Healthcare Group of AZ

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Healthcare Group of Arizona
Arizonas Health Care and Policy Laboratory for
Small Business Coverage Options
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The Evolution of AHCCCS Health Care Coverage

• Arizona Revised Statute gives AHCCCS broad
  authority to provide health care coverage to
  federally funded beneficiaries, small businesses,
  and public employees for acute and long term
  care.
• Started in October 1982, 3 year demonstration
  waiver approved by CMS for AHCCCS Acute program .
• In 1987, the Waiver request includes a proposal
  to include long Term Care and the Arizona Long
  Term Care System (ALTCS) is approved.
• In 1988, small employers in 4 counties are
  allowed to purchase medical coverage for their
  employees from AHCCCS Health Plans through
  Healthcare Group.

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The Evolution of AHCCCS Health Care Coverage

• In 1990 there is Phase-in of behavioral health
  services for certain Title XIX members.
• In 1993 Healthcare Group services for small
  employers is expanded statewide.
• In 1997, AHCCCS submits an amendment to cover
  single adults and children up to 100 of the FPL.
• 1998 there was a 3 year pilot to provide
  coverage based on a sliding scale monthly premium
  to uninsured people who do not qualify for
  Medicaid Premium Sharing.
• 1998 Arizona implemented its version of State
  Childrens Health Insurance Program (SCHIP)
  KidsCare- Covers children under 150 of the FPL.

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Voter Approved Proposition 204

• In 2001 Arizona voter approved proposition 204
  which funded the expansion of AHCCCS and created
  the opportunity for the state to replace state
  and local funding for the medically needy
  population with federal funds.
• Prop 204 replaced a state-only program for the
  Medically Needy and Medically Indigent (MNMI),
  which cost 200 M per year from the General Fund
  and over 30 M in county funds.

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FY 2006/2007 Legislative Changes

• HB-2698 Small Businesses Exemptions
• Exempts small business health care coverage from
  specified insurance coverage requirements,
  including certain mandates for businesses that
  employ 2 to 25 persons and that have been
  uninsured for at least 6 months.
• Exemptions for small businesses health insurance
  plans include any surgical services, maternity
  benefits, coverage of medical foods to treat
  metabolic disorders, and drug or devices for
  contraception or outpatient contraception
  services.
• HB- 2177 Tax Credit for Small Businesses and
  Employees
• A tax credit for individual or a small business
  that is certified by Dept. of Revenue as meeting
  the requirements for tax credit.

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FY 2006/2007 Legislative Changes

• SB 1442 Temporary Medical Coverage
• Appropriates 6.5 million to AHCCCS to establish
  the Temporary Medical Coverage Program to provide
  health care coverage to persons who are citizens
  and residents and who have been enrolled in
  AHCCCS at any time within the last 24 months and
  became ineligible for coverage due to federal
  disability insurance benefit payment.

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While the rate of uninsured in Arizona has
declined significantly since 1997, 17.0 of
Arizona residents remained uninsured in 2004.
Source U.S. Census Bureau, Housing Household
Economic Statistics Division.
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Assumptions About the Small Business Market

• The small business market is growing.
• Extremely price sensitive.
• Small business owners to do not see health
  benefits as a necessary part of competitive
  employee compensation.
• Significant employee turn over.
• What the small business owner wants in a health
  benefit their employees cannot afford.
• Small business employers prefer a defined
  contribution for any employer participation in
  health benefit coverage.

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Policy Question Can the Market Work?
Will the small business market respond to
differentiated benefits and health coverage
products?

• Designing benefit plans that the small business
  Market will buy
• Product and Pricing Strategy
• Product Differentiation
• Product Evaluation

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Healthcare Group Business Model
A
Administrative Ease
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The ABCs of Healthcare Coverage for Small
Businesses

• A Administrative Ease
• Easy to enroll
• Easy to deal with
• B Budget-ability
• A health plan that fits into every employees
  budget
• C Choice
• Choice of health plan benefits
• Choice of provider networks
• Choice of providers
• Our success equation is
• A B C Success

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Product Development Strategy
Design benefit plans that

• Address varying health needs
• Address varying incomes
• Address varying consumer needs
• Can be reasonably-priced
• Are meaningful, provide utility and value
• Can be self-sufficient

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HCG Healthstyles?
HCG Healthstyles
Designed for varying health needs, income, and
lifestyles.

• Richest benefit package, intended for
• employees with existing disease or chronic
  condition
• employees wanting the added security of a wide
  range of benefits

CLASSIC
Intended for employees with limited health needs
beyond routine and preventive care. Little or no
co-pays for most physician office visits,
diagnostic services and prescriptions. Maternity
excluded.
SECURE
ACTIVE
A variation of the Secure plan, with lower
premium and higher co-pays and coinsurance.
Maternity excluded.
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Healthstyles Benefit Grid
Benefit Type (partial list) Classic Secure Active
Physician Services (PCP) 20 copay 0 copay 10 copay
Specialist Services 20 copay 20 copay 30 copay
Preventive Care 20 copay 0 copay 10 copay
Maternity Services Included None/Rider None/Rider
Urgent Care 40 copay 20 copay 20 copay
Emergency Care 100/150 copay 50 copay 20 coinsurance
Inpatient Hospitalization 100 admission 50 coinsurance 20 coinsurance
Diagnostic Services 0 copay 0 copay 20 coinsurance
Rehabilitation Services 15 copay 20 coinsurance 20 coinsurance
Prescription Medicine 15/30 copay 0/20 copay 0/20 copay
100 coverage for first 10 days, thereafter 50
coinsurance.
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Product Evolution
HCG Enrollment
Product Evaluation Begins
Subsidy Starts
New HCG Administration
Healthstyles Benefit Plans Introduced

• Broker fees ends
• To single plan
• Rate increase

Loss of health plan
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Historic Enrollment Trends(1999-2006)
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HMO Enrollment by Benefit Plan and Deductible
Total Membership as of July 11, 2006 22,027
HMO 20,473 members
Classic 0 deductible
Classic 500 deductible
Classic 1,000 deductible
Classic 2,000 deductible
Secure 0 deductible
Secure 500 deductible
Secure 1,000 deductible
Active 0 deductible
Active 500 deductible
Members electing a deductible option 28
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PPO Enrollment by Benefit Plan
Total Membership as of July 11, 2006 22,027
PPO 1,554 members
Medallion PPO
Medallion PPO Plus
Medallion Classic PPO
Medallion Classic PPO Plus
Medallion Platinum PPO
Medallion Platinum Plus PPO
Medallion Gold PPO
Medallion Silver PPO
Medallion Plus, Classic Plus and Platinum Plus
meets federal requirements for pairing with an
optional HSA.
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Product Evolution
Original Healthstyles design based on

• Historical experience with previous HCG benefit
  plans
• Meetings with small business employers
• Experience of other states
• Characteristics of the working uninsured
• Demographic from Kaiser
• CAN initiative (St. Lukes)

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HCG Product Evolution
December 2004 Results from Employers and Employee
Satisfaction Survey (n285)
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Product Evolution
Validation of Focus Group/Survey findings

• Asked Brokers/Producers what they thought
• Actuarial pricing analysis
• Empirical research
• Experience of other states

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Product Evolution
1998-2003
June-July 2004 Employer Focus Groups
April 2004
SB1166

• Solidify relationships with HCG employer groups
• Evaluate employer satisfaction
• Validate product design assumptions
• Assess unmet need (benefits services)
• Validate future product ideas

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Product Evolution
1998-2003
June-July 2004 Employer Focus Groups
April 2004
SB1166

• DESIRED BENEFITS
• Deductible options
• Mental Health benefits
• Vision benefits
• Dental benefits
• Expanded provider network
• PPO plans
• HSA/HDHP option
• Wellness

February 2006
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Product Differentiation as of May 2006
Products are differentiated by covered services,
benefit plan features, provider networks, and
availability
Comprehensive Preventive Active
HMO Healthstyles Classic Secure Active
PPO Medallion Platinum Platinum Plus (HSA) Gold Silver
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Benefit Comparison
Covered Services (partial list) Healthstyles HMO Healthstyles HMO Healthstyles HMO Medallion PPO Medallion PPO Medallion PPO
Physician Services (PCP/Spec) ? ? ? ? ? ?
Inpatient - Medical ? ? ? ? ? ?
Outpatient - Medical ? ? ? ? ? ?
Maternity ? ?
Acute Ancillary (SNF, HH, Dialysis) ? ?
0 Preventive Care ? ? ? ?
Inpatient - MH/SA ?
Outpatient - MH/SA ? ?
Formulary Tiers 3 3 3 4 3 3
Rx Benefit Limit None None None None 12,500 7,500
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Benefit Comparison
Benefit Plan Features (Deductible) Healthstyles HMO Healthstyles HMO Healthstyles HMO Medallion PPO Medallion PPO Medallion PPO
Number of Deductible Options 3 2 1 3 / 2 3 3
Zero Deductible Option Yes Yes Yes No / No No No
MD Office Visit (EM) excluded ? / - ? ?
Preventive Care excluded ? ? ? ? / ? ? ?
Mammography excluded ? ? ? ? / ? ? ?
Prescription Drugs excluded ? ? ? ? / - ? ?
Emergency/Urgent Care excluded ? ? ?
Prescription Drugs excluded ? ? ? ? / - ? ?
Out-of-Pocket Maximum No No No Yes Yes Yes
Out-of-Network Benefit (NPPN) None None None 50 50 50
Health plan assumes first dollar liability for
services excluded from deductible.
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HMO Provider Networks
Geographic differentiation HMO benefit plans
are not available statewide
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PPO Provider Network
Geographic differentiation PPO availability
varies by county
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HMO Product DemographicsDecember 2004 to April
2006
Product Month Enrollment Average Income Average EE Age Percent Male Tier 1 EE Tier 2 EES Tier 3 EEF Tier 4 EEC
December 2004 11,224 53,743 46.2 53 58 23 16 4
April 2006 12,215 53,344 48.1 55 57 23 16 4
December 2004 800 53,397 49.9 48 72 23 3 3
April 2006 5,052 45,458 49.5 51 61 25 9 5
December 2004 415 73,864 42.1 51 72 17 7 5
April 2006 1,990 42,835 46.8 53 61 22 11 6
Classic
Secure
Active
Represents stated income from subscribers on
enrollment forms. Not all subscribers supply
these data.
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Product Growth (2005-2006)
Healthcare Group Growth by Product
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HCG Enrollment by Product
December 2006 25,000 members anticipated
Expected
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HCG Enrollment by Product and Provider Network
Total Membership as of July 11, 2006 22,027
HCG Products 22,027 members
HCG Networks 22,027 members
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HMO Product MigrationDecember 2004 to April 2006
Deductible options were first introduced in
October 2004. By April 2006, 25 of members had
switched to a deductible option.
This period represents the migration behavior of
100 of membership following a complete contract
renewal cycle.
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Product Evaluation
Evaluation Tools

• Financials
• Actuarial Analysis (COG)
• Analytic Dashboard (Rates and Measures)
• Enrollment Reports
• Ad-hoc Analysis
• Risk Profiling (Medical Intelligence)
• Satisfaction Surveys
• Focus Groups

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Rate Analysis Tools

• Actuarial Tool Box
• Milliman Health Cost Guidelines (Industry
  standard)
• Pricing Models
• Reserving Models
• Ad-Hoc Studies
• National Studies (CMS, Kaiser Family Foundation,
  etc.)
• Financial and Actuarial Education
• External Actuarial Services

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Pricing Strategies

• Small groups are subject to significant
  fluctuations in premium rates
• Community Rated Premiums
• Medical cost risk is spread across a larger group
• Member Out of Pocket Costs
• Co-pay and co-insurance is used to pass on
  financial responsibility and mitigate premium
  rate increases

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HCG Member Satisfaction
Member satisfaction with choice of
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HCG Member Satisfaction
Member satisfaction with choice of
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HCG Member Satisfaction
Overall member satisfaction with
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Our first care is your healthcare