071+$232$738

Employer Rate$8,552.50$10,303$10,071$10,809

ActualEstimatedEstimatedEstimated

FY 2019FY 2020FY 2021FY 2021

Total Revenue$130,118,610$149,517,701$148,046,488$156,830,840

Total Expenses$145,846,524$149,516,154$157,323,087$156,823,087

Current Year Over/(Underrecovery)($15,727,914)$1,547($9,276,599)$7,753

Prior Year Over/(Underrecovery)$15,836,221$108,307$109,854$109,854

Cumulative Over/(Underrecovery)**/Reserve Level$108,307$109,854($9,166,745)$117,607

ENDING CASH BALANCE$34,936,277$28,516,102$16,665,704$23,134,360

IBNP/Allowable Reserve Level$15,544,100$16,128,000$17,208,000$17,208,000

(Incurred But Not Paid included in claims amount)

**Cumulative Over/(Underrecovery) is the analysis of the revenues and expenses since the beginning of the program.

When this line is zero we have collected enough to pay all liabilities for this program that would be paid out in the next fiscal year. Any amount above zero is considered reserve.

&"-,Bold"&14&18 State Employee Health Plan Full Accrual Financial Statement&14

&"-,Bold"&16

&F&D &T

Request $5.5M Increase for FYs 20 & 21

44

General Funds $1.5M Federal Funds $0.5MOther Funds $1.1MTotal $3.1M

FY21

FY20

General Funds $4.1M Federal Funds $1.7MOther Funds $4.2MTotal $10.0M

Fiscal Year 21�Department Budget�Employee Total CompensationBHR Partners to Achieve Other’s GoalsNo Budget Change is RecommendedExecutive Branch Employees1/3 of Employees Have 15 or More Years of ServiceSlide Number 6Pay Reported as Second Highest Reason for LeavingState Faces Significant Retirement RiskCompensationGovernor’s Budget Recommends No IncreaseMany Factors Impact Attraction and RetentionMarket Analysis and Pay Ranges Best Comparison97.8% of State Employees Paid Below Market666 People in SDSEHP and Medicaid in FY19Slide Number 15BenefitsSlide Number 17Slide Number 18Slide Number 19Total covered employees, pre-65 retirees, spouses, dependents, and COBRA participants on January 1, 2020*Slide Number 21Slide Number 22Slide Number 23Slide Number 24FY19 High Cost Claimant Spending AnalysisSpecialty Drug Users and Costs Higher than Peers10 Drugs Account for 64% of Specialty Costs Wellness Participation Remains StrongSlide Number 29Numbers with Multiple Risks FallingBetter Wellbeing Avoids Higher SpendingPast Plan Changes Focused on UserFY21 Change Focused on Improving HealthSDSEHP Deductible Rising Faster than NationalLow Deductible Plan Not Aligned With MarketOut of Pocket Max Higher than MarketSD Contributes More for Individual CoverageFamily Contribution Lower than Other StatesEmployee Costs Highest Among NeighborsCovered Families Pay Much MorePlan Faces Several ChallengesSD Has Higher Rates of Some Cancers5% Expense Increase Expected in FY21Request $5.5M Increase for FYs 20 & 21