2012
Annual Report
Health Insurance
Trust Fund

Arizona Department of Administration
Human Resources Division – Benefit Services

Janice K. Brewer
Governor

Brian C. McNeil
Director

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. 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, 2012 through December 31,
2012. The active and retiree plans were concurrent for this period.
The 2012 annual report reflects a method change in the statistical reporting. In prior
years, many of the reported statistics were weighted averages (by enrollment) of vendor
report data. Often, the results of the weighted average approach could not be
reproduced independently by ADOA staff.
In addition, the vendors’ reporting
methodology is proprietary, confidential, and subject to change without notice to ADOA.
In contrast, for this report ADOA has internally developed a more consistent statistical
model. ADOA’s model is based on generally accepted actuarial principles and
standards, including Milliman Health Cost Guidelines Commercial Rating Structures,
July 1, 2012. As a result, Plan Year 2011 figures and values may differ from the 2011
Annual Report.
Any questions relating to the contents of this report should be addressed to:
Arizona Department of Administration
Human Resources Division – Benefit Services
100 N. 15th Avenue, Suite 103
Phoenix, Arizona 85007
Telephone: 602-542-5008 or
1-800-304-3687
Fax: 602-542-4744

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

1

Table of Contents
Report Background ......................................................................................................... 4
Executive Summary ........................................................................................................ 5
Health Insurance Trust Fund Summary........................................................................... 6
Enrollment in Benefit Options Medical Plans................................................................... 7
Medical Premiums ........................................................................................................... 9
Premiums vs. Expenses for Active and Retired Members............................................. 10
Expenses for Benefit Options Self-Funded Plans ......................................................... 11
Medical Expenses Associated with Medical Diagnoses ................................................ 12
Hospital Care ............................................................................................................. 13
Emergency Room Visits ............................................................................................ 15
Urgent Care Visits...................................................................................................... 15
Physician Visits .......................................................................................................... 15
Annual Prescription Use ................................................................................................ 17
Generic and Name-Brand Prescription Use ............................................................... 18
Prescription Use by Therapeutic Class ...................................................................... 18
Prescription Use by Type of Drug .............................................................................. 19
Benefit Options Fully-Funded Dental Plans................................................................... 20
Wellness........................................................................................................................ 21
Life, Disability, Vision Insurance and Flexible Spending Accounts Premiums ............... 23
Vendor Performance Standards .................................................................................... 24
Vendor Performance Measures 1: Aetna ................................................................... 25
Vendor Performance Measures 2: Cigna ................................................................... 26
Vendor Performance Measures 3: United HealthCare............................................... 27
Vendor Performance Measures 4: AmeriBen ............................................................ 28
Vendor Performance Measures 5: American Health Holding .................................... 28
Vendor Performance Measures 6: MedImpact .......................................................... 28
Vendor Performance Measures 7: Delta Dental ........................................................ 29
Vendor Performance Measures 8: Total Dental Administrators ................................. 29
Vendor Performance Measures 9: ComPsych ........................................................... 29
Vendor Performance Measures 10: Avesis ............................................................... 29
Vendor Performance Measures 11: Application Software Inc.................................... 30
Vendor Performance Measures 12: The Hartford ...................................................... 30
Audit Services ............................................................................................................... 31
Appendix ....................................................................................................................... 33
Table A: Special Employee Health Fund Cash Statement......................................... 33
Glossary of Terms ..................................................................................................... 34

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

2

Figures and Tables
Figure 1: Average Monthly Premiums & Expenses per Member ............................. 10
Figure 2: Hospital Admissions per 1,000 Members.................................................. 13
Figure 3: Inpatient Average Length of Stay .............................................................. 13
Figure 4: Inpatient Days per 1,000 Members ........................................................... 14
Figure 5: Average Cost per Admission .................................................................... 14
Figure 6: Active Medical Expense by Place of Service ............................................ 15
Figure 7: Retiree Medical Expense by Place of Service .......................................... 16
Figure 8: Average Number of Prescriptions per Year .............................................. 17
Figure 9: Pharmacy Expense per Utilizer per Year .................................................. 17
Table 1: Health Insurance Trust Fund Summary ....................................................... 6
Table 2: Average Medical Enrollment by Plan & Network .......................................... 8
Table 3: Active Medical Premiums by Pay Period...................................................... 9
Table 4: Monthly Retiree Medical Premiums ............................................................. 9
Table 5: Self-funded Expenses by Active, Retiree, & Plan ...................................... 11
Table 6: Self-funded Expenses by Plan for Actives & Retirees ................................ 11
Table 7: Medical Expenses by Diagnosis for Actives & Retirees ............................. 12
Table 8: Total Prescriptions by Tier ......................................................................... 18
Table 9: Pharmacy Top Therapeutic Classes by Plan Paid ..................................... 18
Table 10: Top Ten Drugs by Total Plan Paid ........................................................... 19
Table 11: Average Dental Enrollment by Plan ......................................................... 20
Table 12: Monthly Dental Premiums ........................................................................ 20
Table 13: Plan Year 2012 Wellness Screenings ...................................................... 21
Table 14: Plan Year 2012 Flu Vaccines ................................................................... 21
Table 15: Plan Year 2012 Employee Assistance Program Utilization ...................... 22
Table 16: Plan Year 2012 Health Management Courses ......................................... 22
Table 17: ERE/Benefits Administration Fund Summary........................................... 23
Table 18: Audit Services Summary .......................................................................... 31

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

3

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. For 2012, the health benefit plan was self-funded; whereas the dental
plans, vision plan, disability insurance, and life insurance plans were fully-insured.
The State’s self-funded medical plan began on October 1, 2004, and consists of both
integrated and nonintegrated options for the medical plan with a carved out pharmacy
plan. The integrated option combines the functions of claims review and payment,
network access, and medical management, including utilization management, case
management and disease management. The non-integrated option is similar, except the
medical management function is carved out to a separate contracted vendor.
Schedules of premiums received and accounted for in fund 3015, distribution by
enrollment, incurred and paid medical/drug claims, and expenses related to the medical
and dental plans are included within this Annual Report. A summary of premiums
collected and paid for life insurance, disability insurance, vision insurance and flexible
spending accounts has also been included for fund 3035.
All data provided herein is for the Plan Year 2012 (January 1, 2012 – December 31,
2012).

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

4

Executive Summary
During the 2012 Plan Year, the Benefit Options program offered a comprehensive
insurance package to over 128,000 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.
Based on the 2012 contribution strategy, the total health and dental premiums collected
was $734 million with total plan expenses of $726 million, resulting in a net operational
gain of $7 million.
Health Plan
 The average cost to insure each member was $5,061
 Average active member cost was $4,789
 Average retiree cost was $8,503
 Medical claims expense was $481 million of total health plan cost for 2012
 The leading diagnosis category by cost was the musculoskeletal system
o Just over 12% of total medical claims cost
 Claims showed members are seeking the care of a physician or specialist
for the majority of their medical needs indicating appropriate care
o 169 emergency room visits per 1,000 members
o 183 urgent care visits per 1,000 members
o 3,960 physician visits per 1,000 members
 Pharmacy claims expense was $118 million of total health plan cost for 2012
 The leading therapeutic drug class by cost was Diabetes
o 10% of total pharmacy claims cost
 1.4 million prescriptions were filled during the 2012 plan year
o Retirees filled an average of 31.5 prescriptions per year
o Active members averaged 10 per year
Wellness Program
 Administered over 13,500 flu vaccines through 405 worksite or public events
 Administered over 4,500 screenings through 162 worksite events
 614 referrals to physicians for various health issues
Performance Measures
Financial guarantees are in place to manage the performance of the contracted
vendors. Penalties collected in 2012 for the 2011 plan year, from vendors failing to meet
agreed upon performance measures, totaled over $315,000.
Review
The 2012 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, 2012 to December 31, 2012

5

Health Insurance Trust Fund Summary
Table 1 is a cash statement of receipts received and expenses paid during 2012 for the
2012 Plan Year and as well as prior plan years.
ADOA Benefit Options is the
self-funded medical program
and includes Aetna, Blue
Cross Blue Shield of Arizona
administered by AmeriBen,
CIGNA, and United Healthcare
networks. State and University
employees
and
retirees
choose coverage from one of
the
self-funded
networks.
BCBS (NAU) is a fully-insured
option available only to NAU
employees and NAU retirees.
The Medicare Part D Retiree
Drug Subsidy is available to
employers who provide a
qualified pharmacy plan to
Medicare-eligible retirees.
The Early Retiree Reinsurance
Program was instituted by the
Affordable Care Act as an
incentive for employers to
continue health coverage for
early retirees.
The 2012
expense is reimbursement for
an overpayment received in
the prior year.

Health Insurance Trust Fund Summary
Prior Balance December 31, 2011

Plan Year 2012
$269,370,283.08

Revenues
ADOA Benefit Options
BCBS (NAU)
Premium Holiday
Dental
Other Revenue
Total Revenues

722,898,333.62
33,156,089.92
(64,745,409.79)
42,826,230.60
38,044.67
$734,173,289.02

Expenditures
Medical Claims
Drug Claims
Medicare Part D Retiree Drug Subsidy
Early Retiree Reinsurance Program
BCBS Payments
Administrative Fees
Dental Costs
Appropriated Expenses
General Fund Transfers
Total Expenditures

481,280,557.17
117,870,604.80
(4,405,890.98)
148,531.10
32,453,351.76
23,806,885.86
41,967,782.10
3,533,327.41
29,986,000.00
$726,641,149.22

Fund Balance December 31, 2012

$276,902,422.88

Reserves
IBNR Liability
Contingency Reserve
Total Reserves

90,800,000.00
90,800,000.00
$181,600,000.00

Unrestricted Balance December 31,2012
$ 95,302,422.88
Table 1: Health Insurance Trust Fund Summary

Reserves are monies set aside for the purpose of paying claims that have been
Incurred But Not Reported (IBNR) and a Contingency Reserve to cover any
insufficiencies that may develop, such as actual medical trend exceeding assumed
medical trend in rate setting, shifts in plan membership, unexpected catastrophic claims,
and changes in provider reimbursement rates that may occur in a given plan year.

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

6

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 (HSAO).
The EPO Plan
If a member 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. Members selecting the EPO plan choose from
four networks: Aetna, Blue Cross Blue Shield of Arizona administered by AmeriBen*,
CIGNA, and UnitedHealthcare.
The PPO Plan
If a member chooses the PPO plan under Benefit Options, services can be provided innetwork 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. Members selecting
the PPO plan choose from Aetna, Blue Cross Blue Shield of Arizona administered by
AmeriBen*, and UnitedHealthcare.
The HSAO Plan
The HSAO plan is a high deductible health plan only available with the Aetna network
and is only available to active employees. If the employee chooses to enroll in the
HSAO, 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 healthcarerelated withdrawals. If the employee opens the Aetna associated qualifying HSA, the
state makes a bi-weekly deposit to the account.
If the HSAO plan 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,
except for qualified preventative services, which are covered without a copay or
coinsurance.
*Blue Cross Blue Shield of Arizona Network administered by AmeriBen. Blue Cross Blue Shield of
Arizona, an independent licensee of the Blue Cross Blue Shield Association, provides Network access
only and does not provide administrative or claims payment services and does not assume any financial
risk or obligation with respect to claims. AmeriBen has assumed all liability for claims payment. No
Network access is available from Blue Cross Blue Shield Plans outside of Arizona.

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

7

Table 2 below shows how enrollment was distributed by plan and network between
active, retired, university, and COBRA members.
Average Monthly Enrollment by Plan & Network
Network
Plan Type
AETNA
Active
EPO
Retiree
EPO
University
EPO
COBRA
EPO
Active
PPO
Retiree
PPO
University
PPO
COBRA
PPO
Active
HSAO
Retiree
HSAO
University
HSAO
COBRA
HSAO
AmeriBen*
Active
EPO
Retiree
EPO
University
EPO
COBRA
EPO
Active
PPO
Retiree
PPO
University
PPO
COBRA
PPO
CIGNA
Active
EPO
Retiree
EPO
University
EPO
COBRA
EPO
UnitedHealthcare
Active
EPO
Retiree
EPO
University
EPO
COBRA

2012
Subscribers Members

EPO

2,011
Subscribers Members

1,451
260
1,392
13
89
46
140
0
196
242
1

3,306
344
2,573
19
161
54
235
0
369
423
1

1,273
261
1,230
20
81
51
142
0
146
194
1

2,865
342
2,246
30
146
62
231
1
285
347
1

6,112
1,105
1,889
23
267
126
267
3

15,138
1,451
3,998
33
476
153
479
5

5,839
1,098
1,705
35
240
147
256
3

14,441
1,443
3,558
47
428
181
468
4

2,929
605
1,101
6

6,964
774
2,256
8

2,942
624
1,134
9

6,913
803
2,283
11

21,148
4,718
11,034

50,452
6,084
24,798

22,059
4,735
11,683

51,942
6,126
25,938

104

141

158

206

Active
PPO
509
932
520
948
Retiree
PPO
113
144
131
168
University
PPO
592
1,134
630
1,165
COBRA
PPO
6
6
10
12
Blue Cross Blue Shield**
NAU only
PPO
2,770
4,304
2,821
4,391
Total
59,258
127,213
60,177
128,029
Table 2: Average Medical Enrollment by Plan & Network
*AmeriBen administering the Blue Cross Blue Shield of Arizona Network for the selffunded Benefit Options program. **Blue Cross Blue Shield fully insured plan only
available to NAU employees and NAU retirees.

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

8

Medical Premiums
Table 3 below lists the medical premium by plan and coverage tier per pay period for
active members.
Active Medical Premiums by Pay Period (26 pay periods)*
Employee
State
Tier
Premium
Premium
Employee only
$18.46
$253.85
Employee + adult
$54.92
$522.92
EPO
Employee + child
$46.62
$497.54
Family
$102.00
$648.46
Employee only
$71.54
$342.00
Employee + adult
$161.54
$695.08
PPO
Employee + child
$152.77
$667.85
Family
$224.31
$890.31
Employee only
$12.00
$232.15
Employee + adult
$47.08
$466.15
HSAO
Employee + child
$37.38
$450.92
Family
$89.08
$583.85
Table 3: Active Medical Premiums by Pay Period
*University of Arizona has 24 pay period deductions.
Plan

Total
Premium
$272.31
$577.84
$544.16
$750.46
$413.54
$856.62
$820.62
$1,114.62
$244.15
$513.23
$488.30
$672.93

State HSA
Contribution
$27.70
$55.39
$55.39
$55.39

Table 4 lists the monthly medical premium by plan and coverage tier for retirees not
enrolled in Medicare and for retirees where the retiree or one or more family members
are enrolled in Medicare.
Monthly Retiree Medical Premiums
Without Medicare
With Medicare
Plan
Tier
Premium
Tier
Retiree only
$593
Retiree only
Retiree +1
$1,387
Retiree +1 (Both Medicare)
EPO
Retiree +1 (One Medicare)
Family
$1,869
Family (Two Medicare)
Retiree only
$943
Retiree only
Retiree +1
$2,219
Retiree +1 (Both Medicare)
PPO
Retiree +1 (One Medicare)
Family
$3,074
Family (Two Medicare)
Table 4: Monthly Retiree Medical Premiums

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

9

Premium
$442
$878
$1,024
$1,166
$789
$1,576
$1,740
$1,980

Premiums vs. Expenses for Active and Retired Members
The 2012 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%.
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 & Expenses per Member
*2012 Premiums are net of the legislatively mandated Premium Holiday

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 premiums lower and active premiums higher than what
their experience would otherwise dictate.

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

10

Expenses for Benefit Options Self-Funded Plans
The tables below show the distribution of claims and expenses incurred in Plan Year
2012, and the average annual cost to insure each type of subscriber/member.
Self-funded Expenses by Active, Retiree, and Plan
Expenses
Medical Claims
Drug Claims
Medicare Part D
Subsidy
ERRP Reimbursement
Rebates & Recoveries
Administration Fees
Appropriated Expenses
Total Expenses

Overall
402,794,859
113,569,696

Active
363,367,688
86,119,182

Retiree
39,427,171
27,450,515

EPO
385,953,442
105,862,924

PPO
15,936,799
7,621,485

HSAO
904,618
85,288

(4,405,891)
148,531
(8,217,459)
23,806,886
3,533,327
531,229,950

133,992
(7,153,163)
20,916,400
3,097,135
466,481,233

(4,405,891)
14,539
(1,064,296)
2,890,486
436,193
64,748,717

(4,190,016)
142,321
(7,826,797)
22,337,900
3,370,932
505,650,705

(215,875)
5,877
(374,908)
894,344
134,962
24,002,684

334
(15,753)
574,643
27,433
1,576,562

90,800,000

79,039,910

11,760,090

86,483,330

4,142,601

174,070

Total
$622,029,950 $545,521,143 $76,508,807
Enrollment in self-funded plans
Subscribers
56,488
49,515
6,974
Members
122,909
113,905
9,004
Annual cost
Per subscriber
$
11,012 $
11,017 $
10,971
Per member
$
5,061 $
4,789 $
8,497
Table 5: Self-funded Expenses by Active, Retiree, & Plan

$592,134,034

$28,145,284

$1,750,631

53,892
118,339

2,158
3,777

439
793

IBNR Liability

$
$

10,987
5,004

$
$

13,044
7,451

$
$

3,992
2,208

Self-funded Expenses by Plan for Active & Retiree

334
(15,753)
574,643
27,433
1,576,562

Retiree
EPO
37,787,166
26,105,525
(4,190,016)
13,934
(1,016,792)
2,772,355
418,366
61,890,537

Retiree
PPO
1,640,006
1,344,990
(215,875)
605
(47,503)
118,131
17,827
2,858,180

3,617,705

174,070

11,235,195

524,896

Total
$622,029,950 $519,008,302 $24,762,209
Enrollment in self-funded plans
Subscribers
56,488
47,203
1,873
Members
122,909
109,686
3,426
Annual cost
Per subscriber
$
11,012 $
10,995 $
13,223
Per member
$
5,061 $
4,732 $
7,227
Table 6: Self-funded Expenses by Plan for Actives & Retirees

$ 1,750,631

$73,125,732

$3,383,075

439
793

6,689
8,653

285
351

Expenses (in dollars)
Medical Claims
Drug Claims
Medicare Part D Subsidy
ERRP Reimbursement
Rebates & Recoveries
Administration Fees
Appropriated Expenses
Total Expenses
IBNR Liability

Overall
402,794,859
113,569,696
(4,405,891)
148,531
(8,217,459)
23,806,886
3,533,327
531,229,950
90,800,000

Active
EPO
348,166,276
79,757,399

Active
PPO
14,296,794
6,276,495

Active
HSAO
904,618
85,288

128,387
(6,810,005)
19,565,545
2,952,566
443,760,168

5,272
(327,405)
776,212
117,135
21,144,504

75,248,135

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

11

$
$

3,992
2,208

$
$

10,933
8,451

$
$

11,870
9,634

Medical Expenses Associated with Medical Diagnoses
Table 7 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.
Medical Expenses by Diagnosis for Actives & Retirees
2012

Diagnosis
Musculoskeletal System and
Connective Tissue
Supplementary Classification
of Factors Influencing Health
Status and Contact With
Health Service
Neoplasms
Symptoms, Signs, and IllDefined Conditions
Injury and Poisoning
Circulatory System
Nervous System and Sense
Organs
Digestive System
Genitourinary System
Respiratory System
Pregnancy, Childbirth, and
The Puerperium
Endocrine, Nutritional and
Metabolic Diseases, and
Immunity Disorders
Mental Disorders
Infectious and Parasitic
Diseases
Skin and Subcutaneous
Tissue
Congenital Anomalies
Blood and Blood-Forming
Organs
Certain Conditions Originating
In The Perinatal Period
Supplementary Classification
Of External Causes of Injury
and Poisoning

2011

All
members
% of
Total

Actives
% of
Total

Retirees
% of
Total

All
members
% of
Total

Actives
% of
Total

Retirees
% of
Total

12.08%

12.07%

12.17%

12.31%

12.25%

14.23%

10.04%
9.86%

10.20%
9.20%

8.57%
15.97%

10.21%
10.09%

10.23%
9.88%

9.73%
17.39%

9.38%
7.52%
8.72%

9.64%
7.20%
9.00%

6.96%
10.51%
6.12%

9.64%
7.60%
7.90%

9.69%
7.65%
7.89%

7.92%
5.70%
8.28%

6.93%
5.99%
7.06%
5.08%

7.16%
5.83%
6.58%
5.09%

4.83%
7.42%
11.46%
4.97%

6.48%
6.92%
6.90%
4.87%

6.39%
6.95%
6.85%
4.90%

9.36%
5.69%
8.55%
3.77%

4.30%

4.76%

0.07%

4.14%

4.26%

0.00%

4.21%
2.73%

4.12%
2.86%

5.09%
1.50%

3.78%
2.52%

3.77%
2.55%

3.97%
1.36%

2.27%

2.30%

1.98%

2.23%

2.24%

1.91%

1.52%
1.04%

1.54%
1.12%

1.34%
0.28%

1.58%
1.48%

1.59%
1.52%

1.24%
0.14%

0.87%

0.88%

0.76%

0.99%

0.99%

0.77%

0.41%

0.45%

0.00%

0.37%

0.38%

0.00%

0.00%

0.00%
0.00%
0.00%
0.00%
0.00%
100.00
100.00
Total
100.00%
% 100.00%
100.00%
% 100.00%
Table 7: Medical Expenses by Diagnosis for Actives & Retirees
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, 2012 to December 31, 2012

12

Hospital Care
Inpatient hospital care represents a significant portion of total medical expenses: 34%
for active members and 31% 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 HSAO members.

Figure 2: Hospital Admissions per 1,000 Members

Figure 3: Inpatient Average Length of Stay
Note: Mental health, substance abuse, and maternity admissions are included.

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

13

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 4.8 times as many days in the hospital as active members. While
the plan pays less for Medicare enrolled retiree admissions than for active admissions,
the total cost of retiree admissions is 2.1 times higher than the cost of active admissions
when all sources of insurance are considered.

Figure 4: Inpatient Days per 1,000 Members

Average Cost per Admission

10,000
5,000
0
2012

2011

Figure 5: Average Cost per Admission

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

14

HSAO $11,163

PPO $23,595

EPO $18,126

Active $15,367

Retiree $30,423

15,000

HSAO $11,464

20,000

EPO $19,818

25,000

Retiree $34,169

30,000

Active $16,432

35,000

PPO $23,882

40,000

Cost-sharing*
*Includes
Copay, Coinsurance
Medicare,
and Other
Insurance

Emergency Room Visits
During Plan Year 2012, there were approximately 169 emergency room visits per 1,000
members of the self-funded plan. The average plan cost per emergency room visit was
$1,246. 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 2012, there were approximately 183 urgent care visits per 1,000
members of the self-funded plan. The average plan cost per urgent care visit was
$80.54.

Physician Visits
During Plan Year 2012, there were approximately 3,960 physician visits per 1,000
members (or each member of the self-funded plan visited a physician approximately 4
times). The average plan cost per office visit cost was $97.21
Figures 6 and 7 show how total active and retiree medical expenses were distributed by
type of care. Emergency room care for active employees was 4.44% of medical
expenses, compared to 1.98% of medical expenses for retired members.

Active Medical Expense by Place of Service
2.62% 1.35% 0.82%
0.44%
2.66%
4.44%
Inpatient hospital
Office

4.99%
34.20%

Outpatient hospital
Ambulatory Surgical
ER

22.82%

Home Health
Independent
Laboratory
Other

Ambulance

25.66%

Figure 6: Active Medical Expense by Place of Service

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

15

Figure 7: Retiree Medical Expense by Place of Service

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

16

Annual Prescription Use
Figure 8 compares the average number of prescriptions filled by active and retired
members for plan years 2012 and 2011.

Figure 8: Average Number of Prescriptions per Year

Figure 9 compares pharmacy expense per utilizer by age for plan years 2012 and 2011.

Figure 9: Pharmacy Expense per Utilizer per Year

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

17

Generic and Name-Brand Prescription Use
Table 8 shows how total pharmacy expenses were distributed among generic,
preferred, and non-preferred types of drugs.
Total Prescriptions by Tier

Tier 1 Generic ($10 copay)
Tier 2-Preferred ($20 copay)
Tier 3-Non-Preferred ($40 copay)
Total
Table 8: Total Prescriptions by Tier

2012
Prescriptions
1,074,935
284,675
63,688
1,423,298

Percent
75.5%
20.0%
4.5%
100.0%

2011
Prescriptions
1,058,605
302,013
107,477
1,468,096

Percent
72.1%
20.6%
7.3%
100.0%

Prescription Use by Therapeutic Class
Table 9 shows the ten most utilized classes of drugs according to total expense. More
dollars were spent on "Diabetes" than on any other therapeutic class.
Pharmacy Top Therapeutic Classes by Plan Paid
2012
Therapeutic class
Plan Paid
Percent
Diabetes
12,099,557 10.00%
Cardiovascular Disease - Lipid
9,416,313
7.78%
Behavioral Health - Other
8,897,548
7.40%
Inflammatory Disease
8,197,472
6.78%
Asthma
7,677,516
6.35%
Infectious Disease - Viral
6,476,226
5.35%
Behavioral Health - Antidepressants
6,236,733
5.16%
Pain Management - Analgesics
5,710,999
4.72%
Neurological Disease - Miscellaneous
5,456,252
4.51%
Cardiovascular Disease - Hypertension
5,412,245
4.47%
Upper Gastrointestinal Disorders - Ulcer
Total
$ 75,580,861 62.52%
Table 9: Pharmacy Top Therapeutic Classes by Plan Paid

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

18

2011
Plan Paid
Percent
11,096,187
9.53%
11,044,000
9.48%
8,732,785
7.50%
7,426,270
6.38%
8,264,688
7.10%
5,372,585
4.61%
6,304,133
5.41%
5,149,968
4.42%
4,873,118
4,952,566
$ 73,216,300

4.18%
4.25%
62.86%

Prescription Use by Type of Drug
Table 10 shows the ten most utilized drugs according to total expense. Humira is the
leading prescription for the plan year.
Top Ten Drugs by Total Plan Paid
2012
Plan Paid

2011
Plan Paid

Drug Name
Percent Drug Name
Percent
3,276,990
2.71% Lipitor
3,960,962
3.40%
Humira
3,067,585
2.54% Crestor
2,778,828
2.39%
Crestor
2,626,269
2.17% Humira
2,697,286
2.32%
Cymbalta
2,415,040
2.00% Singulair
2,520,425
2.16%
Enbrel
2,316,883
1.92%
2,278,946
1.96%
Copaxone
Enbrel
1,821,311
1.51% Cymbalta
2,116,590
1.82%
Carbaglu
1,740,462
1.44% Plavix
2,079,448
1.79%
Singulair
1,695,500
1.40% Carbaglu
1,877,138
1.61%
Atorvastatin Calcium
1,646,261
1.36% Copaxone
1,789,746
1.54%
Oxycontin
1,565,730
1.29% Advair Diskus
1,713,935
1.47%
Abilify
Total
$ 22,172,031 18.33% Total
$ 23,813,305 20.44%
Table 10: Top Ten Drugs by Total Plan Paid
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, 2012 to December 31, 2012

19

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
Table 11 shows how active employee and retiree dental enrollments were distributed
among plans.
Average Dental Enrollment by Plan
Delta
TDA
Actives
33,643
15,783
Retirees
11,152
2,256
Table 11: Average Dental Enrollment by Plan

Total
49,426
13,408

Dental Rates
Table 12 summarizes monthly dental rates for active and retired members.
Monthly Dental Premiums
Actives

Single Coverage
Employee
State
Total
Delta
$30.98
$4.96 $35.94
TDA
$5.00
$4.96
$9.96
Retirees
Single Coverage
Delta
$35.94
TDA
$9.96
Table 12: Monthly Dental Premiums

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

Employee + One Coverage
Employee
State
Total
$70.87
$9.92 $80.79
$9.00
$9.92 $18.92
Employee + One Coverage
$80.79
$18.92

20

Family Coverage
Employee
State
Total
$123.12
$13.70 $136.82
$14.00
$13.70
$27.70
Family Coverage
$136.82
$27.70

Wellness
Wellness services are available to State employees, retirees and covered dependents
as part of the Benefit Options Health Plan benefits package. Members have access to
preventive health screenings, health management courses, annual flu vaccines and
Employee Assistance Program (EAP) benefits.
Table 13 shows the total utilization of the health screening benefit during the 2012 Plan
Year and the number of at-risk employees referred to follow-up care.
Plan Year 2012 Wellness Screenings
Events Participant
Referrals
Mini Health Screening*
65
2,692
497
Osteoporosis Screening**
1,027
13
Prostate Specific Antigen (PSA)**
167
7
Facial Skin Analysis**
1,796
N/A
Mobile Onsite Mammography
67
1,311
34
Prostate Onsite Projects
30
558
63
Total
162
7,551
614
Table 13: Plan Year 2012 Wellness Screenings
* 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.

Table 14 shows the total utilization for the 2012 Annual Flu Vaccine Program held
October through December. Wellness provided a total of 13,589 vaccines. Of the
13,589 members who participated in the Flu Vaccine Program, 11,638 were active
employees. Members had access to the flu vaccine at a total of 405 locations, and
89.5% of members who received a flu vaccine, did so at a worksite clinic.
Plan Year 2012 Flu Vaccines
State Agency Worksite
University Worksite
Combined Worksite (Wesley Bolin)
Open Enrollment Clinics
Public Clinics
Total
Table 14: Plan Year 2012 Flu Vaccines

Locations
189
30
5
5
176
405

Participants
7,563
3,007
1,603
297
1,119
13,589

Table 15, on page 21, 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 LegalConnect consultation were the two most
utilized services via live telephonic access. LegalConnect utilization increased 96% in
2012 and replaced FamilySource consultation as the second leading reason employees
sought support through EAP. Total utilization for 2012 increased by 50% over 2012
statistics. As part of the Stress and Pain Quarterly Health Target, Benefit Options
Wellness held an EAP training campaign which increased participation from 129 in 2011
to 403 in 2012.
Benefit Options Annual Report
January 1, 2012 to December 31, 2012

21

Plan Year 2012 Employee Assistance Program Utilization
Eligible
Population

Users
Live Telephonic Access
1,855
EAP
1,378
FamilySource
97
FinancialConnect
60
LegalConnect
320
Online Access
4,767
EAP
742
FamilySource
1,293
FinancialConnect
423
GlobalConnect
14
Health & Wellness
941
LegalConnect
1,354
Critical Incident Stress Debriefing
191
Trainings
403
Overall Utilization
22,113
7,216
Table 15: Plan Year 2012 Employee Assistance Program Utilization

Utilization
Rate
8.4%
6.2%
0.4%
0.3%
1.4%
21.6%
3.4%
5.8%
1.9%
0.1%
4.3%
6.1%
0.9%
1.8%
32.6%

In addition to health screenings, vaccines, and EAP, the Wellness strategic plan for
2012 provided employees with Health Management Courses to support the four
Quarterly Health Targets: Men’s and Women’s Preventive Health, Stress and Pain,
Hypertension, and Diabetes. Table 16 shows the class series held during the Plan Year
and total participation.
Plan Year 2012 Health Management Courses
Classes
Participants
Cholesterol (5 weeks)
1
21
Diabetes Management (10 weeks)
2
42
Weight Management (12 weeks)
5
138
Fitness (4 weeks)
2
41
Nutrition (4 weeks)
7
162
Hypertension (5 weeks)
2
44
Stress Management (5 weeks)
6
140
Total
25
588
Table 16: Plan Year 2012 Health Management Courses

The Wellness Strategic Plan continues to progress as scheduled.
Wellness
achievements for the 2012 Plan Year include: increased wellness participation, health
plan vendor integration, and the early development efforts on the utilization database.

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

22

Life, Disability, Vision Insurance and Flexible Spending
Accounts Premiums
Fund 3035, ERE/Benefits Administration, is used to pay insurance premiums and to
administer state employee benefit plans other than health and dental. Vision, Flexible
Spending, Supplemental and Dependent Life and Short Term Disability are funded
solely by employee premiums. Basic Life Insurance and Non-ASRS Long Term
Disability is funded solely by employer premiums. Fund 3035 is primarily a passthrough fund with collections funding the insurance vendor premium payments.
ERE/Benefits Administration Fund Summary
Plan Year 2012
$ 4,423,158.03

Prior Balance December 31, 2011
Revenues
Insurance Product
Basic Life
Supplemental Life
Dependent Life
Short Term Disability
Long Term Disability
Total Life & Disability

$ 34,279,428.53
Amount
1,353,409.79
11,096,878.37
2,456,410.36
7,304,459.75
2,842,811.96
25,053,970.23

Vision

4,759,227.74

Health Care FSA
Dependent Care FSA
Total Flex Spending

3,423,278.99
1,042,951.57
4,466,230.56

Total Revenues

34,279,428.53

Expenditures
Insurance Product
Basic Life
Supplemental Life
Dependent Life
Short Term Disability
Long Term Disability
Total Life & Disability*

Amount
1,358,782.58
11,440,705.25
2,539,468.60
7,591,336.28
2,947,209.32
25,877,502.03

$ 35,291,675.41
Penalties

-

Vision*

4,891,125.39

(3,500.00)

Health Care FSA
Dependent Care FSA
Administrative Fees*
Total Flex Spending

3,367,956.56
1,009,496.35
147,506.00
4,524,958.91

(510.92)
(510.92)

GAO AFIS Cost
Total Expenditures

2,100.00
35,295,686.33

(4,010.92)

35,291,675.41

Ending Balance December 31, 2012
$ 3,410,911.15
Table 17: ERE/Benefits Administration Fund Summary
*Vendor administrative fees and fully insured premiums are paid 55 days in arrears per contract.

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

23

Vendor Performance Standards
Pursuant to A.R.S. § 38-658(B) “On or before October 1 of each year, the director of the
Department of Administration shall report to the Joint Legislative Budget Committee 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, and other contracts for
the Benefit Options program, are a number of ADOA-negotiated performance measures
with specific financial guarantees tied to the performance of the contracted vendors
providing various services for the program. If a vendor fails to meet any of the
measures within the specified performance range, the vendor is required to submit a
Corrective Action Plan detailing why the measure was missed and actions taken to
address the issue and improve performance to meet the standard of the measure. A
percentage of the vendor’s annual payment is withheld by ADOA as a performance
penalty per terms of the vendor contract. This percentage is allocated among the more
critical measures of the contract.
The following is a report of the agreed upon performance standards both met and
missed by contracted vendors during the 2012 plan year. In each case, performance
penalties for measures missed will be assessed per the terms of the vendor contract.

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

24

Aetna
Successfully Met Performance Measures
Fees At Risk
Performance Measure
23.00% of Total Administrative Fee
Customer Service - 53 of 61 targets
Appeals – met 34 of 36 targets
Reporting – met 16 of 18 targets
Claims Adjudication - met 55 of 60 targets
Open Enrollment, Administration, Survey & Medicare
Administration – met all 34 targets
20.00% Medical Management Fee
Nurse Line – met 2 of 3 targets
Medical Management, Case Management & Disease
Management - met all 17 targets
Performance Measures Not Met
Total Percent
Percent of Fees
Performance Measure
Assessed Based on
at Risk
Reporting Frequency
Missed 1 month of 12
1.00%
Customer Service: call abandonment rate 3% or less.
months measured =
0.08%
Missed 3 months of 12
1.00%
Customer Service: average speed to answer call <30
months measured =
seconds.
0.25%
Missed 1 month of 12
1.00%
Customer Service: 97% telephone call quality.
months measured =
0.08%
Missed 3 months of 12
1.00%
Customer Service: contractor will resolve 95% or more of
months measured =
all "normal" correspondence within 15 calendar days of
0.25%
receipt. Normal correspondence is defined as: plan
descriptive materials requests; and premium and/or
coverage verification.
Missed 2 months of 12
0.33%
Appeals: written appeals resolved in 15 calendar days after
months measured =
receipt of participant’s request for review in the case of pre0.17%
service claims.
Missed 1 quarter of 4
1.00%
Reporting: Contractor will deliver quarterly reports to the
quarters = 0.25%
ADOA within 45 calendar days from the end of the quarter.
Missed 1 month of 12
1.00%
Reporting: Contractor will deliver monthly reports to the
months measured =
ADOA within 30 calendar days from the end of the month.
0.08%
Missed 3 months of 12
1.00%
Claims Adjudication: 98.2% of claims dollars submitted for
months measured =
payment will be accurately processed and paid.
0.25%
Missed 2 months of 12
1.00%
Claims Adjudication: 96% of all claims will be processed
months measured =
accurately.
0.17%
Missed annual
0.00%
Nurse Line: 90% of all calls appropriately triaged (selfmeasurement
reported by vendor).
Vendor Performance Measures 1: Aetna

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

25

Cigna
Successfully Met Performance Measures
Fees At Risk
Performance Measure
15.20% of Total Administrative Fee
Customer Service - met 70 of 72 targets
Claims Adjudication - met 49 of 60 targets
Appeals, Open Enrollment, Administration, Reporting,
Survey & Medicare Administration - met all 99 targets
27.00% Medical Management Fee
Medical Management - met 15 of 16 targets
Case Management, Disease Management & Nurse Line met all 32 targets
Performance Measures Not Met
Total Percent
Percent of Fees
Performance Measure
Assessed Based on
at Risk
Reporting Frequency
Missed 2 months of 12
0.50%
Customer Service: call abandonment rate 3% or less.
months measured =
0.08%
Missed 6 months of 12
0.75%
Claims Adjudication: 97% of all fully documented claims
months measured =
received will be completely processed within 14 calendar
0.38%
days after they are received.
Missed 1 month of 12
2.00%
Claims Adjudication: 99% of claims dollars submitted for
months measured =
payment will be accurately processed and paid.
0.17%
Missed 4 months of 12
0.50%
Claims Adjudication: 97% of all claims will be process
months measured =
accurately. Accurate processing includes payment amount;
0.17%
communication to claimant or provider; data entry errors
affecting current or future benefit determinations and
management reports.
Missed 1 quarter of 4
2.00%
Medical Management: Contractor to provide a quarterly
quarters = 0.50%
report demonstrating that HIPAA compliance standards
have been met.
Vendor Performance Measures 2: Cigna

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

26

United HealthCare
Successfully Met Performance Measures
Fees At Risk
Performance Measure
18.55% of Total Administrative Fee
Customer Service - met 59 of 60 targets
Appeals - met 45 of 48 targets
Reporting - met 28 of 29 targets
Claims Adjudication - met 56 of 60 targets
Open Enrollment, Administration, Survey & Medicare
Administration - met all 41 targets
25.00% Medical Management Fee
Medical Management - met 12 of 13 targets
Case Management, Disease Management & Nurse Line met all 38 targets
Performance Measures Not Met
Total Percent
Percent of Fees
Performance Measure
Assessed Based on
at Risk
Reporting Frequency
Missed 1 month of 12
0.50%
Customer Service: average speed to answer call <30
months measured =
seconds.
0.04%
Missed 3 months of 12
0.25%
Appeals: written appeals resolved in 15 calendar days after
months measured =
receipt of participant’s request for review in the case of pre0.06%
service claims.
Missed 1 quarter of 4
0.50%
Reporting: Contractor will deliver quarterly reports to the
quarters = 0.13%
ADOA within 45 calendar days from the end of the quarter.
Missed 2 months of 12
0.75%
Claims Adjudication: 97% of all fully documented claims
months measured =
received will be completely processed within 10 calendar
0.13%
days after they are received.
Missed 1 month of 12
2.00%
Claims Adjudication: 99.3% of claims dollars submitted for
months measured =
payment will be accurately processed and paid.
0.17%
Missed 1 month of 12
1.00%
Claims Adjudication: 97% of all claims will be process
months measured =
accurately. Accurate processing includes payment amount;
0.08%
communication to claimant or provider; data entry errors
affecting current or future benefit determinations and
management reports.
Missed 1 quarter of 4
2.00%
Medical Management: Contractor to provide a quarterly
quarters = 0.50%
report demonstrating that HIPAA compliance standards
have been met.
Vendor Performance Measures 3: United HealthCare

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

27

AmeriBen
Successfully Met Performance Measures
Fees At Risk
Performance Measure
14.00% of Total Administrative Fee
Administration – met 31 out of 32 targets
Claims Adjudication – met 59 out of 60 targets
Customer Service, Appeals, Open Enrollment, Reporting,
Survey & Medicare Administration – met all 151 targets
Performance Measures Not Met
Total Percent
Percent of Fees
Performance Measure
Assessed Based on
at Risk
Reporting Frequency
Missed 1 month out of
0.50%
Administration: Contractor will mail appropriate plan
12 months measured =
descriptive material to participants within 2 calendar days of
0.04%
receiving a request.
Missed 1 month out of
0.75%
Claims Adjudication: Processing of a claim will be
12 months measured =
completed when it has been approved for payment, denied
0.06%
or pended with a request for further information. 97% of all
fully documented claims received will be completely
processed within 10 calendar days after they are received.
Vendor Performance Measures 4: AmeriBen

American Health Holding
Successfully Met Performance Measures
Fees At Risk
Performance Measure
21.00% of Total Administrative Fee
Implementation, Reporting, Systems & Survey - met all 46
targets
30.00% Medical Management Fee
Utilization Management, Case Management, Disease
Management & Nurse Line - met all 48 targets
Performance Measures Not Met
Total Percent
Percent of Fees
Performance Measure
Assessed Based on
at Risk
Reporting Frequency
No measures missed.
Vendor Performance Measures 5: American Health Holding

MedImpact
Successfully Met Performance Measures
Fees At Risk
Performance Measure
Fixed Amounts Totaling $1,520,000
Network Management, Eligibility, Claims/Paper,
Claims/Mail Order, Customer Service, Survey, Account
Management, Implementation, Reporting & Generic
Substitution/Utilization - met all 96 targets
Performance Measures Not Met
Total Amount
Fees at Risk
Performance Measure
Assessed Based on
Reporting Frequency
$200,000
$200,000
Account Management: PBM guarantees a satisfaction
rating of at least 90% on a scale from 0 - 100% based upon
a mutually agreed methodology.
Vendor Performance Measures 6: MedImpact

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

28

Delta Dental
Successfully Met Performance Measures
Fees At Risk
Performance Measure
1.25% of Total Premiums Paid
Implementation, Report Timeliness, Account Management,
Network Management, Satisfaction, Appeals & Quality of
Service - met all 159 targets
Performance Measures Not Met
Total Percent
Percent of Fees
Performance Measure
Assessed Based on
at Risk
Reporting Frequency
No measures missed.
Vendor Performance Measures 7: Delta Dental

Total Dental Administrators
Successfully Met Performance Measures
Fees At Risk
Performance Measure
3.25% of Total Premiums Paid
Implementation, Report Timeliness, Network Management,
Appeals & Quality of Service - met all 130 targets
Performance Measures Not Met
Total Percent
Percent of Fees
Performance Measure
Assessed Based on
at Risk
Reporting Frequency
Missed 1 of 1 annual
0.25%
Satisfaction: no less than 80% overall member satisfaction
measure = 0.25%
on annual survey.
Vendor Performance Measures 8: Total Dental Administrators

ComPsych
Successfully Met Performance Measures
Fees At Risk
Performance Measure
17.00% of Total Administrative Fee
Account Management/Customer Service Administration,
Reporting, Program Administration & Survey – met all 36
targets
Performance Measures Not Met
Total Percent
Percent of Fees
Performance Measure
Assessed Based on
at Risk
Reporting Frequency
No measures missed.
Vendor Performance Measures 9: ComPsych

Avesis
Successfully Met Performance Measures
Fees At Risk
Performance Measure
Fixed Amounts Totaling $313,000
Call Center - met 35 of 36 targets
Implementation/Member Communication, Reporting,
Network Management, Claims Administration, Appeals &
Survey - met all 84 targets
Performance Measures Not Met
Total Amount
Fees at Risk
Performance Measure
Assessed Based on
Reporting Frequency
Missed 1 month out of
$30,000
Call Center: 90% of all calls requesting a member services
12 months measured =
representative will be answered in 30 seconds or less.
$2,500
Vendor Performance Measures 10: Avesis

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January 1, 2012 to December 31, 2012

29

Application Software Inc.
Successfully Met Performance Measures
Fees At Risk
Performance Measure
5.00% of Total Administrative Fees
Claims Adjudication – met 6 of 8 targets
Claims Financial, Web Availability & Phone Response Time
– met all 9 targets
Performance Measures Not Met
Total Percent
Percent of Fees
Performance Measure
Assessed Based on
at Risk
Reporting Frequency
Missed 1 quarter of 4
1.00%
Claims Adjudication: 95% of claims will be processed within
quarters measured =
two working days.
0.25%
Missed 1 quarter of 4
1.00%
Claims Adjudication: 100% of claims will be processed
quarters measured =
within five working days.
0.25%
Vendor Performance Measures 11: Application Software Inc.

The Hartford
Successfully Met Performance Measures
Fees At Risk
Performance Measure
7.28% of Total Premiums Paid
Implementation, Quality of Service, Appeals, Claimant
Notification, Financial Payment & Report Timeliness - met
all 101 targets
1.25% of Total STD Premiums Paid
Short Term Disability Processing – met all 36 targets
0.50% of Total LTD Premiums Paid
Long Term Disability Processing – met all 2 targets
1.00% of Total Life Premiums Paid
Life Claims Processing – met all 13 targets
Performance Measures Not Met
Total Percent
Percent of Fees
Performance Measure
Assessed Based on
at Risk
Reporting Frequency
Missed 1 month of 12
0.50%
Quality of Service and Responsiveness to Membersmonths measured =
Telephonic: Abandonment Rate <3%
0.04%
Vendor Performance Measures 12: The Hartford

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January 1, 2012 to December 31, 2012

30

Audit Services
The Benefit Services Audit Unit provides assurances that add value and improve the
operations of the Human Resource Division (HRD). Audit Services performs systematic
evaluations of contract compliance, operational controls, risk management, and the
implementation of best practices to support HRD objectives.
During the 2012 plan year, thirty-two (32) audit projects were completed 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. The 32 audit projects resulted in 26 recommendations, 12 of which were fully
implemented by the end of the year, and $219,312 of recoverable savings.
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. Table 18 is a summary of the functional areas in which audits
were completed, and the corresponding audit methodology.
Audit Services Summary
Functional Area
Vendor operating transactions

Vendor internal operating standards
Vendor execution of benefit design and
contract elements

ADOA accuracy of shared data
Table 18: Audit Services Summary

Audit Methodology
Statement on Standards for Attestation Engagements
No. 16 Audits (“SSAE 16”)
Evaluation of external audit results
Quality Management Review (“QMR”)
Plan Allowances/Exclusions (“A&E”)
Plan Authorizations
Claims adjudication compliance
Inquiries (i.e., research, plan coverage design, etc.)
Dependent Eligibility Audit (DEA)

Vendor Operating Transactions
Each of the health plans’ contracted vendors that pay claims are required to provide a
copy of a SSAE 16, which is an independently assessed operational annual audit.
SSAE 16 audits evaluate the internal control of the vendor’s processing systems utilized
to adjudicate claims and identify deficiencies. 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. In addition,
audits performed by external or third party vendors are evaluated and considered for the
development of the audit schedule when there is significant impact on the health plan
and contract compliance (i.e. large medical and/or pharmacy claims audit).
Vendor Internal Operating Standards
QMRs are conducted to ensure the vendor’s internal audit teams are effectively
measuring established operating standards, identifying and correcting errors, and
providing sufficient training for claims processing, customer service, and clinical
reviews. QMR results indicated that vendors had adequate operating controls and retrained staff as issues were identified.

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

31

Vendor Execution of Benefit Design and Contract Elements
Plan Implementation audits are completed annually for new, deleted, or revised plan
design elements. Implementation audits are designed to measure compliance with new
and/or revised plan elements as they are executed at the start of a new plan year. Plan
elements may include revisions to language in the plan document, vendor system edits
(claim adjudication), plan allowances/limitations, internal controls, etc. Audit results
indicated that, in some cases, routine physicals were not adjudicated properly and a
recoverable savings of $2,013.92 was identified.
Plan allowance/exception (A&E) audits are designed to evaluate whether the contracted
vendors’ system were set up correctly in compliance with the health plan’s benefit
design. A&E audit findings for the plan year indicated that plan limitations and
restrictions were processed accurately and members received the benefits allowed to
them as defined in the plan description with the exception of two coverage elements.
Medical foods allowance and excluded erectile dysfunction and sexual dysfunction
treatment were erroneously adjudicated. As a result of the Medical Foods audit, an
impact report identified $108,390.28 in recoverable savings. The Erectile Dysfunction
and Sexual Dysfunction audit identified $2,505.76 of recoverable savings.
Plan authorization reviews are conducted to ensure contracted vendors implement
operational changes, language revisions, and claim payment exceptions in an accurate
and timely manner. A plan authorization is an agreement to revise a process or
operating standard and may be initiated by either a contracted vendor or ADOA. Results
indicated that plan authorizations were correctly implemented and no corrective action
was required.
Claims adjudication compliance audits are performed to evaluate the contracted
vendors’ adherence to regulatory guidelines, current operating standards, contractual
elements, vendor performance, and/or plan authorization documents. During the 2012
plan year, the End-Stage Renal Disease (ESRD) Audit was conducted to evaluate the
medical vendors’ accuracy of primary and secondary payer status. The audit identified
$106,402.35 of recoverable savings.
ADOA Accuracy of Shared Data
Dependent Eligibility audits are performed annually on the health plan’s membership.
The eligibility audits provide assurance that dependent eligibility is monitored effectively
and the risk of claims paid on behalf of ineligible dependents is minimized. 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.

Benefit Options Annual Report
January 1, 2012 to December 31, 2012

32

Appendix
Table A: Special Employee Health Fund Cash Statement
Prior Balance December 31, 2011
Revenues
Source
ADOA Health Plan (EE)
ADOA Health Plan (ER)
BCBS NAU Plan (EE)
BCBS NAU Plan (ER)
Dental Plan (EE)
Dental Plan (ER)
Other Revenue
Net Revenue

Premiums
130,271,277.16
592,627,056.45
6,416,104.92
26,739,985.00
35,781,551.65
7,044,678.95
38,044.67
798,918,698.81

Reductions****
(11,371,655.64)
(51,170,309.00)
(261,221.72)
(1,942,223.42)

Admin Fees
1,090,544.60
2,695,582.19
1,486,196.73
13,715,733.06
3,634,648.57
1,090,371.80
395,234.56
383.72
24,108,695.23

Penalties
0.00
(9,455.55)
(16,642.82)
(51,833.96)
(10,127.04)
(213,750.00)

Medical Claims
26,511.05
25,384,986.47
40,910,988.47
329,362,371.93
86,281,174.31
124,778,480.82

Recoveries*
(565,788.70)
(2,934.10)
(7,129.11)
(133,567.27)
(600,163.49)
(6,907,876.02)
148,531.10
(4,405,890.98)

(64,745,409.79)

Harrington
Aetna
Cigna
UnitedHealthcare
AmeriBen
MedImpact
Early Retiree Reinsurance Program
Medicare Part D Retiree Drug Subsidy
Other Wellness
Net Medical Claims
Self-Insured Expenditures

BCBS (NAU Only)
Delta Dental
Total Dental Administrators
Fully Insured Expenditures***
HITF Operating
Fund Transfers Out
NET EXPENDITURES

624,107.61
607,368,620.66

Fully Insured Premium
32,453,351.76
38,271,083.62
3,706,197.40
74,430,632.78
3,533,327.41
29,986,000.00
739,427,276.08

Fund Balance December 31, 2012
IBNR Liability
Contigency Reserve

(301,809.37)

(12,474,818.57)

Plan Year 2012
269,370,283.08
734,173,289.02

$

759,094,500.98

$

276,902,422.88

$
$

90,800,000.00
90,800,000.00

734,173,289.02

Expenditures
Vendor
AHH Medical Management
Aetna
Cigna
UnitedHealthcare
AmeriBen
MedImpact
Other Fees**
AG Collection Fees
Net Administrative Fees***

$
$

23,806,885.86

594,893,802.09
618,700,687.95

Penalties
0.00
(9,498.92)
(9,498.92)

74,421,133.86

(12,786,126.86)

3,533,327.41
29,986,000.00
759,094,500.98

Unreserved Cash Balance As Of December 31, 2012
$
95,302,422.88
*Recoveries include prescription drug rebates, overpayment recoveries (including stop payments and voids), subrogation
recoveries, etc. **Other Fees include HSA Administration, surcharges by other states (MA, MI, NYHCR), and legal fees.
***Vendor administrative fees and fully insured premiums are paid 55 days in arrears per contract. ****Legislatively
mandated premium holiday.

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January 1, 2012 to December 31, 2012

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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 Active Employees or
“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, MI 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/Pre-Paid Dental – a dental plan that offers members dental services with no
annual maximums, no claim forms, and services based on a discounted rate. Total
Dental is the prepaid dental vendor.
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,
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January 1, 2012 to December 31, 2012

34

clinical management in conjunction with intensive patient education, coaching, and
monitoring.
Eligibility appeal – is 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 – is 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.
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.
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January 1, 2012 to December 31, 2012

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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 – defined as the period of January 1 through December 31 of a given year.
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 – is 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 – is a process whereby an insurer evaluates the quantity
(duration) and quality (level) of the delivery of medical services.
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January 1, 2012 to December 31, 2012

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Utilization review – a process whereby an insurer evaluates the appropriateness,
necessity, and cost of services provided.
Utilizer – a member who receives a specific service.

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January 1, 2012 to December 31, 2012

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Arizona Department of Administration
Human Resources Division – Benefit Services
100 N. 15th Avenue, Suite 103
Phoenix, Arizona 85007
Telephone: 602-542-5008
Fax: 602-542-4744

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January 1, 2012 to December 31, 2012

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