Southeast Missouri State University

1
Southeast Missouri State University
Campus Forum on Medical Insurance

• May 5, 2004
• Presented by
• CBIZ Benefits Insurance Services, Inc.
• David J. Johnson, GBA, RPA, Manager of Client
  Services
• James V. Vigliaturo, Jr., Vice President

2
CBIZ is

• One of the nations leading providers of
  outsourced business services
• Offices in most major cities in the U.S.
• 9th largest Accounting Firm
• 13th largest Business Insurance Firm
• 1 Benefits Specialist in the U.S. for the last
  two years
• Other local clients include the City of Cape
  Girardeau, Cape Girardeau School District and
  Jackson School District

3
Southeast Missouri State University contracted
with CBIZ to provide

• Information on national and regional benefit
  trends
• Conduct Request for Proposal (RFP) for benefit
  programs
• Make recommendations based on review of current
  programs and results of RFP

4
Market Projections

• Expenses for health plan sponsors will double in
  5 years (Hewitt)
• Health care inflation outpaces all other cost
  increases (Bureau of Labor Statistics)
• CalPERS HMO premiums increased 18.4 in 2004
  PPOs increased 17
• Towers Perrin forecasted 15 increase in medical
  claims for 2004
• Hewitt forecasted HMO increases of 17.7
  nationwide, 20 in the Midwest for 2004

5
Latest Market Forecasts

• Watson Wyatt NBGH forecasts 12 average
  increase in healthcare cost this year (2004),
  down from 13 in 2003.
• High Performers 7 increase
• Low Performers 17 increase

6
Why Health Care Costs are Rising

• Aging population, overweight population - many
  Americans have increasing chronic conditions
  (asthma, diabetes, elevated cholesterol,
  arthritis)
• Doctors diagnosing treating chronic illness at
  a higher rate
• Managed care plans cover more of the costs
• New drugs are highly marketed
• 50 increase in spending to treat depression,
  high cholesterol, diabetes, arthritis, high blood
  pressure, pain, allergies, ulcers, and
  gastro-intestinal ailments
• Anti-depressants - top selling drug category, up
  by 20

7
Out-of-Pocket Costs as a Percent of Total Health
Expenditures
US Average (1970 2000)
Estimated (2001 2003)
8
Historical Look at Pharmacy Spending
Billions
9
What Current Research Tells Us

• 15 of a plans members incur 85 of paid claims
• 5 of a plans members incur 45 of paid claims
• 85 of members use the plan sparingly

10
Benefit Trends

• Deductible/Coinsurance Prescription Drug Plans
• 4-Tier Prescription Drug Copays
• Core/Buy Up Concept
• Defined Contribution Programs
• Consumer Centric/Driven Program
• Implement Health Productivity Program
• Engage employees to be better consumers
• Engage employees to take better care of
  themselves
• Engage your community to become involved

11
Where do we go from here????

• We need to embrace 5 thoughts
• The employer will not be able to financially
  provide unlimited health care benefits for all
  employees.
• Focus on the majority of your insureds the 85
  who use plan sparingly and help the 15 with
  their health issues.
• Need to develop and communicate long term
  strategy to educate value and importance of good
  health habits.
• There are limited opportunities to solve problems
  through competitive bidding process.

12

• Reasons for Withdrawal from MSU Consortium
• Lack of Flexibility (plan design/retiree rating,
  etc.)
• Results of RFP show interest in the market for
  the Southeast Missouri benefit plans
• Withdrawal of other schools
• Send out updated RFP in mid-Summer
• Additional claims information should allow more
  proposals

13
When examining responses to RFP, review 4 key
areas

• Pricing
• Plan Design (Benefit Structure)
• Administrative Capabilities of Responders
• Network of Providers (Doctors and Hospitals)
  available