2010 Hospital Benefit Plans     and Strategies Report
INTRODUCTIONIntroduction                                                                                   MethodologyFor ...
The participants          The plan design analysis represents benefit plan          data from 142 hospitals and health sys...
KEY FINDINGS           Key findings           • Healthcare employers increased employee               cost sharing in 2010...
COSTS   Managing costs with plan design        Multi-tiered benefit plans                               Consumer-driven he...
IncentivesForty-seven percent of responding hospitals (about the sameas last year) use incentives within their benefit str...
Managing costs with techniques                               Professional Domestic Reimbursement Methodologyunique to heal...
Are domestic clinicians/staff personnelPharmacy                                                                    Managed...
Population         Population health risk management         Employers, including hospitals, are focusing more on         ...
A CLOSER    LOOK           A closer look at plan design           Plan prevalence           Once again 83 percent of the p...
PPO HMO POS   Benefit              Annual Deductible/Family              Annual Deductible/Individual              Annual ...
Matt Warner                                 About Gallagher Benefit Services, Inc.                                 Arthur ...
Upcoming SlideShare
Loading in …5

Hospital Benefit Plans & Strategies Report


Published on

A 2010 report from Gallagher Benefits on various hospital benefits plans and strategies.

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Hospital Benefit Plans & Strategies Report

  1. 1. 2010 Hospital Benefit Plans and Strategies Report
  2. 2. INTRODUCTIONIntroduction MethodologyFor purposes of clarification, in this booklet we will refer to health- Data was compiled from 142 client benefit plans of Gallaghercare (as one word) when discussing the term in relation to the Benefit Services (GBS) and UMR in April 2010. This representsindustry and utilize the term health care (as two words) in refer- a 14.5 percent increase over 2009 when 124 plans wereence to the type of coverage. reviewed. In addition 62 supplemental survey responses were received, representing an increase of 19 percent over the 42We have moved into new territory. The Patient Protection and responses received in 2009.Affordable Care Act is now law, and much of the regulationaddresses reform of the healthcare system. These new regula- The survey was conducted on an organizational basis, withtions will impact your employee medical benefit plans and your only one recipient per hospital, and data was reviewed forbusiness. Gallagher Healthcare Practice Group has extensive validity and completeness of response. When respondentsinformation discussing the impact of reform on your organiza- chose not to answer a question or indicated the question wastion, and we would be happy to share this information with you. “not applicable,” the base size used was that which applied toHowever, this report, while containing information about strategic the specific question. When the accuracy, completeness orprogram initiatives that may also be of use to your organization validity of the data was in question, it was not used.as the health system reforms, is focused on helping you as an When an employer offered more than one medical or pharmacyemployer manage the conflicting interests of your employees program option, the prevalent plan (plan with the highest enroll-and your organization’s fiscal health as it relates to your medical ment) was selected for inclusion in the data set.benefits program. Plan options that include a higher level of benefits for employeesWe initiated this project on behalf of hospital and health system who use domestic facilities and/or providers are noted as such.plan sponsors to better understand current benefit and opera-tional strategies as well as future plans. This is the second year ofour analysis so we can look at current medical program compo-nents as well as benefit trends since last year.In this report... In this report .....................................................................2 Population health risk management ................................9 Methodology ....................................................................2 Making better decisions ...................................................9 The participants................................................................3 A closer look at plan design ..........................................10 The respondents ..............................................................3 About Gallagher Benefit Services, Inc. .........................12 Key findings .....................................................................4 About UMR ....................................................................12 Managing costs with plan design ...................................5 Managing costs with techniques unique to healthcare providers ..........................................................................7 2
  3. 3. The participants The plan design analysis represents benefit plan data from 142 hospitals and health systems across the country. Thirty-five states and the District of Columbia are represented, up from 31 last year. The 11.3% 43.5% 11.3% biggest concentration of participants continues to be from Texas, with Wisconsin, North Carolina, New Jersey, California, and Georgia representing the largest next five. This year 67 hospitals are located in the South, 39 in the Midwest, 14 in the Northeast 33.9% and 22 in the West. The average group size in 2010 was 2,117 There are 62 hospitals in employees, up four percent from 2009, and the 25 states responding to the survey. average number of plans offered was exactly 3 (it was 2.88 in 2009). Once again 75 percent of the plans renewed in the first quarter of the year, so The respondents their data represents 2010 plan design. The other Supplemental survey responses were received from 62 hospi- participants renewed later in the year, so their data tals across the country, with the largest concentration from the reflects 2009 plan design. Midwest and South. Over half operate a single acute care hospital, and four of the respondents operate 10 or more facili- ties. Academic facilities represent just over 20 percent of the respondents. One-third of the 2010 respondents employed 1000 or less 15.5% 27.5% 9.9% employees, 45 percent employed between 1000 and 5000 employees, with the remaining 21 percent employing over 5000 employees. Eighty-seven percent of respondents employed primary care physicians and 77 percent employed specialists, up from less than 70 percent last year. Twenty-seven percent of 47.2% the respondents have union employees, about the same as last year.There are 142 hospitals in35 states and the D.C.participating in the dataset. 3
  4. 4. KEY FINDINGS Key findings • Healthcare employers increased employee cost sharing in 2010, using significant plan design changes rather than premium • While benefits for preventive services have become richer and more comprehensive (a good thing), a disconcerting trend from last year continues: less than half of the contribution increases to do so. Prevalent respondents are offering Health Risk Appraisals or Health plan individual deductibles were up as much and Wellness Incentives to their employees. This as 36 percent over last year, and family indicates that many healthcare facilities are still providing deductibles were up 33 percent, but only for sick care insurance for their employee medical benefit non-domestic providers. Contribution programs and not a longer term focused health and amounts did not seem to shift significantly, so wellness approach. Interestingly, this is a common the healthcare employers chose to increase complaint among those who championed reform about cost sharing from those who used the plan the system overall. more and did not use domestic facilities, • Those organizations that use domestic staff to deliver rather than from everyone across the board. aspects of existing health, wellness and chronic disease 40% Percent change from 2009 management programs are still in the minority. As the 35% Domestic Center for Medicare and Medicaid Studies continues to 30% In push healthcare reform toward integrated delivery with a 25% Out health and wellness focus, more healthcare organizations 20% 15% may realize the wisdom of using the medical benefit plan 10% 5% program as a platform to gain competencies for the future 0% (not to mention medical program cost-containment). -5% -10% • Use of online benefit enrollment seems to be on the rise Fam Deduct Ind Deduct Fam OOP Ind OOP among healthcare employers. • New this year were questions on the use of stop-loss insurance against the risk of budget- busting catastrophic claims. We found that nearly 80% of the respondents use this financial risk management tool, although not all cover domestic claims under the insurance contract and many set their own domestic claim reimbursement schedules lower than their commercial contracts, both of which serve to lower the premium cost. 80% Stop Loss 70% 60% Yes 50% No 40% 30% 20% 10% 0% Specific Aggregate 4
  5. 5. COSTS Managing costs with plan design Multi-tiered benefit plans Consumer-driven health plans Once again open access PPO plans are the plan of Once again healthcare respondents who offer high-deductible, choice for most hospital facilities and employees. consumer-driven health plans are in the minority (24 percent PPO plans were the prevalent plan for 83 percent of this year as compared to 29 percent of last year’s respondents) the participant organizations, the same as last year. and they offer these plans as an option to more traditional Within these plans, the network plan design features programs. Of those 15 respondents offering consumer-driven an average individual deductible of $758 and a plans, four also include an employer-funded Health Reimburse- family deductible of $1841. The employees’ coin- ment Account, and 6 offer Health Savings Account access. surance obligation average 21 percent, up from last When a respondent contributed employer funds to the HRA or year’s 19 percent. Once again three-quarters of the HSA, the most common amount was between $250 and $500 respondents pay for between 70 and 90 percent of for single coverage and between $500 and $1000 for family the cost of coverage for employees in the prevalent coverage, the same as last year. plan. Fifty-nine percent of the participants this year offer employees more comprehensive benefits if they use domestic facilities or providers, up from 51 percent last year. On average, for the domestic Offer CDH plan, the individual deductible is reduced to $323 and the family deductible is reduced to $1001, YES about the same as last year’s averages. The 24% employees’ coinsurance obligation under the domestic plan averaged four percent, again about NO the same as last year. While the domestic program’s 76% deductible and coinsurance features are about the same as they were last year, the domestic option must seem even more attractive to employees since deductible and coinsurance obligations have If so, do you offer a cash account? 45% increased for nondomestic services. 40% 35% 30% 60% Employer Contribution 25% Single 20% 45% Family 15% 10% 30% 5% HDHP only HDHP w/HSA HDHP w/HRA 15% 0% >90% 80-89% 70-79% 60-69% <60% 5
  6. 6. IncentivesForty-seven percent of responding hospitals (about the sameas last year) use incentives within their benefit structure toencourage healthy behavior and participation in healthmanagement programs. Of these, 58 percent use premiumcontribution reductions (about the same as last year) and two-thirds offer assistance in meeting deductibles (about doublelast year’s results).There can be any number of criteria that must be met in orderfor employees to receive the incentives. Almost all (93 percent)who offer incentives do so if the employee completes a healthrisk appraisal, this is up from about 50 percent last year. In addi-tion, three-quarters of respondents specifically indicated arequirement of having a biometric screening in conjunction withthe Health Risk Appraisal. Other criteria included participationin specific health and wellness activities (seventy percent ofrespondents who offer incentives this year as compared to 48percent last year), participation in disease managementprograms (over 50 percent this year as opposed to about 40percent last year), or being tobacco free (also over 50 percentthis year as opposed to about 40 percent last year). Offer Incentives? YES NO 47% 53% Incentive Criteria Incentives HRA participation Deductible assistance Biometric Results HW participation Premium reduction DM participation Other Non-smoker 0% 20% 40% 60% 80% 100% 0% 16% 32% 48% 64% 80% 6
  7. 7. Managing costs with techniques Professional Domestic Reimbursement Methodologyunique to healthcare providersDomestic reimbursement methodologies % of MedicareThis year about 57 percent of our respondents indi-cated that they set their own domestic facility RBRVS fee schedulereimbursement rates rather than running claimsthrough existing provider network contracts, up % of billed chargesfrom 49 percent last year. This approach giveshospitals additional control over the cost of the 0% 6% 12% 18% 24% 30% 36% 42% 48% 54% 60%employee medical plan, eliminates fluctuation inrevenue from employees when carrier changes aremade and, when reimbursement is set at a ratelower than typical payment contracts, results in Facility Domestic Reimbursement Methodologylower out-of-pocket expenses for employees. In Otheraddition, the facility that uses a reimbursement % of Medicareschedule which is less than existing contracts can ASC case ratealso have a positive impact on the cost of any stop- Per diemloss insurance purchased for the program. Once DRGagain, the majority of hospitals that set their owndomestic facility rates did so on a simple percent of % of billed charges 0% 9% 18% 27% 36% 45% 54% 63% 72% 81% 90%billed charges basis. The percentage used,however, varies greatly. Nearly a quarter of ourrespondents use a percentage equal to or greaterthan 90 percent of billed charges, while over a third Average Domestic Reimbursement(37 percent) use between 50 and 70 percent of 25%billed charges. Sixty percent of the respondents 20%indicate that their methodology includes somemargin for profit while the other 40 percent are 15%offering services at cost to their employees. 10%About a third of respondents set their own domestic 5%professional reimbursement as well, up from about 0%20 percent last year. Again the most common meth- >90% 80-89% 70-79% 60-69% 50-59% 40-49% >40%odology was to use a percent of billed charges(used by half of those who set their own profes-sional reimbursement methodology); however,billing as a percentage of Medicare (25 percent) orusing a combination of approaches (17 percent)were also used. One respondent used the RBRVSschedule. 7
  8. 8. Are domestic clinicians/staff personnelPharmacy Managed care involved in the delivery or management of any of your care management programs?Once again more than half of all respondents indicate that they This year, 42 percent of theprovide incentives for their employees to use owned or in-house respondents indicate thatpharmacies (57 percent, up from 53 percent last year). Using a they are using domestic YESPBM negotiated contract to set prescription drug prices remains staff as part of the delivery of 41.9%the most common pricing strategy for these domestic pharma- NO health and wellness 58.1%cies, but one in five of the respondents has used more programs. This is anaggressive GPO or Medicare 340B pricing contracts to which increase from 34 percentthey have access. last year. At these organiza- tions, domestic personnel are most likely to be involved with the Pharmacy Pricing Strategies wellness program (74 percent), smoking cessation program Other (64 percent), or an employee assistance program for behavioral health issues (50 percent). Acquisition Plus GPO On-site clinics Do you have an on-site clinic? Use of on-site clinics by health systems 340B and hospitals remains low. This yearPBM contract schedule 33 percent of respondents indicate YES 0% 7% 14% 21% 28% 35% 42% 49% 56% 63% 70% that they are using an on-site clinic (up 32.8% from 29 percent last year). Once again NO the majority of those who have on-site 67.2% clinics requires employees to pay something for their use and about sixty percent of the respondents allow dependents to also use the clinic. As was the case last year, only half of the respondents generate claims and track clinical activity and cost at the clinic. Over 80 percent of the respondents indicate that there is a registered nurse on staff at the clinic while three-quarters report physicians or LPNs on staff and half use physician’s assistants. Financial risk management New to our report this year is information on the use of stop-loss insurance contracts in self-funded medical plans. Seventy-nine Do you purchase individual Do you purchase aggregate percent of the respondents purchase individual stop-loss stop loss coverage? stop loss coverage? coverage to protect them against the effects of a single cata- YES strophic claim. Of those who purchase stop-loss insurance 57 NO 23% percent use an attachment point equal to or greater than 21% $250,000 and 70 percent also cover domestic claims under the policy. When domestic claims are covered, a little more than YES NO 79% 77% half cover the claims at 100 percent, while the others receive less than 100 percent reimbursement for domestically gener- ated catastrophic claims. Three-quarters of individual stop-loss coverage include medical and prescription drug expenses. Only 23 percent of respondents also purchase aggregate stop loss coverage. 8
  9. 9. Population Population health risk management Employers, including hospitals, are focusing more on respondents offer smoking cessation programs, over proactive health and wellness management. An effec- half offer obesity reduction and about half offer well- tive approach will include a high level of preventive ness coaching services. service benefits, tools to help employees determine Disease management what areas of health and wellness they need to focus Chronic disease management programs were most on individually, and chronic condition management. likely provided by a third party and, according to this Preventive care year’s respondents, use of these programs is up across This year half of our respondents indicate that they the board. Over 60 percent of respondents have cover routine in network preventive care at 100 percent, disease management programs targeted at diabetes, up from just over 40 percent last year. Preventive visits hypertension, asthma, chronic obstructive pulmonary allow individuals face-to-face interactive dialog with disorder (COPD) and congestive heart failure (CHF). caregivers, and the blood work usually associated with Last year only one of these (diabetes) was targeted by these visits can provide additional biometric data. more than half of the respondents. Health and wellness initiatives While quantitative biometric data has proven to be very useful in identifying individual health and wellness Conditions targeted with disease management needs, studies at the University of Michigan Healthcare Diabetes Management Resource Center (Baunstein, Yi, Hirsch- Hypertension land, McDonald, Edington. Am. J. Health Behavior. Asthma 25(4):407-417, 2001) indicate that self-reported data is COPD even more useful. Unfortunately, less than half of our 2010 CHF 2009 respondents offer a formal health risk assessment tool CAD to their employees. Many do, however, offer general Depression support for some well-known health and wellness chal- 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% lenges: for the second year in a row over 80 percent of Making better decisions Plan sponsor data analysis Effective population health risk management requires capturing data about claims, biometric indicators, and self- reported health status. A robust engine to analyze the data and create predictive models is essential for turning the data into useful information and concrete action steps. This year’s respondents use engines from actuarial organiza- tions like Medstat and Ingenix, from their claims administrator or, in the majority of cases, from their broker consultant. In all cases it is important to make sure that the engine has been developed by a team that includes actuaries, clini- cians and information technology experts. Employee and dependent tools The respondents’ use of tools for their employees and their dependents remains quite similar to last year: about 90 percent have provider directory assistance; about 70 percent provide a library of health and wellness information, about 60 percent provide employee self-service and about 15 percent make available provider quality information. The one significant increase in use was for online enrollment, which increased from 49 percent of our respondents last year, to over 60% this year. 9
  10. 10. A CLOSER LOOK A closer look at plan design Plan prevalence Once again 83 percent of the prevalent plans were PPO plans. We defined a PPO plan as a program where services can be obtained from any license provider; where services obtained from a specified group of providers, which usually includes the domestic facility and related providers, are covered at a higher benefit level; and where there are no primary care “gatekeepers.” This year HMO plans were presented 6 percent of prevalent plans, and POS plans comprised 11 percent of prevalent plans. Again there was one indemnity program. We defined an HMO program as one where services must be obtained from a specified group of providers, which usually includes the domestic facility and related providers; and where no benefit is payable for services outside the network unless for true emergency treat- ment. We defined a POS plan as one where services can be obtained from any license provider; where services obtained from a spec- ified group of providers, which usually includes the domestic facility and related providers, are covered at a higher benefit level; and where specialists within the specified group of providers must be accessed through a primary care physician who is also within the specified group of providers. 10
  11. 11. PPO HMO POS Benefit Annual Deductible/Family Annual Deductible/Individual Annual Out-of-Pocket Limit/Individual Domestic $267 $150 $3,417 In-Network $435 $187 $4,304 Out-of-Network $1,710 $830 $9,150 Annual Out-of-Pocket Limit/Family $1,857 $2,354 $5,000 Brand (Formulary/Preferred) ($) $25 $37 $53 Brand (Formulary/Preferred) (%) Brand (Non-Formulary/Non-Preferred) ($) $30 $64 $60 Brand (Non-Formulary/Non-Preferred) (%) Coinsurance 96% 90% 60% Generic ($) $5 $13 $40 Generic (%) Lifetime Plan Maximum $1,833,333 $2,166,667 $2,625,000 Office Visit/Exam ($) $17 $22 $50 Office Visit/Exam (%) - 20% 36% Benefit In-Network Annual Deductible/Family $107 Annual Deductible/Individual $36 Annual Out-of-Pocket Limit/Individual $3,336 Annual Out-of-Pocket Limit/Family $1,583 Brand (Formulary/Preferred) ($) $36 Brand (Formulary/Preferred) (%) Brand (Non-Formulary/Non-Preferred) ($) $57 Brand (Non-Formulary/Non-Preferred) (%) Coinsurance 97% Generic ($) $16 Generic (%) Lifetime Plan Maximum $3,000,000 Office Visit/Exam ($) $28 Office Visit/Exam (%) Benefit Domestic In-Network Out-of-Network Annual Deductible/Family $1,001 $1,841 $3,661 Annual Deductible/Individual $323 $758 $1,496 Annual Out-of-Pocket Limit/Individual $4,308 $6,335 $12,773 Annual Out-of-Pocket Limit/Family $1,866 $2,700 $5,582 Brand (Formulary/Preferred) ($) $33 $41 $41 Brand (Formulary/Preferred) (%) 23% 26% 28% Brand (Non-Formulary/Non-Preferred) ($) $48 $65 $64 Brand (Non-Formulary/Non-Preferred) (%) 33% 39% 37% Coinsurance 92% 79% 56% Generic ($) $10 $12 $14 Generic (%) 12% 20% 26% Lifetime Plan Maximum $2,028,571 $2,261,062 $2,165,179 Office Visit/Exam ($) $19 $24 $31 Office Visit/Exam (%) - 28% 42%
  12. 12. Matt Warner About Gallagher Benefit Services, Inc. Arthur J. Gallagher & Co. (AJG) prides itself on being a national risk management and insuranceArea Vice President consulting leader in the highly specialized Healthcare employer industry. AJG continues toHealthcare Practice Group differentiate itself with incomparable industry expertise, outstanding market leverage, and supe-561.801.7011 rior client service. As a division of AJG, Gallagher Benefit Services (GBS) focuses on all aspectsmatt_warner@ajg.com of compensation and benefit program strategies, analysis, products, and implementation. Since Healthcare employers have unique requirements, we organized the Gallagher Healthcare Prac- tice Group in 2003 to address the complexities and ever-changing issues inherent to the Healthcare industry. Gallagher Healthcare personnel possess the experience and expertise necessary to meet the unique challenges in this market.Tony Anastasia About UMR UMR is the country’s largest third-party administrator of health benefits, providing customizedVice President solutions, cost-effective networks and compassionate service for self-funded medical, dental,Hospital Market vision and disability plans. Serving more than 425,000 hospital members, UMR offers flexibility,952.992.4731 scale and cost savings necessary to help hospitals design customized employee health planstony.anastasia@umr.com to meet their unique needs as both employer and health care provider. In addition, UMR offers a variety of programs to help clients manage their benefit Plans and control costs, including care management, pharmacy benefits administration, reinsurance products, claim recovery manage- ment, claim repricing and provider data management services, and non-network claims cost-containment. © 2010. No part of this document may be reproduced without permission. pgraphicsGBSHospitalGroup/HG_EB_2010.indd