07-05-07 Chapter 172 Employee Retiree Insurance and Benefits Board Meeting Minutes

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Comments Neal Welch: I am sorry I was not here for the last meeting. However, I am happy Kathy and Donnie made the presentation because they researched all of the information you received. The way Kathy laid out the book Chapter one is exactly as you saw it before. It looks at comparison of discounts and fees, networks, Pharmacy and so forth. As a result of that review we are down to three (3) companies for Best and Final Offer illustrations. Humana is our incumbent; Aetna is one of the alternatives and Texas Municipal League (TML) using United Healthcare, as their back office shop is also one of the three finalists. The first distinction to look at is if there is a dramatic advantage to getting away from Humana as it relates to the Networks. Not only are they third in this category but also they are fifth in the overall review of the five finalists. It seems that the horse race is between Aetna and TML. When Donnie conducts his review he not only looks at the relative value of each of the proposals he looks at the proposal that generates the greatest net saving to the plan including the Administrative fees and the impact of discounts and etc. on the claims cost. According to the aggregate discount Aetna came out number one. On the last page there are more details of the claim cost, which is what determines the true value. Keep in mind, we are talking about a plan that will spend in excess of three million dollars plus a year. While the Administrative fees range from $150,000 to $200,000 are certainly not insignificant. However, it is far more important to see how those companies exert influence on the $2,800,000 worth of claims. On the bottom you see renewal rates. They are certainly a concern because we do try to negotiate a long-term rate guarantee and a long-term contract. This does not mean we are locked in and cannot change our mind and leave the vendor at anytime. However, we do try to protect ourselves with rate caps on the Administration fees. In the next illustration this is a comparison of Physician pricing. It is important that you see how we drill down to this level of detail by using the top 25 or so, CPG codes for zip codes where your folks utilize health care and compare cost. It is also important that you know how network pricing is negotiated and the impact it has not only on your folks in the plan, but also on the providers of service. A number of years ago the government came up with a rating system called RBRBS which was new way of calculating a reimbursement to a provider of service based upon the geographic area which was regionally based. Basically they paid more to primary care physicians and paid less to the higher specialty care providers. Question George Van Dyke: Neal are these the prices of administration fees in the network?