The 7 Health Plan Metrics Every Company Should KnowUnderstanding Your Health Plan Cost

Jamie Bishop

Vice President, Employee Benefits

Cottingham & Butler

Today’s AgendaFor companies managing Employee retention &

recruiting is at an all time fever pitch. Leveraging the

health plan has been one approach and today we will

look at seven different plan metrics to help you analyze

your benefit plan.

The 7 Health Plan Metrics are designed to assist with

the following:

1) Benchmarking – How does your plan compare?

2) Diagnose – Get to the root of any inefficiencies/cost

drivers?

3) Design - A strategic plan of Appropriate cost containment

strategies?

Lets get started

Jamie Bishop, GBAVice President, Employee Benefits

Is This Your Current Benefits Program?

RISING COSTS

Specialty

prescriptions

HSA, FSA

& HRA’s

TREND

Employer

ACA

reporting

Large claimantsCadillac tax –is it

coming?

Network discounts

Competitive

Plan Design

Preventative

coverage at

100%

Wellness program

requirements

PCORI fees

Spousal coverage

Aging population

Waiting period

restrictions

Approved clinical

trialsStaying competitive

A High Level Benefit Overview – 3 C’s

ACA

Human Resources

DOL

ADA

FLSA

HIPAA

COBRA

FMLA

COVERAGE

X

CONSUMPTION

X

COST SHARE

Enrollment

HRIS

Payroll Feeds

On-Line Systems

Open Enrollment

Employee Communications

ACA Reporting

Costs Creating

EfficienciesCompliance

C CC

Coverage

Consumption

Cost Sharing

Metric What it tells you

How many people are

on your health plan?

Participation Rate Whether you may be covering too many

employees relative to benchmark averages

Dependent Ratio Whether you may be covering too many

dependents

Metric What it tells you

What is the employer

share of costs?

ER Plan Cost Share

Percentage

The percentage that employees are paying

for deductibles, OOP max, Copays and

Coinsurance

ER Contribution

Percentage

The percentage of total plan costs that are

paid for by the employer

Metric What it tells you

What is the average

spend per person?

Average claims per

member

The total amount of money spent on claims by

an average member without regard to plan

design and contributions (absolute cost of

benefits)

Demographic Index The impact of demographics on average costs

Admin Cost Percentage View of the overall administrative costs

7 Metrics: A Framework for Analyzing your Benefit Plan

Metric #1: Participation Rate

Participation Rate = # of employees covered

# of benefit eligible employees

INSIGHT: Will show if current program is over or under

incenting employees to join plan

Participation Rate • Company A is providing benefits

to 90% of eligible employees

• Company A is covering a

significantly higher percentage

of employees than the

benchmark

• High participation is often driven

by generous benefit programs

compared to competition and

workforce demographics

• Lower than average

participation is often driven by

high contributions and a less

generous benefit program *C&B Proprietary Book of Business

90%

75.1%

75%

80%

85%

90%

95%

Company A Benchmark

Impact to Move to Benchmark – $(55,942)

Metric #1: Participation Rate

A Sample of Key Levers for Participation:

1. Review of eligibility processes and eligibility language

•Create longer waiting periods (limited with ACA)

•Review termination provisions

2. Adjust Employee Contributions

3. Manage you Member Population

Metric #1: Participation Rate

Dependent Ratio:

= Total number of plan participants

Total number of covered employees

INSIGHT:

Will show if you are covering more or less dependents per employee than benchmark

Metric #2: Dependent Ratio

Metric #2: Dependent Ratio • For each covered employee, Company A is covering 1.28 dependents.

• This is above benchmark averages of 1.78 dependents per employee.

• High dependent ratios can be driven by ineligible dependents, low family contributions, and demographics of your workforce.

• Low dependent ratios are often driven by eligibility provisions, high family contributions, and demographics of your workforce.

*C&B Proprietary Book of Business

2.28

1.78

2

2.1

2.2

2.3

2.4

Company A Benchmark

Dependent Ratio

A Sample of Key Levers for Managing the Dependent Ratio:

1. For Eligible Participants

• Adjust contributions

• Review spousal surcharge or carve out

2. What about Ineligible Participants

• Conduct a thorough dependent eligibility audit (between 3-9%

ineligible)

• Create tighter eligibility paperwork requirements at time of

enrollment

Metric #2: Dependent Ratio

Average Claims Cost Per Member:

= Total allowed claims before cost sharing

Total number of covered members

INSIGHT:

Will provide data on how your members consumption of healthcare compares to

the national average utilization patterns in medical and prescription drugs.

Metric #3: Average Claims Per Member

Metric #3: Average Claims Per Member

Demographically Adjusted Medical Allowed Claims per Member

• Company A’s annual cost per member for medical and Rx is greater than the benchmark.

• Individuals in Company A are consuming more care (either in quantity and/or price) than benchmark averages.

*C&B Proprietary Book of Business

$7,156$6,073

$0

$1,000

$2,000

$3,000

$4,000

$5,000

Company A Benchmark

$1,400 $1,252

$0

$200

$400

$600

$800

$1,000

Company A Benchmark

Demographically Adjusted Rx Allowed Claims per Member

A Sample of Key Levers for Reducing Claims per Member

1. Detailed review of Claims Utilization Data:

a) Inpatient – length of stay, costs of stay

b) Emergency Room,

c) Urgent Care

d) Imaging

2. Prescription Drug Claims Review

3. Large Claims Analysis

4. Telemedicine

Metric #3: Average Claims Per Member

Demographic Index:

= The weighted average expected cost index based on participant age and

gender (where 1 is the average)

INSIGHT: The impact of your organizations’ demographics on average costs and

also used to adjust metrics for apples to apples benchmark comparison.

Metric #4: Demographic Index

Metric #4: Demographic Index

• Weighted average expected cost index based on participant age and gender (1 is average).

• Company A’s demographics are 28% above benchmark. We would expect this company’s costs to be 28% above average based solely on their demographics.

*C&B Proprietary Actuarial Index Calculator

Summary of Key Levers for Altering Your Demographic Index:

There is very little that you can do to adjust the demographics and in Trucking we are seeing an older demographic.

Understanding the demographics of your group and creating benefit plans to best fit is important.

Metric #4: Demographic Index

Administrative Cost Percentage:

= Total fixed costs

Total plan costs

INSIGHT: The fixed costs as a percentage associated with the plan

Metric #5: Administrative Cost Percentage

1. Effectively Purchasing Stop Loss

• Decision to purchase or not purchase certain stop-loss coverages

• Purchasing the proper contract level to include run-in and/or run-out

2. Effectively Purchasing Partner Services

• Third Party Administration or Administrative Services Only contracts

• Pharmacy Benefit Management Services and Outcomes

3. Reviewing Options for Prescription Rebates

Metric #5: Administrative Cost Percentage

Employer Plan Cost Sharing Percentage:

= Total Allowed Claim Costs - (amount employees pay for deductibles, coinsurance & copays)

Total claim cost

INSIGHT: Shows the split between what the plan pays versus what the employees pay

through deductibles, coinsurance, and copays when medical services are

purchased. This percentage gauges how rich of a plan design you have.

Metric #6: Employer Plan Cost Sharing

Percentage

Metric #6: Employer Plan Cost Sharing Percentage

Employer Plan Cost Share Percentage• On average, Company A is

paying a higher share for medical bills than benchmark.

• This is driven by plan design parameters which create the percentage of medical and prescription claims that employees have.

• Plan Cost share is conceptually the same % as a plan’s actuarial value, thus it is a grade of plan value.

*C&B Proprietary Book of Business

86%

73%

80%

81%

82%

83%

84%

85%

86%

87%

Company A Benchmark

Metric #6 – Employer Cost Sharing

Employer Contribution %:

= (Total plan costs – employee contributions )

Total plan costs

INSIGHT: Shows the percentage of total plan costs that are paid for by the

employer.

Metric #7: Employer Contribution Percentage

Metric #7: Employer Contribution Percentage

• On average, Company A is paying a higher share of plan costs than benchmark.

• This is driven by employee premium rates and suggests that Company A’s employee premiums are too low in relation to the benefit plans that are offered.

• Low EE contributions drive participation, which in turn drives costs and risk for self-funded employers.

Benchmark Source: C&B All Trucking Benchmark

77%

62.4%

70%

72%

74%

76%

78%

Company A Benchmark

Employer Contribution Percentage

A Sample of Key Levers for modifying Employer Contribution

1. Ensure premiums are at benchmark levels within each covered class

2. Manage to a set Employer/Employee split

3. If you offer more than one plan option:

a) Determine how you are contributing as to not create adverse selection.

b) Be sure to continue to manage enrollment by plan and adjust as needed

Metric #7: Employer Contribution Percentage

Coverage: 1) Plan Participation2) Dependent Ratio

Consumption:3) Cost per Member

4) Demographic Index5) Admin Cost

Cost Sharing:6) Plan Cost Share %

7) Contribution Share %

We have shared with you the background, information, calculations, benchmarks and levers for the 7 Health Plan Metrics.

We hope they assist you in preparing: • Action-oriented recommendations

• Quantified savings – depending on the level of data you receive

• Longer-term trend strategic initiatives

• Integrated model of savings

7 Metrics Health Plan Benchmarking – In Conclusion

Thank you

Jamie Bishop

jbishop@cottinghambutler.com

Work: 563-587-5394

Mobile: 563-564-2130