07-24-07 Chapter 172 Employee Retiree Insurance and Benefits Board Meeting

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Answer Neal Welch: No, because the claims dropped as well. As you notice in June you have 335 versus 367. This is probably going to be a sub group/ sub department. The next thing you asked was,"were those expenses occurred by category?" What this next exercise shows you for calendar year 2006 is the Administrative Cost, which does not change much month by month. It doesn't change much because we pay per employee per month for all of those Professional Services and the participation stay pretty even every month. Actually the Physician Cost stayed pretty much the same except for month two which increased a little. The Pharmacy certainly stays pretty constant. So, what's the variable, what's the catastrophic? It is the hospital expense. That is not surprising to anybody; except what it does show is when we have an extraordinary expense it usually comes in the form of a hospitalization. You know we buy Stop Loss; we buy specific and aggregate Stop Loss. Ifwe have a claim over $125,000.00 we are only responsible for the first $125,000.00. We re-coup the amount over that $125,000.00 from the insurance carrier. Our plan runs 4/1 thru 4/1. The most important thing to remember here is that the volatility really comes from hospitalization. The next page is in response to questions from the board members at our last meeting. It shows cost sharing's in the Pharmacy Program as it relates to fixed co-pays versus something like co-insurance. On the top Kathy used calendar year 2006. Our co-pays today are $10, $25 and $50 for our three different tiers. You can see the number of prescriptions those represent. You can see what the members share is in dollars and what the plan paid. You can see what the percentages are for members and the totals. We had a comment from a board member at our last meeting and he said, "Hey I went to the Pharmacy and I paid $10 but the whole prescription was only $12.71. Am I paying a higher percentage when I go and buy a generic drug? The answer is yes. What's wrong with that? Nothing, the answer is you don't spend money in percentages, you spend money in dollars. So, if you look down at the bottom in level one the average cost for a level one drug is $13.42. If you pay $10.00 the plan pays $3.42. You might not think that is not the proper percentage but in reality you are paying $10.00. If you go to tier two which is a $25 co-pay, the member is paying about 34-35% and the average cost is $71. Does the client pay a higher percent if they buy a brand name drug in tier two? The employee pays a smaller percentage. The plan pays a higher percentage but the employee also pays 150% more between $10 and $25 in co-pay. The same thing happens at tier three at $50. By the way, tier four is inject able higher cost medications. Essentially, under the program we have today 60% is employer paid 40% is employee paid. Now the question is, "what if the co-pay was a percentage versus a flat amount?" Well at one time we had that. However, the insurance companies came up with co-pays which are fine, except the co-pay is designed to stratify cost sharing among the employees. As an example, below is a co-pay of 10%, 20% and 40%. You can see what the difference is between the cost to the member and the cost to the plan. In this case we end up with the member paying 25% and the employer paying 75%. If we do something like that we would have a large increase in premium but those type options are available.