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  1. 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

  2. VALUE PURCHASING • Issues affecting plan costs • Technological advances • Usage patterns • Aging population • Varying practice patterns • Advertising • Annual Inflation 10% - Medical 8% - Prescription Drug • Government Regulation – Affordable Care Act (ACA) Federally required benefit enhancements Federally required taxes to support ACA

  3. 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

  4. 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

  5. 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

  6. VALUE PURCHASING • Consortium Purchasing • Manage risk through shared riskand self-insurance • Provide more stable plan costs • Provide more flexibilityto consortium members • Offer programs and services under specific Ohio Statutory Authority for Ohio based public entities

  7. 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

  8. 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

  9. VALUE PURCHASING • Consortium Purchasing – Community Pooled Features Plan Design - Determined by Pool Network Options - Determined by Pool Deductible - Determined by Pool Costs - Determined by Pool (Average Costs) Reserves - Owned by Pool Interest Income - Owned by Pool Moratoria - Determined by Pool Rebates - Held by Pool Reporting - Pool only Ability to impact costs - Determined by Pool

  10. 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

  11. VALUE PURCHASING • Jefferson Health Plan – Allocated Balance Pooled Features Plan Design - Member decides Network Options - Member decides Deductible - Member choice Costs - Based on your experience/Pool Blend Reserves - Owned by Member Interest Income - Retained by Member Moratoria - Member decides Rebates - Retained by Member Reporting - Online Access to Account Ability to impact costs - Member controls plan design

  12. 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

  13. 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

  14. 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

  15. 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 claims best access to providers best discounts on services lowest network fees 100% pass-through of network discounts to group

  16. 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

  17. 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

  18. 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

  19. 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

  20. Key Underwriting Financial Indicators

  21. 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

  22. VALUE PURCHASING 1 Annual Segal National Survey of Managed care Plans (2013)

  23. 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

  24. 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