Benefits

 

pg.

 

1

 

Health Care Plan - Cost Management Recommendations Executive Summary

As

 

a

 

follow

 

up

 

to

 

last

 

year’s

 

Board

 

meeting

 

where

 

we

 

agreed

 

that

 

we

 

would

 

conduct

 

further

 

analysis

 

of 

 

our

 

health

 

care

 

plan

 

costs,

 

we

 

have

 

completed

 

a

 

review

 

of 

 

the

 

medical

 

insurance

 

plan

 

in

 

order

 

to

 

develop

 

alternatives

 

to

 

reduce

 

future

 

costs

 

while

 

maintaining

 

a

 

competitive

 

program

 

compared

 

to

 

other

 

not

‐

for

‐

profit

 

organizations.

 

The

 

following

 

summarizes

 

the

 

key

 

medical

 

plan

 

cost

 

issues

 

and

 

our

 

recommendations

 

for

 

reducing

 

costs,

 

as

 

well

 

as

 

strategies

 

for

 

future

 

cost

 

management

 

of 

 

our

 

medical

 

expenses

 

under

 

the

 

plan.

 

Background

 

For

 

the

 

2011

 

calendar

 

year,

 

medical

 

costs

 

per

 

employee

 

rose

 

55%

 

over

 

the

 

2010

 

costs.

 

Although

 

the

 

Foundation’s

 

prior

 

claim

 

experience

 

was

 

quite

 

low,

 

the

 

law

 

of 

 

averages

 

more

 

than

 

caught

 

up

 

with

 

us

 

in

 

2011.

 

This

 

claim

 

experience

 

was

 

caused

 

by

 

a

 

significant

 

increase

 

in

 

claims

 

between

 

$20K

 

and

 

$100K

 

plus

 

a

 

few

 

large

 

claims.

 

For

 

2011,

 

our

 

average

 

annual

 

cost

 

per

 

employee

 

was

 

$11,673

 

compared

 

to

 

a

 

national

 

average

 

of 

 

$10,621

 

for

 

other

 

employers

 

with

 

similar

 

plans.

 

For

 

2012,

 

our

 

costs

 

are

 

trending

 

about

 

6.9%

 

over

 

forecast

 

based

 

on

 

claims

 

through

 

July,

 

so

 

we

 

are

 

still

 

experiencing

 

a

 

high

 

level

 

of 

 

claims.

 

We

 

have

 

identified

 

three

 

main

 

drivers

 

for

 

this

 

increase

 

in

 

costs:

 



 

No

 

employee

 

contributions

 

are

 

required

 

for

 

dependent

 

coverage.

 

 –

 

Employees

 

have

 

no

 

incentive

 

not

 

to

 

cover

 

their

 

spouse/dependent

 

under

 

our

 

plan

 

because

 

coverage

 

is

 

free

 

even

 

when

 

coverage

 

is

 

available

 

through

 

a

 

working

 

spouse’s

 

plan.

 

As

 

a

 

result,

 

almost

 

all

 

employees

 

elect

 

to

 

cover

 

their

 

entire

 

family

 

under

 

the

 

Foundation

 

plan

 

so

 

we

 

end

 

up

 

with

 

an

 

“adverse

 

selection”.

 

Approximately

 

one

‐

third

 

of 

 

employees

 

have

 

dependent

 

coverage.

 

Non

‐

profit

 

benchmarking

 

information

 

for

 

international

 

NGOs

 

shows

 

that

 

the

 

average

 

monthly

 

contributions

 

for

 

covering

 

a

 

spouse,

 

child(ren)

 

or

 

a

 

family

 

are

 

$250,

 

$200

 

and

 

$350,

 

respectively,

 

so

 

we

 

are

 

significantly

 

below

 

the

 

common

 

practice.

 



 

We

 

maintain

 

a

 

generous

 

plan

 

design

 

compared

 

to

 

the

 

competitive

 

market.

 

 –

 

Certain

 

features

 

of 

 

the

 

plan

 

(e.g.,

 

co

‐

pays)

 

have

 

not

 

been

 

adjusted

 

to

 

competitive

 

norms.

 

The

 

key

 

plan

 

coverage

 

provisions

 

compared

 

to

 

2011

 

benchmarking

 

data

 

show

 

that

 

our

 

plan

 

provisions,

 

except

 

for

 

preventative

 

care,

 

are

 

significantly

 

more

 

generous

 

than

 

the

 

norms

 

as

 

follows:

 

 

Benefits

 

pg.

 

2

 

Clinton

 

Foundation

 

Medical

 

Plan

 

Provisions

 

vs.

 

Benchmarking

 

Data

 

Current

 

Plan

 

Market

 

Deductibles

 

Individual/Family

 

Individual/Family

 

Network

 

Providers

 

$250/$500

 

$500/$1,000

 

Non

‐

Network

 

Providers

 

$500/$1,000

 

$750/$1,500

 

Out

‐

of 

‐

Pocket

 

Maximums

 

Network

 

Providers

 

$1,000/$2,000

 

$1,500/$3,000

 

Non

‐

Network

 

Providers

 

$2,500/$5,000

 

$3,000/$6,000

 

Office

 

Visit

 

Co

‐

Pays

 

Network

 

Providers

 

$15

 

for

 

charges

 

up

 

to

 

$300

 

$25

 

for

 

charges

 

up

 

to

 

$300

 

Prescription

 

Drug

 

Co

‐

Pays

 

Generic

 

$5

 

$10

 

Preferred

 

Brand

 

$20

 

$25

 

Non

‐

Preferred

 

Brand

 

$30

 

$50

 

Preventative

 

Care

 

Subject

 

to

 

deductibles,

 

co

‐

pays

 

and

 

co

‐

insurance

 

Pay

 

at

 

100%

 



 

We

 

use

 

regional

 

provider

 

networks

 

and

 

have

 

allowed

 

providers

 

in

 

our

 

network

 

that

 

provide

 

lower

 

or

 

no

 

discounts.

 

 –

 

The

 

provider

 

discounts

 

obtained

 

by

 

using

 

smaller,

 

regional

 

networks

 

are

 

substantially

 

less

 

than

 

using

 

a

 

national

 

network

 

(e.g.,

 

CIGNA

 

or

 

Aetna).

 

We

 

also

 

have

 

the

 

legacy

 

of 

 

a

 

past

 

practice

 

where

 

we

 

allowed

 

employees

 

to

 

include

 

any

 

doctor

 

they

 

nominated

 

in

 

the

 

network

 

even

 

when

 

we

 

did

 

not

 

obtain

 

a

 

discount.

 

Based

 

on

 

a

 

recent

 

analysis

 

we

 

conducted

 

using

 

the

 

CIGNA

 

and

 

Aetna

 

networks,

 

92%

 

of 

 

the

 

Little

 

Rock

 

and

 

84%

 

of 

 

the

 

New

 

York

 

providers

 

currently

 

used

 

by

 

our

 

employees

 

participate

 

in

 

these

 

national

 

networks,

 

presenting

 

an

 

opportunity

 

to

 

achieve

 

cost

 

savings

 

with

 

a

 

fairly

 

moderate

 

level

 

of 

 

disruption.

 

Recommendations

 

Based

 

on

 

the

 

total

 

compensation

 

strategy

 

we

 

adopted

 

last

 

year,

 

which

 

targets

 

our

 

compensation

 

and

 

benefit

 

programs

 

at

 

the

 

average

 

level

 

provided

 

by

 

other

 

similar

 

organizations,

 

we

 

recommend

 

the

 

following

 

approach

 

for

 

addressing

 

these

 

issues: