Health Insurance Shared Services Analysis
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Health Insurance Shared Services Analysis Project Report Submitted To: Joint Commission On Shared Services Initiatives April 10, 2013 Compiled By: Eau Claire County Eau Claire Area School District City of Eau Claire 721 Oxford Avenue 500 Main Street 203 S. Farwell Street Eau Claire, WI 54703 Eau Claire, WI 54701 Eau Claire, WI 54701 TABLE OF CONTENTS I. Introduction . 1 II. Executive Summary . 3 III. Defining the Current State of Health Insurance . 6 A. Current Programs. 6 1. Current Insurance Companies . 6 2. Renewal Dates . 6 3. Demographics . 6 4. Benefits Comparison (Coverage Analysis) . 8 5. Analysis of Expenses Within the Deductible. 9 6. Out of Pocket Employee Paid Expenses. 10 7. Wellness Program Plan Designs . 11 8. Premium Rates . 14 9. Premium Rate Increase History . 15 10. Total Annual Cost to Provide Health Insurance . 16 11. Claims Data – Where Does the Money Go? . 16 B. Medical Cost and Health Insurance Trends. 17 C. Regional Medical Cost Analysis . 20 D. Access to Accurate Pricing and Cost Information . 25 E. Quality of Health Care in the Chippewa Valley . 26 F. Availability of Insurance Companies – Region and State. 27 G. Insurance Company Administrative Cost Analysis . 28 H. History of Combined Public Sector Health Insurance Purchasing Efforts . 29 I. Impact of Federal Legislation . 30 J. Description of Regional Medical Facilities and Services . 33 IV. Prioritization of Collaborative Opportunities . 34 V. Collaborative Opportunities and Barriers . 36 VI. Conclusion . 45 Works Cited. 46 Appendix Table of Contents . 47 i I. Introduction I. INTRODUCTION A Report to the Joint Commission on Shared Services Initiatives Health insurance is expensive and, for most employers, the fastest growing expense. This is also true for public entities like the Eau Claire Area School District (ECASD), City of Eau Claire and Eau Claire County. These entities spend a combined $46 million each year on health insurance. Furthermore, this expense is consistently, year after year, rising much faster than inflation and sources of revenue. This report, commissioned by the Joint Commission on Shared Services Initiatives, reviews the current state of health insurance for these three public entities. It also explores possible ways the entities may better impact and control the cost of health care by working together, versus standing alone. The Joint Commission on Shared Services Initiatives was created to provide visionary leadership in the delivery of collaborative public services by identifying opportunities and challenges, engaging the multiple constituencies, and developing strategies to support collaboration in areas of common interest among the governmental bodies. The Commission makes recommendations to the School Board, City Council and County Board for approval of concepts and strategies for implementation. The Commission consists of three School Board members, three City Council members and three County Board members. Current members of the Commission are: Eau Claire Area School District Carol Craig Brent Wogahn Kathryn Duax City of Eau Claire David Duax Jackie Pavelski Kerry Kincaid Eau Claire County Colleen Bates Gregg Moore Gerald Wilkie 1 Priority Partnership Opportunities (Projects) that have been identified by the Joint Commission on Joint Services Initiatives include: • Combine information technology & communications technology functions • Share administrative functions • Include the school district in joint purchasing program • Joint health care insurance program • Combine land record systems including GIS • Share administrative space and facilities This report is a review of the current health insurance and wellness plan for each entity, and an exploration of the options for combining the plans. The goal is to improve the health insurance buying power and experience rating of the group to produce healthier and more engaged consumers of health care. Team Members that produced this report include: Kay Marks, Executive Director of Human Resources, Eau Claire Area School District Daniel Van De Water, Executive Director of Business Services, Eau Claire Area School District Dale Peters, Director of Human Resources, City of Eau Claire Frank Draxler, Director of Purchasing, City & County of Eau Claire Scott Rasmussen, Director of Finance, Eau Claire County Heather Baker, Director of Human Resources, Eau Claire County Carrie Riepl, Human Resources Secretary, City of Eau Claire 2 II. Executive Summary II. EXECUTIVE SUMMARY Health insurance is the fastest growing line item in the budget of any business that offers health insurance to its employees. A public sector employer is no different. In fact, in this age of decreasing revenue and increased demand for services, failure to control health insurance costs can result in layoffs and reductions in services. This report focused on exploring ways that public entities in the Chippewa Valley, principally the Eau Claire Area School District, City of Eau Claire and Eau Claire County, can work together to lower the cost of providing health insurance to their employees. Although the report was completed specifically with regard to these three public entities, the recommendations and resulting collaborations are made with the flexibility and understanding that other units of local government may want to participate as well. Report Philosophy The price of an employer’s health insurance premium is really quite simple. It is a function of the medical claims (cost of each medical procedure, number of medical procedures and cost of prescriptions), the cost to administer the claims, the cost of catastrophic or large loss protection and the profits of the insurance company. By far, the largest component of any health insurance premium is the employer’s claims experience. The authors of this report believe strongly that the way to impact the cost of claims and consequently the cost of health insurance is to: 1. Have healthy employees. 2. Have employees establish relationships with primary doctors that encourage wellness and preventive screenings. 3. Have easy access to high quality care for employees with chronic conditions and have these conditions actively managed. 4. Have employees actively engaged in understanding the price and quality of the medical services they receive. 5. Continue to require that employees have a reasonable financial interest concerning their health insurance costs and options. 3 Report Methodology This report was divided into three primary sections: • Understanding the current state of health care in the Chippewa Valley. Prior to answering any question, it is important to know the problem or situation that is to be addressed. Health care and the purchase of health insurance for employees is complex, with many players that have a strong financial interest, sometimes in maintaining the status quo. This report attempts to carefully describe the quality, cost, and availability of health care and insurance services to local employers. It also carefully describes the health insurance and wellness plans offered by each of the three public entities in order to be able to make “apples to apples” comparisons of the plans and identify features of the plans that are successful. • Exploring opportunities for future collaboration. This section of the report focuses on ways that the public sector, working together, can leverage their significant resources together to influence the quality and cost of health services offered to their employees. • Developing recommendations and priorities. There is no quick or easy solution for controlling health insurance costs. This section of the report takes the information and ideas gathered in the development of the report and presents recommendations or a “road map” for how the three entities can move forward together in a collaborative manner to positively impact the cost of the health insurance that is provided to their employees. Summary of Findings • Medical procedures and drugs are expensive. • The cost of medical procedures and drugs (medical CPI) is rising significantly faster than the price of general consumer goods and personal income (CPI). • The rate of increase in the cost of medical procedures in the Chippewa Valley is higher than the state and national medical CPI. • All area hospitals routinely have higher net operating income and total net income than the average for hospitals in the state of Wisconsin. • There is high variability in the cost of procedures from facility to facility. • It is very difficult to obtain an accurate price quote for specific procedures from a medical facility or clinic. 4 • The price or cost of a procedure is not based upon the outcome of the procedure. • The Chippewa Valley generally enjoys high quality and broad access to specialty medical care. • Wellness programs can positively impact the utilization of medical services and cost of claims. • The current purchasing practices of each entity present challenges for having all three entities covered by the same insurance company. • Combined, the School District, City and County spend more than $46 million every year on health insurance. • Consistent, complete and “apples to apples” claims data is difficult to obtain from different insurance companies. • Complete paid claims data can be difficult to obtain in usable formats. • Historically, health insurance premium increases have not been stable or predictable, which can provide large variances in entity budgets. • In order for employees to embrace recommendations for engaging price and quality discussions