The State of Healthcare Benefits

The State of Healthcare Benefits

Pat HainesSenior Vice President, Benefits

• The Context for Change• Considered Alternatives and Resulting

Options• The Impact of Healthcare Reform• The Importance of Health

2

Topical Overview

Cost is the Challenge

3

The Context for Change: The Larger World in Which We Live

• Healthcare Spending• Amount: $2.8 trillion in 2013; 18% of GNP• Pace: > inflation; > growth in national income• Drivers: Technology; Prescription Drugs; Rise in

Chronic Disease; Administrative Costs• Payers: Medicare, Medicaid, Private Plans,

Individuals

4

The Context for Change: The Larger World in Which We Live

• Large Employer Trends• Cost Shifting: Premium and Point-of-Service

Cost Sharing• Cost Management: Incentives and Penalties• Provider Management: High Performance

Networks; Reference-based Pricing … all about Value

5

The Context for Change: The LargerWorld in Which We Live

Cost is still the Challenge

6

The Context for Change: The Smaller World in Which We Live

Church Plan Benchmarks

Plan Approximate Annual Cost

Cost sharing policy/practice

Lutheran Church, Missouri Synod (LCMS)

$8,688/M

$14,496/M + C

$17,472/M + P

$23,220/M + F

Each employer is responsible for at least 50% of member cost; may share none, some or all of remainder of member + dependent cost

8

Church Plans

Plan Approximate Annual Cost

Cost sharing policy/practice

Evangelical Lutheran Church of America (ELCA)

6 rate classes

12.3% - 14.9%/ M

21.6% - 26.2%/ M + C or P

30.8% - 37.4%/ M + F

Church responsible for dues but opt-out permitted at all levels.

9

Church Plans

Plan Approximate Annual Cost

Cost sharing policy/practice

Evangelical Covenant Order (ECO)

$8,412/M

$15,996/M + C

$17,676/M + P

$25,248/M + F

Church responsible for 100% of member only cost; may share none, some or ALL of dependent coverage cost

10

Church Plans

• Key Statistics• Demographics• Utilization• Financials

11

The Context for Change: The Smaller World in Which We Live

Facts about Member Demographics and Church Size

• Members participating in Traditional Medical Plan as a result of their employment with a church or employing organization

• Approximately 12,100

• 65% are Teaching Elders

• 35% are Lay employees

13

Covered Population Demographics

• 15% (1,178) of Teaching Elders participate at the 2013 minimum of $40,000

• 59% (2,441) of Lay members participate at the 2013 minimum

• 30% (3,619) of all members participate at the 2013 minimum

14

Participation at Minimum

• 1.7% (137) of Teaching Elders participate at the 2013 maximum of $124,000

• 1.2% (52) of Lay members participate at the 2013 maximum

• 1.5% (189) of all members participate at 2013 maximum

15

Participation at Maximum

Population by Salary

16

Under $40,000

40,000 - 50,500

50,501 - 61,000

61,001 - 71,500

71,501 - 82,000

82,001 - 92,500

92,501 - 102,500

102,501 - 113,000

113,001 - 124,000

Above$124,000

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

2,750

2,441

821

398

194125

59 29 17 18 52

1,178

2,009

1,644

1,267

750

458

258157

81 137

LAY TEACHING ELDER

2013 FTE SALARY

MEM

BER

COUN

T

78% of Lay members40% of Teaching Elders

1.7% of Lay members2.7% of Teaching Elders

• 16% at Member Only

• 5% at Member + Children

• 33% at Member + Covered Partner

• 46% at Member + Family

17

Participation by Family Configuration

Family Configuration by Salary

18

Under $40,000

40,000 - 50,500

50,501 - 61,000

61,001 - 71,500

71,501 - 82,000

82,001 - 92,500

92,501 - 102,500

102,501 - 113,000

113,001 - 124,000

Above $124,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

22.1% 18.4% 15.3% 11.2% 9.3% 8.7% 6.6% 4.6% 6.1% 3.7%

6.1%5.1%

3.8%3.8% 3.5% 2.9% 3.1% 1.7% 1.0% 1.1%

34.9%32.7%

30.1%29.4% 33.6% 31.9% 39.7%

39.7%26.3% 32.3%

36.9%43.9%

50.8% 55.6% 53.6% 56.5%50.5% 54.0%

66.7% 63.0%

MEMBER ONLY MEMBER/CHILDRENMEMBER/COVERED PARTNER MEMBER/FAMILY

2013 FTE SALARY

Population by Age

19

Under 25 25 - 35 35 - 45 45 - 55 55 - 65 Over 650

1,200

2,400

3,600

4,800

6,000

7,200

8,400

9,600

10,800

12,000

11,346

1,443

1,585

2,607

3,641

1,045

1,0781,874

3,199

4,885

1,234

MEMBER DEPENDENT

AVG

CO

VER

ED L

IVES

Member Age by Salary

20

Under $40,000

40,000 - 50,500

50,501 - 61,000

61,001 - 71,500

71,501 - 82,000

82,001 - 92,500

92,501 - 102,500

102,501 - 113,000

113,001 - 124,000

Over$124,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

11.7% 14.4%8.6% 4.1% 2.9% 1.3% 1.1% 0.8% 0.0% 0.6%

13.3%17.4%

18.7%17.3%

10.7% 11.2% 10.6% 13.6% 11.2% 11.3%

25.1%24.4%

25.2%28.8%

31.2% 29.1% 30.3% 25.0% 32.6% 26.9%

37.9%35.7% 39.9% 40.1% 47.2% 49.4% 48.1% 50.0%

50.6%48.1%

11.0% 8.0% 7.5% 9.7% 8.1% 9.1% 9.8% 10.6% 5.6%13.1%

Under 25 25 - 35 35 - 45 45 - 55 55 - 65 Over 65

2013 FTE SALARY

Family Configuration by Member Age

21

Under 25 25 - 35 35 - 45 45 - 55 55 - 65 Over 650%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

64.1%

26.3%12.3% 12.2% 15.7%

24.2%

5.1%

2.5%

5.1% 7.6% 3.8%0.7%

23.1%

27.9%

7.8%12.9%

48.7%

66.8%

7.7%

43.3%

74.8%67.2%

31.8%

8.3%

MEMBER ONLY MEMBER/CHILDRENMEMBER/COVERED PARTNER MEMBER/FAMILY

AGE RANGE

Churches and Employing Organizations

22

• The Board bills over 6,600 churches and employing organizations with Traditional members every month

• 76% (5019) have an individual member

• 23% (1530) have 2 to 10 members

• 1% (79) have more than 10 members

Facts About Cost & Utilization

Age: A factor but not the whole story

24

Under 25 25 - 35 35 - 45 45 - 55 55 - 65 65 & Above$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

$1,865

$2,794 $2,837

$3,694

$6,169$6,554

Average Paid per Covered Life

2012 2011 2010

Teaching Elder vs. Lay: A factor but not the whole story

25

Lay Teaching Elder$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

$4,335

$3,588

Average Paid per Covered Life

2012 2011 2010

Dependent Status: A factor but not the whole story

26

• 53% of total claims paid for Members

• 47% of total claims paid for Dependents

• Maximum variation of 1.4% over last 36 months

High-Cost Claimants

27

• Consistently the single largest contributor to trend

• 1% of claimants responsible for 30% of expense

• Indiscriminate with regard to age, gender, and income

Average Costs per Active Member

28

• The average cost per Active Member (in the Traditional Plan) per year is $12,000

• Individual Member: $7,200

• Members With One or More Dependents: $13,000

• The Value of Community Nature• Minimum Dues

$8,400 = 70% of $12,000 Average Cost

• Maximum Dues$26,000 = 217% of $12,000 Average Cost

29

Relationship Between Dues and Cost

Financial ForecastsAn Art and A Science

Current Milliman Projections (in $1,000s)

31

2012 2013Total Revenue $171,507 $176,153

Total Expenses $173,891 $182,517

Net Income $(2,384) $(6,364)Fund Balance (Reserve)

$66,313 (38.1%)

$60,110 (32.9%)

Current Milliman Projections (in $1,000s)

32

2014 2015Total Revenue $170,984 $169,553

Total Expenses $189,271 $196,154

Net Income $(18,287) $(26,601)

Fund Balance(Reserve)

$39,700 (21%)

$11,978( 6%)

Considered Alternatives and ….Resulting Options

34

Expense Shifting Alternatives

• Double Office Copays• Increase Plan Copayment by 50%• Increase Deductibles by 60%• Increase Copayment Maximum by 40%• Add Emergency Room Copay (per visit)• Double Rx Plan Copays

GRAND TOTAL = $13.7 Mil

• Minimum Salary: Increased to $42,000 in 2014 and to $44,000 in 2015

• Target Fund Balance (Reserve): remains at 20% - 33% (2 ½ - 4 months of estimated claims)

• “Call to Health”: Initiate a model designed to improve member health in 2014

35

Revenue Raising Options: Underlying Assumptions

Action 2014 Dues 2015 Dues

Maintain Current Dues Model

23% effective salary

24.3% effective salary

36

OPTION A

Action 2014 Dues (Annual)

2015 Dues (Annual)

Maintain Dues at 21% for Member only; Introduce Dependent Coverage Tiers at flat amounts

Member: 21%+ Child(ren) =$534+ Partner = $664+ Family = $1,165

Member: 22%

(Flat dollar amounts TBD)

37

OPTION B

Action 2014 Dues 2015 Dues

Set Dues at % of effective salary and a lesser % for member only coverage

Dues w/ Dependents = 23%Dues w/o Dependents = 21%

Dues w/ Dependents = 25%Dues w/o Dependents = 22%

38

OPTION C

• Maximum Member Contribution Towards Family Coverage (2014)

39

OPTION C

Minimum($42,000)

Median($54,000)

Maximum($124,000)

Annually $840 $1,080 $2,480

Monthly $70 $90 $207

Community Nature

Flexibility Member Responsibility & Awareness

Quality & Member Service Advocacy

Option A(23%)

Option B(21% + flat premium by tier

Option C23% / 21%

40

Comparative View of Options

Cost is still the Challenge

41

The Impact of Healthcare Reform

• Primary Objectives• Address Access and Affordability• Reduce the Number of Uninsured Americans

• Early Challenges• Political• Judicial

42

Healthcare Reform: A Look Back

• Expanded Coverage: Adult Children; Lifetime Maximums; Preventive Care

• Communication: Summary of Benefits and Coverage; Notice of Exchange Coverage

43

Healthcare Reform: Direct Impact

• Government “Subsidy”: Early Retiree Reinsurance Program; Medicare Part D; Small Employer Tax Credit

• Assessed Fees: Patient-Centered Outcomes Research; Transitional Reinsurance

44

Healthcare Reform: Direct Impact

• Nondiscrimination Rules

• Payment Reforms

• Exchanges (Marketplaces): Public and Private

45

Healthcare Reform: Potential Impact

Cost is not the Only Challenge

46

The Importance of Health

• Goals:• Improved Member Health• Sustained Effort• Significant Rewards and Consequences• No Added Cost

47

Call to Health

• Timeline• 2014 – Define and Monitor 2014 Health

Actions2015 – Resulting Consequence

• 2015 – Define and Monitor 2015 Health Actions2016 – Resulting Consequence

48

Call to Health

• You Are “Called” To Be• Conscious• Accountable• Responsible• Engaged

49

Call to Health: To Care and To Take Care

• Three Strategic Objectives• Provide quality coverage that offers real

financial protection when it’s needed• Support Community Nature, balancing the

needs of ALL members• Ensure the Plan’s financial solvency by

maintaining adequate reserves

50

OUR COMMITMENT