25 State of Arizona Arizona Department of Administration Benefit Services Division 2011 Annual Report Benefit Options January 1, 2011 through December 31, 2011 Janice K. Brewer Governor Scott A. Smith Director Arizona Department of Administration FOREWORD Benefit Options is the program name for the benefits offered to State of Arizona employees and retirees. This report was prepared to give a broad overview of Benefit Options. The information provided in the report was gathered from contracted vendors participating in the Benefit Options insurance programs. This report was compiled to meet the requirements of A.R.S. §38-652 (G) and A.R.S. §38-658 (B). The data shown is presented for the period January 1, 2011 through December 31, 2011. The active and retiree plans were concurrent for this period. Any questions relating to the contents of this report should be addressed to: Benefit Options Arizona Department of Administration, Benefit Services Division 100 N. 15th Avenue, Suite 103 Phoenix, Arizona 85007 Telephone: 602-542-5008 Fax: 602-542-4744 Contents Report Background 1 Executive Summary 2 Health Insurance Trust Fund Summary 3 Enrollment in Benefit Options Medical Plans 4 Medical Premiums 6 Expenses vs. Premiums for Active and Retired Members 7 Expenses for Benefit Options Self-Funded Plans 8 Medical Expenses Associated with Medical Diagnoses 9 Hospital Care 10 Emergency Room Visits 12 Urgent Care Visits 12 Physician Visits 12 Annual Prescription Use 14 Generic and Name-Brand Prescription Use 15 Prescription Use by Therapeutic Class 15 Prescription Use by Type of Drug 16 Annual Pharmacy Expenses by Age 17 Benefit Options Dental Plans 18 Dental Rates 19 Wellness 20 Life, Disability, Vision Insurance and Flexible Spending Accounts Premiums 22 Health Insurance Vendor Performance Standards 23 Audit Services 34 Glossary of Terms 35 Appendix A - Plan Year Cash Flow Reconciliation 39 Report Background This document has been assembled 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 Benefit Options program is accounted for in two different funds. The Special Employee Health Fund, also known as fund 3015 or the Health Insurance Trust Fund (HITF), encompasses the medical and dental programs and the appropriated expenditures for ADOA Benefit Services operations. The ERE/Benefits Administration Fund or fund 3035, is primarily a “pass through” fund for other benefits including vision, disability insurance, life insurance and flexible spending accounts. The benefits offered through the program fall into one of two types — self-funded or fully-insured. The health benefit plan is self-funded; whereas the dental plans, vision plan, disability insurance, and life insurance plans are fully-insured. The State’s self-funded medical plan began on October 1, 2004, and consists of a carved out pharmacy plan with integrated or nonintegrated options for the medical plan. The integrated option combines the functions of; claims review and payment, network access, and utilization review and utilization management (URUM), and case management and disease management. The non-integrated option is similar, but the URUM function is carved out to a separate contracted vendor. Schedules of premiums received and accounted for in fund 3015; incurred and paid medical/drug claims; expenses related to the medical and dental plans; and distribution by enrollment are included within this Annual Report. A summary of premiums collected and paid for life insurance, vision insurance and flexible spending accounts has also been included for fund 3035. The Cash Flow Reconciliation charts for the two funds can be found in Appendix A. The difference in the values presented in Appendix A and the Health Insurance Trust Fund (HITF) Summary on page 4 is a result of the difference between when premiums and/or services are incurred and when they are paid. Appendix A was prepared on a cash basis, where as, the HITF Summary was prepared on an accrued and paid basis. All data provided herein is for the Plan Year 2011 (January 1, 2011 – December 31, 2011). Benefit Options Annual Report January 1, 2011 to December 31, 2011 1 Executive Summary During the 2011 Plan Year, the Benefit Services Division (BSD) Health Plan offered a comprehensive insurance package to over 128 thousand members consisting of active State and University employees, retirees, and their qualified dependents. The benefits include medical, pharmaceutical, dental, flexible spending, vision, wellness, life, and disability insurance. Premiums Based on the 2011 Contribution Strategy, the total premiums expected were $810 million with total expenses for the plan of $702 million, resulting in an expected net operational gain of $108 million. Medical Expenses Medical claims expenses accounted for $455 million of the total health plan cost during 2011. The average cost to insure each member was $5,065.50. • Average active member cost was $4,795.78 • Average retiree cost was $8,452.79 The leading diagnosis category when analyzed by cost was the musculoskeletal system, accounting for $56 million or just over 12% of total claims paid. Medical Utilization Claims showed members are seeking the care of a physician or specialist for the majority of their medical needs. There were 192 emergency room visits, 194 urgent care visits, and 4,270 physician visits per 1,000 members on the plan indicating appropriate care. Pharmacy Expenses Total pharmacy expense was $115 million. The five most expensive drug classes are maintenance drugs used to control and prevent chronic diseases. Diabetes drugs were the highest cost with 11 million dollars or 15% of the total pharmacy expenses. Pharmacy Utilization A reported 1.5 million prescriptions were filled during the 2011 plan year. • Retirees filled an average of 25.1 prescriptions per year • Active members averaged 10.4 per year Performance Measures Financial guarantees are in place to manage the performance of the contacted Health Plan vendors. Penalties collected for the prior plan year totaled over $201,000. Review The 2011 Plan Year demonstrated a balance of expenses and premiums that allowed the State to offer members comprehensive and affordable insurance coverage. The State effectively controlled the rise in health care costs through quality benefit design, administrative oversight, strategic planning and auditing, and effective contract management. Detailed evidence of the State’s Health Plan accomplishments can be reviewed herein. Benefit Options Annual Report January 1, 2011 to December 31, 2011 2 Health Insurance Trust Fund Summary Table 1 provides a summary of receipts, expenses, and enrollment incurred during the 2011 Plan Year and paid through March 2012. ADOA Benefit Options refers to the self-funded medical program and includes Aetna, Blue Cross Blue Shield of Arizona administered by AmeriBen, CIGNA, and United Healthcare networks. UHC Secure Horizons, BCBS (NAU), and all dental plans are fully-insured. Table 1: Health Insurance Trust Fund Summary 2011 Receipts (accrual basis) ADOA Benefit Options UHC Secure Horizons BCBS (NAU) Dental Total Expenses Medical Claims (accrual basis) Drug Claims (accrual basis) Medicare Part D Subsidy Rebates & Recoveries Reserve for Unreported Claims Secure Horizons expense BCBS Payments Administration Fees Stop-Loss Premiums Appropriated Expenses Dental Costs Total Difference 2009-2010* $733,523,433.75 $664,852,966.76 $1,839,423.23 $34,511,692.27 $30,718,640.22 $42,927,763.06 $42,061,539.64 $810,962,889.08 $739,472,569.85 $455,227,059.25 $442,328,374.53 $115,534,293.24 $104,245,794.65 ($2,651,407.78) ($1,249,718.22) ($10,606,711.75) ($12,994,653.98) $38,007,320.98 $36,270,926.71 $2,260,433.67 $34,320,311.68 $30,714,058.44 $27,016,754.23 $29,092,947.64 $6,470,888.20 $4,190,980.95 $3,846,184.78 $41,767,766.83 $40,848,735.78 $702,806,367.63 $681,833,972.20 $108,156,521.45 $57,638,597.65 State and University employees and retirees choose coverage from one of the self-funded networks. However, Blue Cross Blue Shield is a fully-insured option available only to NAU *The data is for the incurred period October 2009 through September employees and NAU 2010 and paid through December 2010. retirees. UHC Secure Horizons is a fully-insured option that was available to Medicare-eligible retirees until the contract terminated December 31, 2009. The Medicare Part D Subsidy is available to employers who provide a qualified pharmacy plan to Medicare-eligible retirees. Rebates & Recoveries consist of rebates paid by drug manufacturers, performance penalties assessed to contractors for not achieving performance guarantees, overpayment recoveries, and stop-loss reinsurance payments. Reserve (IBNR) is the amount of money that must be held in reserve for the purpose of paying claims that have been incurred but have not been reported. Stoploss is a “-catastrophic claim-” reinsurance program that covers individual medical/drug plan expenses over $500 thousand with a lifetime maximum of $2 million. Benefit Options Annual Report January 1, 2011 to December 31, 2011 3 Enrollment in Benefit Options Medical Plans The Benefit Options group medical plan is available to the following:  Eligible State employees and University staff, officers, and elected officials  State retirees receiving pension benefits through any of the State retirement systems  State employees or University staff accepted for long-term disability benefits  employees of participating political subdivisions  State employees or University staff eligible for COBRA benefits There are three medical plans offered to active participants under Benefit Options. They are the Exclusive Provider Organization (EPO), the Preferred Provider Organization (PPO), and the Health Savings Account Option (HSA). The EPO Plan If the employee chooses the EPO plan under Benefit Options, services must be obtained from a Network provider. Out-of-Network services are only covered in emergency situations. Under the EPO plan, the employee will pay the monthly premium and any required copay at the time of service. The EPO plan is available with all four Networks: Aetna, Blue Cross Blue Shield of Arizona Network administered by AmeriBen, CIGNA, and UnitedHealthcare. The PPO Plan If the employee chooses the PPO plan under Benefit Options, services can be provided in-Network or out-of-Network, but there will be higher costs for out-of-Network services. Additionally, there is an in-Network and out-of-Network deductible that must be met. Under the PPO plan, the employee will pay the monthly premium and any required copay or coinsurance (percent of the cost) at the time of service. The PPO plan is available with Aetna, Blue Cross Blue Shield of Arizona Network administered by AmeriBen, and UnitedHealthcare. The High Deductible Health Plan (HSA Option) If the employee chooses to enroll in the High Deductible Health Plan (HSA Option), the employee will be eligible to open a Health Savings Account (HSA), which is a special type of account that allows tax-free contributions, earnings, and healthcare-related withdrawals. If the HSA Option is chosen, the employee can use in-Network and out-of-Network providers. Members pay the copay and/or coinsurance after the deductible is met. The premiums for the HSA Option are lower, qualified preventative services are free, and members pay coinsurance and/or copays. The table on page 5 shows how enrollment was distributed between networks and between active, retired, university, and COBRA members. Benefit Options Annual Report January 1, 2011 to December 31, 2011 4 Table 2: Average Monthly Enrollment 2011 2009-2010* Network Plan Type Subscribers Members ** Subscribers Members ** AETNA 1,273 2,865 1,037 2,338 Active EPO Retiree EPO 261 342 278 354 University EPO 2,246 981 1,767 1,230 20 30 21 32 COBRA EPO Active PPO 81 146 75 123 Retiree PPO 51 62 72 90 142 231 116 191 University PPO COBRA PPO 0 1 2 3 Active HSAO 146 285 109 194 Retiree HSAO University HSAO 194 347 136 256 COBRA HSAO 1 1 3 5 AmeriBen Active EPO 5,839 14,441 5,528 13,516 Retiree EPO 1,098 1,443 1,104 1,459 1,705 3,558 1,524 3,161 University EPO 35 47 60 88 COBRA EPO Active PPO 240 428 205 360 147 181 220 267 Retiree PPO 256 468 250 460 University PPO COBRA PPO 3 4 7 11 CIGNA 2,942 6,913 2,688 6,398 Active EPO Retiree EPO 624 803 688 900 1,134 2,283 1,127 2,209 University EPO 9 11 25 37 COBRA EPO UnitedHealthcare 22,059 51,942 23,337 53,633 Active EPO 4,735 6,126 4,838 6,318 Retiree EPO University EPO 11,683 25,938 12,340 26,505 158 206 402 588 COBRA EPO Active PPO 520 948 645 1,145 131 168 178 233 Retiree PPO University PPO 630 1,165 761 1,429 COBRA PPO 10 12 26 39 Blue Cross Blue Shield NAU only PPO 2,821 4,391 2,809 2,961 SecureHorizons 2,223 2,890 Medicare only HMO Total 60,177 128,029 63,814 129,959 * The data is for the incurred period October 2009 through September 2010. **UHC Secure Horizons plan was not offered during the 2011 Plan Year. Benefit Options Annual Report January 1, 2011 to December 31, 2011 5 Medical Premiums The tables below summarize medical rates by pay period for active and retired members. Table 3: Pay Period Medical Premiums (26 pay periods)* State Premium $253.85 $522.92 Total Premium $272.31 $577.84 Agency HSA Contribution - Emp+child Family $46.62 $102.00 $497.54 $648.46 $544.16 $750.46 - Emp only Emp+adult $71.54 $161.54 $342.00 $695.08 $413.54 $856.62 - Emp+child Family $152.77 $224.31 $667.85 $890.31 $820.62 $1,114.62 - Emp only Emp+adult $12.00 $47.08 $232.15 $466.15 $244.15 $513.23 $27.70 $55.39 Emp+child Family $37.38 $89.08 $450.92 $583.85 $488.30 $672.93 $55.39 $55.39 Tier EPO (Aetna, BCBSAZ/AmeriBen**, CIGNA, UnitedHealthcare) PPO (Aetna, BCBSAZ/AmeriBen**, UnitedHealthcare) HSA Emp only Emp+adult Employee Premium $18.46 $54.92 Plan (Aetna) Table 4: Medical Premiums (Without Medicare) Tier Retiree only EPO (Aetna, BCBSAZ/AmeriBen**, CIGNA, PPO (Aetna, BCBSAZ/AmeriBen**, UnitedHealthcare) Premium Payment $593 Retiree +1 $1,387 Family Retiree only $1,869 $943 Retiree +1 Family $2,219 $3,074 Table 5: Monthly Medical Premiums (With Medicare) Tier EPO (Aetna, BCBSAZ/AmeriBen**, CIGNA, UnitedHealthcare) Retiree only Retiree +1 (Both Medicare) Retiree +1 (One Medicare) Family (Two Medicare) Retiree only Retiree +1 (Both Medicare) (Aetna, BCBSAZ/AmeriBen**, Retiree +1 (One Medicare) UnitedHealthcare) Family (Two Medicare) PPO Premium Payment $442 $878 $1,024 $1,166 $789 $1,576 $1,740 $1,980 *University of Arizona has 24 pay period deductions; please refer to your Human Resources website for more information. **Blue Cross Blue Shield of Arizona Network administered by AmeriBen. Benefit Options Annual Report January 1, 2011 to December 31, 2011 6 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 $800.00 $700.00 $600.00 $500.00 $400.00 $300.00 $200.00 $100.00 Ex pe ns e Pr em R iu et m ire e Ex pe ns Ac e tiv e Pr em iu Ac m tiv e Ex pe R ns et i re e e Pr em R iu et m ire e Ex pe ns e Re tir ee Ac ti v e Ac tiv e Pr em iu m $S ub scriber Paid S tate Paid Drugs Medical Administrative 2011 2009-2010* * The data is for the incurred period October 2009 through September 2010. ADOA developed an employee/employer cost strategy that provided affordable health insurance to all State and University employees. The EPO plan was offered to employees for an employee contribution of $39 for single, $97 for employee plus adult, $79 for employee plus child, and $178 for family coverage. Monthly premiums were determined from actual experience and the true cost of the coverage. The 2011 contribution strategy for the self-insured medical plan resulted in employees paying 11% of the average monthly total premium, while the State paid the remaining 89%. The contribution strategy for the dental plans resulted in employees paying 85% of the average monthly total premium, while the State paid the remaining 15%. 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. Benefit Options Annual Report January 1, 2011 to December 31, 2011 7 Expenses for Benefit Options Self-Funded Plans The tables below show the distribution of the self-funded expenses. Table 6 shows the expenses distributed between active/retiree and EPO/PPO members. The average annual cost to insure each type of subscriber/member is also provided. Table 6: Self-funded Expenses by Active, Retiree, EPO, and PPO Subscribers and Members Expenses Medical Claims (accrual basis) Drug Claims (accrual basis) Medicare Part D Subsidy ERRP Reimbursement Rebates & Recoveries Reserve (IBNR) Administration Fees Stop-Loss Premiums Appropriated Expenses Overall $455,227,059 $115,534,293 ($2,651,408) ($429,413) ($10,606,712) $38,007,321 $27,016,754 $0 $4,190,981 Total $626,288,876 Enrollment in self-funded plans Subscribers $57,355 Members $123,638 Annual cost Per subscriber $10,919 Per member $5,066 Active $410,610,823 $87,652,031 ($374,869) ($9,259,440) $33,179,605 $23,697,480 $0 $3,676,078 Retiree EPO $44,616,236 $434,664,778 $27,882,262 $106,481,018 ($2,651,408) ($2,527,836) ($33,567) ($327,021) ($1,347,272) ($10,056,353) $4,827,716 $36,035,204 $3,319,274 $25,815,127 $0 $0 $514,903 $4,004,578 PPO $19,859,588 $9,000,169 ($123,571) ($14,941) ($536,314) $1,921,788 $1,040,727 $0 $161,443 HSAO $702,693 $53,105 ($529) ($14,045) $50,329 $160,900 $0 $24,960 $549,181,709 $77,128,144 $594,089,496 $31,308,889 $977,414 $50,309 $114,513 $7,047 $9,125 $54,804 $119,193 $2,209 $3,812 $342 $632 $10,916 $4,796 $10,945 $8,453 $10,840 $4,984 $14,171 $8,213 $2,861 $1,546 Table 7 below shows the distribution of expenses by benefit plan. Table 7: Self-funded Expenses by Benefit Plan Expenses (in dollars) Medical Claims (accrual basis) Drug Claims (accrual basis) Medicare Part D Subsidy ERRP Reimbursement Rebates & Recoveries Reserve (IBNR) Administration Fees Stop-Loss Premiums Appropriated Expenses Overall Active/ EPO Active/ PPO Active/ HSAO $455,227,059 $115,534,293 ($2,651,408) ($429,413) ($10,606,712) $38,007,321 $27,016,754 $0 $4,190,981 $391,642,686 $80,190,719 $18,265,444 $7,408,207 $702,693 $53,105 ($354,985) ($8,768,290) $31,419,653 $22,650,551 $0 $3,513,673 ($13,742) ($477,105) $1,709,623 $886,029 $0 $137,446 Total $626,288,876 Enrollment in self-funded plans Subscribers $57,355 Members $123,638 Annual cost Per subscriber $10,919 Per member $5,066 $520,294,007 Benefit Options Annual Report January 1, 2011 to December 31, 2011 Retiree/ EPO Retiree/ PPO ($529) ($14,045) $50,329 $160,900 $0 $24,960 $43,022,092 $26,290,300 ($2,532,053) ($32,368) ($1,288,063) $4,615,551 $3,164,576 $0 $490,906 $1,594,144 $1,591,962 ($119,355) ($1,199) ($59,209) $212,165 $154,698 $0 $23,998 $27,915,902 $977,414 $73,730,941 $3,397,203 $48,086 $110,479 $1,881 $3,402 $342 $632 $6,718 $8,714 $328 $411 $10,820 $4,709 $14,841 $8,207 $2,861 $1,546 $10,975 $8,461 $10,344 $8,271 8 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 diagnosis. Table 8: Medical Expenses by Diagnosis – Actives & Retirees 2011 Actives All Retirees members 2009-2010* Actives All Retirees members Diagnosis % of Total % of Total % of Total % of Total % of Total % of Total Musculoskeletal System and Connective Tissue 12.25% 14.23% 12.31% 12.65% 14.57% 12.83% Supplementary Classification of Factors Influencing Health Status and Contact With Health Service 10.23% 9.73% 10.21% 10.16% 8.38% 9.99% Neoplasms 9.88% 17.39% 10.09% 8.22% 12.73% 8.64% Symptoms, Signs, and Ill-Defined Conditions 9.69% 7.92% 9.64% 9.92% 8.16% 9.75% Circulatory System 7.89% 8.28% 7.90% 8.05% 13.47% 8.56% Injury and Poisoning 7.65% 5.70% 7.60% 9.44% 6.14% 9.13% Digestive System 6.95% 5.69% 6.92% 7.32% 5.34% 7.14% Genitourinary System 6.85% 8.55% 6.90% 7.32% 9.78% 7.55% Nervous System and Sense Organs 6.39% 9.36% 6.48% 5.63% 7.95% 5.85% Respiratory System 4.90% 3.77% 4.87% 4.92% 4.40% 4.87% Pregnancy, Childbirth, and The Puerperium 4.26% 0.00% 4.14% 4.37% 0.02% 3.96% Endocrine, Nutritional and Metabolic Diseases, and Immunity Disorders 3.77% 3.97% 3.78% 3.51% 3.56% 3.52% Mental Disorders 2.55% 1.36% 2.52% 2.30% 1.46% 2.22% Infectious and Parasitic Diseases 2.24% 1.91% 2.23% 1.90% 1.22% 1.84% Skin and Subcutaneous Tissue 1.59% 1.24% 1.58% 1.53% 1.65% 1.54% Congenital Anomalies 1.52% 0.14% 1.48% 1.49% 0.20% 1.37% Blood and Blood-Forming Organs 0.99% 0.77% 0.99% 0.92% 0.96% 0.93% Certain Conditions Originating In The Perinatal Period 0.38% 0.00% 0.37% 0.35% 0.00% 0.32% Supplementary Classification Of External Causes of Injury and Poisoning 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Grand Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% * The data is for the incurred period October 2009 through September 2010. 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. Benefit Options Annual Report January 1, 2011 to December 31, 2011 9 Hospital Care Inpatient hospital care represents a significant portion of total medical expenses: 36% for active members and 33% for retired members. The figures below show a comparison of hospital admissions and the average length of stay for active and retired members and EPO, PPO, and HSA members. Figure 2: Admissions per 1,000 Members Retiree 189.2 Retiree 200.0 165.1 180.0 160.0 HSAO 112.0 Admissions 140.0 PPO 93.6 120.0 100.0 Active 71.8 PPO 85.2 Active 67.5 80.0 EPO 76.1 60.0 EPO 77.3 HSAO 27.0 40.0 20.0 2011 2009-2010* * The data is for the incurred period October 2009 through September 2010 Figure 3: Average Length of Stay Retiree 6.4 7.0 Retiree 5.0 6.0 Days 5.0 4.0 Active 4.1 EPO 4.2 PPO 4.6 Active 4.1 HSAO 2.8 EPO 4.6 HSAO 2.0 3.0 2.0 1.0 2011 2009-2010* * The data is for the incurred period October 2009 through September 2010 Note: Mental health, substance abuse, and maternity admissions are included. Benefit Options Annual Report January 1, 2011 to December 31, 2011 PPO 5.7 10 Hospital Care (continued) The figures below show how active/retired members and EPO/PPO/HSAO members compared statistically in number of hospital days and average cost per admission. As a group, retirees spent 2.8 times as many days in the hospital as active members. Also, PPO members spent 1.3 times as many days in the hospital as EPO members. On average, PPO members cost per admission was $1,930 higher than EPO members. Figure 4: Days per 1,000 Members Retiree 1,209.9 1,400.0 1,200.0 Retiree 827.4 1,000.0 Days 800.0 600.0 400.0 PPO 433.3 Active 294.3 PPO 486.0 HSAO 313.6 Active 279.8 EPO 352.3 EPO 318.8 200.0 HSAO 53.0 2011 2009-2010* *The data is for the incurred period October 2009 through September 2010. Figure 5: Average Cost per Admission 20,000.0 18,000.0 16,000.0 14,000.0 2011 2009-2010* *The data is for the incurred period October 2009 through September 2010. Note: Mental health, substance abuse, and maternity admissions are included. Benefit Options Annual Report January 1, 2011 to December 31, 2011 11 PPO $18,920 EPO $13,983 Retiree $12,311 Active $14,564 - HSAO $7,334 2,000.0 HSAO $7,005 4,000.0 PPO $15,526 6,000.0 EPO $13,595 8,000.0 Retiree $10,960 10,000.0 Active $13,895 12,000.0 Emergency Room Visits During Plan Year 2011, there were approximately 193 emergency room visits per 1,000 members of the self-funded plan. The average plan cost per emergency room visit was $1,139.26. This cost is indicative of proper utilization of emergency room visits. These figures include facility claims and professional fees. Urgent Care Visits During Plan Year 2011, there were approximately 194 urgent care visits per 1,000 members of the self-funded plan. The average plan cost per urgent care visit was $98.43. Physician Visits During Plan Year 2011, there were approximately 4,270 physician visits per 1,000 members (or each member of the self-funded plan visited a physician approximately 4.3 times). The average plan cost per office visit cost was $95.66. Figures 6 and 7 show how total active and retiree medical expenses were distributed by type of care. 2.25% of medical expenses for active employees were spent for emergency room care while 1.25% of medical expenses for retired members were spent for emergency room care. Figure 6: Active Employee Medical Expense by Place of Service Independent Laboratory, 2.71% Ambulance, 1.42% Urgent Care Facility, 0.37% Home H ealth, 2.35% Other, 0.68% Emergenc y Room, 2.25% Inpatient Hos pital, 35.64% Ambulatory Surgic al C enter, 4.15% Outpatient H ospital, 23.76% Office, 26.69% Benefit Options Annual Report January 1, 2011 to December 31, 2011 12 Figure 7: Retiree Medical Expense by Place of Service Home Health, 3.84% Independent Laboratory, 2.29% Ambulance, 1.19% Urgent Care Facility, 0.10% Emergency Room, 1.25% Other, 2.30% Ambulatory Surgical Center, 4.06% Outpatient Hospital, 22.25% Office, 30.15% Benefit Options Annual Report January 1, 2011 to December 31, 2011 13 Inpatient Hospital, 32.58% 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 35.0 Retiree 30.1 Retiree 25.1 30.0 25.0 20.0 15.0 Active 10.1 Active 10.4 10.0 5.0 2011 2009-2010* *The data is for the incurred period October 2009 through September 2010. Benefit Options Annual Report January 1, 2011 to December 31, 2011 14 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 9: Claim Distribution for 3-tier Formulary 2011 Total Prescriptions Tier 1 Generic ($10 copay) 1,058,605 Tier 2-Preferred ($20 copay) 302,013 Tier 3-Non-Preferred ($40 copay) 107,477 Total 1,468,096 2009-2010* Percent Total Prescriptions Percent 72.1% 980,591 68.0% 20.6% 361,208 25.0% 7.3% 101,173 7.0% 100.0% 1,442,972 100.0% *The data is for the incurred period October 2009 through September 2010. Prescription Use by Therapeutic Class The table below shows the ten most utilized classes of drugs according to total expense. More dollars were spent on "Diabetes", than on any other therapeutic class. Table 10: Top Therapeutic Classes by Total Expense Therapeutic Class Diabetes Cardiovascular Disease - Lipid Behavioral Health - Other Asthma Inflammatory Disease Behavioral Health - Antidepressants Infectious Disease - Viral Pain Management - Analgesics Upper Gastrointestinal Disorders - Ulcer Cardiovascular Disease - Hypertension Anticonvulsants Total 2011 Total Cost $11,135,835 $11,067,035 $8,742,497 $8,291,055 $7,446,035 $6,327,975 $5,377,764 $5,168,510 $4,947,846 $4,884,327 $73,388,879 Percent 15.17% 15.08% 11.91% 11.30% 10.15% 8.62% 7.33% 7.04% 6.74% 6.66% 100.00% *The data is for the incurred period October 2009 through September 2010. Benefit Options Annual Report January 1, 2011 to December 31, 2011 15 2009-2010* Total Cost Percent $9,602,335 8.70% $10,065,596 9.10% $7,078,441 6.40% $7,705,106 7.00% $6,527,936 5.90% $7,431,696 6.70% $5,214,141 4.70% $5,965,851 5.40% $5,549,570 5.00% $5,450,331 4.90% $70,591,003 63.80% Prescription Use by Type of Drug The table below shows the ten most utilized drugs according to total expense. Lipitor, a cholesterol controlling medication, is the leading prescription for the plan year. Table 11: Top Ten Drugs by Total Expense 2011 Drug Name Total Gross Cost Lipitor $3,945,794 Crestor $2,753,127 Humira $2,664,647 Singulair $2,494,553 Enbrel $2,220,952 Cymbalta $2,093,297 Plavix $2,073,300 Carbaglu $1,877,138 Copaxone $1,789,746 Lexapro $1,666,472 Total $23,579,026 Percent 3.42% 2.38% 2.31% 2.16% 1.92% 1.81% 1.79% 1.62% 1.55% 1.44% 20.41% 2009-2010* Drug Name Total Gross Cost Lipitor $3,440,283 Enbrel $2,289,241 Advair diskus $2,063,084 Humira $2,062,801 Crestor $2,000,769 Singulair $1,921,456 Plavix $1,769,859 Cymbalta $1,663,635 Actos $1,566,236 Oxycontin $1,461,868 Total $20,239,230 *The data is for the incurred period October 2009 through September 2010. Benefit Options Annual Report January 1, 2011 to December 31, 2011 16 Percent 3.30% 2.20% 1.98% 1.98% 1.92% 1.84% 1.70% 1.60% 1.50% 1.40% 19.41% 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 $2,270 $2,500 $2,094 $2,000 $1,439 0-18 yrs $1,291 $1,500 19-39 yrs $1,000 $341 $614 $554 $407 40-64 yrs 65+ yrs $500 $0 2011 2009-2010* *The data is for the incurred period October 2009 through September 2010. 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. Benefit Options Annual Report January 1, 2011 to December 31, 2011 17 Benefit Options Fully-Funded Dental Plans Benefit Options offers two different dental plan types: a Prepaid Plan provided by Total Dental Administrators and an Indemnity Plan provided by Delta Dental. Prepaid Plan – Total Dental Administrators (TDA) Key components of Prepaid Plan include:  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 Total Dental Administrators  No claim forms (except for emergency services) Indemnity/PPO Plan – Delta Dental Key components of Indemnity/PPO Plan include:  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 table show how active employee and retiree dental enrollments were distributed among plans. Table 12. Average Monthly Enrollment Delta TDA TOTAL Actives 34,088 16,179 50,267 Retirees 10,479 2,184 12,662 Benefit Options Annual Report January 1, 2011 to December 31, 2011 18 Dental Rates The table below summarizes monthly dental rates for active and retired members. Table 13: Summary of Monthly Dental Rates Active Employees Single Coverage Employee +One Coverage Family Coverage Employee State Total Employee State Total Employee State Total Delta Dental $30.98 $4.96 $35.94 $70.87 $9.92 $80.79 $123.12 $13.70 $136.82 Total Dental Admin. $5.00 $4.96 $9.96 $9.00 $9.92 $18.92 $14.00 $13.70 $27.70 Retirees Delta Dental Total Dental Admin. Single Coverage $35.94 $9.96 Benefit Options Annual Report January 1, 2011 to December 31, 2011 Employee +One Coverage $80.79 $18.92 19 Family Coverage $136.82 $27.70 Wellness Worksite wellness services are available to State employees as part of the employer benefits through the Benefit Options Program. Employees have access to preventive health screenings, annual flu vaccines and Employee Assistance Program (EAP) benefits. The table below shows the total utilization of the health screening benefit during the 2011 Plan Year and the number of at-risk employees referred to follow up care. Table 14: Plan Year 2011 Screenings Mini Health Screening* Osteoporosis Screening** Prostate Specific Antigen (PSA)** Facial Skin Analysis** Mobile Onsite Mammography Prostate Onsite Projects Total Events 79 Participants*** 2,994 1,308 273 1,769 1,168 517 8,029 63 23 165 Referrals 499 12 20 N/A 33 63 627 * The basic Mini Health Screening includes; full lipid panel, fasting blood glucose, blood pressure, BMI, and body composition. ** Optional tests offered as a package with the basic Mini Health Screening. *** Participants are not unique. The table below shows the total utilization for the 2011 Annual Flu Vaccine Program held October through December. Wellness provided a total of 14,039 vaccines. Employees had access to the flu vaccine at a total of 477 locations, and 89% of members received shots at a worksite clinic. Table 15: Plan Year 2011 Flu Vaccines State Agency Worksite University Worksite Combined Worksite (Wesley Bolin) Open Enrollment Clinics Public Clinics Total Benefit Options Annual Report January 1, 2011 to December 31, 2011 20 Locations 178 38 6 4 251 477 Participants 7,668 3,108 1,690 163 1,410 14,039 The table below shows the utilization for the Employee Assistance Program (EAP) and support services offered to agencies covered under the Arizona Department of Administration. EAP counseling and FamilySource consultation are the two most utilized services both telephonically and online. Table 16: Plan Year 2011 EAP Utilization Eligible Population Live Telephonic Access EAP FamilySource FinancialConnect LegalConnect Online Access EAP FamilySource FinancialConnect GlobalConnect Health & Wellness LegalConnect Critical Incident Stress Debriefing Trainings Overall Utilization 20,807 Users 1153 894 54 42 163 3637 568 1025 443 6 712 883 19 68 4,877 Utilization Rate 5.5% 4.3% 0.3% 0.2% 0.8% 17.5% 2.7% 4.9% 2.1% 0.0% 3.4% 4.2% 0.1% 0.3% 23.4% A three year Wellness strategic plan was put into place midway through 2011 to enhance the services offered to Benefit Options members. The major strategic plan achievements for the 2011 Plan Year included wellness rebrand and revised communications, improved integration with health plan vendors, assignment of quarterly health topics, and the implementation of health management educational series. During the third and fourth quarters wellness targeted heart disease and diabetes and organized 18 health management classes, 16 weight management and, 2 cholesterol management series. A total of 353 participants utilized the new health management series and lost on average 11 pounds. Benefit Options Annual Report January 1, 2011 to December 31, 2011 21 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 17: Summary of Earned Premiums 2011 Collected Vendor Hartford** Basic Life Supp Life Dep Life STD LTD Total Paid 2009-2010* Collected Paid $1,380,353 $11,251,701 $2,537,922 $7,505,119 $2,830,391 $25,505,485 $1,391,396 $11,249,172 $2,537,759 $7,504,655 $2,829,702 $25,512,684 Avesis** - Vision $4,703,866 $4,689,082 $4,728,106 ASI - FSA $4,576,280 $4,876,516 $5,861,366 $34,785,632 $35,078,282 $36,765,607 Total *Per contract, vendors paid 55 days in arrears. Benefit Options Annual Report January 1, 2011 to December 31, 2011 22 $2,353,728 $11,569,012 $2,635,373 $7,538,133 $2,744,220 $26,840,466 $23,930,135 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 performance penalties. This percentage is allocated among the more critical measures of the contract. The following is a report of the performance penalties incurred by health plan vendors not meeting agreed upon performance standards during the year starting January 01, 2011, ending December 31, 2011. In each case below, the final member satisfaction survey and the Benefit Services Division Vendor Survey for FY 2011 may result in additional penalties. Benefit Options Annual Report January 1, 2011 to December 31, 2011 23 A. UnitedHealthcare (Claims Administrator) – penalties to date of $48,105.65, equaling .33% of the administrative fee and .50% of the vendor’s medical management fee. Measure Written appeals resolved in 15 calendar days after receipt of participant’s request for review in the case of pre-service claims. 97% of all fully documented claims received will be completely processed within 10 calendar days after they are received. Percent of Fees at Risk 0.25% Total Percent Assessed Vendor (Based on Missed Measure)  0.10%: Which equals 5 months missed out of 12 months measured.  Corrective Action: Feedback and coaching was provided to the team member who misdirected or caused delay in appeal processing. 0.75%  0.06%: Which equals 1 month missed out of 12 months measured.  Corrective Action: During the month of May 99.3% of claims dollars submitted for payment will be accurately processed and paid. 2% 90% of DM members identified will receive follow-up outreach and assessments according to the program specifications. 2%   Benefit Options Annual Report January 1, 2011 to December 31, 2011   overall claim receipts were higher than anticipated. As a result, turn around times increased causing claims to flow to transaction claim queues later in the cycle than normal resulting a claims processing metric of 96.76% against the goal of 97% at the end of the month. We have made appropriate adjustments to our cycle so claims will not be delayed in our queues when we have heightened claims in the future. In addition, we are currently back on track and currently sitting at a 98.17% turn around time in 10 days. 0.17%: Which equals 1 month missed out of 12 months measured. Corrective Action: The measure was missed due to two errors during the month of February resulting in a metric of 99.06% against the goal of 99.3%: o The first was due to a copay error made by a processor. This person has been coached on their mistake. o The second error was due to the wrong provider suffix paid. The processor had a revenue code on the claim and should have changed the suffix from physician to facility. This processor has also been coached. 0.50%: Which equals 1 quarter missed out of 4 quarters measured. Corrective Action: This metric was missed for Q1 2011. This metric was missed due to the timing of our mailing since they go out 3 times a year. Mailings do not go out for Q1, this caused the metric to drop. 24 B. AmeriBen (Claims Administrator) – penalties to date of $19,443.92, equaling 0.64% of the vendor’s administrative fee. Measure Written appeals resolved in 45 calendar days after receipt of participant’s request for review in the case of postservice claims. Contractor will process 98% or more of enrollments within 1 calendar day of receipt of the file load. This standard will not apply during the open enrollment or option selection period. ID card release report noting number of ID cards required and number released each day for new hire enrollments. 97% of all fully documented claims received will be completely processed within 10 calendar days after they are received. Percent of Fees at Risk 0.50% Total Percent Assessed Vendor (Based on Missed Measure)  0.04%: Which equals 1 month missed out of 12 months measured.  Corrective Action: AmeriBen created an appeal 1.25% 0.25% open log reports that are monitored daily by the Appeals Supervisor. Logs exceeding 25 days are reviewed by the Manager of Customer and Network Relations.  0.10%: Which equals 1 month missed out of 12 months measured.  Corrective Action: To ensure 100% of enrollments are processed within 1 calendar day receipt of the file load, AmeriBen established a backup plan in the event that the primary ADOA Eligibility Specialist is unavailable due to scheduled or unscheduled absence.  0.13%: Which equals 2 quarters missed out of 4 quarters measured.  Corrective Action: All ID card files will continue to 0.75% Benefit Options Annual Report January 1, 2011 to December 31, 2011 be reviewed by the Account Management Team prior to release to the print vendor to minimize any print delays.  0.06%: Which equals 1 month missed out of 12 months measured.  Corrective Action: AmeriBen identified that claims were worked in the maintenance queue without priority. AmeriBen implemented the following action items: o A daily report has been prepared, which identifies explicitly each of the ADOA claim extracts. o The Provider Relations Team Lead receives and reviews the report daily, assigning ADOA files. o Transmit claim files with ‘ADOA’ in the file name standard, to ensure visibility to ADOA files with or without reporting/monitoring of extracts. 25 C. Cigna (Claims Administrator) – penalties to date of $16,642.82, equaling .86% of the vendor’s administrative fee. Measure Average Speed to Answer <30 seconds. Percent of Fees at Risk 0.50% Total Percent Assessed Vendor (Based on Missed Measure)  0.08%: Which equals 2 months missed out of 12   First Call Resolution 90% or greater. 0.50%   Monthly appeal statistic reports. 0%   Written appeals resolved in 45 calendar days after receipt of participant’s request for review in the case of post-service claims. 0.33% Benefit Options Annual Report January 1, 2011 to December 31, 2011   months measured. Corrective Action: Increased Call Handle Time: Average call handle time increased more than expected (almost 10%) as we increased agent focus on staying on the phone with the customers to fully resolve their issues. In order to truly "take the customer out of the middle", our agents began to conference in the 3rd parties and providers with the customer on the line instead of just giving them an 800# or directing them to contact their providers. We expected an increase to handle time, but our estimates fell short. Staffing levels: Staffing levels dropped slightly below plan due to agent attrition and call volumes. Planned staffing increases (hiring plan) and will continued to increase by more than 280 agents in 2011. Note call ASA is based on 24/7 members services availability, not just dedicated team results. 0.04%: Which equals 1 month missed out of 12 months measured. Corrective Action: Cigna implemented 2 hours of Open Call time per Customer Service Associate per week. This initiative allows the CSA's time off phones to follow up on outstanding issues and make customer contacts timely. 0.0%: Which equals 2 months missed out of 12 months measured. Corrective Action: Reporting measure only no corrective action requested. 0.11%: Which equals 4 months missed out of 12 months measured. Corrective Action: Supervisor provided additional training and check daily appeal reports to ensure that days are being tracked more closely. Processor has been given additional training and Supervisor will work closely with the processor on an ongoing basis. 26 Continued C. Cigna (Claims Administrator) Measure Contractor will deliver quarterly reports to the ADOA within 45 calendar days from the end of the quarter. 97% of all fully documented claims received will be completely processed within 14 calendar days after they are received. Will be calculated by counting the number of days from the day the claim is received. Percent of Fees at Risk 0.25% Total Percent Assessed Vendor (Based on Missed Measure)  0.11%: Which equals 4 months missed out of 12 months measured.  Corrective Action: Account Manager was using 55 day delivery rule for in person meetings in error.  Account Manager is aware that reports to be 0.75%      Network ManagementChange to Primary Provider Count. 0% Contractor will provide a detailed provider report which identifies providers by TIN number. 0%   Benefit Options Annual Report January 1, 2011 to December 31, 2011   delivered via email 45 days after close of quarter and 55 days for in-person meeting. Calendar alerts and reminders set up so that all required reports will be received from reporting areas in advance of each quarterly deadline. Supervisor provided additional training and check daily appeal reports to ensure that days are being tracked more closely. 0.11%: Which equals 4 month missed out of 12 months measured. Corrective Action: Jan – Apr claim payment delays due to claim diverts for Health Care Reform required Audits. Further impacted as first in is first out rule once the hold was released. Better planning and staffing for any known HCR audits that will need to take place in the future. In the last quarter of the year, team placed additional focus on aging claims and pended claims so that they could be paid by year’s end, which impacted monthly time to process, but we followed up on all claims to ensure all claims were paid. Will ensure appropriate staff for 2012 year end focus on aging and pended claims and ensure the training and skill set is appropriate. 0.0%: Which equals 1 month missed out of 12 months measured. Corrective Action: Reporting measure only no corrective action requested. 0.0%: Which equals 1 month missed out of 12 months measured. Corrective Action: Reporting measure only no corrective action requested. 27 D. Aetna (Claims Administrator) – penalties to date of $9,455.55, equaling .63% of the vendor’s administrative fee. Measure Percent of Fees at Risk Total Percent Assessed Vendor (Based on Missed Measure) Abandonment Rate 3% or less. 1% Average Speed to Answer <30 seconds. 1% 97% Telephone Call Quality. 1% Contractor will resolve 95% or more of all "normal" correspondence within 15 calendar days of receipt. Normal correspondence is defined as: plan descriptive materials requests; and premium and/or coverage verification. 1%  0.08%: Which equals 1 month missed out of 12 months measured.  Corrective Action: Higher than expected call volume occurred within the ADOA designated Member Services Team due to open enrollment calls. Call routing volume adjustments were made subsequently the target was met in December.  0.08%: Which equals 1 month missed out of 12 months measured.  Corrective Action: Higher than expected call volume occurred within the ADOA designated Member Services Team due to open enrollment calls. Call routing volume adjustments were made subsequently the target was met in December.  0.17%: Which equals 2 months missed out of 12 months measured.  Corrective Action: Feedback and coaching was provided to the team member identified as causing the error.  0.17%: Which equals 2 month missed out of 12 months measured.  Corrective Action: (December) Aetna identified correspondence tasks that were internally mis-routed causing a delay in reaching the Correspondence Team for handling. The Correspondence Team worked the tasks as quickly as possible once identified. Feedback and coaching was provided to the team member that caused the delay.  Corrective Action: (November) Written Correspondence Rate - There was one correspondence task that was opened in error by a Member Services Representative in which the Representative failed to follow correct handling workflow. This caused this guarantee to be missed. The Member Representative involved has been re-educated on the correct workflow and a reminder has been sent to the Member Services Team.  0.08%: Which equals 1 month missed out of 12 months measured.  Corrective Action: The PG was missed due to larger than expected claim inventory and the TAT was missed in the first week of January. ADOA Claim Team resources were focused on reducing the inventory and was able to recover the plan TAT guarantee for the month of February. 92% of all fully documented claims received will be completely processed within 12 calendar days after they are received. 0.50% Benefit Options Annual Report January 1, 2011 to December 31, 2011 28 E. ASIFLEX (Flexible Spending) - penalties to date of $510.92, equaling .50% of the vendor’s fee at risk. Measure 95% of claims will be processed within two working days. 100% of claims will be processed within five working days. Percent of Fees at Risk 1% Total Percent Assessed Vendor (Based on Missed Measure)  0.25%: Which equals 1 quarter missed out of 4 quarters measured.  Corrective Action: ASIFLEX hired 17 additional 1% Benefit Options Annual Report January 1, 2011 to December 31, 2011 claims/customer service representatives to address the increase in claims in the first quarter.  0.25%: Which equals 1 quarter missed out of 4 quarters measured.  Corrective Action: ASIFLEX hired 17 additional claims/customer service representatives to address the increase in claims in the first quarter. 29 F. Avesis (Vision) - penalties to date of $3,500, equaling 1.05% of the vendor’s fee at risk. Measure Monthly reports provided within 30 calendar days after the close of month. 90% of all calls requesting a member services representative will be answered in 30 seconds or less. Fees at Risk $12,000.00    $30,000 Benefit Options Annual Report January 1, 2011 to December 31, 2011  Total Percent Assessed Vendor (Based on Missed Measure) $1,000: Which equals 1 month missed out of 12 months measured. Corrective Action: As a result of Avesis’ performance falling outside of the monthly reporting requirement of 30 calendar days after the close of the month for the February 2011 monthly report, Avesis has crossed trained additional staff to ensure that the monthly reports are provided within 30 calendar days. $2,500: Which equals 1 month missed out of 12 months measured. Corrective Action: As a result of Avesis’ performance falling below the requirement for the month of December 2011 additional resources were put in place to support unexpected spikes in call volume. Additional staff was added to ensure coverage during spike times. Contingent staff has also been identified to assist during spikes in call volume. 30 G. MedImpact - penalties to date of $13,750.00, equaling 2.63% of the vendor’s fee at risk. Measure 99% Percent of time internal on-line system available. 3 Business Days Number of days for a response to a written inquiry. Fees at Risk $5,000.00   $50,000.00 Benefit Options Annual Report January 1, 2011 to December 31, 2011   Total Percent Assessed Vendor (Based on Missed Measure) $1,250.00: Which equals 1 quarter missed out of 1 quarter measured. Corrective Action: MedImpact will ensure improvements have been made since 2Q11. MedImpact commits to periodic system improvements and updates in order to reach the 99.9% mark for this item. $12,500.00: Which equals 1 quarter missed out of 4 quarters measured. Corrective Action: MedImpact completed review of timely responses to all ADOA inquiries, and will make a concerted effort to respond quickly and effectively to meet the target. 31 Successfully Met Performance Guarantees Table 18: Successful Performance Guarantees Vendor At risk Guarantees Met UHC 18.55% Total Customer Service, Appeals (met 79 out of 84 Administration targets), Open Enrollment, Claims Adjudication (met Fee 57 out of 60 targets), Administration, Account 25% Medical Management Meeting, Network Management, Management Medical Management, Case Management, Disease Fee Management (met 9 out of 10 targets), and Nurse Line. AmeriBen 15% Total Customer Service, Appeals (met 26 out of35 Administration measures), Open Enrollment, Claims Adjudication Fee (met 71 of the 72 targets), Administration (met 29 of the 32 targets), Account Management Meeting (met 3 out of the 4 targets), Reports (met 16 out of17 targets), & Finance Accounting. Cigna 15.20% Total Customer Service (met 81 out of 84 targets), Administration Appeals (met 42 out of 48 targets), Open Enrollment, Fee Claims Adjudication (met 52 out of 60 targets), 25% Medical Account Management Meeting, Administration , Management Reports (met 25 out of 29 targets), Network Fee Management (met 20 out of 24 targets), Finance Accounting, and Case Management. Aetna American Health Holding MedImpact 23% Total Administration Fee 20% Medical Management Fee Total Administration Fee 1.95% Case Management Fee 1.87% Disease Management Fee 1.25% Nurse Line Fee 1.25% $522,500.00 Total Fees at Risk Benefit Options Annual Report January 1, 2011 to December 31, 2011 Customer Service (met 65 out of 73 targets), Appeals, Open Enrollment, Claims Adjudication (met 72 out of 73 targets), Administration, Account Management Meeting, Reports, Network Management & Nurse Line (met 1 out of 3 targets). Implementation, Utilization Management, Case Management, Disease Management, Reporting, Systems, Nurse & Other Call Center Activity. Data & Eligibility Requirements, Claims, Customer Services, Account Services, Reports, Network Access, Network Pharmacy Management, Mail Order Service, Retail Paper Claims Processing Time, Network Pharmacy POS Compliance. 32 Continued Table 18: Successful Performance Guarantees Vendor Delta Dental TDA Hartford Avesis ASIFlex ComPysch At risk 1.25% Total Administration Fee 1% Total Administration Fee 10% Total Administration Fee Guarantees Met Reporting, Network Management, Claims Administration, Appeals, Satisfaction, and Quality of Service and Responsiveness to Members. Reporting, Network Management, Appeals, Satisfaction, Quality of Service & Responsiveness to Members. Open Enrollment, Report Timeliness, Quality of Service and Responsiveness to Members, Appeals/Grievance, Claims Administration, Claimant Notification, and Financial Payment Accuracy. $332,000.00 Implementation, Reporting (met 16 out the 17 Total Fees at targets), Networking, Claims, Appeals, and Call Risk Center (met 35 out of the 36 targets). 5% Total Claims Turnaround (met 6 out of 8 targets), Claims Administration Adjudication Financial Accuracy, Web Availability, Fee and Phone Response Time. 20% Total Implementation, Account Management, Customer Administration Service, Reporting, Program Administration, and Fee Surveys. Benefit Options Annual Report January 1, 2011 to December 31, 2011 33 Audit Services The Benefit Services Division (BSD) Audit Services Unit provides assurances that add value and improve the operations of the BSD. Audit Services performs systematic evaluations of contract compliance, operational controls, risk management, and the implementation of best practices to support BSD objectives. During the 2011 plan year, BSD Audit Services completed audits to ensure the health plan vendors appropriately provided contracted services. The audit schedule for the plan year was developed using a combination of contract elements and risk analysis. Individual audit objectives were developed with the consideration of dollar value, complexity of operations, changes in personnel or operations, loss exposure, and previous audit results. Audits were completed in, but were not limited to the following four functional areas: Functional Area Vendor operating transactions Vendor internal operating standards Vendor execution of benefit design ADOA accuracy of shared data Audit Methodology Statement on Standards for Attestation Engagements No. 16 Audits (“SSAE 16”) Quality Management Review (“QMR”) Plan Allowance/Exclusion Audit (“A&E”) Dependent eligibility audit All of the health plan’s contracted vendors that pay claims are required to provide BSD a copy of an independently assessed operational audit (SSAE 16) annually. SSAE 16 audits evaluate the internal control of the vendor’s processing systems utilized to process claims and identify deficiencies to be addressed. Audit services reviewed the SSAE 16 reports provided by each of the vendor’s external auditors. There were no instances of significant operating failure noted and no corrective action was required. QMRs ensure the vendor’s internal audit teams were effectively measuring operating standards, identifying and correcting errors, and providing sufficient training for claims processing, customer service, and clinical reviews. QMR results indicated that vendors were either meeting or exceeding internal standards and that claims processors were appropriately trained. A&E Audits ensure that the vendor’s systems were set up correctly to service the health plan’s benefit design. A&E Audit findings for the plan year indicated that plan limitations and restrictions were processed accurately with few exceptions and members received the benefits allowed to them as defined in the plan description. A dependent eligibility audit was also performed on the health plan’s membership. The results of the eligibility audit indicated that only eligible individuals were enrolled in the plan and receiving benefits. Additionally, dependent eligibility is effectively monitored to minimize the risk of claims paid on behalf of ineligible dependents. In addition to the regularly scheduled audits, reviews, and evaluations listed above, Audit Services performed operational standards testing related to vendor performance guarantees, quality management standards, and reporting structure for each of the contracted vendors. Benefit Options Annual Report January 1, 2011 to December 31, 2011 34 Glossary of Terms Active member – an employee, other than one excluded by the Arizona Administrative Code, who works for the State of Arizona or a State University and is enrolled in one of the health plan options offered by the State. Also referred to as “Actives.” 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. DHMO/PrePaid Dental – a dental plan that offers members dental services with no annual maximums, no claim forms, and services are based on a discounted rate. Total Dental is the prepaid dental vendor. Benefit Options Annual Report January 1, 2011 to December 31, 2011 35 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. 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-Insured – an insurance model wherein Benefit Options collects premiums and transfers the premiums to commercial insurers who take the risk of revenue to expense. Health Savings Account Option (HSAO) – an account that allows individuals to pay for current health expenses and save for future health expenses on a tax-free basis. Only certain plans are HSA-eligible. Indemnity/PPO – a dental plan that offers members choice to visit any dentist with an in-network and out-of-network co-insurance structure. There is a maximum annual benefit of $2,000 per member per year for dental services. The vendor for the PPO plan is Delta Dental. 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. Benefit Options Annual Report January 1, 2011 to December 31, 2011 36 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. Plan year – the period January 1 through December 31. 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. Benefit Options Annual Report January 1, 2011 to December 31, 2011 37 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. Benefit Options Annual Report January 1, 2011 to December 31, 2011 38 Appendix A The HITF Fund-3015 established under A.R.S. 38-654-A is used to pay medical claims, dental premiums, and administrative and operating costs of the Wellness Program and the Benefits Services Division. Table A: 3015 Fund Plan Year 01/1/2011 - 12/31/2011 BEGINNING CASH PER AFIS REVENUE EXPENDITURES VENDOR ADMIN FEES AHH UR/UM $ 1,023,116.40 AETNA $ 2,150,991.12 CIGNA $ 2,142,910.89 UHC $ 22,849,050.42 AMERIBEN $ 3,321,299.14 MEDIMPACT $ 1,015,992.25 OTHER FEES** $ 241,035.25 AG COLLECTION FEES $ 321.99 NET ADMIN FEES^ 32,744,717.46 $ MEDICAL CLAIMS $ 111,772.98 $ 23,397,906.52 $ 39,771,480.75 $ 322,424,880.35 $ 83,644,333.28 $ 192,127.66 $ $ $ $ $ $ $ $ $ RECOVERIES* 3,370,051.61 2,480.62 77,972.29 789,320.23 14,044.99 6,075,443.64 429,413.25 2,651,407.78 $ 32,552,589.80 $ 110,799,552.44 $ $ 750,543.77 580,900,470.09 $ 13,410,134.41 $ 567,490,335.68 SYMETRA STOP LOSS PREM $ 280,305.60 $ CLAIM REIMB 85,270.71 $ 195,034.89 $ 600,237,960.37 $ 34,376,006.00 $ 41,681,609.10 $ 76,057,615.10 SELF INSURED EXPENDITURES FULL SVC PREM $ 34,376,006.00 DELTA TDA NET DENTAL PREM DENTAL PREM $37,908,686.44 $3,782,278.06 $ 41,690,964.50 189,162,971.16 801,029,668.34 720,822,356.42 $ 269,370,283.08 PERF PENALTIES $ 1,556.77 $ 13,835.66 $ 13,724.52 $ 146,937.80 $ 9,822.91 $ 6,250.00 HARRINGTON AETNA CIGNA UHC AMERIBEN WHI MEDIMPACT ERRP REIMBURSEMENT RDS SUBSIDY OTHER WELLNESS NET MEDICAL CLAIMS BCBS (NAU ONLY) $ $ $ PERF PENALTIES $ $ 9,355.40 $ 9,355.40 FULLY INSURED EXPENDITURES HITF OPERATING EXP $ 4,190,980.95 $ 4,190,980.95 FUND TRANSFERS OUT $ 40,335,800.00 $ 40,335,800.00 TOTAL EXPENDITURES TOTAL RECOVERIES* NET EXPENDITURES $ 734,519,244.60 $ 720,822,356.42 $ 13,696,888.18 ENDING CASH BALANCE PER AFIS *Recoveries include Medicare Part D Retiree Drug Subsidy reimbursement, prescription drug rebates, stop loss claim reimbursements, overpayment recoveries (including stop payments and voids), subrogation recoveries, etc. **Other fees include HSA Administration, NYHCR, MA, and legal fees. ^Vendor administrative fees and fully insured premiums are paid 55 days in arrears per contract. Benefit Options Annual Report January 1, 2011 to December 31, 2011 39 Fund 3035 is established under A.R.S. 38-651.05. to pay premiums for other insurance products offered to State employees including Vision, Flexible Spending, Supplemental and Dependent Life, Short Term Disability, Non-ASRS Long Term Disability, and Basic Life insurance. Table B: 3035 Fund Plan Year 01/1/2011 - 12/31/2011 BEGINNIN G CASH PER AFIS REVENUE VEND OR HARTFORD IN SUR ANC E BASIC LIFE SUPP LIFE DEP LIFE STD LTD TOTAL HARTFORD AVESIS $ 4,703,866.15 ASI AMRA DC RA TOTAL FLEX SPENDING $ $ $ 3,443,290.79 1,132,989.39 4,576,280.18 PAYROLL CLEARING $ 1,935.37 TOTAL REVENUE $ 34,787,566.22 IN SUR ANC E BASIC LIFE SUPP LIFE DEP LIFE STD LTD TOTAL HARTFORD AVESIS VISION 4,687,702.45 ASI $ $ $ $ 3,243,924.24 1,110,217.00 97,097.38 4,451,238.62 GAO AFIS COST $ 2,100.00 $ 34,648,429.04 TOTAL EXPENDITUR ES ENDING C ASH BALANC E PER AFIS Benefit Options Annual Report January 1, 2011 to December 31, 2011 $ 34,787,566.22 $ 34,648,429.04 $ 4,423,158.03 AMOUNT $ 1,394,221.27 $ 11,260,169.68 $ 2,546,554.91 $ 7,478,916.02 $ 2,827,526.09 $ 25,507,387.97 $ AMRA DC RA ADMIN FEES TOTAL FLEX SPENDING 4,284,020.85 AMOUNT $ 1,380,352.52 $ 11,251,700.51 $ 2,537,921.75 $ 7,505,118.63 $ 2,830,391.11 $ 25,505,484.52 VISION EXPEN DITUR ES VEND OR HARTFORD $ 40 Benefit Options Arizona Department of Administration, Benefit Services Division 100 N. 15th Avenue, Suite 103 Phoenix, Arizona 85007 Telephone: 602-542-5008 Fax: 602-542-4744 Benefit Options Annual Report January 1, 2011 to December 31, 2011 41