Public Employees’ Benefits Board Meeting March 8, 2005

1. Public Employees’ Benefits Board Meeting March 8, 2005

2. PEBB Budget Update March 8, 2005 Presented by Connie Robins Deputy Administrator

3. Budget Update • Biennial Projection • First Quarter FY 05 • Data through September 2004

4. Revenue FY 05 State Agency Revenue $ 760,946,617 State Employee Contribution 95,611,862 K-12, Political Subdivisions 94,675,398 Retiree Premiums 187,643,951 Other Self Pay (COBRA etc) 8,570,960 Other Revenue 55,603,555 $1,203,052,344 Funding Rate $584.58 Budget Update

5. Expenditures FY 05 Insured Premium $ 612,255,403 Uniform Medical Plan 482,631,843 Prescription Drug Program 124,000 Uniform Dental Plan 90,858,335 Other Expenditures 7,424,853 $1,193,294,434 Excess/(Deficit) of Revenues Over Expenditures $ 9,757,909 Budget Update

6. Fund Balance FY 05 Beginning Balance $ 74,534,127 Adjustments -0- Premium Stabilization Reserve 8,867,996 Excess/ (Deficit) 9,757,909 Ending Balance $ 93,160,032 Budget Update

7. Components of Fund Balance FY 05 Employee Contribution Buy Down $ 4,924,418 Quality Initiatives 500,000 Life Insurance at $25,000 13,417,129 Fund Bal Retention -0- FSA Reserve & Startup 1,135,647 Contingency 7,200,000 Restricted/Designated $ 27,177,194 Premium Stabilization Rsv $ 39,906,679 Unrestricted Balance $ 26,076,159 Total Fund Balance $ 93,160,032 Budget Update

8. Legislative Update March 8, 2005 Presented by Richard Onizuka Director, Health Care Policy

9. 2005 HCA (PEBB) High Priority Bills 3/4/05 (After 1st Cutoff)

10. 2005 HCA (PEBB) High Priority Bills 3/4/05 (After 1st Cutoff)

11. 2006 Procurement March 8, 2005 Presented by Richard Onizuka Director, Health Care Policy

12. 2006 PEBB MedicalProcurement • April 8, 2005: Request For Renewal Released • May 18, 2005: Proposals Due • June 28, 2005: Board Votes • Benefits • Non-Medicare Enrollee Premiums • Medicare Subsidy

13. UMP Plan & Benefit Alternatives Update March 8, 2005 Presented by Janet Peterson Director, Uniform Medical Plan

14. Major Goals • Simplify or standardize UMP benefit design • Promote appropriate use of preventive services and healthy lifestyle • Target resources to clinically effective services

15. Summary of Benefit Alternatives for 2006 Estimated First Tier Premium Impacts (2005 $$$)

16. Eliminate Prescription Drug Deductible • Current $100 Rx deductible is not a standard benefit design • Many enrollees are confused about how the deductible applies, especially for mail order prescriptions

17. Three Month Carryover of Payments Toward the Medical/Surgical Deductible • For health plans with annual deductibles, this carryover design is quite common – becoming standard • Any payment toward the deductible for services in the last quarter of the year (i.e. October – December) would also apply towards the next year’s deductible • Currently, enrollees joining UMP mid-year often barely meet their $200 deductible before the deductible starts over again for the next calendar year • This change will be particularly helpful to K-12 school district employees and retirees who join in early fall

18. Increase UMP’s Share of Cost or Network Services Out-of-State • Outside Washington and Oregon, nonMedicare UMP PPO enrollees currently pay 20% coinsurance for most services from network providers • Inside Washington and Oregon, enrollees pay 10% coinsurance for network professional services, and $200 per day (up to max $600 per year) for inpatient stays at network hospitals • The proposal would change the cost-sharing provisions in all states to match the current cost-sharing in Washington and Oregon

19. Increase Routine Vision Coverage to One Exam Per Year • Currently, UMP covers a routine eye exam every two years • Clinical studies recommend more frequent screening exams for early detection and treatment of serious eye diseases, particularly as patients get older (examples: glaucoma and diabetic eye disease) • The proposed change would cover up to one routine eye exam per calendar year • PEBB enrollees in PacifiCare and Regence currently have coverage for annual eye exams • The proposed change does not affect UMP coverage for vision hardware (still capped at $100 payment every two calendar years)

20. $30 Annual Premium Rebate for Healthy Lifestyle and Use of Preventive Services • Still developing specific criteria and process (not finalized) • To qualify for the $30 incentive, enrollees will answer questions on a secure web site • Separate questions for 4 demographic groups: Men Under 40, Women Under 40, Men Age 40+, and Women Age 40+ • $30 rebate is per qualifying adult (subscribers and spouses). Children are not eligible; however, parents may earn points if children’s immunizations are up to date • Enrollees earn points based on categories of preventive services or healthy behaviors • Each adult with enough points earns a $30 premium rebate (once per year)

21. Separate 16-Visit Massage Therapy Benefit • Massage therapy is currently included in the same benefit as physical, occupational and speech therapy. UMP covers a maximum of 60 visits per year for any combination of these therapies • Utilization of massage therapy has been increasing dramatically. PMPM costs rose 30% per year for non-Medicare and 38% per year for Medicare enrollees from CY2002 to CY2004 • In some cases, current utilization of massage therapy may exceed treatments that are medically necessary • When justified as medically necessary based on unique circumstances (i.e. severe illness), UMP may exceed benefit limits when covered under case management • Separating physical, occupational and speech therapy into a different benefit will preserve enrollee access to these services in case of injury or disease

22. Carrier P&T Committees & Formulary Development March 8, 2005 Presented by Richard Onizuka Director, Health Care Planning

23. Mader vs. HCA Update March 8, 2005 Presented by Mary Fliss Assist. Administrator, PEBB Program

24. Mader vs. HCA CASE SUMMARY Background WA State Supreme Court Findings Settlement Agreement

25. Issues • Extrapolating to all state employees • “Averagers” • “Stackers”

26. Proposed Process 1. Emergency Rule Making a) Draft language b) Stakeholder the Emergency Rules c) Board Vote April 12th Meeting d) File CR103 5/4/05 (emergency rule takes effect when filed) 2. Permanent Rule Making a) Stakeholder b) Policy decision on issues c) Draft language d) Board Meeting and Open Public Hearing 7/26/05 e) File CR102 6/22/05 (proposed rule); CR103 7/27/05 (final rule, as adopted)

27. Public Testimony March 8, 2005