mid-year budget update and review
DESCRIPTION
September 18, 2013. Mid-Year Budget Update and Review. Agenda. Federal Healthcare Legislation Medical and Prescription Drug Plan Update Texas County & District Retirement System Update. Health Care Legislation Update. The Affordable Care Act ( ACA) Today is Tomorrow. - PowerPoint PPT PresentationTRANSCRIPT
MID-YEAR BUDGET
UPDATE AND REVIEWSeptember 18, 2013
Agenda• Federal Healthcare Legislation
• Medical and Prescription Drug Plan Update
• Texas County & District Retirement System Update
Health Care Legislation Update
Signed into law March 2010.
Supreme Court upheld portions of the law June 28, 2012.
Ongoing Regulations and Guidance have been issued.
Changes in County’s group health plan to comply as required.
Effective March 1, 2012 Harris County lost its “grandfathered” status.
The Affordable Care Act (ACA)Today is Tomorrow
ACAWhere we’ve been
Increased taxes for Tanning Services, Pharmaceuticals and Medical Device Manufacturers.
Applied for the Early Retiree Reinsurance Program…funds exhausted in early 2012.
Limits and limited reimbursement of over-the-counter medicine from Flexible Spending Accounts.
“Adult children” ages 19-26 covered by plan regardless of student or marital status.
Preventive care covered at 100%.
Expanded preventative care benefits.
Additional communication information included in enrollment materials.
Appeals process expanded for internal claims and new external review requirements.
Value of benefits reported on W-2’s.
Long-Term Care (CLASS Act) was repealed.
ACAWhere we’ve been
Coming soon Comparative Effectiveness Fee
of $1 per covered life per year in 2013 increasing to $2 for 2014
Marketplace Availability Model Notice to all employees by October 1, 2013
Marketplace exchanges open enrollment begins October 1, 2013
Exchange coverage and individual compliance begins January 1, 2014
ACA2014 and Beyond
Annual Health Insurance Provider Fee (Tax) effective January 1, 2014 for Harris County’s dental and vision plans
Limit effective dates for coverage of newly hired eligible employees to 90 days or less beginning March 1, 2014
Coverage for expenses related to approved clinical trials
Transitional Reinsurance Fee, effective from January 1, 2014 through December 31, 2016. For 2014, the contribution will be $5.25 per covered member per month
Maximum out of pocket limits for “essential health benefits” (Medical only for 2014; prescription drugs added in 2015)
“Employer Mandate” Delay Must offer minimum essential
coverage that is affordable as defined by the ACA
Must identify and offer health coverage to all full-time employees as defined by the ACA
Full-time (FT)= any employee who regularly works 30 or more hours per week, or averages 130 hours per month (look back period begins March 1, 2014).
ACA2014 and Beyond
“Essential” health benefits definitions will continue to be modified
Annual reporting requirement for employers and self-insured plans recently delayed until 2015
An excise tax (40% of incremental costs) is imposed on employer-sponsored health plans in 2018.
What does all this mean?
Medical Plan Update
Covered Employee/Retiree Changes
2004 2005 2006 2007 2008 2009 2010 2011 2012 201312,000
12,500
13,000
13,500
14,000
14,500
15,000
15,500
16,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000Insured Employees and Retirees
Empl
oyee
s
Ret
iree
s
Note: November actual enrollment each year. 2013 enrollment projected.
Retirees
Employees
A look back…Impact of Hiring Freeze
Mar-09 May Jul Sep Nov Jan-10 Mar May Jul Sep14,500
14,600
14,700
14,800
14,900
15,000
15,100
15,200
15,300
15,400
15,500
3,250
3,300
3,350
3,400
3,450
3,500
3,550
3,600
3,650
3,700
3,750 Insured Employees and Retirees
Empl
oyee
s
Ret
iree
s
Retirees
Employees
Commissioners Court implements policy of no new
positions in General Fund and limited filling of vacant
positions
Commissioners Court
implements hiring freeze
Active Workforce Demographics:32% of Insured Employees Are Now Age 50 or Over
(62% Are over Age 40)
2013
2010
2008
2006
2004
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
14.9%
15.0%
13.8%
13.6%
13.3%
23.0%
23.7%
25.6%
28.2%
29.3%
29.8%
30.5%
31.3%
31.2%
30.8%
23.7%
23.4%
23.4%
21.7%
21.6%
8.6%
7.4%
5.9%
5.3%
5.0%
Age 30-39 40-49 50-5918-29 60+Note: Data as of June of each year.
Impact of Under 65 Retirees:37% of Insured Retirees are Non-Medicare Age
2013
2010
2008
2006
2004
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
4.5%
7.7%
7.7%
9.1%
10.9%
32.8%
36.2%
35.1%
34.5%
31.6%
40.4%
35.1%
35.7%
35.0%
35.2%
22.2%
21.0%
21.5%
21.4%
22.3%
Age 55-64 65-74 75+<55Note: Data as of June of each year.
Covered Employee/Retiree Percentage Change
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10% Insured Employees & Retirees
Note: November actual enrollment each year. 2013 enrollment projected.
Employees
Retirees
Medical Plan is Fully Funded
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14*$0.0
$20.0 $40.0 $60.0 $80.0
$100.0 $120.0 $140.0 $160.0 $180.0 $200.0
$158.1 $172.2 $176.4
$182.3
$175.0
$87.6
$170.2 $177.9 $177.4
$171.9
$179.8
$90.7
Medical Plan Costs Premium Funding
Mill
ions
*Through August 2013.
$500,000 Every Day…
FY 2012-13 Total Medical Plan Costs ($ Millions)
Medical/Rx; $165.9
Administration incl. EAP; $7.0 Stop Loss Insurance, $2.14.0%
94.8%
1.2%
Where Harris County Medical Plan Dollars Are Spent (FY 2012-13)
Inpatient Facility; 21.7%
Rx; 20.1%
Pro-fes-
sional Ser-
vices; 17.0%
Radiology; 7.7%Ambula-tory Fa-
cility; 8.3%
Emer-gency Room; 5.4%
Office Visits; 5.6%
Medical Phar-macy; 5.8%Lab;
5.2%
Home Health;
2.8%
Outpa-tient
Mental Health;
0.4%
Note: Incurred with 2 month lag
Medical Cost Drivers• Uncompensated Care• Medicare Reimbursement Rates• Advancement in Treatment Options
and Technology• Waste and Fraud• Pre-Mature Babies and Aging
Population• Increased Life Span• Prescription Drugs• Chronic and “New” Illnesses• Legislative Changes/ACA• Defensive Medicine• Physician Ownership of Facilities• Utilization (Demand)• Catastrophic (and large) claims
3% of Harris County Members Incurred46% of All Claims Paid in 2012-13
Note: Excludes administration. *Includes all members covered throughout the plan year.
Claims Amount Total # Members* % of Total Total Claims Paid % of Total
Annual Claims Paid per Member
<$25,000 30,713 96.7% $88,856,565 53.86% $2,893 $25,000 - $49,999 625 2.0% $21,329,487 12.93% $34,127 $50,000 - $99,999 234 0.7% $15,805,251 9.58% $67,544
$100,000 - $199,999 118
0.6%
$15,841,945 9.60%
$134,254
$200,000 - $299,999 40$9,909,027
6.01%$247,726
$300,000 - $399,999 10 $3,337,291 2.02% $333,729
$400,000 - $499,999 7 $3,039,633 1.84% $434,233
$500,000 - $599,999 2$1,112,542
0.67%$556,271
$600,000 - $699,999 2$1,331,805
0.81%$665,903
$700,000+ 4 $4,420,198 2.68% $1,105,050 Total 31,755 100% $164,983,744 100% $5,196
FY 2012-13 Top 10 High Cost Claimants
Claimant Major Diagnosis Category Medical Paid1 Newborn $2,373,7322 Colon Diverticulitis $1,040,9823 Acute Respiratory Failure $930,4714 Heart Failure $908,9175 Intestinal Inflammation $739,2056 Cancer $675,9177 Influenza Virus / Pneumonia $665,7578 Human Immunodeficiency Virus Disease $665,0729 Heart Failure $560,276
10 Cancer $521,136
Note: Excludes administration and RX.
Top 10 Sites of Cancer (FY 2012-13)
Cancer Site MembersSkin 402
Breast 310
Prostate 262
Colorectal 102
Hodgkin’s Disease/Lymphoma 82
Malignant Melanoma 67
Lung 60
Leukemia 49
Bladder 45
Cervical 33
Cancer Incidence and Cost
FY 2011-12 FY 2012-13 % Change
Members 1,596 1,527 -4.3%
Medical Paid $13,821,407 $13,450,435 -2.7%
Pharmacy Paid $670,955 $937,268 39.7%
Total Paid $14,492,362 $14,387,703 -0.7%
Prescription Drugs
Prescription Drug Utilization of Harris County Members (FY 2012-13)
Approximately 85% of all members had at least one prescription.
Approximately 515,000 prescriptions filled (nearly 1,900 different drugs).
Average of 17.7 prescriptions per member per year.
Prescription Drug Cost TrendPer-Member-Per-Month
2011-12 2012-13 $25.00
$75.00
$125.00
$175.00
$225.00
$71.23 $65.35
$190.74 $180.78
$219.73
$178.21
Actives Retirees <65 Retirees 65+
Upcoming Major Generic Launches
Q3 2013• Niaspan
Q4 2013• Aciphex• Cymbalt
a
Q1 2014• Loestrin
Q2 2014• Celebrex• Detrol
LA• Lunesta• Nexium• Xeloda
Q3 2014• Evista• Renvela
Q1 2015• Namend
a
Q2 2015• Abilify
Recent Outpatient Drug Approvals
• Zubsolv
Addiction
• Gilotrif• Mekinist• Tafinlar
Cancer
• Epaned
Hypertension
• Fetzima• Khedezla
Depression
• Lo Minastrin Fe
• BrisdelleEndocrine
• Trokendi XR
Epilepsy
Average Copayment % For All Drugs
FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 1315%
17%
19%
21%
23%
25%
27%
29%
27% 27%
26%
24%
23% 23%22%
21%
24%
Generic Utilization Ratio Continues to Climb
FY 02FY 03
FY 04FY 05
FY 06FY 07
FY 08FY 09
FY 10FY 11
FY 12FY 13
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
38%41%
43%
48%51%
53%57%
60%63%
66%69%
76%
Top 10 Prescription Drugs by Total Cost 2012-13
Drug Diagnosis Patients Annualized Cost
Plan Cost/Rx
HUMIRA Rheumatoid Arthritis 65 $766,066 $2,116 CRESTOR High Cholesterol 1,144 $736,293 $119 NEXIUM Heartburn and Ulcer 868 $727,938 $164
ATORVASTATIN CALCIUM High Cholesterol 1,790 $602,848 $69 ENBREL Rheumatoid Arthritis 40 $549,177 $2,223 ABILIFY Psychiatric Disorders 183 $439,105 $525 ADVATE Hemophilia 3 $438,381 $39,853 LANTUS
SOLOSTAR Diabetes 386 $394,498 $224 CYMBALTA Depression 429 $361,485 $171 COPAXONE Multiple Sclerosis 14 $358,613 $4,122
Opportunities for Savings on DrugsCholesterol Management Drug Therapy
$9 $11$16 $17
$38
$115
$130 $132$138 $141 $143 $145 $145
$154
1550
164
564
81158
965
209228
752
184 203110
275 173
avg. charge per month# patients
Opportunities for Savings on DrugsHeartburn Management Drug Therapy
generic Pepcid
generic ZantacPrilosec OTC
generic Axid
generic Protonix
generic Prilosec
generic Prevacid
generic ZegeridDexilant
NexiumAciphex
$15$24 $18
$44 $46 $48$63
$110
$136
$190
$234
4472
016
267 283263
15
162
571
40
avg. charge per month # patients
Opportunities for Savings on DrugsDepression Management Drug Therapy
generic Celexa
generic Prozac
generic Zoloftgeneric Paxil
generic Wellbutrin
generic Wellbutrin XL
generic Effexor XR
generic Lexapro ViibrydLexapro Pristiq
Cymbalta
$8 $11 $13$22
$33$44
$55
$100
$117
$132 $137
$199
323
272
473
153138
223234
375
22
64
102
250
avg. charge per month # patients
Specialty Rx Costs Increasing
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-130.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
75.1% 74.0% 72.7% 71.0% 74.2% 72.6% 72.4% 72.6%
23.2% 23.6% 22.2% 19.4% 17.4% 16.8% 14.7% 13.6%
1.7% 2.4% 5.0%
9.6% 8.4% 10.6% 12.9% 14.2%
Harris County Rx Plan Dollars
Community Mail Order Specialty
Top 10 Specialty Drugs by Total Cost (FY 2012-13)
Drug Diagnosis
Patients Annualized Cost
Plan Cost/Rx
HUMIRA Rheumatoid Arthritis 64 $ 766,066 $ 2,116
ENBREL Rheumatoid Arthritis 39 $ 549,177 $ 2,223
ADVATE Hemophilia 3 $ 438,381 $ 39,853
COPAXONE Multiple Sclerosis 14 $ 358,613 $ 4,122
INCIVEK Hepatitis 5 $ 231,023 $ 17,771
ATRIPLA HIV 20 $ 221,541 $ 1,978
GLEEVEC Oral Oncolytics 3 $ 172,193 $ 8,200
REBIF Multiple Sclerosis 4 $ 170,496 $ 3,628
REVLIMID Oral Oncolytics 4 $ 166,838 $ 7,584
KUVAN PKU 1 $ 157,050 $ 13,088
FY 2012-13 Medical Costs by Group (Per-Member-Per-Month)
Actives Retirees (Non-Medicare) Retirees (Medicare) All Groups$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
$800.00
$900.00
$345.28
$652.64
$159.02
$348.77
$65.35
$180.78
$178.21
$86.20
$21.66
$27.71
$32.04
$23.23
Medical Rx Admin
Total $432.29
Total $861.13
Total $369.27
Total $458.20
FY 2012-13 Medical Cost and Premium Comparison by Group (Per-
Member-Per-Month)
Actives Retirees (Non-Medicare) Retirees (Medicare) All Groups $-
$100
$200
$300
$400
$500
$600
$700
$800
$900
$449.77
$624.28
$498.48 $468.26 $432.29
$861.13
$369.27 $458.20
Premiums
Medical Claims and Expenses
GASB 45 Retiree Healthcare Liability (3/1/2011 Valuation)
Unfunded Accrued Liability (UAL):Fully Eligible Actives $190.4 MNot Yet Eligible Actives $309.0 MRetired $477.3 M
Total UAL: $976.7 M Annual Required Contributions (ARC):
Service Cost At Year-End $34.9 M30-year Amortization of UAL $61.7 M
Total ARC: $96.6 M
County Paid Premiums: $38.2 M
FY 2014-15 Health Benefits Renewal
No premium changes for employees, retirees, and county departments for medical, dental, vision, life, and
long-term disability.
Rates, Plan Changes, and EAP Enhancement
Department Rate will remain at $11,116 per year
$104.90 per month will be added to the cost of Non-Medicare ( or under 65) retiree coverage for “non-grandfathered” retirees
Recommended increase in maximum out of pocket limits due to Affordable Care Act mandate
$100 copayment for complex imaging – Plus plan
Implementation of Healthy Actions Plan
Employee Assistance Program (EAP) recommended to be enhanced to provide additional elder care services
Base Plan vs. Healthy Actions Medical Plan
Plan Feature Base Plan Healthy Actions Medical Plan (HAMP)
Plan Deductible per Individual/Family (Per Calendar Year)
$500/$1,500 $250/$750
Maximum Out-of-Pocket – includes medical deductible, coinsurance and copays
$4,000/$10,000 $3,500/$8,750
Primary Care Physician Visits $25 copay $20 copay
Specialist Office Visit Participating Aexcel providers Non-Aexcel participating providers
$40$50
$35$45
Employees who satisfied the criteria for the Healthy Actions Medical Plan will see that option on their 2014-2015 Open Enrollment Worksheet.
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TCDRS Update
TCDRS Funding Equation
When one piece moves, there has to be anequal or opposite move in the other pieces.
Employee Contributions
+County
Contributions+
Investment Returns
Retirement Benefits
What Is In a Retirement Check?
Employee Deposits; 10%Employer Deposits,
13%
Investment Earnings, 77%
Source: TCDRS
Higher TCDRS Contribution Rate in 2014 (Assuming No Plan Changes)
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14* 2014-15*$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
13.00%
$63,427,707.0$63,619,549.0$68,824,674.0$79,100,488.0$82,175,827.0$88,172,958.7$93,199,497.9
$78,351,965.9$84,443,662.9$97,300,000.0$101,500,000.0
10.53%
10.05%9.81%
10.43%
9.64%9.74%
11.31%
9.82%
10.67%
11.59%
12.43%
County's Contribution County's Contribution Rate
*FY 2013-14 is projected based on current payroll and assumes no plan changes. FY 2014-15 assumes no plan changes and is based on an overall 2% aggregate payroll growth.
Note: Contribution rates are established by the TCDRS on a calendar year basis.
Employee Deposit Rate
Changed to 6%
Reasons For 2014 TCDRS Employer Rate Change
2013 Rate 11.59%
Investment Return 0.72%
Payroll / Salary Variation 0.21%
Withdrawal -0.07%
Demographic / Other -0.02%
2014 Rate (assuming no plan changes) 12.43%
TCDRS Investment Returns
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
8% Target Investment Return
Source: TCDRS
Projected TCDRS Employer Contribution Rates
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 20337%
9%
11%
13%
15%
17%
19%
2008 2009 2010 2011 2012
Valuation Date
Harris County’s Retirement Plan Funded Ratio*
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201280%82%84%86%88%90%92%94%96%
Funded Ratio*
* Funded ratio is based off of valuation date and equals Unfunded Actuarial Accrued liability/Actuarial Value of Assets.
Governmental Accounting Standards Board (GASB)
Statement 68 Net pension liability on balance sheet instead of in the notes
to the financial statements.
Changes in calculation of long term unfunded liabilities
Differences between expected and actual investment returns on pension plan assets would have to be recognized as a pension expense over a closed 5-year period rather than being “smoothed” and then also being amortized as part of the unfunded liability.
Additional disclosure requirements.
Questions & Answers