Slide1: Healthcare Group of Arizona Arizona’s Health Care Coverage and Policy Laboratory for Small Business Coverage Options


The Evolution of AHCCCS Health Care Coverage : 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 1988, small employers in 4 counties are allowed to purchase medical coverage for their employees from AHCCCS Health Plans through Healthcare Group.


The Evolution of AHCCCS Health Care Coverage : The Evolution of AHCCCS Health Care Coverage In 1993 Healthcare Group services for small employers is expanded statewide. 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.


FY 2006/2007 Legislative Changes : 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.


While the rate of uninsured in Arizona has declined significantly since 1997, 19.0% of Arizona residents remained uninsured in 2005.: While the rate of uninsured in Arizona has declined significantly since 1997, 19.0% of Arizona residents remained uninsured in 2005. Source: U.S. Census Bureau, Kaiser Family Foundation The Uninsured


The Small Business Market in Arizona: The Small Business Market in Arizona 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 as a health care coverage benefit their employees cannot afford. Small business employers prefer a defined contribution with the employee picking up the rest of the cost. Small business employers can not manage significant premium price increases year to year.


Policy Question: Can the Market Work?: Designing benefit plans that the small business Market will buy Product and Pricing Strategy Product Differentiation Product Evaluation Policy Question: Can the Market Work? Will the small business market respond to differentiated benefits and health coverage products?


Slide8: Administrative Ease Healthcare Group Business Model


The ABCs of Healthcare Coverage for Small Businesses: The ABCs of Healthcare Coverage for Small Businesses A = Administrative Ease Easy to enroll Easy to deal with Good Customer Care 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


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 Product Development Strategy


HCG Healthstyles: CLASSIC SECURE ADVANTAGE ACTIVE Similar coverage as Classic, but intended for employees with limited health needs beyond routine and preventive care. Maternity excluded. Richest and most robust benefit package, intended for: employees with existing disease or chronic condition; employees wanting the added security of a wide range of benefits. A variation of the Secure Advantage, with lower premium and higher co-pays and coinsurance. Maternity excluded. HCG Healthstyles HCG Healthstyles Designed for varying health needs, income, and lifestyles.


Healthstyles™ Benefit Grid: Healthstyles™ Benefit Grid * Member pays $50 co-pay per day for first 10-days, thereafter 50% coinsurance.


Product Evolution: Product Evolution HCG Enrollment Broker fees ends To single plan Rate increase Loss of health plan New HCG Administration Subsidy Starts Product Evaluation Begins Healthstyles Benefit Plans Introduced


Slide14: Historic Enrollment Trends (1999-2006)


Slide15: HMO Enrollment by Benefit Plan and Deductible Total Membership as of November 8, 2006: 24,011 HMO 21,876 members Classic $0 deductible Classic $500 deductible Classic $1,000 deductible Classic $2,000 deductible Secure/Sec. Adv. $0 deductible Secure/Sec. Adv. $500 deductible Secure/Sec. Adv. $1,000 deductible Active $0 deductible Active $500 deductible Members electing a deductible option: 28%


Slide16: PPO Enrollment by Benefit Plan Total Membership as of November 8, 2006: 24,011 PPO 2,135 members Medallion Plus, Classic Plus and Platinum Plus meets federal requirements for pairing with an optional HSA. 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


Employer Groups and Community Rating: Employer Groups and Community Rating Created a separate premium pricing “Group of One Subscriber” Plan to create two additional employer premium pricing group categories: Employer Groups with 2 to 10 subscribers and Employer Groups with 11 and more subscribers Community Rating determined based on regional service area and age and sex


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. Luke’s) Product Evolution


Slide19: December 2004 Results from Employers and Employee Satisfaction Survey (n=285) HCG Product Evolution


Product Evolution: Validation of Focus Group/Survey findings: Asked Brokers/Producers what they thought Actuarial pricing analysis Empirical research Experience of other states Product Evolution


Slide21: Product Evolution 1998-2003 April 2004 June-July 2004 Employer Focus Groups SB1166 Solidify relationships with HCG employer groups Evaluate employer satisfaction Validate product design assumptions Assess unmet need (benefits & services) Validate future product ideas


Slide22: Product Evolution DESIRED BENEFITS Deductible options Mental Health benefits Vision benefits Dental benefits Expanded provider network PPO plans HSA/HDHP option Wellness 1998-2003 April 2004 June-July 2004 Employer Focus Groups February 2006 SB1166


Benefit Comparison: Benefit Comparison


Benefit Comparison: Benefit Comparison * Health plan assumes first dollar liability for services excluded from deductible.


HMO Provider Networks: HMO Provider Networks Geographic differentiation: HMO benefit plans are not available statewide


PPO Provider Network: PPO Provider Network Geographic differentiation: PPO availability varies by county


Slide27: Classic Secure Active HMO Product Demographics December 2004 to April 2006 *Represents stated income from subscribers on enrollment forms. Not all subscribers supply these data.


Slide28: HCG Enrollment by Product


Slide29: HCG Enrollment by Product and Provider Network Total Membership as of November 8, 2006: 24,011 HCG Products 24,011 members HCG Networks 24,011 members


Slide30: HMO Product Migration December 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.


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 Product Evaluation


Slide32: 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 Rate Analysis Tools


Pricing Strategies: 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


Slide34: HCG Member Satisfaction Member satisfaction with choice of …


Slide35: HCG Member Satisfaction Member satisfaction with choice of …


Slide36: HCG Member Satisfaction Overall member satisfaction with …


Lessons Learned: Lessons Learned Need a critical mass of participating businesses and employees to make the benefits actuarially sound and community rating work. Community Rating mitigates year to year premium pricing swings. You can use Medicaid health plans to provide coverage but they need to provide a “good” network of providers. State subsidy will be required until you reach a critical mass of enrollment usually 50,000 member or more. State must have the core organizational competencies to manage the program. You must expect some “pent up” demand from the uninsured.


For Additional Information Regarding:: For Additional Information Regarding: Arizona Healthcare Cost Containment System (AHCCCS) (www.azahcccs.gov) or Healthcare Group of Arizona (www.hcgaz.com) Or request information at: AHCCCS 701 E. Jefferson, MD-4100 Phoenix, AZ 85034 or Anthony.Rodgers@azahcccs.gov


Slide39: Our first care is your healthcare