Decision and Design Process Creating the Right Solution

1
Overview of Michigan Tech Health Plans for
Retirees
Presented by Michigan Technological University
and Aon Consulting
November 19, 2009
2
Philosophy and issues

• Michigan Tech values the contributions made by
  its retired employees
• Tech intends to continue offering retiree medical
  coverage in the future however, as conditions
  change, the plans will continue to change
• Given the rising cost of health care, Tech
  reserves the right to change or even discontinue
  retiree medical coverage
• Federal accounting changes in the last few years
  have made the cost of retiree medical coverage a
  bigger financial liability on the books of the
  University

3
Cost increases for 2010

• Michigan Tech is self-funded on its medical plans
• Aetna processes the claims, but Tech pays
  directly for the cost of all plan claims
• Utilization in the plan directly drives the rates
  that are developed
• 2008 showed a much higher spike in utilization
  and, therefore, higher costs than anticipated
• High number of very large claims
• 11 claimants cost over 100,000 in 2008
• One claim was more than 700,000
• This experience is reflected in the 2010 rates

4
GASB requirements for retiree rates

• Retiree rates must reflect the higher utilization
  that the retiree group experiences
• Cannot use the same rates developed for the
  active population since this does not reflect
  true cost of the retiree group
• Tech had historically used active rates and has
  been gradually ramping up the retiree rates to
  reflect true cost
• Post 65 retiree rates are offset by the value of
  Medicare payments
• Trend (year over year increase in the cost of
  care) continues in the high single digits

5
Whats changing for 2010?

• The HuskyCare 1 plan remains unchanged
• For HuskyCare 2, the out of pocket maximum has
  been increased to 3000 for single, 6,000 for
  family (in network)
• Previously 2,500/5,000
• For both plans, Tech pays for 100 of the medical
  expenses that are subject to the deductible and
  coinsurance after the out of pocket maximum is
  reached
• Pharmacy and other copays do not accumulate
  toward the out of pocket maximum

6
Dental and vision

• There are no changes to the dental and vision
  coverage
• Rates have increased somewhat
• GASB rules also apply to dental and vision
  coverage

7
Coordination with Medicare

• Retiree plans were set up January 1, 2009 with a
  standard coordination of benefit arrangement
• Tech was picking up anything Medicare didnt pay
• Later switched to a standard maintenance of
  benefit approach
• Tech would pay only up to the amount that would
  otherwise be paid by the plan
• Will change effective January 1, 2010 to match
  Blue Cross processing methodology

8
Difference in methods

• Assume claim with 5,000 approved amount
  (first claim of year, single enrollment on
  HuskyCare 1). Medicare pays 2,000.
• Standard COB Apply 500 deductible and assume
  10 coinsurance for balance (additional 450).
  Plan would normally pay up to 4,050 therefore,
  Tech would pay 3,000 on this claim, with the
  employee having no out of pocket responsibility.
• Standard MOB Apply 500 deductible and assume
  10 coinsurance for balance. Plan would normally
  pay up to 4,050. Subtract the 2,000 paid by
  Medicare, and Tech would pay 2,050. Retiree
  pays 950.
• Plan matching method Take the unpaid balance on
  the bill (3,000) and apply HuskyCare 1 plan
  design. Deduct the 500 for deductible, and Tech
  would pay 90 of the remaining 2,500, or 2,250.
  Retiree pays 750.

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Difference in methods (continued)

• Assume claim with 5,000 approved amount
  (first claim of year, single enrollment on
  HuskyCare 2). Medicare pays 2,000.
• Standard COB Apply 1,500 deductible and assume
  10 coinsurance for balance (additional 350).
  Tech plan would normally pay up to 3,150
  therefore, Tech would pay 3,000 on this claim,
  leaving no balance for the retiree.
• Standard MOB Apply 1,500 deductible and assume
  10 coinsurance for balance. Plan would normally
  pay up to 3,150. Subtract the 2,000 paid by
  Medicare, and Tech would pay 1,150. Retiree pays
  1,850.
• Plan matching method Take the unpaid balance on
  the bill (3,000) and apply HuskyCare 2 plan
  design. Deduct the 1,500 for deductible, and
  Tech would pay 90 on the remaining 1,500, or
  1,350. Retiree pays 1,650.

10
Alternatives for Medicare eligible retirees

• Several options for Medicare eligible retirees
• Other Medicare plans
• Medicare Advantage Plans
• Replaces traditional Medicare
• Generally offers more coverage
• Medigap Plans
• Fills in the deductibles and copays of Medicare
• May be more cost effective
• Medicare Part D Prescription Plans
• Supplements both of the above by providing
  prescription coverage
• Go to www.medicare.gov

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Questions and discussion
Renee Hiller Michigan Technological
University 1400 Townsend Drive Houghton, MI
49931 [phone] rlhiller_at_mtu.edu
Janet M. Vermeulen Aon Consulting, Inc. 3000 Town
Center Southfield, MI 48075 (248)
936-5477 Janet_Vermeulen_at_aon.com