Practical Strategies for Reducing Health Plan Costs

What Works & What Doesn’tMay, 2019

Bob Foley

Vice President, Employee Benefits

Mutual of Omaha Insurance Company

Active Employees: 5,500

Enrolled Employees: 4,500

Enrolled Dependents: 5,700

Retirees with health coverage: 1,500

MUTUAL OF OMAHA INSURANCE

COMPANY

Discussion Topics:

1. Tactics that worked for our plan

2. Now What? – Where do we go from here?

▪ Future Medical Strategies Considered and Selected

▪ Future Pharmacy Strategies Considered and Selected

AGENDA

Fully insured premiums are based on expected costs

Actual claims cost is often less than expected cost

▪ Advantages:▪ Estimated cost reduction about 6% (after stop loss and reserves)

▪ Eliminate premium taxes and broker commissions

▪ Likely to come out ahead 3 out of every 5 years

▪ Access to claims reports and plan design flexibility

▪ Disadvantages:▪ Are network discounts comparable?

▪ Significant assumption of risk despite use of stop loss coverage

▪ Need to pay TPA admin fees and network rental charges

▪ Need to establish IBNR (Incurred but not Reported) reserve in first year (3% of claims)

F

SELF INSURANCE

Obtain premiums for two fully insured plans

▪Plan differences are only the deductibles

▪Plan deductibles could be $2,500 and $5,000

Self insure just the difference in deductibles

The plan is essentially a $2,500 deductible plan

Set up claims interfaces with ASO

First claims paid out of Health Reimbursement Account

▪ Claims between $2,500 - $5,000 reimbursed at 80%

▪ In network and out of network HRA payments paid at 80%

▪ Fund as needed with no rollover to following year

▪No need for stop loss coverage

▪ Could save 2.5% of premium▪ F

SELF INSURANCE - LIGHT

What makes sense for your company to offer?

▪ Infertility coverage

▪ Gender reassignment surgery▪ May be required under Title 7

▪ Pregnancy of a dependent child

▪ Surrogate pregnancy

▪ Bariatric surgery F

NO REQUIREMENT TO OFFER

▪ Bariatric Surgery

▪Offered to reduce cost of comorbidities▪ Mandatory Center of Excellence for surgery has shown to

significantly reduce complications

▪ Opens plan up for adverse selection

▪ Are employees hired that just want the surgery and leave?

▪ Service related Veteran Administration claims

▪Plans only pay VA claims unrelated to service▪ VA will not negotiate rates

▪ Plan should not pay for service related claims

▪ Is the carrier asking which claims are service related?

▪ F

BEWARE

▪Avoids compliance issues

▪Reduces health plan cost & complexity

▪Fewer communication issues

▪Allows for experimentation▪ Program changes made without changing the plan

▪Wellness offered outside the health plan

▪ Health risk appraisals

▪ Weight loss program

▪Managing costs is not the same thing as managing risks

▪ F

WELLNESS COSTS KEPT OUT OF PLAN

Steer members to pharmacy for flu shots▪ Resolve potential network issue

Subrogation recoveries:▪ Should be $8 - $14 per member per year

▪ Less TPA charge of 30%

▪ Vendor compares claims to P&C claims database

Half of accident information requests are ignored

Send out e-mails requesting plan members to respond

Benefit Recovery Group and Aetna F

WORTH PURSUING?

▪ Air Ambulance:▪ACA eliminated caps on emergency care

▪ Air Ambulance firms don’t negotiate with networks

▪ Carrier to lock in cost when precertification is approved

▪ Use 4 times the Medicare rate

▪ Require Medicare Part B coverage if eligible▪End Stage Renal Disease:

▪ First day of the fourth month of dialysis treatments

▪Disability:

▪ Medicare B should be primary after 30 months

▪Check the carrier’s progress on this ▪ F

AVOID PROBLEMS

▪ Prior to 65: Allow retirees to use spouse’s plan

▪ They can return to your retiree coverage later

▪ Use Employer Group Waiver Plans▪ Access to Medicare Part D prices

▪ 15% reduction in total costs due to:▪ Subsidies for members below poverty guidelines

▪ Reinsurance for catastrophic claims

▪ Rebates

▪ Use Group Medicare Advantage Plans:▪ Includes Part D pharmacy coverage

▪ Significant additional 15% reduction in premium

▪ Network issues can be problematic

▪ Very popular in California▪ F

RETIREE & LTD PLAN STRATEGIES

Disease Management

Health Risk Assessment incentive

Pay to waive coverage

Nurse Helpline

Office Visit Copayments

Premium discounts for bio testing

Bariatric Surgery

Incent mail order Rx

Value based Rx benefit

RN advocate

Transparency Tools

Telemedicine

Second Opinion Services

Prevalence Cost

74% 0.5%

26% - 30% 1.1%

21% 1.7%

79% 0.4%

83% 4% - 6%

32% 1 .6% - 3%

20% - 32% 1.5%

22% 0.5%

20% 1.5%

30% - 44% .67% - .96%

28% .1% - .2%

59% .2% - .4%

48% .3% - .4%

F

ARE ALL ADD-ONS REALLY ESSENTIAL? POTENTIAL COST IMPACT (AS A % OF PREMIUM)

▪ Auto refills for each 90 day supply often yields waste

▪ When changes occur to the prescription

▪ If plan member is out of town, shipments exposed to weather

▪ 5 shipments of 90 day supply in 12 months

▪ Just because the drugs are shipped, doesn’t mean they are used

▪ Allowing purchase of 90 day supply at retail

▪ Reduces waste – Only 12 months supplied each year.

▪ Eliminates two monthly fill charges

▪ F

DOES MAIL ORDER RX YIELD SAVINGS?

▪Mail order discounts are larger than retail discounts▪ But does it matter?

▪PBM’s can repackage drugs from manufacturer

▪ The price is then increased

Retail Mail Order

Lipitor 20 mg (3X30 capsules) Lipitor 20 mg (90 capsules)

AWP: $441 AWP: $684 (inflated by PBM)

AWP-15%+$2 = $376.85 AWP-20%+$0 = $547.20

Additional mail order cost: $547.20 – 376.85 = $170.35▪ Now add the cost of the plan’s mail order incentive

Pharmacists United for T ruth and T ransparency

MAIL ORDER PRICES ARE NOT ALWAYS

LOWER THAN RETAIL

▪ Transparency services used by 5% of members

▪Success limited by timing of information received

▪Service now likely provided by the ASO for free

▪ Telemedicine used by 2-10% of plan members

▪How could ER spend be significantly reduced?

▪ Good results from Best Doctors

VOLUNTARY PROGRAMS HAVE POTENTIAL

ONLY IF USED

▪15% of members diagnosed with esophogeal

reflux have an intestinal infection: H Pylori.

▪More likely in men over 50 and pregnant women

▪Likely to be correctly diagnosed by younger doctors

▪Possible savings: $100,000 per 1,000 plan members

▪$30 blood test needed

▪Requested test to be added to preauthorization

G e r r y F r y e , B e n e f i t S e r v i c e s G r o u p

M i l w a u k e e , W i s c o n s i n

POTENTIAL SAVINGS

▪ Use experienced auditors

▪ Frequency:▪ Large Plans: Every 1 - 2 years

▪ Small Plans: Every 2 - 4 years

▪ Correct processing errors. CDHP plans are complex. ▪ Prescriptions covered after the deductible is met.

▪ Zero copays that bypass the deductible

▪ Accumulators that can either separate or combine with the medical plan

▪ Preventive drug list

AUDITS IMPROVE NEGOTIATING POSITION

▪ Options:▪ Statistical Audits

▪ 100% Audits (self insured plans only)

▪ Should we audit large dollar claims annually?▪ Auditor may accept payment based on a percentage of the savings

▪ For example: 30 claims over $200,000

▪ ASO contracts may restrict: The audit frequency

Number of claims requested

Who can perform the audit

AUDITS SHOW HOW PLANS REALLY WORK

▪Audit Prescription Rebates

▪Are you getting all the rebates according to the contract?

▪Specialty Medications:

▪National Clinical specs should be used in pre-authorization

▪Avoid off-label use for specialty medications

▪Avoid administration outside specialty Rx provider

PBM AUDITS

▪ Require proof of relationship before adding to plan

▪ Spousal Rule Audit:▪ Will likely reduce spouse coverage by 1 - 2%

▪ Small claims reduction of 1 – 2%

▪ Dependent Audits:▪ Will likely reduce dependent count by about 4%

▪ May be more if turnover is high or if the company has not required proof

of eligibility upon enrollment in the plan

▪ F

FOCUSED AUDITS

▪ Strategy options categorized by impact on:

1. Claimants over Maximum Out of Pocket Limits

2. Claimants below Maximum Out of Pocket Limits

3. Wellness

▪ I am focusing on #1. Anything else is a distraction.

CLAIMS DISTRIBUTION

▪Advantages:

▪ Potential exists for significant cost reduction

▪ Offered through selected TPA’s

▪ Seems to be starting in Texas and Indiana

▪Disadvantages:

▪ Not offered by carriers yet

▪ Networks will be very limited

▪ Will plan members be responsible for balance bills?

▪ Will providers admit plan members for non-emergencies?

REFERENCE BASED PRICING

Currently used by Walmart

▪ For heart, spine, cancer, joint replacement & bariatric surgery

Advantages:

▪ Best care delivered by experts and free to plan member

▪ About 10-15% saved on procedures. Some procedures cost more.

▪ Follow-up care/readmissions/complications/time off reduced

Disadvantages:

▪ Some plan members resist traveling for treatment/surgery

▪ Coinsurance for care outside Center of Excellence is 50% or 100%Harvard Business Review

DIRECT CONTRACTING & BUNDLING

PRICES AT CENTERS OF EXCELLENCE

Avoided

Surgery

Lowered

Readmission Rate

Lowered

Postsurgical SNF

Use

Earlier

Return to

Work

Spine 54% 3 vs 65 per 1,000 6 vs 49 per 1,000 2.6 weeks

Joint Replacement 20% 15 vs 50 per 1,000 0 vs 52 per 1,000 1.5 weeks

▪Pros:

▪ Providers reduce costs in exchange for steerage

▪ Avoid member disruption by using local providers

▪Cons:

▪ Is this provider successful at reducing costs?

▪ Bigger discounts on higher prices is not always the lowest cost

▪ It is not all about cost. What about quality?

▪ Will plan members embrace the limited network?

▪ Coverage issues for plan members outside the market area

▪ Do members need travel policies when they leave the market area?

▪ Are members liable for balance bills for non-network charges?

▪ Mercer says 5% of plans with 500 employees and 14% of plans with 20,000 employees are doing this.

▪ F

DIRECT CONTRACTING WITH LOCAL NARROW

& HIGH PERFORMANCE NETWORKS

▪ Accolade, Quantum, Compass

▪ Navigators could help the plan member select

providers based on cost and quality

▪ Not obligated to use the same network for all services

▪ Navigator services offer 4-6% reduction in claims

▪ Expensive: 2% of premium

▪ Mostly an option for larger plans due to the work

needed for set up

NAVIGATORS AS AN ALTERNATIVE TO

NARROW NETWORKS

▪ Decided to approach TPA and Best Doctors

▪Can our plan require an expert second opinion based

on diagnosis or as part of a pre-authorization process?

▪Could reduce costs by ensuring accurate diagnosis

▪Strategy would focus on the high dollar claimants

▪Little negative impact on other plan members

▪No need for travel to a national Center of Excellence

▪ This could work for large and small plans

▪Build on the success of the Second Opinion vendor

SELECTED OPTION: PROACTIVE SECOND

OPINIONS

▪20% of plan claim expense before rebates

▪ If there are savings, this is where it will be found

▪Use consultants who specialize in prescription drug

benefits to help negotiate ASO/Rx contract language

▪ There are just too many games being played

PRESCRIPTION DRUGS

Generics

▪ Minocycline 45 mg: $538

▪ Mupirocin Cream 30mg: $274

▪ Brimonidine 0.15%: $222

▪ Nadolol 40mg: $127

▪ Brand

▪ Benicar 40mg: $213

▪ Xolegel 2% Gel: $553

▪ Alphagan P 0.1%: $242

Generics

▪ Minocycline 50 mg: $10

▪ Mupirocin Ointment 22mg: $7

▪ Brimonidine 0.2%: $9

▪ Atenolol 50mg: $1

▪ Generic

▪ Irbesartan 300mg: $12

▪ Ketoconazole 2% Cream: $47

▪ Brimonidine 0.2%: $9

CLINICAL ALTERNATIVES

With Permission: TFG Partners

Nexium (30 capsules) Omeprazole (30 capsules)

Cost: $148 Cost: $20

Rebate to plan: $10 Rebate to plan: $0

Plan cost: $138 Plan cost: $20

Rebate to PBM: $40 Rebate to PBM: $0

Which medication needs to be preauthorized?

Pharmacists United for Truth and Transparency

WHO GETS THE REBATES?

▪Strategy should be to minimize the annual Rx net cost

For example:

Traditional PBM: Transparent PBM:

Nexium (30 capsules) Nexium (30 capsules)

Cost: $148 Cost: $188

Rebate to plan: $10 Rebate to plan: $50

Net plan cost: $138 Net plan cost: $138

Rebate to PBM: $40 Rebate to PBM: $0

TRANSPARENT PRICING

▪Step 1: Combine 2 inexpensive drugs

▪Step 2: Charge what the market will bear:

▪ Nystatin 10,000: $4.00

▪ Triamcinol 1%: $2.17

▪ Nystatin 10000-Triamcinol 1%: $103.69

▪ Naproxen 500 mg: $4.00

▪ Imetrex 85mg: $17.00

▪ Treximet (Naproxen 500 mg-Imetrex 85mg): $729.00

▪ Ibuprofen 800 mg: $16.00

▪ Famotidine 26.6 mg: $4.00

▪ Duexis (Ibuprofen 800 mg-Famotidine 26.6 mg): $2,319

JACKPOT DRUGS

With permission: TFG Partners

▪ Site of Care

▪ Require administration through specialty medication vendors

▪ If specialty meds administered by physician, no rebates

▪ Minimize the J codes

▪ Require 15 day supply until side effects are known

▪ Charge half the copay

▪ Reduces waste

SPECIALTY MEDICATION TACTICS

▪ Convince carrier you will switch for best deal▪Carving out drug benefits may not be an ideal strategy,

▪But it is an ideal threat and negotiating tool.

▪ Market is changing too quickly▪Contract for Rx should not exceed 2-3 years

▪Require an annual market check

▪ All rebates go back to the plan (ERISA issue)▪Ensure contract terms agree to this

▪Rebates will be recharacterized

CARRIER/PBM NEGOTIATION TACTICS

▪ Use coalition pharmacy pricing to negotiate▪ Useful for smaller employer plans (4 - 5% savings)

Coalitions reduce flexibility▪ Are you absorbing risks from the other coalition members?

▪ Compare your demographics and costs to the coalition

▪ Larger employer plans may beat coalition pricing

▪ If mail order Rx is subsidized, ensure lower prices offset the cost of the incentive

MORE NEGOTIATION TACTICS

▪ Consider taking formulary control away from PBM

▪ Control Rx Costs:

▪Reference Based Formulary: Rx Results

▪Each Script: Keenan, Rx Results & Rx Savings Solutions

▪ Transparent PBM’s:

▪Navitus, Clearscript and others

▪ Transparent PBM’s may not always offer the lowest costs

▪Goal is lowest net cost after rebates

FUTURE STRATEGIES TO REDUCE RX COST

Near Future:

▪ Use Keenan to change prescriptions in use

▪ Use Best Doctors to review large dollar claimants

▪ Audit large dollar claims

Longer Term:

▪ Take control of the formulary

▪ Carve out drug benefit to a transparent PBM

WHAT OPTIONS AM I LOOKING AT NOW?

QUESTIONS

Bob Foley

Bob.foley@mutualofomaha.com

(402) 351-5657