SEGBP Governor’s Taskforce EvaluationFebruary 20, 2001

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Table Of Contents

Taskforce Directives For Health Plan Current & Emerging Health Plan Environment Taskforce Recommendations for Health Plan

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Taskforce Directives For Health Plan

Identify And Evaluate Options For The Delivery Of Health Benefits To Participating Employees, On An Actuarially Sound Basis

Identify And Evaluate All Reasonable Options To Improve The Efficiency And Cost Effective Administration Of SEGBP, Including Program Oversight, Internal Administration And Privatization

Conduct Public Hearings To Receive Input From SEGBP Plan Members, Stakeholders And Others

Examine and Evaluate The Future Impact Of Providing Health Benefits On The State Budget

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Current Health Plan Environment

National SEGBP

Rising Health Care Costs X X

Aging Demographics X X

Inadequate Funding X

Operating Constraints X X

Insufficient Controls OfAdmission

X

Statewide Hospital System X

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Emerging Health Plan Environment

Pressure On Health Plans To Raise Premiums In Order To Increase Profits

Tougher Provider Negotiations With Health Plans For Higher Reimbursement

Consumer Demands For Easier And Broader Access To Care

Medical Needs And Demands Of 77 Million Baby Boomers

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Taskforce Recommendations

Taskforce Recommendations for Health Plan:– Active Vesting of Retiree Health– State Contributions Toward Active Coverage– Provide Plan Choice– Uniform Premiums/Plan Designs– Claims Administration– Medical Management– Plan Procurement– Plan Governance– Continued Evaluation Of Plan

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Active Vesting Of Retiree Health

Issues:– High Cost– Not An “Earned” Benefit– Up To 75% State Subsidy

Solution:– Introduce Vesting Schedule For Years of Participation in SEGBP:

5-9 Years Participating in SEGBP > 17.5% 10-14 Years Participating in SEGBP > 35.0% 15-19 Years Participating in SEGBP > 52.5% 20+ Years Participating in SEGBP > 75.0%

– Must Be Pension Eligible– Must Be Enrolled in Active Plan Prior to Retirement– Grandfather Current Plan Participants

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Active Vesting Of Retiree Health (Cont.) Rationale:

– Reduce State Cost– May Incent & Increase Active Enrollment– Private Sector Already Limiting Retiree Coverage– Other States Are Considering

Other Considerations– Retiree Liability Disclosure Obligation– Medicare Buy-In Possibilities for Those Not Eligible– Use Medicare To The Fullest Benefit Of Program To Reduce

Expenses

Fiscal Impact– Civil Service Liability Calculated as $6 Billion– Preliminary Estimate $12 Billion Liability for all Participants

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State Contributions Toward Actives

Issues:– State Subsidy Not Competitive (50% Vs. 75%)– Low Participation in SEGBP (Only 54% of Civil Service)– Availability Of Cheaper Alternatives – Aging/Sicker Population– Possible “Death Spiral” For Self-Insured Plan

Solution:– 3 Year Phase In Of Higher State Contribution For Employee

Only Coverage Year 2002 > 55.6% Year 2003 > 65.3% Year 2004 > 75.0%

– Target Cost of the Statewide Plan Offered

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Solution (Cont.):– Comprehensive Survey Of Estimated 80,000 Non-Participating

Population (Do they have Spousal Coverage, Individual Coverage, or are they Uninsured?)

Rationale:– More Consistent With Other States– Increase Plan Enrollment– Stabilize Plan– Improve Recruitment and Retention

Fiscal Impact– Year 2002 $20 Million (55.6% active employee only)– Year 2003 $60 Million (65.3% active employee only)– Year 2004 $140 Million (75.0% active employee only)

Plan Contributions (Cont.)

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Plan Choice

Issues:– Two Plans (PPO/EPO) With Significantly Different Per

Capita Value– No Differentiation In Employee Contribution– One Subsidizes The Other– Both Plan (PPO/EPO) Relatively Generous– Limited Choices of Available Options in Areas of LA– Current Use of Charity Hospital System by Uninsured State

Employees

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Solution/Alternative:– Keep EPO (Until Additional Choices are Available)– Establish Separate Premiums– Consider Other Coverage Options (HMO, POS, MSA,

Flexible Spending Accounts)– Consider Impact of Expansion of Medicaid and LaCHIP– Consider Reorientation of “charity care” in LSU HCSD to low

cost insurance option

Plan Choice (Cont.)

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Rationale:– EPO Has Ultra-Generous Benefits / No Cost Controls– More Equitable Cost-Sharing– EPO Not A Competitive Requirement– Potential Use Of LSU Healthcare Service Division /

Louisiana Children’s Health Insurance Program / Medicaid

Fiscal Impact– Neutral (Savings from Increased Employee Contribtutions

are Offset by Cost of Offering)

Plan Choice (Cont.)

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Uniform Premiums/Plan Design

Issues:– Sense That Cost May Vary By Sub-Group– Different Participation “Rights” (e.g., Local Entities)– Differences In Employment Market Benefit Demands

Solution/Alternative:– Relative Cost Data Currently Being Collected– When Data Available, Consider:

Charging Group Specific Premiums Changing The Price Of Admission (Group With In/Out Discretion) Whether Procurement Autonomy Makes Sense

– Groups That Opt to Leave the Program, Take Their Run-out Claims

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Rationale:– Cost And Benefit Equity– Fulfillment Of Attraction & Retention Needs Of Diverse

Employment Markets

Fiscal Impact– Not Yet Assessed

Uniform Premiums/Plan Design (Cont.)

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Claims Administration

Issues:– Current RIMS System Inadequate In Key Areas– Problems Recruiting Adequate Staff– Insufficient Technology Funding From State

Solution/Alternative:– Conduct In-Depth Assessment Of Claims System– Define Best Practice– Consider The Feasibility Of Outsourcing Claims

Administration Where Makes Economic Sense– Compare Comprehensive Outsourcing Claims

Administration Cost to Cost / Future Cost of In-house Processing

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Rationale:– Effective Claims Administration Critical To Cost

Management– LA is One of Two States That Handle Own Claims

Administration– Reflects Continued Commitment To Modernization– Outsourcing May Be Only Option Due To:

Capital Investment of IT Compliance to Changing Regulation Recruitment and Retention of Skilled Workforce

Fiscal Impact– Not Yet Assessed

Claims Administration (Cont.)

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Medical Management

Issues:– Cost Avoidance Vs. Cost Shifting– Focus On:

Reducing Inappropriate Utilization Improving Quality Of Care

– Past Initiatives Relatively Low Key

Solution/Alternative:– Endorse Recently Implemented SEGBP Data Development

Strategy– Endorse Recently Implemented Utilization Review Vendor

Selection Decision

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Solution/Alternative (Cont.):– Evaluate Other Utilization Management Opportunities:

Acute Care Management Chronic Care Management Large Case Management Diagnostics Management Health Promotion/Disease Prevention Outreach

– Assure Compliance with Statutory Requirements

Rationale:– Significant Potential ($25 million annual savings),

Difficult Realization– Emerging Technology To Support Actions

– ROI Of 2x to 5x Program Expense

Medical Management (Cont.)

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Plan Procurement

Issues:– Efficiencies and ROI Of Current Procurement Practices– Desire To Identify “Best In Class” Administration– RFP Model Too Rigid

Solution/Alternative:– Make Procurement Process More Flexible– Consider An “Invitation To Negotiate” Model

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Rationale:– Achieve Goal Of Contracting With “Best In Class”– Recognize That Buying Administrative/Managerial Services

Not The Same As Buying Widgets– ITN Process Allows More Hands-On Validation Of Service

Capabilities

Fiscal Impact– Minimal

Plan Procurement (Cont.)

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Plan Governance

Issues:– Current Structure Is Too Large And Unwieldy– It Takes Too Long To Get Things Done– Board Too Involved In Day-To-Day Administration

Solution/Alternative:– Change Function of Board– Proposed Function of Board:

Policy Making Board, Not A Management Board Review and Make Recommendations Does Not Set Premiums or Plan of Benefits Does Not Approve RFPs

– Legislative Oversight– CEO Should Report to Commissioner of Administration

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Rationale:– Increased Proactive Decision Making– Increased Accountability For Plan Performance– Increases Efficiencies In Plan Controls

Fiscal Impact– Not Yet Assessed

Plan Governance (Cont.)

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Annual Review of Health Plan Components Including:– COST

Benefit Expense Administrative Expense Risk Management

– QUALITY Access Of Care Care Management Health Management Satisfaction Program Management

Resolution to Continue to Formally Evaluate Health Plan by Governor Appointed Study Commission

Continued Evaluation Of Health Plan

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Questions

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