How We’re Cutting Benefit Costs Without Cutting

Benefits

APPA Discussion Forum3:00pm-4:00pmJune 21, 2004

Seattle, Washington

How We’re Cutting Benefit Costs Without Cutting Benefits Joint Health Insurance Initiative

• What We Attempted

• What We Actually Did

• Why Joint Health Initiative?

• How We Did It

• Keys Energy Services Example

• Important Steps and Program Elements

• Summary

2

How We’re Cutting Benefit Costs Without Cutting Benefits

What We Attempted

•Establish separate entity

(MEBA-Municipal Employees Benefit Association)

•Articles of “Incorporation”

•State Insurance Department Contact

3

How We’re Cutting Benefit Costs Without Cutting Benefits What We Actually Did

• Partnered with benefits broker

Large, reputable firm

Extensive public employer experience

Ability to successfully manage potential accounts

• Individual plans for each member

Premium rates based on claims history

Ability to customize plans

• Economy of scale

Using one reinsurance agency

Contracting with one TPA

4

How We’re Cutting Benefit Costs Without Cutting Benefits

Why Joint Health Initiative?

• Escalating costs/premiums

• Reduced employee benefits

• Increased co-pay

• Self-determination

• Economies of scale

• New “Member Service”

5

How We’re Cutting Benefit Costs Without Cutting Benefits How We Did It

• Obtained Board of Directors approval

• Established Board Oversight Committee/interested members

• Engaged insurance expert

• H.R. Manager Program Leader

• Budget authority from development fund

• General Counsel assistance

• Member claims history

• Broker bid plan to reinsurers and TPAs

• Program costs paid via Administrative fee

• Members sign participation agreements

6

How We’re Cutting Benefit Costs Without Cutting Benefits

Keys Energy Services Example

• 260 employee/retiree participants

• $244,000 first year savings to Keys Energy

• $104,000 first year savings for 100 Keys Energy employees (dependent coverage—5% savings)

• Improved services

Flex debit card for Section 125

Employee education and “buy in”

Large claims management

7

How We’re Cutting Benefit Costs Without Cutting Benefits

Important Steps and Program Elements

• Policy/political support

• Slow and deliberate

• Get legal assistance

• Work with reputable broker/consultant

• Establish in-house (H.R.) expertise and liaison to members

• Participant understanding of long-term commitment

8

How We’re Cutting Benefit Costs Without Cutting Benefits

Summary

• It CAN be done

• Economies are available

• HMOs have pricing power

• Design long-term sustainable program

• Negotiate from strength

• Manage broker and member relationships

9