VALUE PURCHASING• Today’s Agenda

• Examine opportunities for public employers to self-insure their benefit program through group purchasing

• Review the advantages of self-insurance through either traditional or allocated balance model consortiums

• Provide information on the Jefferson Health Plan, an allocated balance model consortium

VALUE PURCHASING• Issues affecting plan costs

• Technological advances• Usage patterns• Aging population• Varying practice patterns• Advertising• Annual Inflation

10% - Medical8% - Prescription Drug

• Government Regulation – Affordable Care Act (ACA)Federally required benefit enhancementsFederally required taxes to support ACA

VALUE PURCHASING• Issues affecting plan costs

• Claims drive plan costs - more than 90% of costs are for claims• Anything designed to control costs must affect claims

• Plan Design• Fewer Claims

• Costs will continue to rise• Inflationary pressures• Advancing Technology• Greater Demands on an aging population

• You cannot control some outside forces but you can control your benefit plan

VALUE PURCHASING• Advantages of Self Insurance

• Lower operating costs• Eliminates insurance company profits• Avoids some Federal and State taxes• Control of plan design• Effective Claim Processing – dedicated to your risks• Management of risk with stop loss• No insurance premiums• No insurance company profits or dictates• No insurance for claims• Employer is responsible for the benefits promised by the program

VALUE PURCHASING• Self-Insured employers pay less for their benefits

• Savings on state and federal taxes on insurance premiums• Reduced administrative costs• Retain surpluses in good years and maintain reserves for poor

experience years• Minimize risk, profit and insurance charges• Viewed from a long term perspective, self-insured employer’s pay

less for their benefits

VALUE PURCHASING• Consortium Purchasing

• Manage risk through shared risk and self-insurance• Provide more stable plan costs• Provide more flexibility to consortium members• Offer programs and services under specific Ohio Statutory

Authority for Ohio based public entities

VALUE PURCHASING• Consortium Purchasing

• Participation in a consortium affords the small employer the advantages otherwise available only to the largest employers

• Generally, there are two types of consortia• Community Pool Programs• Allocated Balance Pool Programs

VALUE PURCHASING• Consortium Purchasing

• Community Pooled Programs combine the experience and reserves of all members in a single pool owned by the program

• Allocated Balance Pooled Programs combine the large claims experience of all members in a single pool and fully vest the ownership of reserves in individual member accounts

VALUE PURCHASING• Consortium Purchasing – Community Pooled Features

Plan Design - Determined by PoolNetwork Options - Determined by PoolDeductible - Determined by PoolCosts - Determined by Pool (Average Costs)Reserves - Owned by PoolInterest Income - Owned by PoolMoratoria - Determined by PoolRebates- Held by PoolReporting - Pool onlyAbility to impact costs - Determined by Pool

VALUE PURCHASING• Allocated Balance Model Consortium

• Allows member organizations to retain control of surpluses in good experience years

• Separate Reserve Accounts for each member organization• Monthly statements and daily transaction reporting on member

reserve accounts allows tracking of experience throughout the plan year

• Excess reserves can be held in the consortium and earn returns for the member organization, or used as moratoria against monthly accruals

VALUE PURCHASING• Jefferson Health Plan – Allocated Balance Pooled Features

Plan Design - Member decidesNetwork Options - Member decidesDeductible - Member choiceCosts - Based on your experience/Pool BlendReserves - Owned by MemberInterest Income - Retained by MemberMoratoria - Member decidesRebates- Retained by MemberReporting - Online Access to AccountAbility to impact costs - Member controls plan design

VALUE PURCHASING• Jefferson Health Plan – Consortium Purchasing

• Formerly known as OME-RESA, has been in operation since 1985• Organized as a Public Employer Group Insurance Trust under

Council of Government Rules (Section 167)• Each participating organization is a voting member• Membership elects a Board of Directors, consisting of

representatives from the member organizations• Over 100 separate member organizations today• Approximately 12,000 employees• Approximately 30,000 plan participants

VALUE PURCHASING• Jefferson Health Plan – Consortium Purchasing

• Leverages purchasing power of members to reduce cost of benefit plans

• Provides same purchasing efficiencies available to the largest employers to all size members of the consortium

• Negotiates the “best” contracts and passes through 100% of the savings

• Provides fixed annual funding rates to members • Full disclosure of plan income and expenses to member group

VALUE PURCHASING• Jefferson Health Plan – Internal Pool

• Member chooses a specific deductible• Deductibles range from $35,000 to $150,000• Deductible pooling charge included in monthly funding rates• Member group is subject to reimbursement for plan participant’s cumulative

claims above the deductible• Reimbursements are credited to the member group’s trust account• Standard rates at each deductible, not based on member claims• No lasers or exclusions permitted• Aggregate Protection

VALUE PURCHASING• Jefferson Health Plan – Consortium Purchasing

• Focus on reducing Plan Payments to providers

• Get the best provider network for your employees, based on member group location and claimsbest access to providersbest discounts on serviceslowest network fees100% pass-through of network discounts to group

VALUE PURCHASING• The Jefferson Health Plan offers members access to several national

and regional networks

• CIGNA• OCHIP• Aetna• FrontPath• HealthSpan• Paramount• HealthSmart• The Health Plan• United Healthcare• Medical Mutual of Ohio

VALUE PURCHASING• The Jefferson Health Plan offers members access to several

national and regional claims administrators

• Meritain, Boardman• Self-Funded Plans, Cleveland• The Health Plan, St. Clairsville• Paramount Health Care, Maumee• Healthsmart (formerly Klais), Akron• United Healthcare or UMR, Westerville• Employee Benefit Management Corp., Dublin• Medical Mutual of Ohio or Mutual Health Services, Cleveland• Aetna

VALUE PURCHASING• The Jefferson Health Plan members can retain their own plan

designs or convert to another of their choosing

• Deductibles • Co-pays• Co-insurance levels• Out-of-Pocket limits• Provider Networks• PPO Plans• HMO Plans• POS Plans• CDHP, HDHP and HSA Plans

VALUE PURCHASING• Jefferson Health Plan – Affiliated Vendor Partners

• MetLife – Life Insurance Carrier• Gilmore, Jasion & Mahler – Auditor• Vision Service Plan – Vision Carrier• Sun Life – Reinsurance Carrier• Alere – Wellness & Disease Management• U.S. Bank – Consortium Banking Institution• CVS Caremark – Pharmacy Benefit Manager• Johnson Investment Counsel – Investment Manager• ValueOptions – Employee Assistance Program – New Sept. 1

Key Underwriting Financial IndicatorsIns. Comm. Filings for 2013

Administration Profit Premium Dollars used for Benefits

Aetna 11.14% 5.90% $0.83

Anthem BC/BS 7.28% 10.24% $0.81

Aultcare 10.47% -.02% $0.89

The Health Plan 6.54% 2.39% $0.91

Medical Mutual 12.94% 2.04% $0.85

Paramount 10.07% -5.35% $0.95

United 10.55% 5.48% $0.84

Average Carrier 9.86% 4.48% $0.86

JHP FY13 6.55% 0.0% $0.94

VALUE PURCHASING• The Jefferson Health Plan – Consistent Renewals

• To help produce more consistent renewals, the member’s plan experience is combined with that of the overall consortium in a process called “blending”

• “Blending” means that the overall cost of claims on a member’s plan is shared on a credibility adjusted basis with the experience of the other members in the consortium

• This provides stability to renewal rates, because the consortium’s entire population is used to develop a part of a member’s renewal

• Pooling claims experience with other similar employers decreases rate volatility since claims are spread on a credibility basis over a large population of plan participants

VALUE PURCHASING

Jefferson Health Plan Trend RatesConsortium

FY14MarketRate1

Medical (w/o Rx)8.0% 10.8%

Prescription Drugs6.0% 6.4%

Dental4.0% 4.0%

Vision3.5% 3.7%

High Deductible Plans (with Rx)8.0% 9.1%

1 Annual Segal National Survey of Managed care Plans (2013)

VALUE PURCHASING• The Jefferson Health Plan Advantages

• Financial Security with over $100 million in reserves• Group purchasing power with over 30,000 lives• More predictive, more stable funding levels with pooling of large claims experience• Availability of Moratoria, interest on reserves, and “no interest” loans• Online access to reserve account and monthly financial statement• Health Care reform guidance and support• Member can work with insurance agency advisors

VALUE PURCHASING• Important Questions to ask about a consortium

• Length of time in business• Size of consortium• Governance of consortium• Strength of reserves• Ownership of reserves• Rate setting policies and methodologies• Risk sharing techniques and availability of Moratoria• Member control over plan design• Member choice of networks or plan administrators• Entry and exit requirements• Buy in requirements, if any

VALUE PURCHASING

QUESTIONS?