GIC Public Hearing

1. GIC Public Hearing February 3, 2011

2. What’s the Problem? • Budget pressure on state revenues versus state expenditures continues despite some improvements in the economy • We’re not out of the woods yet

3. Total health benefit cost per employee rises 6.9% in 2010, the sharpest increase since 2004 *ProjectedSource: Mercer’s National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April) 1990-2010; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey(April to April) 1990-2010.

4. Disparities in Provider Costs Attorney General’s “Investigation of Health Care Cost Drivers” and Division of Health Care Finance and Policy hearings 3/16/10 • Provider payment tied to market leverage and geographic isolation • 10 Massachusetts hospitals get 10% - 100% more than the other 55 for similar work • Price variations for hospitals and physicians offering similar services are NOT explained by quality of care, complexity of services/sickness of population or whether the hospital is an academic teaching or research facility

5. What Have Other Employers Done? • Shifted costs to employees • Implement high-deductible plans (example: $1,000-$5,000 deductibles before benefits begin) • Institute co-insurance (example: member pays 20% of the cost of services) • Eliminated retiree benefits

6. Among Firms Offering Health Benefits, Percentage of Firms That Report They Made the Following Changes as a Result of the Economic Downturn, by Firm Size, 2010 *Estimate is statistically different between All Small Firms and All Large Firms within category (p<.05). Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2010.

7. Average PPO deductible for individual, in-network coverage

8. Average Annual Worker and Employer Contributions to Premiums and Total Premiums for Family Coverage, 1999-2010 $5,791 $6,438* $7,061* $8,003* $9,068* $9,950* $10,880* $11,480* $12,106* $12,680* $13,375* $13,770* * Estimate is statistically different from estimate for the previous year shown (p<.05). Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2010.

9. Among All Large Firms (200 or More Workers) Offering Health Benefits to Active Workers, Percentage of Firms Offering Retiree Health Benefits, 1988-2010* *Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2010; KPMG Survey of Employer-Sponsored Health Benefits, 1991, 1993, 1995, 1998; The Health Insurance Association of America (HIAA), 1988.

10. National Health Reform Added benefits and costs effective July 1, 2011 • Dependent expansion to age 26, regardless of dependent’s status • No copays or deductibles for preventive services • Projected added premium costs of 1%-2%

11. What Has the GIC Done to Deal with the Challenges? 2004 - Instituted Clinical Performance Improvement Initiative: members pay lower copays for providers with the highest quality and/or cost-efficiency scores: Tier 1 (excellent) Tier 2 (good) Tier 3 (standard) . Physicians for whom there is not enough data and non-tiered specialists are assigned a plan’s Tier 2 level copay

12. Other GIC Initiatives • Kept premium increases as low as possible (7.91% for FY11 and 3.19% for FY10) – but, deficits caused mid-year deductibles and increased copays • Introduced additional limited network plans: Harvard Pilgrim Primary Choice Plan and Tufts Health Plan Spirit

13. The State’s Budget Crisis • $1.2 – $2 billion structural deficit projected for FY12 • Causes: loss of $2 billion in one time funds, including $1.5 billion from ARRA • Escalating health care costs • Tax revenues will increase slightly, but not enough to get us out of recession (and $1 billion less than FY09)

15. House 1’s Requests to State Agencies • All agencies asked to be part of the solution • Charge to the GIC – Find solutions to preserve and protect current benefits with more enrollees and no additional dollars

16. House 1 – Released 1/26/11 • $1,662,466,938 for FY12 • $1,645,669,744 for FY11 • Variance $16,767,194 • Doesn’t include modest rate increases – still in negotiation; or additional 1,800+ members from MBTA

17. The GIC’s Philosophy • Don’t choose a solution that just shifts all the extra costs to the enrollees • Try to lower costs instead

18. The GIC’s Approach • Share responsibility for reducing costs and improving quality– providers, members, health plans, and the GIC • Maintain comprehensive benefits and choice • Promote value of limited network plans • Adopt only modest employee share increases • Educate members about provider performance • Encourage healthy behavior • Maintain retiree health benefits

19. Option1 – Change Premium Contribution • Increase premium contribution ratios by 5% for all actives, retirees, and survivors = $82 million • Appropriation Act does not get done until June – therefore, we can’t change ratios until it is enacted • Legislature made a 5% increase last year. Not likely to do it again.

20. Option 2 – Limit Plan Offerings • Limit plan offerings, such as: • Drop all broad network plans • Drop all but one state-wide plan • Disruption and opposition from plans, providers, and enrollees (including legislators) would be extreme • Some plans could go under

21. Option 3 – Increase copays and/or deductibles • Increase upfront deductible or go to high deductible plan designs • Eliminate the fourth quarter carry-over of the deductible • Could save up to $20 million However, • Deductibles very unpopular • Hurts sicker patients • Doesn’t fit GIC principles

22. Option 4 – Make the Buy-Out Program More Attractive • Proposed legislation to add a mid-year buy out enrollment

23. Option 5: Re-Enrollment with Incentives to Choose Limited Network, Less Expensive Plans • Counteracts inertia – most employees do not change plans – 2%-3% per year • Focuses attention on costs and savings • Rewards state employees who become part of solution • Puts market pressure on high cost providers • Savings depend on migration patterns

24. Option 5 – Re-enrollment Continued Some negatives: • Minor inconvenience for enrollees • Major work effort for GIC and GIC Coordinators

25. Commission Vote of 1/27/11 • All state employees required to re-enroll in health insurance • Overcomes inertia – most employees do not change plans – 2%-3% per year • Employees may be more likely to consider limited network place • Incentive offered to join limited network plans

26. Who Will be Required to Re-enroll? • All active state employees who reside in Massachusetts and are covered by GIC health insurance • The GIC will choose a plan for you if you do not re-enroll: Be proactive! • Municipal members and state retirees and survivors will not need to re-enroll

27. State Employees Who Enroll in Limited Network Plans Will receive a three-month premium holiday if you enroll in: • Fallon Community Health Plan Direct • Harvard Pilgrim Primary Choice Plan • Health New England • Neighborhood Health Plan - NHP Care • Tufts Health Plan Spirit • UniCare State Indemnity Plan/Community Choice

28. Provider Access and Plan Cost

29. Premium Differences From Last Year – Don’t Know This Year’s Yet

30. Premium Differences From Last Year (continued)

31. Weigh Your Options • Find out if you are eligible for the health plan (See your Benefit Decision Guide) • For the plans you are eligible to join and interested in… • Review their benefit summaries and monthly rates • Weigh features that are important to you • Determine if your doctors and hospitals are in the plan’s network and which copay tiers they are in • Be sure to specify the health plan (e.g., Tufts Health Plan Spirit or Tufts Health Plan Navigator) • Note that if your doctor or hospital leaves the plan in which you have enrolled, you must select a new doctor or hospital that participates in your current plan for your care.

32. Once You Choose a Plan Your choice of plans is for a full year: July 1, 2011 – June 30, 2012 You cannot change plans until the next annual enrollment period unless: • You move out of the plan’s service area • You become eligible for Medicare, in which case you must enroll in a Medicare plan

33. Open Enrollment • April 8 – May 9, 2011 • Changes Effective July 1, 2011

34. State Employees Who Must Re-enroll • Will be mailed notice beginning of March at home • Plans will market to you during March • Will receive a guide at home this year instead of through your benefits office with a special health plan enrollment form • Other enrollment changes (dependents, buyout, LTD, optional life) on regular forms • Return forms early to your Coordinator – no later than May 9

35. UniCare Indemnity Plan/Community Choice Benefit Changes Effective 7/1/11 - $5,000 out-of-pocket per person calendar year maximum unchanged: • Co-insurance for non Community Choice (out-of-network) hospitals: pay 20% of allowable charges plus copay • Inpatient admissions • Outpatient surgery • Laboratory services • Facility charges • Hi-Tech imaging copay at non-Community Choice hospital will increase to $200

36. Prescription Drug Benefit Changes Effective 7/1/11 • UniCare members: Nexium and Aciphex Proton Pump Inhibitors (PPIs) for heartburn no longer covered; covered options include over-the-counter PPIs, generics, and a brand alternative • Tufts Navigator and Tufts Spirit members: • Members who receive their maintenance medications at a retail pharmacy must tell CVS Caremark whether or not they wish to switch to a 90-day supply through either mail order or a CVS pharmacy • All specialty medications will be provided through CVS Caremark’s specialty drug pharmacy

37. Open Enrollment for Dependents Ages 19-26 • Definition of dependent under federal health reform: son, daughter, stepson, stepdaughter, adopted child, or eligible foster child • Dependent must live in health plan’s service area unless enrolled in full time student coverage. Or, family needs to select UniCare State Indemnity Plan/Basic. • New form – available during open enrollment

38. Other Federal Health Reform Changes Effective 7/1/11 • $0 copay for preventive services, such as mammograms, scheduled immunizations, routine physical and OB/GYN visits, colorectal cancer screening, and cholesterol screening for adults • Calendar year deductible will no longer apply to these services

39. Life Insurance for State Enrollees Effective 7/1/11 • The Hartford awarded new contract as life insurance carrier • Basic life rates will go down • Optional life rates will change: • most active employee rates will stay the same or go down • many retirees’ premiums will increase – evaluate whether optional life makes sense

40. Long Term Disability for State Employees Effective 7/1/11 • Benefit Enhancement for disabilities occurring on or after 7/1/11: • Benefit increasing to 55% of your gross monthly salary - was 50%

41. Vision Carrier for Dental/Vision Program • Program for Executive Office managers, legislators, and legislative staff • Carrier selected at 2/11/11 Commission meeting • Possible benefit changes

42. Benefit Decision Guides • Mailed to active state employees and all retiree/survivor homes week of April 4 • Municipal employees will receive through their benefit office • Guides will be on the GIC’s website by April 1

43. Do Your Homework • Plans will have provider network details on their websites before open enrollment • Or, call the plans for provider details

44. No Frills Health Fairs • Because of re-enrollment for state employees – large crowds expected • Scheduled in large facilities near state employee worksites • No wellness exhibits – focus on information to help members choose a plan

45. GIC Website Resourcewww.mass.gov/gic • Benefit Decision Guides, newsletters and other publications • Latest open enrollment news • Information about and links to plans and their provider directories • Answers to frequently asked questions • Forms to expedite your enrollment decisions

46. Please Be Patient • May be difficult to get through to the GIC by phone during open enrollment • 50 staff – processing over 100,000 forms, working the fairs, and answering calls