HayGroup ® Pennsylvania Association of School Business Officials HR 159 Actuarial Report to the Pennsylvania Legislative Budget and Finance Committee March

HayGroup®

Pennsylvania Association of School Business Officials

HR 159Actuarial Report to the Pennsylvania

Legislative Budget and Finance Committee

March 11, 2004

Slide - 2HayGroup®

HR 159

Purpose

Scope

Process

Timeline

Slide - 3HayGroup®

HR 159

Purpose

Study the Feasibility and Cost Effectiveness of Placing Public

School Employees under the Commonwealth’s Jurisdiction

for the purposes of providing Health Benefits.

Slide - 4HayGroup®

HR 159

Scope

Health benefits program

Medical, Dental, Vision, Prescription Drugs

Analyze the pattern of growth in these costs

Public School employeesActive employees

Retired employees

Comparison to Pennsylvania State workers

Slide - 5HayGroup®

HR 159

Scope

Potential cost reductions

For Commonwealth

For LEAs

Slide - 6HayGroup®

HR 159

Scope

Seek input from

Department of Education

Pennsylvania Association of School Business Officials

Pennsylvania School Boards Association

Pennsylvania State Education Association

Pennsylvania Federation of Teachers

Governor’s Office of Administration

Group Insurance Providers

Slide - 7HayGroup®

HR 159

Process

LFBC tasked with conducting the study

RFP

Competitive bids

HayGroup awarded the contract

Slide - 8HayGroup®

HR 159

Timeline

July 2003 -- contract awarded

January 2004 -- final report issued

February 4, 2004 -- LBFC released the report

Report can be printed from - http://lbfc.legis.state.pa.us

Slide - 9HayGroup®

HR 159 -- Health Benefits for Public School Employees

HayGroup

One of the largest international consulting firms

Oldest actuarial firm in the US

Actuary to PA State Employees Retirement System

Extensive healthcare expertise

Hay’s healthcare models used by Congressional Research Service to evaluate legislative proposals

Hay Benefits Report

Key Staff

Slide - 10HayGroup®


Discovery & Data Capture

Customized surveys

One for School Districts

One of IUs

Responses

146 completed surveys received in time to be included in the study -- statistically representative of all LEAs

Population data

PSERS

SERS




Meetings with interested parties

PA DoEd PSBA

PSEA PFT

Governor’s OoA PASBO

PSERS SERS

PAHU PEBTF

Insurance providers

Capital BlueCross BlueCross of NE PA

Highmark Independence BC




State information

Web searches

Discussions with State officials



Data Analysis

Employee contributions

Medical plan deductibles, copays, out-of-pocket limits

Prescription drug benefits

Dental benefits

Vision benefits



Data Analysis

Employee contributions

0% 20% 40% 60% 80% 100%

LEAs

HBR -Governmental

Employers

HBR - AllEmployers

FamilySingle



Data Analysis

Medical plan deductibles -- single coverage

0%

10%

20%

30%

40%

50%

60%

< $100 $100 $125-$150

$200 $201 -$299

$300 >$300

LEAsHBR



Data Analysis

Medical plan deductibles -- family coverage

0%

10%

20%

30%

40%

50%

60%

<$200 $200 $201-$300

$301-$400

$401-$500

$501-$600

$601-$749

$750 >$750

LEAsHBR



Data Analysis

Out-of-pocket limit -- single coverage

0%

10%

20%

30%

40%

50%

60%

70%

80%

< $500 $500 $501 -$999

$1,000 $1,001 -$1,500

$1,501 -$2,000

> $2,000

LEAsHBR



Data Analysis

Prescription Drug Coverage -- generic copay

0% 20% 40% 60% 80% 100%

LEAs

HBR Under $5$5 $6 $7 $7.01-$9.99$10 > $10



Data Analysis

Dental benefits

Coverage

Cost-sharing

Plan design

PreventiveCare Covered

BasicRestorative

MajorRestorative

LEAs 99% @100% 80% @100%17% @ 80%

26% @ 80%68% @ 50%

HBR 90% @100% 8% @ 100%70% @ 80%

7% @ 80%73%@ 50%



Data Analysis

Dental benefits

Orthodontia lifetime maximum benefit

0% 20% 40% 60% 80% 100%

LEAs

HBR Under $750$750 $751-999$1,000 $1,001- $1,500$1,501 - $2,000>$2,000



Data Analysis

Vision benefits

Coverage

Cost-sharing

Retiree benefitsCoverage

Pre-65

Post-65

Cost-sharing



Actuarial Analysis

Compare the LEA plans to the PEBTF plans

Compare:

plans

premiums,

funding arrangements,

plan management,

demographics of covered population



Actuarial Analysis

Demographic differences

Covered population differences

Plan design differences

Funding arrangements

Other factors



Actuarial Analysis

Demographic differences

PSERS

-

10,000

20,000

30,000

40,000

50,000

60,000

20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

SERS

-

5,000

10,000

15,000

20,000

25,000

20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

Females

Males



Actuarial Analysis

Covered population differences

Aging Factors

0.0

0.5

1.0

1.5

2.0

2.5

3.0

20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64



Actuarial Analysis

Plan design differences

medical

prescription drug

dental

vision

Benefit Value Comparison (BVC)

Actuarial model that measures the value of a benefit plan, based on detailed plan design information, standard employee population



Chart 1.1 Medical Benefits

BVC Value Relative to Average Plan Value

0%

20%

40%

60%

80%

100%

120%

140%

0% 20% 40% 60% 80% 100%



Chart 1.2Prescription Drug Benefits


0%

20%

40%

60%

80%

100%

120%

140%

0% 20% 40% 60% 80% 100%



Chart 1.3Dental Benefits


0%

20%

40%

60%

80%

100%

120%

140%

160%

0% 20% 40% 60% 80% 100%



Chart 1.4 Vision Benefits


0%

20%

40%

60%

80%

100%

120%

0% 20% 40% 60% 80% 100%



Chart 1.5 Total Health Plan


0%

20%

40%

60%

80%

100%

120%

140%

0% 20% 40% 60% 80% 100%



Actuarial Analysis

Funding arrangements

Other factors



1. Average premium paid by LEAs per employee in2003

$9,558

2. Average premium if LEA employees in astatewide plan

$7,164

3. Subsidy for covering retirees in the same plan asactive employees

$211

4. Total paid by LEAs in a statewide plan[ 2. + 3. ]

$7,375

5. Savings attributable to a statewide plan[ 1. – 4. ]

$2,183

Estimated Savings per Employee



Estimated Savings for Year Ending June 30, 2003

1. For actives $524,000,000

2. For retirees $38,000,000

3. From stop-loss premiums $15,300,000

4. From prescription drug rebates $8,100,000

5. Total $585,400,000

Total Statewide Savings



Implementation Approaches

Mandatory or Voluntary

Administration

Plan design options

Retirees



Administration Approaches

Service contract with PEBTF

Expand PSERS HOP program

New administrative unit



Proposed StructureFor Commonwealth Wide

Health Plan for Education Employees

Proposed StructureFor Commonwealth Wide

Health Plan for Education Employees

CommonwealthCommonwealth

State EmployeeContributions

State EmployeeContributions

Employee ContributionsEmployee Contributions

PEBTFPEBTFPSETPSET

Administrative StaffAdministrative StaffCommonwealth Contributions

Commonwealth Contributions

LocalEducation Agencies

LocalEducation Agencies

LegislationLegislation

ServiceContract

ServiceContract



AlternativeProposed Structure

For Commonwealth WideHealth Plan for Education Employees

AlternativeProposed Structure

For Commonwealth WideHealth Plan for Education Employees

Local Education Agencies

Local Education Agencies

LegislationLegislation

PSERSor Other

CommonwealthAgency

PSERSor Other

CommonwealthAgency

FUNDING SOURCES FOR EDUCATION

EMPLOYEES



EmployeeContributions

EmployeeContributions



Winners & Losers

0%10%20%30%40%50%60%70%80%90%

100%

LEAs COST

WinnersLosers



Examples of “Strawman” Plan Designs

Summary of Key Design FeaturesBenefits for Typical Enhanced Option Plan Designs

Type of Care FFSEnhanced

PPOEnhanced

In-Network

PPOEnhanced

Out-of-Network

POSEnhanced

In-Network

POSEnhanced

Out-of-Network

Plan Deductible $100 $0 $0 $0 $0Maximum Out-of PocketLimit

$1,500 None None None None

Inpatient hospital 100% 100% 100% 100% 80%Outpatient hospital 100% 100% 80% 100% 80%Physician Visits 80% $10 copay 80% $5 copay 80%Specialist Visits 80% $10 copay 80% $5 copay 80%Surgical 100% 100% 80% 100% 80%Mental Health and SubstanceAbuse Treatment

80% $15 copay60 visits

max

80% 100% 70%

Outpatient Imaging/X-ray &Lab

100% 100% 80% 100% 80%

Preventive Services Provides Provides Provides Provides Provides



Examples of “Strawman” Plan Designs

Summary of Key Design FeaturesBenefits for Typical Basic Plan Designs

Type of Care FFSBasic

PPOBasic

In-Network

PPOBasic

Out-of-Network

POSBasic

In-Network

POSBasic

Out-of-Network

Plan Deductible $250 $250 $250 $0 $200Maximum Out-of PocketLimit

$2,000 None None None None

Inpatient hospital 80% afterdeductible

100% afterdeductible

80% 80% 80%

Outpatient hospital 80% afterdeductible

100% afterdeductible

80% 100% 80%

Physician Visits 80% $15 copay 80% $10 copay 80%Specialist Visits 80% $15 copay 80% $10 copay 80%Surgical 100% 100% after

deductible80% afterdeductible

100% 80%

Mental Health and SubstanceAbuse Treatment

50% $15 copay30 visits

max

50% 100%30 visits

max

50%

Outpatient Imaging/X-ray &Lab

80% 100% 80% 100% 80%

Preventive Services Subject todeductible

Subject todeductible

Subject todeductible

Provides Provides



Implementation Bargaining contracts

Year of Expiration of CBAsNumber of Collective

Bargaining AgreementsYear of

Expiration44 200461 200538 200621 20076 2008



Implementation Timetable



Projected Cost Savings

Fiscal yearMandatory With

ChoiceMandatory

Without Choice Voluntary2005-06 $129 $103 $832006-07 $412 $344 $2652007-08 $643 $552 $4432008-09 $767 $664 $5882009-10 $835 $725 $682

Savings From Initiation of Commonwealth-wide Plan on July 2005 $millions



MandatoryParticipation in

State Health Plan

VoluntaryParticipation in

State Health Plan

No State HealthPlan for School

Employees

Delaware California Maryland

North Carolina Louisiana Ohio

New Jersey Virginia

New York

South Carolina

Summary of State Survey



Question & Answer Session

Documents

HayGroup ® Pennsylvania Association of School Business Officials HR 159 Actuarial Report to the Pennsylvania Legislative Budget and Finance Committee March