Benefit Design 2001Maintaining Affordability

Presented before thePublic Employees Benefit BoardJune 27, 2000

Options for Maintaining Affordability:

Increase member premium share and/or cost-share

Offer a high deductible PPO option

Modify pharmacy benefits

Challenge: Maintaining affordability

Guiding principles for UMP benefit design:

UMP continuously pursues quality of care improvements and innovations in benefit design and plan administration.Benefits are designed to prevent illnesses, improve or maintain member health status, and include incentives for members to select the most cost-effective treatments and drugs.UMP emphasizes freedom of choice paired with member responsibility for care management.

UMP experience Overall UMP trend around 11-12% for 1999

UMP TRENDIncreases in prescription drug costs fuel growthUMP pharmacy trend 25-30% for 1999

Increases in Rx costs driven primarily by higher utilization:

New drugs / new indications for existing drugsDirect-to-consumer advertisingPatient knowledge of drug treatmentsAging population

TREND Continued...

UNIFORM MEDICAL PLANHISTORY OF MEMBER COST-SHARING

1992-95

1996

1997

1998-99

2000

Deductible

$100/ $300

$250/ $750

$200/ $600

$200/ $600

$200/ $600

In-patient Hospital

$100 per day up to $300 per year for ppo - $200 per day up to $1,200 per admit for nonppo

$100 per day up to $300 per year for ppo - $200 per day up to $1,200 per admit for nonppo

$100 per day up to $300 per year for ppo - $200 per day up to $1,200 per admit for nonppo

$100 per day up to $300 per year for ppo - $200 per day up to $1,200 per admit for nonppo

$100 per day up to $300 per year for ppo - $200 per day up to $1,200 per admit for nonppo

Co-insurance general

10% ppo

20% nonppo

10% ppo

30% nonppo

10% ppo

30% nonppo

10% ppo

40% nonppo

10% ppo

40% nonppo

Retail RX

10% generic

20% brandname 40% multisource brandname

10% generic

30% single source brand name

50% multisource brandname

10% generic

30% single source brand name

50% multisource brandname

10% generic

30% single source brand name

50% multisource brandname

10% generic

30% single source brand name

50% multisource brandname

Mail Order RX

$4 generic

$13 brandname

$10 generic

$20 brandname

$10 generic

$20 brandname

$10 generic

$20 brandname

$20 generic

$30 single source brandname

$40 multisource brandname

Stop Loss/ Out-of-pocket maximum

$4000 Stoploss (covered expenses)

$7500 Stoploss (covered expenses)

$1125 per person/ $2250 per family OOP maximum (eligible charges)

$1125 per person/$2250 per family

OOP maximum (eligible charges)

$1125 per person/$2250 per family OOP maximum (eligible charges)

Lifetime Maximum

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

Employee Premium

N/A

$6

$6

$0

$0

Medicare

Retiree

Premium

From $79.68

(FY92)

to $89.46

(FY94)

$73.10

CY 1996

$82.83

CY 1997

$94.70

(CY 1998);

$125.13

(CY 1999)

$128.62

CY 2000

UMP member cost-shareCost-share items based on fixed dollar amounts

$200 deductible

$100/day inpatient hospital copayment

$1,125 out-of-pocket maximum

Mail order Rx co-payments (increased for 2000)

Since 1998, member cost-share as percent of total costs has decreased approximately 2%

Examples of Cost-Share Erosion

Example #1: Single employee with higher than average annual claims, including inpatient hospital stay

1998

1999

2000

Allowed charges

$ 5,000

$ 5,310

$5,641

Employees share

(720)

(736)

(754)

Net payment

$4,280

$ 4,574

$4,887

Employee %

14.4%

13.9%

13.4%

Examples cont.

Example #2: Single employee with lower than average annual claims (no inpatient hospital stay)

Note: Even though the cost sharing dollars increase each year, the cost sharing as a percentage of allowed charges decreases.

1998

1999

2000

Allowed charges

$ 300

$ 317

$ 334

Employees share

(215)

(217)

(219)

Net payment

$ 85

$ 100

$ 114

Employee %

71.7%

68.6%

65.7%

Alternative: Increase cost-sharing to maintain zero premium

High cost-share option to achieve zero premium plan for 2001

Increase subscriber deductible from $200 to $300

Increase coinsurance from 10% to 20% for in-network services

Increase out-of-pocket maximum from $1,125 to $2000

Alternative: Moderate adjustments to specific fixed-dollar cost-share items

Address 2% erosion in cost-sharing

Increase inpatient hospital co-pay to $150 per day (up to $450 per year)

Increase from $20/$30/$40 mail order co-pay to $20/$40/$60

Maintain deductible at $200 (no change)

Increase out-of-pocket maximum to $1,750

Alternative: De-linking pharmacy cost-sharing

Current benefit design applies the $200 deductible and $1,125 out-of-pocket maximum to the total of medical and retail pharmacy claims (mail order pharmacy claims are excluded)

This requires complex coordination of medical/pharmacy claims payments for correct administration of the deductible and out-of-pocket limit

The administrative issues force members to pay the full cost of retail prescriptions up-front, and receive reimbursement after-the-fact for the UMP share.

De-linking pharmacy cost-sharing:

Simplifies claims adjudication would enable pharmacies to collect the member share only

Reduces up-front costs that members must pay at retail increases affordability from the customers perspective

Members continue to participate in the costs of their prescription throughout the yearhelps address specific pharmacy utilization issues that are driving costs

Delinking pharmacy cost-sharing:

$200 deductible applied to medical only; separate $100 deductible for Rx (retail and mail)

$1,125 out-of-pocket maximum applies to medical costs only (see pharmacy out-of-pocket options below)

Incentives for generic substitutions

UMP uses several approaches to encourage appropriate use of generics3-tier co-pay design for both retail and mail order RxVoluntary formulary and provider education

Less than 4% of all prescriptions dispensed are multi-source brands (brand drugs for which a generic is available)

Options for Maintaining Affordability: Increase member premium share and/or cost-shareOffer a high deductible PPO optionModify pharmacy benefits