2. INTRODUCTION
Introduction Methodology
For purposes of clarification, in this booklet we will refer to health- Data was compiled from 142 client benefit plans of Gallagher
care (as one word) when discussing the term in relation to the Benefit Services (GBS) and UMR in April 2010. This represents
industry and utilize the term health care (as two words) in refer- a 14.5 percent increase over 2009 when 124 plans were
ence to the type of coverage. reviewed. In addition 62 supplemental survey responses were
received, representing an increase of 19 percent over the 42
We have moved into new territory. The Patient Protection and
responses received in 2009.
Affordable Care Act is now law, and much of the regulation
addresses reform of the healthcare system. These new regula- The survey was conducted on an organizational basis, with
tions will impact your employee medical benefit plans and your only one recipient per hospital, and data was reviewed for
business. Gallagher Healthcare Practice Group has extensive validity and completeness of response. When respondents
information discussing the impact of reform on your organiza- chose not to answer a question or indicated the question was
tion, and we would be happy to share this information with you. “not applicable,” the base size used was that which applied to
However, this report, while containing information about strategic the specific question. When the accuracy, completeness or
program 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 pharmacy
employer 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 employees
We 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 of
our 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. 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 in
35 states and the D.C.
participating in the dataset.
3
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. 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. Incentives
Forty-seven percent of responding hospitals (about the same
as last year) use incentives within their benefit structure to
encourage healthy behavior and participation in health
management programs. Of these, 58 percent use premium
contribution reductions (about the same as last year) and two-
thirds offer assistance in meeting deductibles (about double
last year’s results).
There can be any number of criteria that must be met in order
for employees to receive the incentives. Almost all (93 percent)
who offer incentives do so if the employee completes a health
risk appraisal, this is up from about 50 percent last year. In addi-
tion, three-quarters of respondents specifically indicated a
requirement of having a biometric screening in conjunction with
the Health Risk Appraisal. Other criteria included participation
in specific health and wellness activities (seventy percent of
respondents who offer incentives this year as compared to 48
percent last year), participation in disease management
programs (over 50 percent this year as opposed to about 40
percent last year), or being tobacco free (also over 50 percent
this 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. Managing costs with techniques Professional Domestic Reimbursement Methodology
unique to healthcare providers
Domestic reimbursement methodologies % of Medicare
This year about 57 percent of our respondents indi-
cated that they set their own domestic facility RBRVS fee schedule
reimbursement rates rather than running claims
through existing provider network contracts, up
% of billed charges
from 49 percent last year. This approach gives
hospitals additional control over the cost of the 0% 6% 12% 18% 24% 30% 36% 42% 48% 54% 60%
employee medical plan, eliminates fluctuation in
revenue from employees when carrier changes are
made and, when reimbursement is set at a rate
lower than typical payment contracts, results in Facility Domestic Reimbursement Methodology
lower out-of-pocket expenses for employees. In Other
addition, the facility that uses a reimbursement % of Medicare
schedule which is less than existing contracts can ASC case rate
also have a positive impact on the cost of any stop-
Per diem
loss insurance purchased for the program. Once
DRG
again, the majority of hospitals that set their own
domestic 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 our
respondents use a percentage equal to or greater
than 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 some
margin 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) or
using a combination of approaches (17 percent)
were also used. One respondent used the RBRVS
schedule.
7
8. Are domestic clinicians/staff personnel
Pharmacy 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 the
provide incentives for their employees to use owned or in-house respondents indicate that
pharmacies (57 percent, up from 53 percent last year). Using a they are using domestic
YES
PBM 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 an
aggressive GPO or Medicare 340B pricing contracts to which increase from 34 percent
they 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 year
PBM 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. 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. 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
