State
of
Arizona

Annual
Check-Up
Benefit Options
October 1, 2007 through
September 30, 2008

Janice K. Brewer
Governor

William Bell
Director
Arizona Department of Administration

FORWARD

Benefit Options is the name for the various insurance benefits offered to Arizona State
employees by the State of Arizona. This report was prepared to give a broad overview of Benefit
Options.
The information provided in the report was gathered from contractors participating in the Benefit
Options insurance programs. This report was compiled to meet the requirements of A.R.S. §38652 (G) and A.R.S. §38-658 (B).
The data shown is presented for the period October 1, 2007 through September 30, 2008. The
active Plan Year runs October 1, 2007 through September 30, 2008. However, all retiree
statistics herein are adjusted to reflect that same period, despite the fact that the retiree Plan Year
runs January 1 to December 31.
Any questions relating to the contents of this report should be addressed to:
Benefit Options
Department of Administration
100 N. 15th Avenue
Suite 103
Phoenix, Arizona 85007
Telephone: 602-542-5008
Fax: 602-542-4048

Contents
Executive Summary

1

Glossary of Terms

2

Health Insurance Trust Fund Summary

5

Enrollment in Benefit Options Medical Plans

6

Networks for Active Employees and Non-Medicare-Eligible Retirees

7

Networks for Medicare-Eligible Retirees

8

Expenses vs. Premiums for Active and Retired Members

9

Expenses for Benefit Options Self-Funded Plans

10

Medical Expenses Associated with Medical Diagnoses

11

Hospital Care

12

Emergency Room Visits

14

Physician Visits

14

Urgent Care Visits

14

Generic and Name-Brand Prescription Use

16

Prescription Use by Therapeutic Class

16

Prescription Use by type of Drug

17

Annual Prescription Use

18

Annual Pharmacy Expenses by Age

19

Benefit Options Dental Plans

20

Dental Rates

22

Life, Disability, Vision Insurance and Flexible Spending Accounts Premiums

23

Health Insurance Vendor Performance Standards

24

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Executive Summary
The purpose of this document is to report the financial status of the Employee Health Insurance
Trust Fund pursuant to A.R.S. §38-652 (G), which reads:
G. The department of administration shall annually report the financial status of
the trust account to officers and employees who have paid premiums under one
of the insurance plans from which monies were received for deposit in the trust
account since the inception of the health and accident coverage program or
since submission of the last such report, whichever is later.
The State’s Benefit Options programs fall into two major categories. The first of these provides
medical and pharmaceutical benefits; the second is comprised of various health benefit programs
including dental, vision, disability insurance, life insurance and a flexible spending account plan.
The health benefit programs, except for the flexible spending account plan, are fully insured. The
medical and pharmaceutical programs fall into one of two types—fully-funded and self-funded.
The self-funded medical plan began on October 1, 2004. As a part of the design, two distinct
options were created: the “integrated” and “non-integrated” options. The differences between
these options are discussed below:
The Integrated Option: Currently UnitedHealthcare (UHC) provides this integrated option.
UHC combines the functions of claims review and payment, contracting and administering a
network of medical providers, utilization review, and disease management, all in one contract
with the State of Arizona.
The Non-Integrated Option: Under this model, the basic functions of the plan are contracted
out to numerous service providers. The Non-Integrated Option allows the State greater flexibility
in contracting since service providers can be replaced, if necessary, without radically affecting
the Benefit Options members.
Schedules of premiums received, incurred and paid medical/drug claims, and expenses related to
the self-funded plans are included within this document. Also included is information regarding
enrollment and the distribution of self-funded medical and pharmacy expenses.
Although not related to the Health Insurance Trust Fund, a summary of premiums collected and
paid for life insurance, vision insurance and flexible spending accounts has also been included.
All data provided herein is for the active employee Plan Year 2007-2008 (October 1, 2007 –
September 30, 2008). Except where noted, data related to the fully-funded Blue Cross Blue
Shield and Secure Horizons plans is excluded.

1

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Glossary of Terms
The following terminology will be used in this report:
Administrative fees – fees paid to third-party vendors for plan administration, network rental,
transplant network access fees, shared savings for negotiated discounted rates with other
providers, COBRA administration, direct pay billing, additional reporting billing, state fees (MA
and NY), and bank reconciliation fees.
Case management – a collaborative process that facilitates recommended treatment plans to
ensure that appropriate medical care is provided to disabled, ill or injured individuals.
Claim – a provider’s demand upon the payer for payment for medical services or products.
Claim appeal – a request for a review of the denial of coverage for a specific medical procedure
contemplated or performed.
COBRA Consolidated Omnibus Budget Reconciliation Act of 1985 – a federal law that
requires an employer to allow eligible employees, retirees, and their dependents to continue their
health coverage after they have terminated their employment or are no longer eligible for the
health plan - COBRA enrollees must pay the total contribution, in addition to an administrative
fee of 2%.
Contribution strategy – a premium structure that includes both the employer’s financial
contribution and the employee’s financial contribution towards the total plan cost.
Copayment – a form of medical cost sharing in the health plan that requires the member to pay a
fixed dollar amount for a medical service or prescription.
Deductible – a fixed dollar amount during the plan year that a member pays before the health
plan starts to make payments for covered medical services.
Dependent – an unmarried child of the employee or spouse who meets the conditions
established by the relevant plan description.
Disease management – a comprehensive, ongoing, and coordinated approach to achieving
desired outcomes for a population of patients - These outcomes include improving members’
clinical condition and quality of life as well as reducing unnecessary healthcare costs. These
objectives require rigorous, protocol-based, clinical management in conjunction with intensive
patient education, coaching, and monitoring.
Eligibility appeal – a request for a review of the denial of coverage relating to a claimant’s
entitlement to benefits under a plan.
Employee – a person, other than one excluded by the Arizona Administrative Code, who works
for the State of Arizona or a State University.
2

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008
Exclusive Provider Organization (EPO) – an exclusive provider organization or network Enrollees are limited to use only those providers on the exclusive list. Any exceptions require
prior authorization.
Flexible spending account (FSA) – an account that can be set up through the State’s Benefit
Options program – An FSA allows an employee to set aside a portion of his/her earnings to pay
for qualified medical and dependent care expenses. Money deducted from an employee's pay
into an FSA is not subject to payroll taxes.
Formulary – a list of preferred medications covered by the health plan - The list contains
generic and name brand drugs. The most cost-effective name brand drugs are placed in the
“preferred” category and all other name brand drugs are placed in the “non-preferred” category.
Fully-funded – an insurance model wherein Benefit Options collects premiums and transfers
the premiums to commercial insurers who take the risk of revenue to expense.
Integrated – health plan operations that are provided by one entity - These operations include:
claims processing and payment, a network of medical providers, utilization management, case
management and disease management services.
Medicare – the federal health insurance program provided to those who are age 65 and older or
those with disabilities who are eligible for Social Security benefits - Medicare has four parts:
Part A, which covers hospitalization; Part B, which covers physicians and medical providers;
Part C, which expands the availability of managed care arrangements for Medicare recipients;
and, Part D, which provides a prescription drug benefit. Retirees signing up for ADOA insurance
should enroll in Parts A and B, but not C or D.
Member – a health plan participant - This individual can be an employee, retiree, spouse or
dependent.
Network – an organization that contracts with providers (hospitals, physicians, and other health
care professionals) to provide health care services - Contract terms include agreed upon fee
arrangements for services and performance standards.
Non-integrated – health plan operations that are provided by multiple entities - These operations
include claims processing and payments, a network of medical providers, and disease
management services.
Payer – the entity responsible for paying a claim.
Pharmacy benefit manager – an organization that provides a pharmacy network, processes and
pays for all pharmacy claims, and negotiates discounts on medicines directly from the
pharmaceutical manufacturers - These discounts are passed to the employer payer in the form of
rebates and reduced costs in the formulary.

3

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008
Plan year – the period October 1 through September 30 for employees; January 1 through
December 31 for retirees.
Preferred Provider Organization (PPO) – an organization that offers a broad selection of
providers and the ability to choose a non-PPO provider as well - This non-PPO provider requires
greater copay from the enrollee and a deductible to be paid.
Premium – agreed upon fees paid for medical insurance coverage - Premiums are paid by both
the employer and the health plan member.
Retiree – a former State or State University employee, officer or elected official who is retired
under a state-sponsored retirement plan - For analytical purposes, this term encompasses both
actual retirees and their dependents.
Self-funded – insurance program wherein Benefit Options collects premiums, pays claims, and
assumes the risk of revenues to expenses.
Self-insured – a plan that is funded by the employer who is financially responsible for all
medical claims and administrative expenses.
Spouse – one legally married—as defined by the Arizona Revised Statutes—to an employee or a
retiree.
Stop-loss – a form of insurance for self-insured employers that limits the amount the employer
as primary insurer will pay for medical expenses.
Subscriber – employee, officer, elected official or retiree who is eligible and enrolls in the
health plan.
Third party administrator – an organization that handles all administrative functions of a
health plan, including: processing and paying medical claims, compiling and producing
management reports, and providing customer service.
Utilization management – a process whereby an insurer evaluates the quantity (duration) and
quality (level) of the delivery of medical services.
Utilization review – a process whereby an insurer evaluates the appropriateness, necessity, and
cost of services provided.
Utilizer – a member who receives a specific service.

4

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Health Insurance Trust Fund Summary
Table 1 provides a summary of receipts, expenses, and enrollment.
UMR, formerly FISERV Health
or Harrington, is the claims
payer for the non-integrated
network of services. These
include the Arizona Foundation,
Beech Street, RAN+AMN, and
Schaller Anderson networks.
UHC refers to the
UnitedHealthcare network.
Both the UMR and UHC
programs are self-funded.
Secure Horizons, Blue Cross
Blue Shield (BCBS), and all
dental programs are fullyfunded.
In general, state, university, and
political subdivision employees
and retirees choose from one of
the self-funded networks.
However, Secure Horizons is
the only fully-funded option
available to Medicare-eligible
retirees and Blue Cross Blue
Shield is the only fully-funded
option available to NAU
employees and retirees.

Table 1: Health Insurance Trust Fund Summary
2007-2008

2006-2007

Premium (accrual basis, in dollars)
UMR, UHC
Secure Horizons
BCBS
Dental
Total
Expenses (in dollars)
Medical Claims (accrual basis)
Drug Claims (accrual basis)
Medicare Part D Subsidy
Rebates & Recoveries
Reserves for future benefits
Secure Horizons expense
BCBS Payments
Administration Fees
Stop-Loss Premiums
Appropriated Expenses
Dental Costs
Total

622,865,513
8,536,011
33,707,464
49,186,542
714,295,530

579,995,347
8,122,332
32,398,069
44,296,625
664,812,373

467,414,597
104,369,240
(2,483,125)
(14,851,232)
38,559,679
7,719,357
33,713,166
24,455,648
3,578,650
4,830,477
48,878,502
716,184,958

420,133,173
91,414,992
(1,747,224)
(10,629,727)
39,912,651
7,961,816
32,398,069
22,353,777
3,439,590
4,205,835
44,296,625
653,739,577

Difference

(1,889,429)

Enrollment
Subscribers
Members

66,993
133,099

11,072,796

66,490
131,496

The Medicare Part D Subsidy is paid to employers who provide pharmacy insurance to
Medicare-eligible retirees. Rebates & Recoveries consist of rebates paid by drug manufacturers
and stop-loss payments. Reserve (IBNR) is the amount of money that must be “reserved” for the
purpose of paying claims that have been incurred but have not been reported. Stop-loss is a
“catastrophic claim” reinsurance program that covers individual medical/drug plan expenses over
$500,000 with a lifetime maximum of $2 million.

5

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Enrollment in Benefit Options Medical Plans
The Benefit Options group medical plan is available to all:
• eligible state and university employees, officers, and elected officials
• state retirees receiving pension benefits through any of the state retirement systems
• state or university employees accepted for long-term disability benefits
• employees of participating political subdivisions
• state or university employees eligible for COBRA benefits
The Table below shows how enrollment was distributed between networks and between active,
retired, and university members. Network availability varies by region. The following pages
show the networks available in each county.

Table 2: Average Monthly Enrollment
Network
AFMC
Active
Retiree
University
Beech Street
Active
Retiree
University
RAN+AMN
Active
Retiree
University
Schaller Anderson
Active
Retiree
University
UnitedHealthcare
Active
Retiree
University
Active
Retiree
University
Blue Cross Blue Shield
NAU only
SecureHorizons
Medicare only
Political Subdivisions
Total

2007-2008
Plan Type Subscribers
Members

2006-2007
Subscribers
Members

PPO
PPO
PPO

522
584
469

990
788
874

584
735
561

1,052
1,000
1,038

PPO
PPO
PPO

130
259
105

380
310
203

121
290
97

357
351
182

EPO
EPO
EPO

7,469
876
1,968

17,943
1,144
3,664

7,841
928
2,304

18,709
1,233
4,177

EPO
EPO
EPO

8,282
1,350
3,650

18,328
1,731
7,363

9,108
1,312
3,962

19,840
1,701
7,793

EPO
EPO
EPO
PPO
PPO
PPO

20,248
3,561
10,527
854
191
830

45,739
4,830
22,465
1,590
250
1,530

18,575
3,503
9,753
700
203
658

41,696
4,821
21,029
1,834
268
1,211

PPO

2,854

not available

HMO
EPO/ PPO

2,225
39

2,892
85

2,318
77

3,034
175

66,993

133,099

66,490

131,496

6

2,860 not available

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Networks for Active Employees and Non-Medicare-Eligible Retirees

Coconino

Apache

Mohave
Navajo

Yavapai

La Paz
Gila

Maricopa

Greenlee

Pinal

Yuma

Graham

Pima

Cochise
Santa Cruz

RAN+AMN EPO, Schaller
Anderson EPO, United
EPO/PPO, AZ Foundation PPO

RAN+AMN EPO,
Schaller Anderson EPO,
AZ Foundation PPO

Out of State: Beech Street PPO
NAU employees/retirees: Blue Cross Blue Shield PPO

7

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Networks for Medicare-Eligible Retirees

Coconino

Apache

Mohave
Navajo

Yavapai

La Paz
Gila

Maricopa

Greenlee

Pinal

Yuma

Graham

Pima

Cochise
Santa Cruz

RAN+AMN EPO, Schaller Anderson
EPO, United EPO/PPO, AZ
Foundation PPO, Secure Horizons
High/Low option

RAN+AMN EPO, Schaller Anderson
EPO, AZ Foundation PPO, Secure
Horizons High/Low Option

Out of State: Beech Street PPO
NAU retirees: Blue Cross Blue Shield PPO

AZ Foundation PPO

8

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Expenses vs. Premiums for Active and Retired Members
The Figure below shows how the average monthly premiums compared to the average monthly
cost for active and retired members.

Figure 1: Average Monthly Premiums and Expenses per Member
$700.00
$600.00
$500.00
$400.00
$300.00
$200.00
$100.00

e
Ex
pe
ns
Re
tir
ee

Pr
em
iu
m
Re
tir
ee

Ex
pe
iv
e
Ac
t

iv
e
Ac
t

ns
e

Pr
em
iu
m

e
Ex
pe
ns
Re
tir
ee

Pr
em
iu
m

ns
e

Re
tir
ee

Ex
pe
iv
e
Ac
t

Ac
t

iv
e

Pr
em
iu
m

$Subscriber Paid
State Paid
Drugs
Medical
Administrative

2007-2008

2006-2007

ADOA developed a contribution strategy that provided affordable health insurance to all state
and university employees. The EPO plan was offered to employees for $25 for single coverage,
$50 for employee plus one, and $125 for family coverage. PPO monthly premiums were
determined from actual experience and the true cost of the coverage.
The 2008 contribution strategy allowed employees to pay only 8% coverage of the total
premium, while the State absorbed the remaining 92%.
Pursuant to A.R.S. §38.651.01(B.), retiree and active medical expenses shall be grouped together
to “obtain health and accident coverage at favorable rates.” This requirement results in retiree
premium rates lower than what their experience would otherwise dictate.

9

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Expenses for Benefit Options Self-Funded Plans
The Tables below show how self-funded plan expenses were distributed between active/retired
and EPO/PPO members. The average annual cost to insure each type of subscriber/member is
also provided.

Table 3: Self-Funded Expenses by Active, Retiree, EPO, and PPO Subscribers and Members
Expenses (in dollars)
Overall
Active
Retiree
EPO
Medical Claims (accrual basis)
467,414,597 422,478,255
44,936,342 434,731,525
Drug Claims (accrual basis)
104,369,240
81,659,753
22,709,487
92,637,345
Medicare Part D Subsidy
(2,483,125)
(2,483,125)
(1,856,872)
Rebates & Recoveries
(14,851,232) (13,215,088)
(1,636,145) (13,905,190)
Reserve (IBNR)
38,559,679
34,311,600
4,248,079
36,103,379
Administration Fees
24,455,648
21,761,395
2,694,253
22,897,792
Stop-Loss Premiums
3,578,650
3,184,394
394,256
3,350,685
Appropriated Expenses
4,830,477
4,298,308
532,169
4,522,770
Total
Enrollment in self-funded plans
Subscribers
Members
Annual cost (in dollars)
Per subscriber
Per member

625,873,933

554,478,618

71,395,316

578,481,434

PPO
32,683,072
11,731,895
(626,254)
(946,042)
2,456,300
1,557,856
227,965
307,707
47,392,499

61,914
130,207

55,093
121,154

6,821
9,053

57,970
123,292

3,944
6,915

10,109
4,807

10,064
4,577

10,467
7,886

9,979
4,692

12,016
6,854

Table 4: Self-funded Expenses by Active, Retiree, EPO, and PPO Subscribers and Members
Expenses (in dollars)
Overall Active/ EPO Active/ PPO Retiree/ EPO Retiree/ PPO
Medical Claims (accrual basis)
467,414,597 395,694,168
26,784,088
39,037,358
5,898,984
Drug Claims (accrual basis)
104,369,240
74,753,199
6,906,554
17,884,146
4,825,341
Medicare Part D Subsidy
(2,483,125)
(1,856,872)
(626,254)
Rebates & Recoveries
(14,851,232) (12,517,070)
(698,018)
(1,388,120)
(248,024)
Reserve (IBNR)
38,559,679
32,499,269
1,812,331
3,604,110
643,969
Administration Fees
24,455,648
20,611,963
1,149,432
2,285,829
408,424
Stop-Loss Premiums
3,578,650
3,016,195
168,199
334,491
59,766
Appropriated Expenses
4,830,477
4,071,273
227,036
451,497
80,672
Total
Enrollment in self-funded plans
Subscribers
Members
Annual cost (in dollars)
Per subscriber
Per member

625,873,933

518,128,996

36,349,622

60,352,438

11,042,878

61,914
130,207

52,183
115,587

2,910
5,567

5,787
7,705

1,034
1,348

10,109
4,807

9,929
4,483

12,491
6,529

10,429
7,833

10,680
8,192

10

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Medical Expenses Associated with Medical Diagnoses
The Table below shows how medical expenses were distributed among different diagnoses.
More dollars are spent on treating conditions related to the musculoskeletal system than on any
other type of disorder.

Table 5: Medical Expenses by Diagnosis – Actives & Retirees
2007-2008
2006-2007
Actives
Retirees All members Actives
Retirees All members
Diagnosis
% of Total % of Total % of Total % of Total % of Total % of Total
Musculoskeletal System
13.20%
12.89%
13.17%
12.79%
14.60%
12.98%
Ill-defined1
Health Status (lab tests, etc.)
Neoplasm (tumors)
Circulatory System
Injury/Poisoning
Genitourinary System
Digestive System
Nervous System
Respiratory System
Pregnancy/Childbirth Complications
Endocrine System
Mental Health
Infectious/Parasitic
Skin and Subcutaneous Tissue
Congenital Anomalies
Conditions in the Perinatal Period
Blood and Blood Forming Organs
External Causes of Injury/Poisoning
Grand Total

10.69%
9.78%
8.65%
8.22%
8.75%
7.09%
6.86%
5.20%
5.18%
4.33%
3.36%
2.26%
1.65%
1.68%
1.31%
1.04%
0.74%
0.00%
100.00%

8.25%
7.21%
14.39%
13.76%
7.87%
7.21%
6.66%
6.50%
4.40%
0.03%
2.98%
1.54%
3.51%
1.65%
0.08%
0.00%
1.08%
0.00%
100.00%

10.46%
9.53%
9.20%
8.75%
8.66%
7.11%
6.84%
5.33%
5.11%
3.91%
3.33%
2.19%
1.83%
1.68%
1.19%
0.94%
0.77%
0.00%
100.00%

10.85%
9.11%
9.33%
7.94%
9.55%
6.76%
7.15%
4.99%
4.94%
4.67%
3.26%
2.43%
2.03%
1.82%
1.08%
0.54%
0.75%
0.01%
100.00%

8.11%
6.20%
14.59%
12.58%
6.87%
7.38%
6.83%
7.21%
5.57%
0.01%
2.73%
1.87%
2.42%
1.49%
0.58%
0.00%
0.96%
0.00%
100.00%

10.56%
8.80%
9.88%
8.43%
9.27%
6.82%
7.12%
5.23%
5.00%
4.18%
3.20%
2.37%
2.07%
1.79%
1.03%
0.48%
0.77%
0.01%
100.00%

Note: Some statistics may vary slightly from previous annual reports due to the late receipt of
program data following the completion of the previous annual report. In no case does the
variation represent a substantive change in trend or comparative values.
1

The ill-defined category is a technical term including symptoms, laboratory results and disorders which cannot be
categorized elsewhere. Examples of ill-defined diagnoses are: adult convulsions not related to epilepsy, laboratory
analysis of blood with findings not related to cellular abnormality, and senility associated with old age.

11

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Hospital Care
The Figures below show how active/retired members and EPO/PPO members compared in terms
of their number of admissions and their average lengths of stay. Inpatient hospital care
represents a significant portion of total medical expenses: 36% and 38% for active and retired
members, respectively.

Figure 2: Admissions per 1,000 Members

160
Retiree
155.4

140

Retiree
148.9

Admissions

120
100
80
60

EPO
73.3

Active
69.4

PPO
81.6

EPO
71.2

Active
67.7

PPO
87.6

40
20
0
2007-2008

2006-2007

Figure 3: Average Length of Stay

7
6

Retiree
5.8

Days

5
4

Active
4.5

Retiree
6.7

PPO
6.2

PPO
5.7

EPO
4.5

Active
4.3

EPO
4.5

3
2
1
0
2007-2008

2006-2007

Note: Mental health, substance abuse, and maternity admissions are included.

12

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Hospital Care (continued)
The Figures below show how active/retired members and EPO/PPO members compared with
regards to their collective number of hospital days and average cost per admission. As a group,
retirees spent 3 times as many days in the hospital as active members. Also, PPO members spent
1.5 times as many days in the hospital as EPO members. On average, PPO members cost per
admission was $4,623 higher than EPO members.

Figure 4: Days per 1,000 Members

1000
900

Retiree
997.6

Retiree
902.2

800
700
Days

600
500

PPO
509.5

400
300
200

PPO
497.7

EPO
328.9

Active
309.6

EPO
320.4

Active
291.3

100
0
2007-2008

2006-2007

Figure 5: Average Cost per Admission

$20,000
$18,000
$16,000

$4,000

PPO $19,834

EPO $12,376

Retiree $18,200

Active $12,385

$6,000

PPO $18,428

$8,000

EPO $13,805

$10,000

Retiree $15,452

$12,000

Active $13,833

$14,000

$2,000
$PY 2007-2008

PY 2006-2007

Note: Mental health, substance abuse, and maternity admissions are included.
13

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Emergency Room Visits
During Plan Year 2007-2008, there were approximately 204.9 emergency room visits per 1,000
members of the self-funded plan. Each emergency room visit cost the plan $1,261.95 on
average. These figures include facility claims and exclude professional fees.

Physician Visits
During Plan Year 2007-2008, each member of the self-funded plan visited a physician
approximately 3.5 times or 3,500 visits per 1,000 members. Each office visit cost the plan $83.54
on average.

Urgent Care Visits
During Plan Year 2007-2008, there were approximately 97.9 urgent care visits per 1,000
members of the self-funded plan. Each urgent care visit cost the plan $227.18 on average.
The following Figures compare how total active and retiree medical expenses were distributed
by type of care. 4% of medical expenses for active employees were spent for emergency room
care while 4% of medical expenses for retired members were spent for home care.

Figure 6: Active Employee Medical Expense by Place of Service
Other, 2%
Home Health, 2%
Independent
Laboratory, 3%
Emergency Room,
4%
Ambulatory Surgical
Center, 5%

Inpatient Hospital,
36%

Outpatient Hospital,
22%
Office, 26%

14

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Figure 7: Retiree Medical Expenses by Place of Service
Other 2%
Independent
Laboratory 2%
Home Health 4%
Emergency Room 2%
Ambulatory Surgical
Center 4%

Inpatient Hospital
38%

Outpatient Hospital
22%
Office 26%

15

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Generic and Name-Brand Prescription Use
The Table below shows how total pharmacy expenses were distributed among generic, preferred,
and non-preferred types of drugs.

Table 6: Claim Distribution for 3-Tier Formulary

2007-2008
2006-2007
Total Prescriptions Percent Total Prescriptions Percent

Tier 1 Generic ($10 copay)
Tier 2-Preferred ($20 copay)
Tier 3-Non-Preferred ($40 copay)

996,785 64.0%
443,881 28.5%
116,811 7.5%
$1,557,477 100.0%

Total

939,708 61.3%
469,088 30.6%
124,170 8.1%
$1,532,966 100.0%

Prescription Use by Therapeutic Class
The Table below shows the top ten most used classes of drugs according to total expense. More
dollars were spent on antihyperlipidemics (cholesterol-lowering drugs), than on any other
therapeutic class.

Table 7: Top Therapeutic Classes by Total Expense
2007-2008
Therapeutic class
Total Cost Percent
antihyperlipidemics
11,419,509
antidepressants
8,907,603
ulcer medications
8,624,570
antidiabetics
7,821,290
antihypertensives
7,807,175
antiasthmatic/bronchodilator agents
7,627,217
analgesics – opioids
6,406,891
analgesics – anti-inflammatory
5,458,343
anticonvulsants
5,223,988
antivirals
4,429,641
Total $73,726,227

16

2006-2007
Total Cost Percent

10.94% 10,808,276
8.53%
8,601,033
8.26%
8,203,568
7.49%
6,602,123
7.48%
7,945,493
7.31%
7,310,141
6.14%
5,798,144
5.23%
4,709,545
5.01%
4,156,683
4.24%
4,510,848
70.64% $68,645,854

9.22%
7.34%
7.00%
5.63%
6.78%
6.24%
4.95%
4.02%
3.55%
3.85%
58.58%

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Prescription Use by Type of Drug
The Table below shows the top ten most used drugs according to total expense. Prevacid
exceeded last year’s top drug, Lipitor, during Plan Year 2007-2008.

Table 8: Top 10 Drugs by Total Expense
Drug Name
Therapeutic Class
Prevacid
Lipitor
Enbrel
Advair diskus
Effexor XR
Singulair
Crestor
Lexapro
Actos
Vytorin

anti-ulcer/gastrointestinal
antihyperlipidemics
antiarthritics
bronchial dilators
psychostimulants-antidepressants
bronchial dilators
antihyperlipidemics
psychostimulants-antidepressants
actidiabetics
antihyperlipidemics
Total

17

2007-2008
Total Cost Percent

2006-2007
Total Cost Percent

4,206,817 4.03%
4,103,694 3.93%
2,413,952 2.31%
2,339,819 2.24%
2,302,871 2.21%
1,999,700 1.92%
1,680,772 1.61%
1,645,187 1.58%
1,617,819 1.55%
1,595,744 1.53%
$23,906,375 22.91%

3,806,801 3.26%
3,983,758 3.41%
2,121,802 1.82%
2,323,748 1.99%
2,000,796 1.71%
1,911,904 1.64%
1,344,940 1.15%
1,436,242 1.23%
1,371,731 1.17%
1,575,980 1.35%
$21,877,702 18.72%

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Annual Prescription Use
The Figure below compares the average number of prescriptions filled last plan year by active
and retired members.

Figure 8: Average Number of Prescriptions per Member per Year

35
30
25
Retiree
31.2

Retiree
30.6

20
15
10
5

Active
10.2

Active
10.4

0
2007-2008

2006-2007

18

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Annual Pharmacy Expenses by Age
The Figure below shows how pharmacy expenses increase with age among plan members.

Figure 9: Pharmacy Expense per Utilizer per Year
(in dollars)

3000
2,921
2,722

2500
2000

0-18 yrs
1,723

1500

1,627

19-39 yrs
40-64 yrs
65+ yrs

1000
500

720
380

649
355

0
2007-2008

2006-2007

Note: Some statistics may vary slightly from previous annual reports due to the late receipt of
program data following the completion of the previous annual report. In no case does the
variation represent a substantive change in trend or comparative values.

19

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Benefit Options Dental Plans
Prepaid Plans – Employers Dental Services and Assurant
•
•
•

See a Participating Dental Provider (PDP) to provide and coordinate all dental care.
No annual deductible or maximums ($200.00 maximum reimbursement for noncontracted emergency services) under Employers Dental Services and Assurant.
No claim forms (except for emergency services under Employers Dental Services).

Indemnity/PPO Plans – Delta Dental and MetLife Dental
•
•
•
•
•

May see any dentist. Deductible and/or out-of-pocket payments apply.
A maximum benefit of $2,000 per person per plan year for dental services.
$1,500 per person lifetime for orthodontia.
May need to submit a claim form for eligible expenses to be paid.
Benefits may be based on reasonable and customary charges.

The following Figures show how active employee and retiree dental enrollments were distributed
among plans.

Figure 10: Active Employee Dental Enrollment

Assurant Dental 8%
Employers Dental
Group 13%

MetLife Dental 16%

Delta Dental 63%

20

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Figure 11: Retiree Dental Enrollment

Employers Dental
Group 7%
MetLife Dental 7%
Assurant Dental 11%

Delta Dental 75%

21

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Dental Rates
The Table below summarizes monthly dental rates for active and retired members.

Table 9: Summary of Monthly Dental Rates for 2007-2008
Active Employees
Assurant Dental
Delta Dental
Employers Dental Group
MetLife Dental
1

Retirees
Assurant Dental
Delta Dental
Employers Dental Group
MetLife Dental
1

Single Coverage
Employee
State
4.68
6.18
14.56
19.82
4.02
6.18
12.90
20.59
Single Coverage
10.86
34.38
10.20
33.49

Effective January 1, 2008

22

Total
10.86
34.38
10.20
33.49

Family Coverage
Employee
State
18.02
11.50
54.14
55.90
18.16
11.50
45.00
60.14
Family Coverage
29.52
110.04
29.66
105.14

Total
29.52
110.04
29.66
105.14

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Life, Disability, Vision Insurance and Flexible Spending Accounts
Premiums
The Table below shows the amount of premiums collected and paid for life insurance, disability
insurance, vision insurance and flexible spending accounts (FSA).
Table 10: Summary of Premiums
Vendor
Standard
Bas ic Life
Supp Life
Dep Life
STD
LTD
Total

2007-2008
Collected

Paid

$2,601,679
10,198,944
1,614,299
10,114,116
4,455,294

2006-2007
Collected

Paid

$2,370,063
9,153,730
1,428,241
8,947,462
4,064,335
$28,787,110

$25,963,831

A ves is - Vis ion

$5,561,668

$5,145,120

A SI - FSA

$5,328,689

$5,198,879

$39,677,467

$36,307,830

Total

23

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Health Insurance Vendor Performance Standards
Pursuant to A.R.S. § 38-658(B), the Arizona Department of Administration (ADOA) shall
“...report to the Joint Legislative Budget Committee at least semiannually on the performance
standards for health plans, including indemnity health insurance, hospital and medical service
plans, dental plans and health maintenance organizations.”
Among the terms of the self-funded health insurance contracts are a number of ADOAnegotiated performance measures with specific financial guarantees tied to the contracted
performance of the vendors providing various services for the health plans. If a vendor fails to
meet any of the measures within the specified performance range, a percentage of the annual
administrative fee is withheld by ADOA as liquidated damages. This percentage is allocated
among the more critical measures of the contract.
The following is a report of the penalties incurred by health plan vendors for their nonperformance during the Plan Year ending September 30, 2008. The details of each assessment
are set forth in the exhibit specified by the same letter that identifies the vendor below. In each
case below, the final member satisfaction survey and the Benefit Services Division Vendor
Survey for FY 2007-2008, may result in additional penalties.
A. UMR (Claims Administrator) – penalties to date of $2,438.65, equaling 0.8% of the
vendor’s annual administrative fee
MEASURE
Written appeals resolved
within 45 calendar days
after receipt of
participant's request for
review in the case of PostService claims.

Annual Percent of Fees
at Risk
•

0.33%
•

24

Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
0.08%: WHICH EQUALS 3 MONTHS
MISSED OUT OF 12 MONTHS MEASURED
Corrective Action: UMR provided
reinforcement training to their processing staff.

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Health Insurance Vendor Performance Standards (continued)
B. ASI Flex – penalties to date of $1352.10, equaling 1% of the vendor’s annual administrative
fee
MEASURE
95% of claims will be
processed within two
working days

98% of dollars will be paid
accurately

Annual Percent of Fees
at Risk
1%

•
•

•

1%

•

Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
0.50%: WHICH EQUALS 2 QUARTERS
MISSED OUT OF 12 MONTHS MEASURED
Corrective Action: ASI has hired approximately
10 new claims processors. ASI anticipated that
the extra man hours will improve turn around
time significantly. Subsequently, ASI met the
measure for the 3rd & 4th quarters.
0.50%: WHICH EQUALS 2 QUARTERS
MISSED OUT OF 12 MONTHS MEASURED
Corrective Action: The Customer Service
Manager initiated retraining on claims
processing accuracy. Subsequently, ASI met
the measure for the 4th quarter.

C. Schaller Anderson (Utilization Review / Utilization Management) – penalties to date of
$2,915.93, equaling 0.249% of the vendor’s annual administrative fee
MEASURE
Percent of calls answered
in 30 seconds or less

Annual Percent of Fees
at Risk
•

1%

25

Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
0.249%: WHICH EQUALS 3 MONTHS
MISSED OUT OF THE 4 MONTHS
MEASURED.

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008

Health Insurance Vendor Performance Standards (continued)
D. Walgreens Health Initiative (Pharmacy Management) - penalties to date of $40,750.00,
equaling 27.14% of the vendor’s annual administrative fee
MEASURE

Average speed to answer
for all calls made to the
WHI Member Service
Center

First call resolution

Annual Percent of Fees
at Risk
(Max $600K)
28%

Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
•
•

•

10%

•

Standard management
monthly reports series
available on FTP site
within 15 days of month
end

8%

Percent of transactions
within three (3) seconds

8%

•
•

•

•

13.99%: WHICH EQUALS 6 MONTHS
MISSED OUT OF 12 MONTHS MEASURED
Corrective Action: WHI will report the results
using an updated metric definition.
Subsequently, WHI met the measure for the
remainder of the year.
2.5%: WHICH EQUALS 1 QUARTER
MISSED OUT OF 4 QUARTERS
MEASURED
Corrective Action: No action taken.
Measurements were met for the rest of the year.
4.65%: WHICH EQUALS 7 MONTHS
MISSED OUT OF 12 MONTHS MEASURED
Corrective Action: WHI implemented system
enhancements.
6%: WHICH EQUALS 3 QUARTERS
MISSED OUT OF 4 QUARTERS
MEASURED
Corrective Action: To improve performance
and response time, WHI has been implementing
several database enhancements.

E. Strategic Health Development Corporation (Utilization Review / Utilization
Management) - penalties to date of $7,496.49, equaling 0.42% of the vendor’s annual
administrative fee
MEASURE
95% of data file exchanges
and reconciliation reports
on time as established
during implementation.

Annual Percent of Fees
at Risk
1.66%

•

•

26

Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
0.42%: WHICH EQUALS 1 QUARTER
MISSED OUT OF 3 QUARTERS
MEASURED
Corrective Action: Due to numerous issues
that were identified involving differing data at
implementation the file exchange measure was
not met. Subsequent to the resolution of the
initial issues, all transmissions were made as
scheduled.

Benefit Options Annual Report
Data contained herein is for Oct. 1, 2007 – Sep. 30, 2008
F. Successfully Met Performance Guarantees
Table 11: Successful Performance Guarantees
Vendor
UMR

At risk
13%

UnitedHealthcare

$2,704,401.00

Schaller
Anderson
URUM
Strategic Health
Development
Corporation

6.32%

Walgreens
Health Initiatives

Total Administration Fee 7.8%
Case Management Fee 7.5%
Disease Management Fee 5%
Nurseline Fee 5%
$600,000.00

Guarantees Met
Appeals (met 9 out of 12 measures), Call Center, Eligibility
Administration, Claims Statistics
Appeals, Telephone Service, Claims Statistics, Eligibility
Administration, Network Management, Care Coordination
Guarantees
Disease Management, Customer Service (met 13 out of 16
measures)
Implementation, Utilization Management, Case Management,
Disease Management, Reporting (met 2 out of 3 measures),
Systems, Nurse & Call Center

ASI Flex

4%

Schaller
Anderson
Network
Arizona
Foundation
RAN+AMN
The Standard
Short Term
Disability

5%

Data & Eligibility Requirements, Claims, Customer Services
(met 21 of 28 measures), Account Services, Reports (met 21
out of 28 measures), Network Access, Network Pharmacy
Management, Mail Order Service, Retail Paper Claims
Processing Time, Network Pharmacy POS Compliance (met
15 out of 24 measures)
Claims Turnaround (3/4 of measure), Claims Adjudication
Financial Accuracy (1/2 of measure), Web Availability,
Phone Response Time
Program Management, Network Management

1%

Program Management

1%
5%

Program Management
Telephone Service, Processing Timeline, Check Issuance
Timeline, Processing Accuracy, Financial Accuracy, Appeals
Timeline, Reports

27