Public Employees Health Benefit Act of 2007 (Senate Bill 418)

1. Public Employees Health Benefit Act of 2007(Senate Bill 418) What does it mean for Michigan Schools? Jim Miller, Director of Sales and Marketing Brian Flowerday, Operations Manager October 17, 2007

2. Agenda • Analysis of the Act • Fundamental paradigm shift • Health crisis is at the root of health care crisis • Employers and employees must take active role in health management • Four alternative school insurance models • Step-by-step process to move forward

3. Public Employees Health Benefit Act • Public employer: city, village, township, county, school, community college • May self-fund individually; or • May form a pool and self-fund • Pools may need to allow any of the above to join • Minimum 250 employees enrolled in pool • 3-year commitment • Cannot re-join within 2 years of leaving • Districts and pools required to get 4 or more bids every 3 years • One bid must be from a VEBA (e.g. SET, MESSA, etc.) • Case management required to meet formal standards

4. Public Employees Health Benefit Act • Office of Financial & Insurance Services (OFIS) • must issue certificate of registration to pool • can order financial assessments as needed to meet reserve requirements • receives 0.25% of premium fee to monitor pools • Reserve requirements: • Greater of 25% of first year premiums or 35% of previous year’s claims • 100% of reserve requirement can be satisfied by a letter of credit, but reduces to 75% then 50% in subsequent years • Excess loss insurance is required • No specific coverage levels defined

5. Public Employees Health Benefit Act • Requires formation of governing board: • Each pool member employer gets equal vote (in electing board members, etc.) • 50% of trustees must be either covered by the plan or be collective bargaining representatives of covered members • Public employers with 100 or more enrolled employees shall be provided with claims data

6. Public Employees Health Benefit Act • Public employers with Letter of Intent to join 100 or more employees in a medical plan shall have access to claims data • Claims data shall be available 120 days prior to renewal and cover 36-month period • Claims data will be de-identified per HIPAA • Claims data is to be compiled beginning 60 days from October 3, 2007

7. Fundamental Shift in Approach Required • Districts cannot be passive about claims expenses • Districts should not necessarily attempt to duplicate current plan design and eligibility • Proactive wellness programs must be implemented • State-of-the-art disease management and outcome measurement needs to be employed • Pool members must collaborate on the above • Improving health – not just controlling costs!

8. Healthcare Paradigm Shift

9. Health Promotion & Management Medical & Care Management Opportunity Expenses ($) Condition Management Opportunity Health Promotion Opportunity Adapted from Dee. W. Edington’s “Health Management as a Serious Business Strategy” University of Michigan Health Management Research Center

10. Health Management Paradigm Adapted from Dee. W. Edington’s “Health Management as a Serious Business Strategy” University of Michigan Health Management Research Center

11. Does it Work?

12. Four Alternative School Insurance Models • Form pools on a self-funded basis • Law makes this possible • Form pools on an insured basis • Law helps by making claims data available • Self-fund as an individual school • Law helps by making claims data available • Purchase insurance as an individual district • Law helps obtain competitive bids with claims data

13. Self-Funded Pools • Several employers pool together by region • Need pool administrator • Legal formation • Reporting and analysis • Competitively bid products and services • Member education • Membership coordination • Primary components • Claims and enrollment administrator (TPA) • Provider network access • Stop-loss insurance • Wellness • Disease management

14. Self-Funded Pools

15. Insured Pools • Several employers participate in a VEBA trust or consortium • SET is a 501(c)(9) VEBA with a pooling trust • The VEBA purchases insurance and provides it to participating subscribers • Rates are set based on overall ISD experience

16. Insured Pools

17. Individual Group Self-Funding

18. Insured Group Plans

19. Moving Forward Step by Step • Immediate action required: • Avoid Negotiation Pitfalls • Do not commit to multi-year contracts at this point in time • Do not allow specific carriers, TPAs, or programs to be named in contracts • Hold ISD-level discussion to gauge interest in pooling • Acquire documents required to pursue best option • Request for claims experience • Letter of intent to pool • Formation of trust • Participation in trust • Create RFPs for applicable policies, service agreement

20. Questions/Discussion