GIC FY2010 OUT OF POCKET final — File 191787

OUT OF POCKET EXPENSES Pool I FY2010 Group Insurance Commission Commission Meeting June 16, 2011

June 16, 2011 2 OUT OF POCKET EXPENSES SUMMARY  Out-of-Pocket Expenses have increased over the past five years. The biggest culprit – the rising cost of health care  Cost Drivers: – Very sick patients (particularly SNF users) – Out-of-Network MH/SA services – Uncovered a systems issue relating to inpatient copayments which, when addressed, will reduce members’ OOPEs – Staff working with health plans to address the latter two items  Given PPACA and the findings of this report, members’ out-of-pocket costs should be reduced significantly

June 16, 2011 3  OUT-OF-POCKET COST/EXPENSE: The sum of a member’s coinsurance, copayment, and deductible charges. Balance bills and the costs of services that are not covered are not included in out-of-pocket expenses. The GIC’s out-of-pocket expense data does not include the costs of members enrolled in fully-insured Medicare plans, because their data is not included in our claims database at this time  TOTAL COST OF HEALTH INSURANCE: Premium cost for HMO plans, and actual expenditures (claims and administrative costs) for the self-insured plans (the Indemnity, PPO, and POS plans). It includes both appropriated funds and employees’ and retirees’ premium contributions DEFINITIONS

June 16, 2011 4 DEFINITIONS (continued)  TOTAL HEALTH EXPENDITURES = Total Cost of Health Insurance + Out-of-Pocket Costs  FAMILIES: In this report, an employee or retiree and all of his or her covered dependents.  ENROLLEES: Health insurance contract holders with the GIC. In most cases, enrollees are either employees, retirees, or survivors. However, people covered by a Medicare plan are counted as enrollees, even if they never worked for the Commonwealth, a municipality, or another entity (e.g. the Medicare-enrolled spouse of a retiree is considered an “enrollee”)  LIVES/MEMBERS: Each person whose health insurance is provided by the GIC

June 16, 2011 5 TOTAL HEALTH EXPENDITURES  GIC enrollees’ total health expenditures (the state’s and the enrollees’ insurance costs and enrollees’ out- of-pocket expenses), rose $674 million, from $1,166 million in FY2006 to $1,840 million in FY2010 – an increase of 57.8 percent  In FY2010, out-of-pocket expenses remain less than 10 percent of total health expenditures  All types of GIC cost growth were partially driven by GIC enrollment increases from FY2007 - on (municipalities and other entities) – 11 additional municipalities joined in FY2010, resulting in a FY2010 municipal enrollment of 29,300 – 4,100 sheriff and MassDOT enrollees joined mid-2010

MEDICAL EXPENDITURES BY THE GIC AND ENROLLEES FY2006 – FY2010 6 $1,840 million $1,166 million$1,245 million $1,430 million $1,583 million $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 Millions FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 Out-of-Pocket Expenses Enrollee Share of Premium State Share of Premium 7.0% 9.2% 77.3% 72.9% 8.5% 76.5% 7.2% 77.1% 75.6% 8.4% 15.7% 15.8% 17.8% 15.9% 15.1%

SHARE OF COSTS: GIC AND ENROLLEES FY2001 – FY2010 7 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 Millions FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 State Share of Premium Enrollee Share of Premium Out-of-Pocket Expenses 9.9% 9.4% 8.5% 74.3% 9.2% 75.6% 8.4% 76.5% 73.9% 8.5% 75.2% 77.0% 8.0% 7.2% 76.9% 77.1% 14.4% 15.7% 15.1% 15.9% 16.9% 16.3% 14.9% 15.1% 15.8% 77.3% 7.0% 72.9% 17.8% 9.2%

June 16, 2011 8 SOURCES OF RECENT CHANGE IN OUT-OF-POCKET EXPENSES INCREASES: February 2010 benefit changes – Calendar year deductible implemented – Modest copay changes DECREASES: July 2011 PPACA implementation – Member cost-sharing prohibited on preventive services (copays and deductibles)

June 16, 2011 9 OUT-OF-POCKET EXPENSES FY2006 – FY2010  The average out-of-pocket expense per enrollee increased $300 (42.6 percent), to $1,020, in FY2010  The overall FY2006 – FY2010 increase in out-of-pocket expenses was 71.9 percent ($71.0 million), however, the GIC’s 24.6 percent enrollment increase accounts for roughly a third of the increased out-of-pocket costs $ - $ 2 5 $ 5 0 $ 7 5 $ 1 0 0 $ 1 2 5 $ 1 5 0 $ 1 7 5 F Y 2 0 0 6 F Y 2 0 0 7 F Y 2 0 0 8 F Y 2 0 0 9 F Y 2 0 1 0 M illio n s $ 1 6 9 .8 m illio n $ 1 1 0 .2 m illio n $ 1 0 4 .2 m illio n $ 9 8 .8 m illio n $ 1 0 3 .2 m illio n

FAMILIES’ OUT-OF-POCKET EXPENSES FY2010 10 0 2,000 4,000 6,000 8,000 10,000 12,000 $0 $201 - $300 $501 - $600 $801 - $900 $1,101 - $1,200 $1,401 - $1,500 $1,701 - $1,800 $2,001 - $2,100 $2,301 - $2,400 $2,601 - $2,700 $2,901 - $3,000 $3,201 - $3,300 $3,501 - $3,600 $3,801 - $3,900 $4,101 - $4,200 $4,401 - $4,500 $4,701 - $4,800 $>$5,000 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Number of Families with this Level of Out-of- Pocket Expenses Percentage of Families at or below this Out-of- Pocket Expense Level Average Family's FY2010 Out- of-Pocket Expenses ($1,075) 90 percent of the over-155,000 GIC Families have Out-of-Pocket Expenses of $2,300 or less This bar represents the 1,080 families with costs of $5,000 or more

FAMILIES’ OUT-OF-POCKET EXPENSES FY2006 11 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 $0 $201 - $300 $501 - $600 $801 - $900 $1,101 - $1,200 $1,401 - $1,500 $1,701 - $1,800 $2,001 - $2,100 $2,301 - $2,400 $2,601 - $2,700 $2,901 - $3,000 $3,201 - $3,300 $3,501 - $3,600 $3,801 - $3,900 $4,101 - $4,200 $4,401 - $4,500 $4,701 - $4,800 $>$5,000 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Number of Families with this Level of Out-of-Pocket Expenses Percentage of Families at or below this Out-of-Pocket Expense Level Average Family's FY2006 Out- of-Pocket Expenses ($752) 95 percent of the 130,000 GIC Families have Out-of-Pocket Expenses of $2,100 or less

June 16, 2011 12 HIGHEST OUT-OF-POCKET FAMILIES  The FY2010 out-of-pocket distribution showed 1,075 families whose out of pocket expenses exceeded $5,000  The GIC and its health plans have looked into members’ costs for some of these families to determine the source of their high out-of-pocket expenses  This analysis will continue into the summer, as each round of inquiry is contributing to our understanding of this group of enrollees

DISTRIBUTION OF FAMILIES $5,000 AND ABOVE -- FY2010 13 0 10 20 30 40 50 60 70 80 90 $5,000-$5,100 $5,601-$5,700 $6,201-$6,300 $6,801-$6,900 $7,401-$7,500 $8,001 -$8,100 $8,601-$8,700 $9,201-$9,300 $9,801-$9,900 $10,401-$10,500 $11,001 -$11,100 $11,601-$11,700 $12,201-$12,300 $12,801-$12,900 $13,401-$13,500 $14,001 -$14,100 $14,601-$14,700 $15,201-$15,300 $15,801-$15,900 $16,401-$16,500 $17,001 -$17,100 $17,601-$17,700 $18,201-$18,300 Number of Families

June 16, 2011 14 HIGHEST OUT-OF-POCKET FAMILIES – CHARACTERISTICS  Many families had at least one member who was seriously ill during the year – 23.8 percent of families included a member whose claims costs exceeded $100,000 in FY2010 – 7.2 percent of families had a member whose claims costs exceeded $250,000 in FY2010  Most high-cost members within the families that the Plans have reviewed to date had been offered (many decline, either up front or after participating for some length of time) case management by their health plan at some point  Large family size was a driver – 12.4 percent of families had five or more members.  Some of the 1,075 families may not have paid out-of-pocket expenses in excess of $5,000 due to: reprocessed claims (5 confirmed to date), having other health insurance (2 confirmed to date), and not being billed for the stated out-of-pocket amounts by the health care providers (“scholarshipping”)

FAMILIES BY PLAN TYPE FY2010 15 4.6% 6.9% 13.9% 22.9% 18.8% 22.8% 10.2% 2.4% 9.5% 27.2% 0.8% 27.9% 29.3% 2.8% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% All Families Families whose OOPE are $5,000 or more non-Medicare HMOs Tufts Navigator HPHC Independence UniCare Medicare UniCare Indemnity Basic UniCare PLUS UniCare Comm. Choice

June 16, 2011 16 HIGHEST OUT-OF-POCKET FAMILIES – DRIVERS Expected costs due to the GIC’s benefit design:  Benefits that are limited and/or have co-insurance (e.g. skilled nursing facilities, durable medical equipment) – In some cases costs could have been avoided if members used preferred vendors  Indemnity Plan members who did not select CIC (comprehensive) coverage  Non-preferred brand drugs

OUT-OF-NETWORK SERVICES HIGH OUT-OF-POCKET FAMILIES -- FY2010 17 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 Inpatient (Med or MH/SA) Physician Care Outpt Psychotherapy Long Term Care ER / Urgent Care Radiology Outpt Other Svcs Lab Outpt Surgery Outpt Oth Prof Svcs DME Chiropractic Services Outpt Drugs Nursing Outpt Anesthesia Inpt Surgery Outpt Facility Inpt Anesthesia Out of Network In Network

June 16, 2011 18 HIGHEST OUT-OF-POCKET FAMILIES – DRIVERS (continued) Unanticipated costs:  Inpatient hospital copayments in our PPO and HMO plans – Members have been identified with as many as eight inpatient copays in the fiscal year – Benefit change possible for FY2013  Out-of-network benefits – mental health and substance abuse more prominent than expected; GIC to meet with its MH/SA vendor to discuss provider network and efforts to assist members in accessing network providers

OUT-OF-NETWORK MH/SA HIGH OUT-OF-POCKET FAMILIES -- FY2010 19 76.7% 23.3% 50.9% 49.1% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Medical MH/SA In Network Out of Network

MENTAL HEALTH/SUBSTANCE ABUSE EXPENSES HIGH OUT-OF-POCKET FAMILIES -- FY2010 20 $62,267 $624,380 $106,481 $138,054 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 Mental Health Substance Abuse Outpatient Inpatient

OUT-OF-NETWORK MENTAL HEALTH SERVICES HIGH OUT-OF-POCKET FAMILIES -- FY2010 21 55.8% 44.2% 55.5% 44.5% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Inpatient Outpatient In Network Out of Network

OUT-OF-NETWORK SUBSTANCE ABUSE SERVICES HIGH OUT-OF-POCKET FAMILIES -- FY2010 22 50.8% 49.2% 28.3% 71.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Inpatient Outpatient In Network Out of Network