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HomeMy WebLinkAbout08-30-04 Admin Com. MinutesDublin City Council ADMINISTRATIVE COMMITTEE August 30, 2004 ATTENDANCE Committee Members: Tom McCash -Chair, Cathy Boring, Mike Keenan Staff Members: Jane Brautigam, David Harding, Renee Telfer, Mary Kay Ruwette, Michele Hoyle Guest: Werner Gliebe, Segal Company CALL TO ORDER Mr. McCash called the meeting to order at 6:30 p.m. in Council Chambers. He noted that the topic of tonight's meeting is a report on the Employee Health Benefits Plan. BACKGROUND Mr. Harding reviewed the 2003 employee health plan provisions. Emerald Health was the only network that would take the City's plan, as the City's plan had no co-insurance differential. Following a comprehensive survey, changes in the plan were implemented in January 2004: co- insurance differential - 90/10 in-network and 80/20 out-of- network; out-of pocket maximum increased; prescription co-pay increased; emergency room charge imposed. Mr. McCash inquired if recent legislation requires that co-payments count toward the maximum out-of-pocket. IVIr. Harding stated that he has not been made aware of such a change. Mr. Keenan stated that a recent notice from United Health Care (UHC) informed plan participants of a plan modification to that effect -that co-payments would apply to the maximum out-of-pocket. Mrs. Boring stated that the reason for adding the $50 emergency visit charge was the fact that emergency room use was often abused by City employees. She inquired how a distinction is made between a true emergency and anon-emergency. The intent was that the $50 charge not be applicable to true emergencies. Ms. Ruwette stated that the only emergency room care for which the charge is not applicable are those emergencies that are admitted to the hospital. Mrs. Boring inquired about the emergency cases that are effectively handled in the emergency room -- for instance an injury that is resolved with sutures, which does not require an admittance for additional care? Ms. Hoyle responded that, except on Sunday evenings, there are urgent care centers that are less expensive than hospital emergency rooms. Mr. Keenan recommended providing the employees with the locations of urgent care network providers in their home vicinities. Administrative Committee August 30, 2004 Page 2 Mr. Harding stated that January 1, 2004, the institution of the co-insurance differential had an impact on the $50 co-payment. Significant plan design modifications were also made with prescription co-payments. Mr. McCash inquired the reason mail order brand names are less expensive than retail brand natnes, while mail order generic is the same as retail generic. Ms. Hoyle responded that mail order is fora 90-day supply. Mrs. Boring referred to the provision: "Dispense as Written or No Generic Available will be charged the Generic Co-payment." In her experience, that is not occurring. Ms. Hoyle stated that would be due to the way in which the pharmacy coded it. She advised her to ask her pharmacy to look into this. Ms. Telfer asked Mrs. Boring to contact her if she would like Human Resources to pursue the matter for her. Ms. Hoyle referred to graphs in the handout showing the financial impacts of the plan design changes. She noted that the increase in prescription co-payments has caused a slight drop in prescription costs, but there has been a greater savings due to the $50.00 emergency room co-pay. In 2002 and 2003, emergency room costs were approximately 6% ofthe total health benefit costs. Following implementation of the $50 co-pay for emergency room visits in January 1, 2004, the percent has dropped below 4%. She noted that there is a significant difference in cost between the emergency room and a doctor's office. The former is approximately $900; the latter is approximately $80.00. Mrs. Boring responded that if more employees are visiting the doctor and not using the emergency room, they are now being treated by their physician with prescriptions. That could be the reason prescription costs have not decreased significantly. Ms. Hoyle stated that because the City's cost for prescriptions is disproportionate to the rest of the industry, the attempt is being made to have the employees pay a greater proportion ofthat cost. Of course, if the employee is using a prescription that prevents a stay in the hospital, that is a benefit to the City. Presently, prescriptions are included in the overall plan, and it is difficult to differentiate. They will be separated in a few months. Mrs. Boring stated that the City has more employees than in previous years, and that fact would be reflected in an increase in health benefit costs. If the costs are not greater, then the changes had more impact than reflected here. Mr. Keenan agreed. It would be necessary to have statistics on the number of employees for each year of this report to be able to interpret the numbers accurately. Administrative Committee August 30, 2004 Page 3 Ms. Hoyle responded that per capita statistics are in the Employee Benefits notebook. She will obtain that information and forte-ard to Mr. Keenan following this meeting. Mr. Keenan inquired if any of these claims would be Workers' Compensation claims. Ms. Hoyle responded that information is maintained separately. She noted that health benefits is a complicated field, and it was decided that staff would benefit from having expert guidance. The Segal Company was retained for that purpose. She introduced the consultant, Mr. Werner Gliebe, of the Segal Company. Werner Gliebe, Segal Company, stated that the Segal Company has been in the benefits consulting business since 1939. They have 1,000+ employees in 20+ offices around the nation. He is a partner in the firm and manages the Cleveland office. He stated that it is important to manage health care costs on an ongoing basis. Employers typically do not adjust plan provisions rapidly enough to keep pace with inflation and other health care changes. He briefly discussed the current rate of inflation for medical costs, health insurance premiums, and workers' wages. He suggested athree- pronged approach to a cost containment strategy -plan management/plan design, vendor management, and individual healthcare management. Initially, Segal Cornpany evaluated the City's health plan vendors, as it is the least painful way in which to save the employer dollars without decreasing benefits to the employees. The City's health benefits program is one of its assets. Having a "rich" health benefits program is not bad strategy, if it is well managed. He noted that the richness of the employee health care plan is a strategic choice ofthe employer. During employee recruitment, applicants consider the health care plan and other benefits in addition to the compensation. Mr. Gliebe stated that in 2003 they conducted three audits to determine the effectiveness of the vendors' services: • Current plan administrator, MCA -- they determined that the administrative services were generally effective, and the fees for the administrative services were reasonable. • Current prescription usage and costs -their study revealed that prescription usage levels were high and the vendor, Ebrx, offered a drug plan with uncompetitive price discounts. • Current medical provider network -- they determined there is good geographic breadth (access) to providers; the quality of provider care was not managed by the network, EBN -- their relationship with providers and oversight regarding quality was passive; the provider discount levels were not competitive. Their key conclusion is that the financial efficiency of the health insurance program could be improved through better vendor management. So doing would mitigate the need for other changes to be made. The City proceeded with those efforts. In 2004, the City has already taken the following initiatives: - Pursued bargaining strategy to allow management to improve financial management of benefits plans - Pursued following efforts to maximize financial efficiency of current programs: - Received four RFP's for prescription drug program - Solicited eight RFP's from combined provider networks/administrative services Administrative Committee August 30, 2004 Page 4 Mr. Gliebe noted that it is anticipated that the new prescription drug vendor will save the City a minimum of 10% ($70,000 - $75,000/year), and the quality of services will be improved. The implementation date with the new prescription drug vendor will be October 1, 2004. He noted that the search for a new network provider was made complicated by the fact that it was desirable to combine the provider network and administrative services under the same corporate umbrella. The RFPs indicate that the financial terms will be greatly improved - a savings of approximately 30% from improved provider discounts, improved network management to improve care quality, and improved long term health management programs. January 1, 2005 is the targeted implementation date with the new vendor. Mrs. Boring inquired what would be involved in a network administrator's efforts to manage treatment methods. Mr. Gliebe stated that the network administrator would evaluate treatment patterns for a particular condition -tests ordered, prescriptions, frequency of follow-up visits. Under one umbrella, the clairns payer will also evaluate the practice patterns of the providers. They begin to profile doctors. Mrs. Boring inquu•ed if the network would attempt to limit payments on the basis that, in their opinion, what the doctor ordered «~asn't necessary or appropriate. Mr. Gliebe responded that the network camiot practice medicine. The physicians follow their own judgments. However the network does have its own infrastructure of clinical physicians and medical directors who do try to educate and keep the physicians current in thew practices. If, over time, however, a physician would not change his/her behavior, the network could choose not to renew their contract. If the physician ends up outside the network, it would cost them economically. IVIrs. Boring inquu•ed about regulation of length of hospital stays. Ms. Hoyle responded that Mrs. Boring's concerns relate to HMO-type practices. The City is not contemplating an HMO network. Mr. Gliebe stated that there is no price package that states services must be provided within certain parameters. However, the bigger networks have a massive reservoir of clinical data -from Cleveland Clinic and on. That type of knowledge can be used with a soft, educational focus to improve the whole medical community -- no HMO approach. Mrs. Boring stated that there are some physicians who refuse patients with a certain insurance provider. She is concerned that this not occur with the City's plan changes. Mr. Gliebe stated that physicians sometimes choose not to participate for financial reasons, not because the insurance administrator is forcing an intrusion upon them. h•Iost likely, the pricing structure is too aggressive for them. Mrs. Boring inquired how the City would insure that this does not become a problem with the plan. Administrative Committee August 30, 2004 Page 5 Ms. Hoyle responded that the price differential between in and out of network physicians is not so egregious that a choice would have to be made between one or the other. If an employee's doctor chooses not to be in the network, the employee would pay 10 percent more; 80 percent would be paid by insurance. The employee continues to have his choice in physician with a minimal difference in cost. Mr. Keenan stated that if the employee has care at Mayo Clinic or Cleveland Clinic, it would cost them only $250 more to be out of network. With many plans, the differential is greater. He inquired if the proposal is to go with United Health Care. Mr. Gliebe responded that the RFP of United Health Care (UHC) would indicate an estimated savings of around 30% or one million dollars. The final decision has not yet been made, however. Staff's interview with UHC will be held later in September. Staff must verify that UHC has not become too big -that they will be able to handle the City account in the way in which the City desires. An assurance of qualitative customer service is essential, to ensure the change doesn't generate dissatisfaction, or there would be no advantage in making the change. Mr. Keenan responded it would be a subjective interview; UHC will not indicate that they would not handle the City account well. Mr. Gliebe stated that there are specific questions asked and commitments required of them. IVIr. Keenan stated that, currently, MCA is the TPA (third party administrator) for Emerald Health. He inquired if UHC would fulfill the TPA responsibility. Mr. Gliebe affirmed that would be the case. Ms. Hoyle noted that recently, two former Dublin employees went to work for the City of Upper Arlington, who has aself-insured plan with UHC as the TPA. Staff will contact them to inquire about their experience with UHC. Mr. Keenan stated that Washington Township has a fully insured program with UHC. His experience was that they were good. Ms. Hoyle stated that the physicians in the two networks were compared to determine how closely they matched. There would be approximately a 97% match. Mr. Keenan suggested phasing in a tiered program. The employees who utilize the program more would pay more for the coverage. Singles and families often are interested in different tiers. He inquired the ratio of single to family plans with the City. IVIs. Hoyle stated that single plans comprise about 12% of the City's coverage. Mr. Keenan inquired if the City has priced a fully funded health insurance plan. Mr. Gliebe responded that quotes were not solicited for fully insured plans. Administrative Committee August 30, 2004 Page 6 Ms. Hoyle stated that the City has stop loss for the big risks. In comparing the City's claims experience versus a fully insured plan of the same size, the City's expenses would have increased much more significantly with a fully insured plan. Self insurance gives the City greater flexibility. The City has enjoyed that flexibility and been successful in managing the gro«~th. Mrs. Boring stated that through the years, Council's position has been that the health benefits plan is one of the primary benefits they value and want to preserve for the employees. Mr. Keenan agreed, but noted that the discount the City has had with Emerald Health has only been 18%. Others offer more. Ms. Hoyle noted that previously there was no differential between in and out of network providers, and the City had to take what was available. Now, the City is in a better position to look at other networks. Over the next few years, the City will also have the opportunity to consider options in plan design. Mr. McCash noted that the amount of claims paid appears to be consistent over the years reflected in the report. Mr. Gliebe stated that in addition to the flexibility offered by the self-insured plan, there is a savings of 2-5% with the lack of mandated benefits, the cost of the insurance commissioner, and similar such costs. He added that in 2005 and beyond, the City would manage new vendors in a proactive manner. Mr. Keenan inquired how the hand-off from the present prescription drug vendor to the new vendor would be facilitated -- which would pick up the run-off? Ms. Hoyle stated that the handoff hasn't been negotiated, but there should be no problem. The City will pay to both for a while. Mr. Keenan inquired how the stop loss would be impacted. Is there any risk involved? Mr. Gliebe responded that there would not be; the stop loss contract is 24 - 12. From an administrative perspective, it would be easier to have MCA pay that one out. Mrs. Boring stated that when changes were implemented in the employee plan several months ago, some employees expressed concern that their salaries would be impacted. How would that have been the case? Mr. Harding responded that they were concerned about the prospect of an employee contribution for health insurance - it would have impacted their salaries. Mr. Keenan stated that an argument could be made that it is a tax increase to the taxpayers. Mrs. Boring stated that Mr. Keenan has expressed the opinion that the employee salary level is an important issue -that the City's salary level should be increased per the marketplace. Administrative Committee August 30, 2004 Page 7 Mr. Keenan agreed that is his opinion. Mrs. Boring suggested that the employees perceive their salaries as being protected by not having to make a contribution for their health insurance. Ms. Hoyle stated that reducing the plan cost results in a larger savings to the taxpayers. Mr. McCash agreed. The more saved by reducing the plan costs, the longer the employee contribution can be deferred. Mr. Gliebe stated that one issue not discussed under plan management and plan design is administrative practices -eligibility, coordination of benefits, secondary insurances. Amending some of those practices, or administrative rules, could also be effective in deferring employee contribution. For instance, there is a public entity in the Columbus area that offers its employees $400/month as an opt-out incentive. IVIr. Keenan inquired why the City does not offer the flexible spending account. Mr. Harding stated the employees do not have significant out-of-pocket expenses with this plan, which is the purpose of a flexible spending account. Mr. Glieb stated that it could be argued that from a public policy perspective, flexible spending accounts (FSA's) are bad policy -they subsidize expansion of the health system. Recently, there has been an initiation to eliminate the infamous "use it or lose it" rule with FSA's. Ms. Brautigam stated that as Council requested, staff has presented a progress report on the results of their health benefits cost savings efforts. Because of the significant savings that have resulted from the changes made to the plan, an employee contribution will not be necessary. She suggested that annual progress reports continue to be made to keep Council informed. Mr. McCash inquired how this progress is reported to the employees. Ms. Hoyle responded that an employee benefits committee has been formed. The results of this meeting tonight would be shared with the employee committee. Mr. Ball, staff reporter, will then share the report with all City employees. Mr. McCash suggested that employees be educated on how they can help to keep the health costs down, thereby deferring an employee contribution for a longer period of time. Ms. Telfer stated that the employee benefits committee has been very instrumental in sharing information with other employees. Mr. McCash inquired if HR becomes a~-are of an employee who is using the system improperly, could they be counseled or otherwise educated on proper use? Administrative Committee August 30, 2004 Page 8 Ms. Telfer stated that employee privacy rights, HEPA, would prevent that. Mr. Gliebe stated that there are legal restrictions on what an employer is permitted to know about an employee's specific medical situation. However, the insurer can distribute education to an entire group of individuals. Mr. Keenan requested data on comparable suburban entities regarding the structure oftheir health benefits plans. Mr. Harding stated that such a survey was completed and a report provided to Council in 2003. Mr. Keenan also requested information regarding other comparable cities with "no deductible" plans. Mrs. Boring requested that the next annual report be provided in the form of a comprehensive report to all of Council, perhaps with a ~-minute presentation. A committee meeting would not be necessary. Ms. Hoyle suggested that report could be provided during the annual budget meetings. The committee agreed with that suggestion. Mrs. Boring stated that she prefers to see the problem addressed in this manner, rather than penalizing all the employees for the abuses of a few. Mr. Keenan reitierated that a tiered program would be an effective way to achieve a cost savings. Mrs. Boring responded that the City would not want to do that. ~n the contrary, the objective should be to have a plan that encourages and facilitates regular examinations to defer major health problems. Mr. Gliebe agreed that the risk involved makes it a poor strategy. In addition, the administrative burden of such programs is very time-consuming and costly. The committee commended staff on their efforts and the progress achieved. The meeting was adjourned at 9:30 p.m. Deputy Clerk of Council