Employee Health & Pharmacy

Benefits Proposal

Presented to: Finance & Facilities Committee

February 7, 2013

1

History

Self-Insurance ¡ UNM’s Group Medical Plan has been self-

insured since FY 2010 l  Prescription Drug carve-out

¡ Third Party Administrators (TPAs) have administered the medical and pharmacy plans l  Medical TPAs: Lovelace & Presbyterian l  Pharmacy Benefit Manager: Express Scripts

2

Rising Cost of Health Care

UNM Specific Challenges ¡ Average employee age ~ 50

¡ Under age 65 retirees are on active plan

¡ UNM provides choice (3 provider networks): Lovelace, Presbyterian, & UNMMG

¡ Healthcare Reform has increased costs by approximately 2.2%

3

Employee Benefits Proposal

Current Enrollment Individuals Impacted

    Lovelace   Presbyterian  Active Employees   3,516   2,073  Active Dependents   3,505   2,302  Total Active Lives   7,021   4,375  Under 65 Retiree   371   236  Under 65 Retiree Dependents   269   215  Total Under 65 Retiree Lives   640   451             Total UNM Medical Plan Lives   7,661   4,826  Total Membership Allocation    61%    39%  Medical Plan Employees and Retirees   6,196  Medical Plan Dependents   6,291  Grand Total Medical Plan Lives   12,487  

4

Rising Cost of Health Care

Trends ¡ UNM’s premium increases have averaged

2.7% since self-funding began

¡ UNM’s claim increases have averaged 10% since FY 11

•  Excluding FY 10 due to first year self-insured transition

¡  Segal national trend survey for FY13 projects cost increase of:

•  Medical without Rx 9.3% •  Rx carve out 6.4%

5

Employee Benefits Proposal

Fiscal Year 2014 ¡ Convened a committee with broad

representation to develop RFP & evaluate proposals

¡ UNM advertised bids under the following financing options: l Medical

•  Self Insured Administrative Services Only (ASO)

l Pharmacy •  Traditional and Pass Through

6

Employee Benefits Proposal

Administrative Services Only (ASO) ¡ Six proposals were received ¡ Three finalists:

l Blue Cross Blue Shield of New Mexico (BCBSNM)

•  Uses the same facility provider network as Lovelace

l Lovelace (incumbent) l Presbyterian (incumbent)

7

Employee Benefits Proposal Pharmacy Benefits Manager (PBM)

¡ Bid two options at the recommendation of UNM College of Pharmacy

¡ Nine proposals were received ¡ Four finalists:

l Catamaran •  Traditional proposal

l Express Scripts (ESI) (incumbent) •  Traditional and Pass Through proposals

l Navitus •  Pass Through proposal

l Optum Rx •  Pass Through proposal

8

Employee Benefits Proposal

Fiscal Year 2014 Recommendations

¡ Medical: Lovelace & Presbyterian

¡ Pharmacy: Express Scripts Traditional

9

Changes in Average Premium

21% 22%

12%

3%

10% 9%

4%

0%

2%

0%

9%

10%

12% 11% 11%

10%

8% 8% 9%

0%

5%

10%

15%

20%

25%

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 SELF

FY11 SELF

FY12 SELF

FY13 SELF

FY14 SELF*

UNM National *Projected

10

Changes in Medical and Rx Total Costs

$18,

460,

000

$21,

443,

000

$22,

930,

000

$24,

173,

000

$26,

184,

000

$28,

873,

000

$33,

538,

000

$35,

865,

000

$37,

808,

000

$40,

954,

000

$47,

333,

000

$54,

981,

000

$58,

795,

000

$61,

981,

000

$67,

138,

000

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

FY10 FY11 FY12 FY13* FY14*

Employee (39%) Employer (61%) Total *Projected

11

Medical and Rx Premiums

Premium Changes Estimations ¡ Active Employees

12

TPA Premium Percentage Increase Lovelace 4% – 5%

Presbyterian 13% – 14%

Employee Benefits Proposal

Medical Proposal Rationale

¡  No disruption as TPAs will not change

¡  Although BCBSNM ASO fees were significantly lower than Lovelace, they could not offset Lovelace’s lower provider discounts

13

Employee Benefits Proposal

Pharmacy FY14 Projected Costs

¡  Pharmacy Benefits Manager (PBM)

PBM Projections Difference Express Scripts Traditional $11,775,470 --

Catamaran Traditional $11,777,586 $2,116

Optum Rx Pass Through $11,862,747 $87,276

Express Scripts Pass Through $12,269,039 $493,569

Navitus Pass Through $12,354,281 $578,810

14

Employee Benefits Proposal

Pharmacy Proposal Rationale ¡  ESI financial score was highest

l  Note: It was less than $2,000 apart from the next highest bidder for total drug spend

l  All finalists bids were lower than FY12 costs

¡  No disruption l  Third Party Administrator will not change l  No formulary disruption l  No network pharmacy disruption l  Minimal reauthorization for existing Rx

15

Employee Benefits Proposal

Calendar of Events Date Event

February 2013

•  Award Contracts (Purchasing) •  Begin Negotiating Contract Details •  Receive Draft Summary of Benefits from Vendors

-  Plan design changes must be made before Summary of Benefits (SBC) can be finalized

-  Significant retiree health care changes that impact under 65 retirees, who are covered on the active employee plan, are anticipated

-  Health Care Reform requires the SBC be provided by the first day of Open Enrollment

16

Employee Benefits Proposal

Calendar of Events Date Event

February - June 2013

•  Prepare New Plan Document -  Changes related to under 65 retirees, who are

covered on the active employee plan, must be made

•  UNM Business Policy changes related to under 65 retirees must be made

-  A 30 day campus comment period is required •  Facilitate Vendor Implementation

March 2013

•  Finalize Projected Contribution Rates for UNM and Employees

•  Banner updates/changes must be completed and tested

•  Employee Self Service must be completed and tested 17

Employee Benefits Proposal

Calendar of Events Date Event

April 2013

•  Receive Stoploss Rates from Gallagher •  Communicate with Benefits-Eligible Employees •  Begin Open Enrollment

-  Occurs before faculty leave campus for summer

May 2013 •  Audit and Finalize Open Enrollment

June 2013 •  Finalize Vendor Contracts

July - September 2013 •  Complete Post Implementation Audit

18

Questions

19