HomeMy WebLinkAbout2005-09-07-HBRC-rpt Town Of Lexington
Report of the Health Benefits Review Committee
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September 7, 2005
1 Introduction
The Health Benefits Review Committee (HBRC)was appointed b` the Board of Selectmen in
October 2004 to review and analyze health benefits provided b` the Town of Lexington. The
HBRC was created to explore ways for Lexington to reduce an anticipated 15%growth in health
insurance costs this year and in the future' For the charge to the committee and committee
membership see Appendix A.
1 1 The Background
The nation recentl` has experienced double-digit increases in healthcare costs annuall` 2
Lexington is projected to spend roughl` $15 million of its $125 million budget for FY 2005
on health benefits for participants in its plans One committee member calculated that if
health benefit costs continue to grow even at 10%, and assuming the Town s other costs
increase at 3%(a common assumption for inflation) within 10 years the portion of the
Town budget devoted to health benefits will double It is this fact, and the inexorable
growth in the cost of providing health insurance,that drove the establishment of the HBRC
1.2. Health Benefits in Lexington
For a brief histor\ of health benefits in Lexington, see Appendix B
In fall 2004 there were 3616 total subscribers (employees, retirees, dependents and others)
Of these 3616 individuals covered b` Town Plans, b` far the most (1994) are non-retirees
covered under the HMO Blue plan. Almost half that mans (982) are covered under retiree
plans Of those not under HMO Blue the remaining are mostl` split between Harvard(301)
and Blue Choice School/Town(285) with a few in TEFRA and Managed Blue Part time
employees who work 20 hours or more are eligible for health benefit coverage and pa` the
same portion of the premium as full time employees This is similar to coverage offered b`
other towns For Plan Descriptions a complete details of the health benefits offered b` the
Town, see Appendix C
With approximatel` 29%of school employees 55 years old or older we will continue to see
the retiree population growing' Under state law the Town is responsible for retiree
benefits for an individual who retires from a Lexington teaching position even if that person
worked for another town for the majonts of his or her career The Town s Earl` Retirement
Initiative in fact added to our health costs disproportionatel` When an employee retires,
we reap a short-term savings in salar\ if we replace them with a less experienced, lower
salaried employee However we also retain the responsibilrt` for retiree health benefits and
have likel` added the new employee as well, and if the retiree is not eligible for Medicare,
costs are high. Other forces also increase Lexington enrollees When Raytheon closed its
local office and Polaroid ended retiree coverage mans famil` members were added to
Lexington s coverage
1 Source:Group Benefits Strategies
2 Boston Globe,Nov 24 2004
3 Enrollment Breakdown Jnd/Family/Total Subscribers covered bw plans
Email from Susan Bottan,Nov 19 2004
Lexington Heath Benefits Review Committee Report 2
1 2.1. Economic Factors Affecting Health Benefits in Lexington
There are three additional factors that need to be taken into consideration in looking
at the future of health benefits in Lexington. First,benefits offered b\ the Town are,
on the whole, richer and cost less to employees than those offered b\ other
employers While the Committee was unable to obtain data on benefits offered b\
private employers, a report b\ the Worcester Regional Research Bureau documented
that private employers spent a much smaller component of their compensation costs
on health benefits than did Worcester In fact, Lexington s share of the health
insurance premium, co-insurance and co-pays are among the most generous of the
comparable towns we surveyed. The committee believes that because the benefits
offered b` Lexington are better than those offered b\ other employers, Town
employees whose spouses work elsewhere usuall` choose to take the Town benefits,
thereb` increasing costs to the Town. There ma` be increasing discomfort if citizens
find themselves paying for health benefits for Town employees that exceed what the\
themselves receive, even though the benefits package is part of a larger picture and
ma` be part of what allows Lexington to remain competitive in hiring.
Another issue which the Committee discussed is the probable need to fund future
obligations for health insurance Because the Town is required to insure retirees and
their dependents,there is a large, but uncalculated, future obligation. The
Government Accounting Standards Board s (GASB) new standards, which are slated
to become effective sometime in 2006 will require that funds for retiree health be
kept in segregated trust funds available onl` for that purpose Wellesle` has alread`
begun funding theirs and the bond-rating agencies have begun to use compliance
with these standards in their evaluations
Additionall` Medicare Part D the pharmaceutical benefit will become operational
on Januar\ 1 2006 At this point, in the absence of detailed information about the
program, its consequences are not clear However the Town should remain alert to
the possibilit\ of saving mone` on retiree pharmaceutical benefits
1.3 Structure of Health Benefits in Lexington
1 3.1. Administration
The Town is self-insured and engages a consultant, Group Benefit Strategies (GBS)
to help with financial reporting, bids, Requests for Quotations (RFQs) administration
and some minor legal issues Blue Cross/Blue Shield and Harvard Pilgrim
Healthcare handle the claims The Committee thought there was considerable value
in the services provided to the Town bGBS
The Town operates a Flexible Spending Account allowing Town employees to
reduce pre-tax income for eligible healthcare and other expenses In 2004 the Town
introduced a pilot `Opt-Out program, in which one-time payments were made for
Worcester Regional Research Bureau. `Condition Serious,Prognosis Uncertain. The Impact of Muncipal
Employee Health Insurance on Massachusetts, Cities,Report No 05-01 February 28 2005
Lexington Heath Benefits Review Committee Report 3
employees who dropped Town coverage and enrolled in a plan maintained b\ their
spouse or partner s employer
1 3.2. Legal Framework
• Chapter 32B of the Mass General Laws governs the provision of benefits
(http.//www.mass gov/legis/laws/mgl/gl-32b-toc.htm) People eligible to receive
health benefits include current employees, retirees, surviving spouses of
retirees, people who have left the emplo` of the Town but continued benefits
under COBRA, and members of these groups families
• Health benefits are subject to negotiations, and the Town cannot change most
elements of the plans unilaterall`
1 3.3. Fiscal Components
The Town pays out the following items to cover health benefits
• Town share of premiums for insured plans (including Dental)
• Claims up to the stop-loss limit
• Administration of benefits
• Purchase of stop-loss insurance (covering catastrophic claims over the set
limit, currentl` $90 000)
• Flu vaccine clinics
The Town receives or sets aside mone` in the Health Insurance Trust Fund to pa` for
health benefits from.
• Appropriation of mone` from the Town budget
• Participant premiums
• Reinsurance reimbursements
Lexington operates on the principle that insurance premiums (and re-insurance
premiums) are ultimatel` priced to include a risk premium or profit to the compan`
Insurers ma` lose mone` on an occasional basis because their pricing is based upon
statistical averages Over a period of several years,however insurance companies
will price their products so that the\ receive their desired risk premium or profit
margin.
Histoncall` Lexington has realized savings through self-insurance as compared to
the full` insured rates quoted b` the insurance companies in the various Requests for
Quotations conducted b\ the Town. These savings, as a result of other budget
pressures, have been passed directl` to the operating budget, instead of funding the
health insurance trust fund and increasing the reserves Over the last several years,
the level of reserves in the Trust Fund has declined.
The Town purchases re-insurance for costs incurred b\ an individual during a plan
year in excess of$90 000 thereb` limiting the Town s exposure to catastrophic
claims Town officials penodicall` review this level and price out the insurance costs
at various levels to make sure the cost is competitive and that the Town is properl`
protected against undue risk. The reinsurance level has been raised penodicall` and
was recentl` increased from$75 000 to $90 000 in order to save on premiums
Lexington Heath Benefits Review Committee Report 4
To better understand the costs of Lexington health benefits and the health benefits
marketplace for eastern Massachusetts municipalities,the Committee conducted a
surve` of comparable local cities and cities We selected towns used b` unions for
comparison purposes in wage agreements and selected other cities and towns with
similar demographics and financial status A surve` instrument was developed and
modified based upon feedback from town staff and committee members Twent`-
nine towns were contacted b` phone,the surve` was faxed and phone follow up was
conducted as needed. Twent`-four towns responded with most of the requested
information. Information included health plans offered, benefit levels, employee
premiums, and questions about other benefits offered, including dental benefits,
chiropractic coverage and pharmac` benefits Lexington offered to share the results
of the surve` with respondents The results of the surve` are spelled out in detail in
Appendix E In general,the Town s costs, premiums and benefit levels were similar
or a little better than average
2. Summary of Recommendations (see table that follows for additional details)
The committee found that health benefits have been quite well-managed b` the Town over the
years As the Committee raised options it found that mans had been tried previousl` often in
partnership with the Coalition of Town Employees,the bargaining unit for health benefits Claim
costs are low relative to other groups insured b` Blue Cross/Blue Shield according to their own
calculations 6 Despite these positive aspects,the Town has a problem of costs growing beyond its
capacrt` to pa`
Based upon our review we would agree with the general feeling that the benefits offered b` the
Town are better than those provided b` local industr\ however employees ma` have foregone
pa` increases or accepted increases which were below market rates in order to maintain the
current benefit levels The Town and collective bargaining units negotiate wages with each unit
separatel` but health benefits for all units are collectivel` bargained. Legislation is under
consideration which might allow towns to bargain wages and benefits together as cities are able
to do now If such legislation is passed,the Town should consider whether it is more cost-
effective to continue to provide richer benefits in lieu of salar\ increases during a period when
medical inflation is higher than the general inflation rate
The Committee offers the following recommendations for changes in health benefits structure and
financing b` the Town. Even though these benefits are subject to collective bargaining, our goal
is to present a comprehensive set of recommendations for the short and long-term. Further
explanation of these recommendations and the advantages and disadvantages associated with
each are contained in the table that follows Other options that were considered and rejected b`
the HBRC are also included in that table
6 Email from Kevin Walsh,Nov 30 2004
Lexington Heath Benefits Review Committee Report 5
2.1 Short Term Recommendations and the Rationale for Them
2.1 1. Implement a Carve-Out Pharmacy Benefit Program and Increase Incentives for
Generic and Mail Order Drugs.
The carve-out of pharmac` benefits, recommended bGBS would establish a
separate administrator for all pharmac` benefits with estimated savings of 30%to
50%in cost-growth. Changes in co-pays can be used to increase use of generic
drugs and mail-order suppl` contributing to the reduction in costs
2.1 2. Strengthen Claims and Enrollment Audits
The effectiveness of the membership claims and other audits currentl` being
performed b\ the town and its insurers, should be validated b` an independent firm.
These audits, which can be done at a reasonable cost, help ensure that claims being
submitted are legitimate, potentiall` saving mono. The Committee also
recommends that the Town review the capabilities of the town s accounting software
to support this activit\ in the future
2.1 3. Consider Premium Structure and Plan Design Changes
Options that the Committee recommends be considered are a change in ratio of
premiums so that enrollees pa` more and a standard dollar contribution b\ the Town.
Non-pharmaceutical co-pays are relativel` low and should be reviewed periodicall`
2.1 4. Consider Separate Plan for Out-of state Enrollees
Because of the need to provide coverage to those who live outside of Massachusetts
(e g. retirees who have moved, children of employees or retirees who are awa` at
college) the Town currentl` offers Blue Choice,the most expensive option. B`
creating a separate plan solei` for those living out-of-state,the Town could choose a
single and most cost-efficient plan for the great maiorrt` of enrollees who live within
Massachusetts
2.1 5. Expand Health Promotion Locally
Among the most likel` risks facing Lexington enrollees are smoking, high blood
pressure, high cholesterol and being overweight. Reducing risk factors means a
reduction or dela` in the onset of diseases and a healthier work force would be a
more productive work force with reduced absenteeism. Little is known about these
risks within the covered group so data needs to be obtained.
2.1 6. Develop a Strategy to Expand Case and Disease Management
Case management coordinates care and seeks to ensure that it is delivered effectivel`
and in the least costl` setting. Although there are indications (e g. cases reaching the
reinsurance cutoff point)that case management could provide savings and better
care, data is not currentl` available to ascertain the number of cases
Lexington Heath Benefits Review Committee Report 6
2.1 7 Continue to Consider Alternative Providers,Stop-loss Levels and Insurance vs.
Self-insurance as a Part of Rebidding Process
The Town has done a good job of this in the past and should continue to review these
issues periodicall`
2.1 8. Ensure that the Health Benefits Trust Fund is at the Recommended Level of Three
Months.
The Town has periodicall` made decisions not to fund the trust fund, instead using
these funds for general operations This is dangerous and runs the risk of the Town
having to appropriate additional funds should expenses be higher than anticipated, as
has happened in the past.
2.1 9 Review Implementation of This Report on an Ongoing,Perhaps Ouarterly Basis.
In order to provide adequate oversight and progress on these issues,the Board of
Selectmen should request the HBRC or its successor to review progress at set
periods
2.2. Long-Term Recommendations
2.2.1. Implement Strategies for Expanded Case Management and Health Promotion
See 2 1 6 above
2.2.2. Explore Group Purchasing in Tandem with Review of Premium Structure and
Plan Design
Although Lexington has not been successful in finding a satisfactorn group in
previous attempts, group purchasing would, b\ increasing the size of the covered
group reduce costs and spread risk. With effective leadership Lexington ma` be
able to develop its own group
2.2.3. Explore Implementation of Consumer-driven Health Plans.
Appendix F contains a detailed discussion of consumer-driven health plans
A first step toward this would be the provision of Explanation of Benefits for all
services so that enrollees understand what services actuall` cost. Currentl` Blue
Cross does not provide this
2.2.4. Begin Funding Future Obligations for Health Benefits
The Town will soon be required bGASB standards to account for its health benefits
more transparentl` To maintain our bond rating and to ensure that we meet our
future obligations, it would be wise to fund these trust accounts adequatel`
The table that follows provides further information on these recommendations and discusses
options which the Committee does not recommend at this time
Lexington Heath Benefits Review Committee Report 7
2.1 1 Implement a Carve-Out Pharmacy Benefit Program (and strengthen recent pharmacy changes)
Option Comments Advantages Disadvantages
Carve out Pharmacy • Recommended by GBS • Unifies administration and benefits across • May impact local pharmacy business,
■ Would establish a separate administrator all plans. depending on how many employees use the
and plan for all pharmacy benefits. • Estimates of 30%to 50%reduced growth pharmacies to get prescriptions.
in claims costs(by GBS)with increased • May increase admin. costs.
generics and mail order
• Significant improvement in data and
reporting.
• Increases transparency of pricing and uses
of rebates.
Increase incentives for • More information is needed on current • Decrease pharmacy costs • More use of mail-order and generics
generics and mail order utilization to evaluate. requires changes in patient and physician
through changes in behavior
pharmacy co-pays
Purchase drugs from • Not a long-tern solution,and not • Short tern savings • Legal issues if not approved by FDA.
Canada or the European recommended by the HBRC • May have higher administrative costs,
Union particularly for switching.
■ May impact local pharmacy business.
2.1.2 Strengthen claims and enrollment audits
Option Comments Advantages Disadvantages
Claims and Enrollment • Use an independent firm to review • Uncover errors. • Amount of savings not clear
Audits effectiveness of current audits by town and • May identify additional savings ■ May increase administrative cost.
insurers. opportunities
■ Review the capabilities of the town s • Eliminate cost for ineligible participants.
accounting software to support this activity
Provide Explanation of • Blue Cross does not currently provide these • Enable participants to identify errors in • May increase administrative costs.
Benefits(EOBs)for all for Town enrollees. claims.
services • Increase awareness of the cost of services
and could therefore impact long-tern
behavior
Develop incentives for • Develop incentives to encourage • Uncover billing errors.
participants to review participants to review bills and EOBs to • Make participants aware of cost of services
bills ensure that billed services were provided.
Could be%of$recovered.
Lexington Heath Benefits Review Committee Report 8
2.1.3 Consider premium structure and plan design changes (includes 2.1 4 on out-of-state plan considerations)
Option Comments Advantages Disadvantages
Premium Structure
Change ratio of premium • Lexington is near the low end of the • Save the Town$ May encourage those • Forces participants to bear higher costs.
contributions middle-range for the employee share of with alternative health plans to opt out of Subject to union negotiations.
premium for comparable towns. Lexington the Lexington plan.
maintains different employee shares for
different plans(e.g. 12%for HMO Blue,
20%for Blue Choice and 15%for HPHC)
These could be equalized,or each adjusted
toward enrollee paying more.
Create a standard dollar • Same Town contribution for individual or • Can be structured to have no cost increase • Forces participants to bear higher costs.
contribution by Town family coverage regardless of plan chosen. for HMO Blue enrollees. Provides • May result in adverse selection,with those in
predictability for Town share of costs. poorer health paying less for a less expensive
plan while using more services.
■ Subject to union negotiations.
Vary required ■ We reviewed this alternative and
contributions based on concluded that it is not viable because
salary(see Globe article) there are not enough highly-paid
employees.
Limit entry to Blue • It is necessary to maintain a Plan which • May decrease use of out of network • Many who elect Blue Choice do not actually
Choice Plan or increase can cover out of state employees and providers. go out-of-network. Their premium
the premium to encourage retirees. contributions will decrease if they go to
lower in-state enrollment HMO Blue(Town would pay more)
Plan Design
Increase non- • Based on our survey the$5 co-pay is still • Higher co-pays/deductibles might impact • Subject to union negotiations.
pharmaceutical co-pays common among cities and Towns. Plans in utilization and thus reduce costs,but the • May make it harder to recruit.
and/or deductibles industry often have$10 or$15 co-pays. savings will not be great. The 2003 RFQ • Lower paid participants may forego medical
Consider setting the co-pay at a%of the showed a slightly greater than 1%change services they need. Percent co-pays may
discounted cost of the service. in funding rate by raising BCBS from a$5 increase provider administrative costs.
■ The Town has reviewed the impact of to a$10 office visit co-pay • Forces participants to bear higher costs.
changing co-pays and deductibles on a ■ Setting the co-pay as a percent of the
regular basis and should continue to do so charge will make people more aware of the
real cost of services. See Appendix F for
discussion of high deductible plans.
Modify/Expand Opt-out Lexington is the only town that reported an May decrease health plan participation and • May increase total costs, if those who opt out
Program opt-out program. This is still uncommon in thus lower costs. May save$if the payment would have moved to alternate plans without
many industries. This program and the is less than the approximately$10 000 cost of any incentive payment.
amounts paid need to be explored further each new enrollee. • Added administrative costs.
• Subject to union negotiations.
• The PAB originally voted against this
program.
Lexington Heath Benefits Review Committee Report 9
Option Comments Advantages Disadvantages
Plan Design
Review the new law re Adequate information is not available at this
Medicare Coverage for time.
prescription drugs to
determine whether any
changes should be made
to retiree coverage.
2.1 4 Consider separate plan for out-of-state enrollees
Option Comments Advantages Disadvantages
Create separate plan for The majority of participants are located within May achieve lower total administrative • Possible higher administrative costs for out-of-
out-of-state participants MA. It may be more efficient to split out costs. Town would have more options for state group.
those who are out-of-state and use a separate in-state plans because it would not have to • May not be able to exactly duplicate benefits
third-party administrator or insurance provide Blue Choice to accommodate those for out-of-state group
company for that group and then design for who are out of state. • Town would have to find a national company
the remaining programs to be most efficient with a network that fits for out-of-state
within MA participants.
2.1.5 Expand health promotion locally
Option Comments Advantages Disadvantages
Increase health promotion • Information is needed on the major health • Reducing risk factors would mean a ■ Cooperation is needed from insurers,providers,
and disease prevention risks of the Lexington enrollees in order to reduction or delay in the onset of and enrollees.
activities. institute activities to reduce these risks. illnesses such as diabetes, heart disease, • There would be some additional costs for
Among the most likely risks are smoking, or stroke,resulting in healthier enrollees savings that would occur later and be hard to
high blood pressure,high cholesterol,and and reduced costs. measure.
being overweight. ■ A healthier work force would mean more
productive employees with reduced
absenteeism.
2.1 6 Develop a clear strategy to expand case management
and
2.2.1 Implement strategy for expanded case management and disease promotion
Option Comments Advantages Disadvantages
Ensure that there are • More data is required about the current • Effective case management and disease • Dependent on cooperation of providers,
effective case costs and the extent to which case and management will result in more effective insurers and enrollees.
management and disease disease management are being applied to treatment and reduced costs. • Data is hard to obtain.
management programs. Lexington enrollees,particularly on an • Hard to monitor particularly for conditions for
ambulatory basis. which there is no hospitalization.
• Responsibility split.
Lexington Heath Benefits Review Committee Report 10
2.1 7 Continue to consider alternative providers, stop-loss levels and insurance vs. self-insurance as a part of rebidding process
Option Comments Advantages Disadvantages
Consider alternative ■ Lexington has requested competitive quotes ■ Bidding keeps BC/BS administrative • United and CIGNA networks are not as
health plans and at each renewal(two years). We pricing competitive. Account may get more strong in MA. Some participants may have
providers recommend continuing that practice. attention from BCBS,HPHC and more to change providers.
Consider Tufts,United Healthcare, & active management from GBS • Increases the administrative workload.
CIGNA. In the past,Tufts has been more
expensive and United and CIGNA networks
have not been as good as BC/BS,Harvard
Pilgrim, &Tufts.
Review • The reinsurance and stop loss levels are • Reduced premiums • Increased risk—a report the committee
Reinsurance/Stoploss reviewed on a regular basis and we reviewed showed only 25 (de-identified)
(Increase retention levels, recommend that this practice be continued. people responsible for$2M in claims, so a
e.g.the portion of risk Currently individual stop loss is set at few extra people having adverse health
retained by the Town.) $90 000 Last year 6 cases exceeded the experiences can increase claims costs
stop-loss level which was set at$75 000 significantly in any one year
■ Compare premium savings from increased
levels to expected value of claims being
assumed by the Town.
Review self-insured • This has been done at each renewal,and • Self-insurance costs less in the long run and • Insured quotes may be low at first to gain
versus fully insured this practice should be continued. Currently gives the Town more control over benefit the business,but is more expensive in the
plans Blue Choice,Network Blue,HPHC& design. Estimates were that risk premiums long run.
Medex are self-insured and the dental and may ultimately cost an additional 3%-5%. • Need to pay runout claims if switch to
a)medical retiree programs(other than Medex)are Self insured plans do not have to offer some insurance.
insured. Less savings to self-insure dental mandated benefits for insured plans and • Must keep appropriate reserves. Current
due to smaller average claims size and high avoids premium taxes. reserves are below two months. The
claims volume. recommended level is 3 months.
b)dental • Dental insurance is not self-insured because
self-insurance cost more.
• Continue to review this on an annual basis.
Lexington Heath Benefits Review Committee Report 11
2.2.2 Explore group purchasing (in tandem with review of premium structure and plan design)
Option Comments Advantages Disadvantages
Re-explore group This has been tried in the past,with negative Possible savings because of larger group size • Less control over benefits offered.
purchasing results. and more negotiating power • Other Towns may have worse experience than
Lexington.
■ Each Town may only have one vote, regardless
of size.
Alinuteman \ashoba This is a new group
Health Group
M114 Tried in the past. Did not obtain stop loss • Lexington may not be allowed to re-enter the
coverage. group
TT est Suburban Tried in the past. One vote per Town was a HPHC rate is lower than the Lexington rate. • Lexington may not be allowed to re-enter the
problem for Lexington as a larger Town More choice of plans available. group
• Lexington rate is currently lower for HMO
Blue(our highest enrolled plan)
Other Form a new group') Added advantage in the ability to select ■ Long term option only Will take an
members and rules. investment of time and resources to organize.
• Illegal to pool with local businesses.
2.2.3 Explore implementation of consumer-drive health plans
Option Comments Advantages Disadvantages
Explore Consumer • This is a long-term project, requiring • Plan design may encourage participants to • Requires additional administrative resources
Driven Health Plans additional study and extensive participant compare prices and use health care more to implement and administer the program.
education. wisely thus decreasing costs. Requires extensive participant education.
■ This type of health plan is only now • May increase consumer choice. • For Health Savings Accounts(HSAs),plan
emerging and has little public sector • Potential long-term change in behavior by design may encourage lower paid
acceptance. patients and providers. participants to pay penalties and use funds
• Increased focus on patient education for non-medical purposes and leave them
through web based and other content. without the resources to pay for health care
• High visibility of products. when they need it.
• All require high deductible levels.
• May encourage people to forego needed
care.
• Lexington would be one of the first
municipalities to adopt such a plan.
Lexington Heath Benefits Review Committee Report 12
2.2.4 Begin funding future obligations for health benefits
Option Comment Advantages Disadvantages
Assess future obligations Lexington s future obligation for retiree • Beginning to fund obligation now will • Will take money from other requirements
and begin funding. benefits has not been calculated but it is large. reduce its impact later
It seems likely that there will be legal or • Will establish the principle that the
regulatory requirements to fund this soon—see obligation exists and needs to be funded
GASB standards. Bonding agencies are • Would prepare Town for future
looking at this. requirements
Lexington Heath Benefits Review Committee Report 13
Appendix A
The Health Benefits Review Committee
Members were suggested b\ individual Board members and invited b\ the Chair The Committee
met 9 times on November 3 November 17 December 1 December 15 (2004) Januar\ 5 Januar\
19 Januar\ 26 Februar\ 2 and August 24 (2005)
The charge to the Committee was
"Description Thoroughl\ review and analyze current components of health insurance
being mindful of employee privac` rights Compare Lexington s benefits with other
communities and private sector operations Suggest possible changes to operation which
could reduce the cost and/or rate of increases to the Town and subscribers Consider all
options including benefit plan designing, pooling with other Towns and/or local businesses,
self-insurance, etc Report back to a joint meeting of the BOS School Committee and
Appropriation Committee findings and recommendations for additional work to be done in
three months
Membership criteria. Criteria for membership shall include Health Care Consultants with
experience in health insurance, one subscriber and citizens with good analytical skills
Staff Support Rose Ducharme (municipal) Susan Bottan(School)
Membership Bob Beckwitt, Richard Doughert\ (Co-Chair) Tom Goodwin,Nano.
Meadows, Tom Rand, Linda Roemer Claudia Sheffield, Deborah Strod(Co-Chair)
Maggie Oliva, a subscriber attended the first meeting but was unable to continue, and
Claudia Sheffield was asked to take her place Update March 2005 Bill Kenneth will
continue as a member of the committee Update August 2005 Tom Rand has moved out of
town.
Liaison Paul Hamburger and Rick Eurich(Appropriation Committee) Bill Kenneth
(Selectmen) Tom Griffiths (School Committee) Evelyn Silber(Personnel Advisor\
Board) Update March 2005 Hank Manz was assigned as the Selectmen Liaison.
Meetings Two per month
The Health Benefits Review Committee recognizes that man` of its recommendations are subject to
collective bargaining. State law provides that the Town cannot unilaterall\ change the management
of health benefits plans, but rather that choices are subject to bargaining.
Lexington Heath Benefits Review Committee Report 14
Background of Committee Members and Staff
Bob Beckwitt is Portfolio Manager Trilog\ Advisors Former Managing Director at Goldman
Sachs Former Portfolio Manager at Fidelit\ Investments He holds an SM in Finance from MIT
and a Princeton BA in Economics
Susan Bottan is Director of Budget and Finance, for Lexington Public Schools Update Jul` 1
2005 Ms Bottan has left the position.
Richard Dougherty is an organizational psychologist with significant experience in public sector
procurement, finance, Medicaid and child welfare polic\ He has assisted businesses and
government agencies in a range of development and change-oriented projects, involving managed
care implementation, qualit\ improvement and organizational and strategic change, often with a
focus on consumer and stakeholder input.
Rose Ducharme is Revenue Officer/Benefits Manager for the Town of Lexington.
Rick Eurich is a member of the Appropriation Committee
Thomas W Goodwin is a partner in a local CPA firm and former chairman of the Finance
Committee in Wakefield Mass For 6 years earlier in his career he was responsible for the
employee benefits of a 600-person multi-state employee group
Tom Griffiths is past-Chairman of the School Committee He is also a principal in Evans Griffiths
&Hart, Inc where, annuall\ he reviews the company's health care plans and their costs
Paul Hamburger is a Member of the Appropriation Committee and Town Meeting Member
Bill Kennedy is a Selectmen Liaison.
Nancy Meadows is a subscriber and has experience in benefits administration.
Tom Rand owned an employee benefits consulting firm that was sold to a national firm.
Linda Roemer is Professor Emerita of Health Care Administration at Simmons College and a
former Chairperson of the Lexington Board of Health.
Claudia Sheffield is Administrative Assistant, Town Manager s Office
Evelyn Silber has 20 years of experience in corporate benefits and 7 years of experience in HR
consulting. She is co-chair of the Personnel Advisor\ Board and has served on the Town-wide
Compensation Committee, and search committees for a Superintendent and Interim Town Manager
Deborah Strod worked for 10 years at Massachusetts General Hospital in technolog\ transfer and
has done some graduate work in public health. She is a Town Meeting member in Lexington.
Lexington Heath Benefits Review Committee Report 15
Appendix B
Brief History of Health Benefits in Lexington?
• 1987— The Town switched from premium-based healthcare to a self-insured plan
• 1993 —Lexington reduced the number of plans and replaced one costl` plan with more
aggressivel` managed plan— $1 3 million dollars saved (had been a projected increase of
15%or$800 000) A change in Massachusetts law allowed this step to take place
• 1993 —Dental benefit added with benefit cap
• 1995 —Access was limited to another plan to consolidate the risk pool.
• 1994-1999—Health insurance appropriation was level during a time when other Towns
increased appropriations b\ double-digit amounts
• 1997—Third part\ administration b\ Blue Cross/Blue Shield avoided$500 000 in plan
increases Dental cap eliminated
• 2003 —Co-payments increased, employee cost of plan increased, plan administration
changes, avoided$1 5 M anticipated cost increases
• 2004—One time opt-out pilot plan implemented, Express Scripts implemented
(prescription b\ mail)
• 2004/5 — adjusted the Town s stop-loss insurance levels, increasing to $90 000
Lexington has participated twice in group-purchasing of health insurance once with the West
Suburban group and, once with the MIIA. In each case Lexington left the group after an
unsatisfactorn experience In West Suburban, Lexington had the largest population but onl\ one
non-weighted vote, and the others in the group chose plans too expensive for Lexington. In the
case of MIIA,the group failed to provide promised re-insurance, which was onl\ recovered after
a great deal of time passed.
It should be noted that the Coalition of Town Employees has repeatedl` bargained with the Town
about ways in which to reduce health care costs
See Lexington/inntenman,Aim 24 2004 bN former Tossii Manager Richard White, Coalition of Tossii Employees.
Health Insurance Bargaining Historti provided bN Vito LaMura,Lexington Education Association President.
Lexington Heath Benefits Review Committee Report 16
Appendix C
Plan Descriptions
The current census and medical premium structures are summarized in Exhibit I. Benefits
covered under the various plans are summarized in Exhibit II.
Currentl` the Blue Choice,Network Blue, HPHC and Medex programs are self-insured and the
HPHC First Seniorrt` the Managed Blue Senior Plan, and all the dental programs are insured.
The Town purchases stop-loss insurance for protection against claims in excess of$90 000 for the
self-insured programs
In the corporate environment,the cost of providing retiree health care is reduced somewhat when
the employee reaches age 65 and qualifies for Medicare Some Town employees ma` never
qualif\ for Medicare unless the\ or their spouses have had jobs outside of state or local
government. The Committee understands that this currentl` involves onl` one or two retirees
Lexington Heath Benefits Review Committee Report 17
2.3 Exhibit I November, 2004 Census and Monthly Premium Structure (per Employee/
Retiree)
Town Town Employee/Retiree Total
Plan Coverage Enrollment % Contribution Contribution Working Rate
Medical
Blue Choice Individual 151 80% $440 80 $110.20 $551 00
Blue Choice Family 116 80% $1 143.20 $285 80 $1 429 00
Network Blue Individual 337 88% $337 92 $46 06 $384 00
Network Blue Family 576 88% $872 96 $119 04 $992 00
HPHC Individual 43 85% $369 75 $65.25 $435 00
HPHC Family 73 85% $885 80 $156 30 $1 042.00
Medex Individual 548 80% $252 80 $63.20 $316 00
Mngd Blue Srs. Individual 44 80% $221 61 $94 98 $316 59
HPHC 1st Seniority Individual 40 80% $153 60 $38 40 $192 00
COBRA
Blue Choice Individual 1 $0 00 $551 00 $551 00
Network Blue Individual 7 $0 00 $384 00 $384 00
Network Blue Family 2 $0 00 $992 00 $992 00
HPHC Individual 2 $0 00 $435 00 $435 00
HPHC Family 1 $0 00 $1 042.00 $1 042.00
Dental
Delta Premier Individual 498 50% $21 30 $21 30 $42 60
Delta Premier I+ 1 454 50% $34.23 $34.23 $68 46
Delta Premier Family 382 50% $54 77 $54 77 $109 54
DeltaCare Individual 88 50% $11 92 $11 92 $23 84
DeltaCare I+ 1 27 50% $22 34 $22 34 $44 68
DeltaCare Family 12 50% $33 63 $33 63 $67.26
COBRA
Delta Premier Individual 8 $43 45 $0 00 $43 45
Delta Premier I+1 1 $69 83 $0 00 $69 83
Delta Premier Family 3 $111 73 $0 00 $111 73
DeltaCare Individual 1 $24 32 $0 00 $24 32
Lexington Heath Benefits Review Committee Report 18
Exhibit II- Benefit Summaries
Blue Choice
Blue Choice In- Out of Network/
Network Self-Referred HMO Blue HPHC HMO
Deductible Not applicable $250 per person/ Not applicable Not applicable
$500 family
Co-Pay per Visit $5 20%coinsurance $5 $5
after deductible. No
routine care.
Out of Pocket Not applicable $1,250 per person/ Not applicable Not applicable
Maximum $2,500 family
Lifetime Maximum $2,000 000 $2,000 000 None None
Hospital In-Patient Covered in Full 20%coinsurance Covered in Full Covered in Full
(including after deductible.
maternity)
Hospital Out- Covered in Full. $25 20%coinsurance Covered in Full. $25 Covered in Full. $30
Patient emergencN room after deductible. emergencN room emergencN room
copaN it-not copaN it-not copaN it-not
admitted. admitted. admitted.
Skilled Nursing Up to 100 days/year 20%coinsurance(up Up to 100 days/year Up to 100 days/year
Facility to 100 days/year)
Laboratory Tests Covered in Full 20%coinsurance Covered in Full Covered in Full
after deductible.
Doctor Visits $5 Co-PaN 20%coinsurance $5 Co-PaN $5 Co-PaN
after deductible.
Mental Health
General Hospital Covered in Full 20%coinsurance Covered in Full Covered in Full
after deductible.
Specialty Hospital Biologically based 20%coinsurance Biologically based Up to 60 days/year
conditions covered after deductible. Up conditions covered
in full Other to 60 days/year in full Other
conditions to 60 conditions to 60
days/year days/year
Out-Patient $5 Co-PaN Up to 20%coinsurance $5 Co-PaN Up to $5 Co-PaN Up to
24 visits per year after deductible. Up 24 visits per year 24 individual visits
to 24 visits per year or 25 group visits per
year(to a maximum
of 25 total visits)
In-Patient Drug/ Up to 30 days/year 20%coinsurance Up to 30 days/year Up to 30 days/year
Alcohol in a substance abuse after deductible. Up in a substance abuse
facilitN to 30 days/year facilitN Unlimited
in general hospital.
Out-Patient Drug/ Up to 8 visits per 20%coinsurance Up to 8 visits per Up to 20 visits or
Alcohol year$5 copa,per after deductible. Up year $5 copaN per $500 in benefit
visit to 8visits per year visit value,whichever is
greater $5 copaN for
first 8 visits,$25
thereafter $5 copa,
for group therapN
Home Health Care Covered in Full. 20%coinsurance Covered in Full. Covered in Full.
after deductible.
Lexington Heath Benefits Review Committee Report 19
Blue Choice In- Blue Choice Out of HMO Blue HPHC HMO
Network Network/Self-
Referred
Prescription Drugs $5 generic/$10 $5 generic/$10 $5 generic/$10 $5 generic/$10
preferred brand/$25 preferred brand/$25 preferred brand/$25 preferred brand/$25
non preferred non preferred non preferred non preferred
phannac,
Up to a 30 da, Up to a 30 da, Up to a 30 da, $10/$20/$75 mail
supply from a supply from a supply from a order
phannac, or 90 da, phannac, or 90 da, phannac, or 90 da,
supply mail order supply mail order supply mail order Up to a 30 da,
supply from a
phannac, or 90 da,
supply mail order
Medicare Supplement Plans(Plan coverage plus Medica•e)
Medex Managed Blue HPHC First Seniority
Deductible Not applicable Not applicable Not applicable
Co-Pay per Visit None(No routine care.) $10 $15
Out of Pocket Maximum Not applicable Not applicable Not applicable
Lifetime Maximum Not applicable Not applicable Not applicable
Hospital In-Patient Covered in Full Covered in Full. Covered in Full
(including maternity)
Hospital Out-Patient Covered in Full. Covered in Full. $50 Covered in Full. $50
deductible for emergent, emergent,room copal if
room unless admitted. not admitted.
Skilled Nursing Facility Full coverage for 100 days. Covered in Full Covered in Full
$10/day for 101-365
Laboratory Tests Covered in Full Covered in full. Covered in Full
Doctor Visits Covered in Full $10 per visit. $15 per visit
Mental Health
General Hospital Covered in Full 20%coinsurance after Covered in Full up to 190
deductible. days
Specialty Hospital Biologically based Biologically based Covered in Full up to 190
conditions covered in full conditions covered in full days.
Other conditions to 60 Other conditions to 60
days/year days/year
Out-Patient Up to 24 visits per year $10 per visit. No limit for $15 Co-Pad visit 1-8,$25
biologically based. Up to for 9-20 then 50%. $15
24 visits per year for other for group visit 1-20 then
50%.
In-Patient Drug/ Up to 30 days/year in a 20%coinsurance after Up to 90 days in a
Alcohol substance abuse facilitN deductible. Up to 30 days/ Medicare covered hospital.
year Additional Lifetime
reserve of 60 days.
Out-Patient Drug/ Up to 8 visits per year$5 $10 per visit. Up to 8 $15 Co-Pad visit 1-8,$25
Alcohol copa,per visit visits or$500 per year for 9-20 then 50%. $15
for group visit 1-20 then
50%.
Home Health Care Covered in Full. Covered in Full. Covered in Full.
Prescription Drugs $50 deductible,then full 25%copa, generic,50% $10 genenc/$20 preferred
coverage for genencs and preferred brand,75%brand brand/$35 non preferred
80%for brands at phannac, $20/$40/$105
phannac, Mail order$5/$30/$50 for mail order
90 da, supply
Mail order$2/$10 for 90 Up to a 30 da, supply from
da, supply a phannac, or 90 da,
supply mail order
Lexington Heath Benefits Review Committee Report 20
Dental Programs Delta Premier DeltaCare in Network DeltaCare out of network
Deductible for out-of- Not applicable Not applicable $100 per person,no family
network services maximum
Preventative Full coverage for most Full coverage for most The Plan will paN 20%less
diagnostic and preventative diagnostic and preventative than it would have paid for
services once ever 6 services once ever 6 services m network.
months months
Combined Deductible for $50 Individual/$100 Not applicable
Basic&Major Family
Restorative
Basic Restorative Covered at 80%after Copayment schedule bN The Plan will paN 20%less
deductible type of service. $1,00() than it would have paid for
maximum per calendar services in network.
year for oral surgerti
endodontics,&
penodontics.
Major Restorative Covered at 50%after Copayment schedule bN The Plan will paN 20%less
deductible type of service. $1,00() than it would have paid for
maximum per calendar services in network.
year for oral surgerti
endodontics,&
penodontics.
Lexington Heath Benefits Review Committee Report 21
Appendix D
Discussion of Options
In this section, we detail more of the Committee's discussions about the options we
recommend the Town investigate further or begin to implement, and other ideas we
rejected after an initial look. For ease of reference, we use the same number as in the
initial summary page and chart
1 Short-Term Recommendations
1 1 Implement a Carve-Out Pharmacy Benefit Program
1 1 1. Pharmacy Benefit Management Carve-out
Pharmac\ Benefit Management (PBM) companies have grown considerabl` in recent
years b\ offering strategies for clients to lower pharmaceutical costs One wa` in
which this is done is through management of the drug formular\ A drug formular\
lists the pharmaceuticals that will be covered b\ insurance, often in three-tiers with
generic drugs costing the least and drugs not on the formular\ the most. PBMs also
use retail drug card programs, encourage the use of mail order and provide other
clinical management programs Maintenance drugs dispensed b\ mail tend to be
cheaper because the distributor can negotiate lower prices because of volume
Express Scripts currentl` provides some pharmac\ benefit management services for
Lexington enrollees The consensus of the Committee and GBS consultants was that
significantl` more savings could be realized through more aggressive benefit
management procedures For a number of its municipal clients, GBS intends to
develop a pharmac\ carve-out plan, where pharmac\ benefits are separatel`
administered from the health benefits, providing a higher level of attention to benefit
management, improved reporting and increased transparent` of costs GBS estimates
that pharmaceutical cost growth could be reduced b\ about one-third if the most
aggressive plans are implemented. These savings are obtained b\ increased
incentives for enrollees to order drugs for deliver\ b\ mail and b\ encouraging
doctors to prescribe generic drugs where possible
1 1 2. Mail-in prescriptions and generic drug use
Express Scripts,the Blue Cross PBM, was implemented in Lexington in 2004
Express Scripts has over 50 million lives under coverage, representing $24 billion in
pharmaceutical spending each year In 2003 the compan` managed 379 million
retail prescriptions and 32 million mail prescriptions
Express Scripts helps its clients select plan design features that balance the need for
cost control with member convenience and satisfaction. The most common benefit
design options offered to its clients are financial incentives and reimbursement
limitations including formularies,tiered co-payments, deductibles, or annual
maximums incentives for generic drug utilization, incentives or requirements to use
onl` network pharmacies or mandator\ mail deliver\ of maintenance drugs and
reimbursement limitations on the amount of a drug that can be obtained within a
specific period.
Lexington Heath Benefits Review Committee Report 22
Lexington currently benefits only from the filling of prescriptions by mail and the
substitution of generic drugs for brand name ones Significant savings can accrue
from each of these with the largest savings coming from increased use of generic
drugs There is an almost even split between prescriptions which are filled by
generic versus brand name drugs Therefore,there is considerable room to grow the
use of generics,through incentive or other programs Reports provided to the
committee ( Drug Payment Drilldown from BCBS) indicate that for Network Blue
subscribers, only about 10%of the prescriptions are being filled by mail. Thus,there
are also large potential savings from increasing mail order prescriptions
There has been controversy in the field about the transparency of drug pricing and
perceptions of conflicts of interest in the use of rebates and other manufacturer
incentives Express Scripts has had some rebates from pharmaceutical manufacturers
but has committed to reducing the amount of fees that it receives from manufacturers,
which may result in some additional savings
A familiar feature of pharmacy benefits is tiered co-payments, in which Express
Scripts or the client actively seek to educate individuals about formulary drugs,
programs that actively promote lower-cost therapeutic and generic interchanges
Whereas clients typically have selected a plan with an open formulary today an
increasing number of clients are selecting formularies that offer financial or other
incentives (such as three-tier co-payments)to encourage the selection of preferred
drugs (While Lexington offers a tiered co-payment scheme it is questionable
whether the difference in prices is large enough to save the Town money )
These approaches help contain the rate of cost increases for clients and encourage
greater involvement by beneficiaries in the decision making process Some clients
opt for even more restrictive closed formularies, in which benefits are available only
for those drugs included on the formulary In 2003 54%of all claims fell into three-
tier or closed categories, compared to 42%for 2001 indicating increased efforts to
reduce costs
Express Scripts uses its electronic claims processing system to apply the client s
benefit plan design parameters to submitted claims and to enable monitoring of the
financial performance of the plan.
At the end of 2003 Express Scripts operated seven mail pharmacies, located in
Missouri,New Mexico Pennsylvania,New York and Arizona. These pharmacies
provide members with convenient access to maintenance and specialty medications,
while helping the company manage drug costs through operating efficiencies and
economies of scale Since mail order pharmacies are directly involved with the
patient and member they are generally able to achieve a higher level of generic
substitutions and therapeutic interventions than is typically achieved at retail. Within
its mail pharmacies, Express Scripts maintains a large inventory of brand name and
generic drugs, which it purchases either directly from manufacturers or through
wholesalers
Other services are available from Express Scripts These include disease
management and education programs to plan beneficiaries in an effort to help
manage clinical outcomes and the total healthcare costs associated with certain
Lexington Heath Benefits Review Committee Report 23
chronic conditions such as asthma, diabetes, and cardiovascular disease These
programs are based on the premise that better-informed patient and physician
behavior can positivel` influence medical outcomes and reduce overall medical costs
Express Scripts identifies patients who ma` benefit from these programs through
analysis of claims data or through self-enrollment. Express Scripts offers a tiered
approach to member education and wellness, ranging from information provided
through its Internet site,to educational mailings,to its intensive one-on-one
registered nurse or pharmacist counseling. The programs include providing patient
profiles directl` to their physicians, as well as measurements of the clinical, personal
and economic outcomes of the programs However Lexington enrollees do not
appear to benefit from these additional services
Express Scripts contracts with retail pharmacies to provide prescription drugs to
beneficiaries of the plans Express Scripts manages In the United States,the compan`
negotiates for discounted prices at the pharmacies which will provide drugs to plan
members More than 57 000 retail pharmacies, representing more than 99%of all US
retail pharmacies, participate in one or more of its networks Express Scripts also
manages pharmac` networks that are customized for or under direct contract with
specific clients These networks can alert pharmacists to opportunities for generic
substitution and therapeutic intervention as well as formular\ compliance issues It
is not clear that this is done for Lexington enrollees
In conclusion, Express Scripts provides a faith comprehensive set of strategies to
control the cost of prescription drugs Lexington ma` need to evaluate each option
so it can determine whether it has reached the optimal balance between cost
containment and member convenience and satisfaction.
1 1 3. Canadian or European Drug Reimportation
The Town staff had been poised to tr. importing drugs from Canada two years ago
but it did not move forward because of Selectmen s concerns At this point,the
consensus of the HBRC is that the possible short-term benefits which might have
been(or might even still be) realized are not worth the effort now Whatever benefits
might accrue in the short term will decrease over the long term.
There has been considerable stud` concerning the potential to reimport drugs from
Canada into the US to save mono. Currentl` it is estimated that the reimportation
business from Canada is over$1 billion because mans drugs can be as much as 50%
cheaper than in the US There are mans who claim that this will grow considerabl`
in the next few years While the FDA has not approved the reimportation of drugs
from Canada, mans states, such as Louisiana,North Dakota, Minnesota,Wisconsin,
California, Massachusetts,New Hampshire, Maine, Illinois and Maryland are
attempting to structure and implement Canadian drug reimportation. Some political
leaders have stated publicl` their intention if necessary to def` the FDA which
believes that such importation is illegal.
To date the FDA has not approved reimportation primaril` due to safet` concerns In
recent testimon` officials of the Food and Drug Administration, as well as
representatives of other government agencies, have noted the potential dangers
associated with reimportation, including individual importation,the purchase of
drugs from foreign sources over the Internet, and counterfeit drugs entering the
Lexington Heath Benefits Review Committee Report 24
United States In testimon\ on this subject,William Hubbard, Senior Associate
Commissioner for Polic\ Planning, and Legislation at the U S Food and Drug
Administration(FDA) stated. `Currentl` new drugs marketed in the United States
must be approved b\ FDA based on demonstrated safet\ and efficac\ This
closed regulator` system has been ver` successful in preventing unapproved,
adulterated or misbranded drug products from entering the U S stream of commerce
Legislation that would establish other distribution routes for drug products,
particularl` where those routes routinel` transverse a U S border creates a wide inlet
for counterfeit drugs and other dangerous products that can be injurious to the public
health and a threat to the securrt` of our nation s drug suppl\ Similar concerns
have been echoed b\ former Bush administration Health and Human Services (HHS)
Secretarn Tomm\ Thompson and former Clinton Administration HHS Secretarn
Donna Shalala.
Representatives of the Canadian government have recentl` clarified their position b\
stating that the\ could not guarantee the safet\ and effectiveness of drugs exported
from their countrn This is especiall\ troublesome as counterfeit drugs entering the
U S pose genuine risks both in lack of efficac\ and in adulteration with unknown
substances There are also man` who claim that the safet\ issue is just a wa` to
politicall\ protect pharmaceutical profits
Eventuall\ mechanisms ma` be put in place to protect US consumers from the risks
stated above At that point,the remaining question will be whether discounts will
remain in Canada should the amount of drugs reimported become much larger
At some point, it is likel\ that the discounts available to US consumers will
disappear most likel\ from a combination of efforts from pharmaceutical companies
and the Canadian government itself. Pharmaceutical manufacturers,who sell their
products to the Canadian government at lower costs, have a direct economic
incentive either to limit an surplus sold to Canada or to stop selling their products to
Canada altogether There does not seem to be an reason wh\ Canada should put its
own discounts at risk to suppl\ customers in the US
The probabilit\ of sustaining discounts might increase should Congress look beyond
Canada to enable the reimportation of drugs from larger European nations For a
number of reasons this seems unlikel` at this time
Therefore, while there ma` be some short-term savings available from Canadian drug
reimportation, it is likel\ that reimportation will not lead to intermediate or long term
discounts and would always face the possibilit\ of being cut off suddenl` b\ Canada,
the drug manufacturers or the FDA.
1.2. Strengthen Claims and Enrollment Audits
A significant cost containment opportunit\ lies in making sure that the Town pays onl\ for
services provided to those who should be covered b\ the Town and that all claims are
legitimate and for services that are covered.
First the Town needs to be extremel\ timel\ in reporting changes in status This includes
monitoring dependent coverage,tracking dates of death and birth, requesting substantiation
Lexington Heath Benefits Review Committee Report 25
for students who fall outside of the age limits, and promptl` terminating former employees
and their dependents
In addition to the internal monitoring,the Town should consider engaging an independent
firm to review the claims on a periodic basis, probabl` quarterl` The\ would review the
data base of employee and dependent information and carefull` monitor cut off information
to make sure that an claims paid subsequent to a termination are the result of services
performed prior to the end of the coverage period. The\ would also review all large claims
paid to make sure that there were no overcharges and that the services were appropriatel`
covered(i.e not excluded services) It is also important that covered services be full\
understood and monitored carefull`
The auditor would also review significant claims for a dependent spouse to make sure that
no other coverage was available from another source to pa` for these services
Note that Express Scripts has support for this kind of work for pharmaceutical costs
1.3 Review Premium Structure and Plan Design
We need to understand how much flexibiht` there is in determining plan design. For
example, if Lexington requests a different benefit structure than the standard programs
offered b` Blue Cross or Harvard Pilgrim in order to influence participant behavior will
Blue Cross or Harvard Pilgrim be able to administer that program') Some design decisions
are tied to other issues for example, some vendors ma` refuse to offer high deductible
programs with Health Reimbursement Accounts (HRAs) or Health Savings Accounts
(HSAs) if the Blue Choice program is also a plan option.
The current structure, with two Blue Cross alternatives and one Harvard Pilgrim alternative
for non-Medicare enrollees, was established in 1994 and participants selected plans at that
time There has not been significant movement between plans since that date because at the
time of the changes, enrollment was frozen for 3-4 years and people were required to move
off the HPHC plan into the BCBS plan to pool risk; most enrollment changes since that
time have been due to new employees selecting plans and eligible employees who had not
previousl` enrolled later choosing to get benefits through the town. It is possible that a
different premium or benefit structure would result in significant changes in the distribution
between plans
There is a two-tier structure for medical coverage (individual and famil`) and three-tier
structure for dental coverage (individual, individual plus one, and famil`) We understand
that a three-tier structure was considered for medical coverage and rejected because the
famil` premium would be too high. This should be reviewed each year The committee
was not provided with information as to how the current premium structure was developed.
For the medical programs,the ratio of the famil` premium to the individual premium varies
b\ plan between 2 40—2 59 This weighting should be reviewed to determine if it is
appropriate It ma` be more appropriate to use the same ratio for all three plans
After reviewing long term cost projections for each Plan,the Town should determine
whether there is an reason to provide incentives to employees to select one plan over
another and, if so to develop a premium structure which encourages movement towards
that plan.
Lexington Heath Benefits Review Committee Report 26
1 3.1. Increase non pharmaceutical co pays
There ma` be an opportunih to significantl` change behavior b\ changing plan
design. Under the current structure, with$5 copays for most services,there is limited
consumerism. Participants do not have the information to make choices based on
cost because the amounts the\ are paving do not relate to the true cost of the services
The cost to the participant of using a high cost or inefficient provider is the same as
the cost of using a more efficient provider There is no incentive, for example to
avoid high cost teaching hospitals for routine tests and services which could be
performed more efficientl` and with equal qualih in a communrt` setting. The
optimum plan structure would include rewards for wise behavior as a health care
consumer
1 3.2. Institute Explanation of Benefits forms
Participants generall` do not receive explanation of benefits forms from Blue Cross
Blue Shield when claims are paid, so the\ are totall` isolated from the real cost of
medical care
1 3.3. A structure with participants paying a percentage of the discounted cost per visit
might encourage more cost-effective behavior
1 3.4. The$5/$10/$25 copay structure for prescription drugs is also somewhat low
Once again,there is no incentive to compare prices charged b` participating
pharmacies or to compare the costs of different generics
1 3.5. Change the ratio of Premium Contributions
The Town currentl` pays 80%of the total cost for Blue Choice, Medex, and HPHC
First Seniorrt` 85%for HPHC 88%for Network Blue, 80%for Managed Blue
Seniors, and 50%for all dental plans
One option to consider is to have the Town contribute the same dollar amount (one
dollar amount for individual coverage and one for famil` coverage) whichever Plan
the employee elects and have the employee pa` the remaining percent of premium.
Another wa` to reduce costs would be to make the Lexington benefits less attractive
b\ reducing benefit levels or increasing employee premiums enough so that those
with working spouses will elect to participate in those plans instead of the plans
offered b` the Town. This could detract from the town s abilit` to attract new
employees
Employee contributions could also van based on pa` with those over a certain
salan contributing more to their own health care When the Committee examined
the salan structure of the Town, it did not seem that this would result in an`
significant savings
The committee discussed the possibilit` of recommending that part time employees
pa` a higher pro rata share of the premium, in order to encourage those with working
spouses to get their medical coverage from the spouse s plan. If legal,this could save
Lexington Heath Benefits Review Committee Report 27
the Town as much as $1M annuall` according to one estimate It appears that this
ma` not be legal under the laws governing municipal benefit plans Furthermore, an
increase in premiums could make it difficult to fill some part time positions as access
to health care is a mayor hiring incentive
In addition,the Committee was told that mans part time jobs within the schools don t
work well as full time positions There has been some effort to keep as mans part
time jobs as possible below the 20 hours that qualifies the individuals for benefits,
but that often is not feasible For mans the availabilit` of the Town s health care
program is the reason the\ are willing to take the jobs at relativel` low wage levels
The Committee also discussed whether or not it would be possible to charge higher
premiums to smokers or other high-risk groups, as is done with life insurance The
consensus was that this would be too difficult to administer and would not be
permissible under Mass General Law 32B and HIPPA. How would the Town treat a
famil` where the employee did not smoke, but the spouse or dependent child did9
How would the Town obtain the information and ensure its confidentialrt`
1 4 Consider Separate Plan for Out-of-state Enrollees
Because the Blue Choice Plan is the onl` one allowing participants to go out of the network
for services, it ma` be the onl` one appropriate for retirees not eligible for Medicare who
live outside Massachusetts (42 individuals and 18 families) and families with dependents in
college out of state Therefore,the Plan cannot be eliminated unless another plan
appropriate for this population is added.
As the cost of coverage for out-of-state retirees is higher a higher retiree share ma` be
appropriate It is also possible that the Town can find an insurer that could provide
coverage to this group separatel` from the rest of the enrollees If this were the case the
Town could eliminate the Blue Choice option which is the most expensive However there
are mans other potential problems with eliminating Blue Choice In addition to the need to
collectivel` bargain over this,there is the fact that Blue Choice enrollees pa` more, but ma`
not use more expensive services This is because few actuall` do go out of network for
services Thus, if Blue Choice were eliminated, premium contributions would decrease,
possibl` without an accompanying decrease in costs
1.5. Expand health promotion and disease prevention locally
There is little systematic attention currentl` being paid to health promotion and disease
prevention activities within the Lexington employee and dependents population.
Health promotion encourages the adoption of health` practices in areas such as diet,
exercise, and stress reduction. Disease prevention involves the identification of specific
risks and the taking of steps to reduce those risks Treatment of individuals shown to be at
risk for osteoporosis aimed at preventing future fractures is an example of disease
prevention. Earl` detection, while often included in disease prevention is not prevention
but is important for the future health of the individual and the cost of health care
Mammograms and PSA testing for prostate cancer are examples of earl` detection. Earl`
detection and disease prevention, because the\ more clearl\ fall within the scope of practice
of medical practitioners, are more likel` to be done than is health promotion.
Lexington Heath Benefits Review Committee Report 28
Neither Blue Cross nor HPHC appear to be offering significant health promotion and
disease prevention activities to Lexington enrollees While such services are available, e g.
Weight Watchers or fitness centers, often at reduced costs,there does not seem to be a
concerted effort to involve Lexington s employees, retirees and dependents
While it is tempting to hope that health promotion activities could provide near-term
savings in health costs for the Town,this is unlikel` for a number of reasons
• The Town does not have information about various risks that exist within the
covered group
• Obtaining data about risks that could or should be addressed will be costl` and
require the cooperation of Town employees This is beyond the current scope
and capacit\ of Town government.
• Within the employee population,there are likel\ to be individuals at high risk
and broad-based programs aimed at the general population ma` not reach them.
High-risk individuals pose a particular threat to health care expenses because of
their effect on the communit\ experience and future costs Methods b\ which an
employer ma` identif\ and reach these individuals so as to reduce risk are onl\
Just being developed and ma` be difficult to implement, particularl` with HIPAA
(the Health Information Portabilit\ and Accountabilit\ Act) in place
• Effective health promotion and disease prevention activities will entail costs now
for savings that might be realized in the future Savings would come in the
medium-and long-term and almost certaml` would not be identifiable as
deriving from such efforts
Simpl` talking about health promotion and making it available to employees at reduced
rates is not sufficient to change much behavior More aggressive action would be required.
One example will suffice It can be assumed that some Town employees and dependents
smoke Smoking affects not onl\ the health of the individual but of his or her famil\ as
well. The effects of second hand smoke on household incidence of lung cancer upper
respirator\ infections and asthma, for example, have been documented. However we do
not know how man` Town employees smoke We also do not know whether those who
smoke are interested in stopping. And, we do not know how effective a Town-organized
program would be in reducing the incidence of smoking.
The Town would benefit also from improved reporting on claims made for particular health
conditions for our population(diabetes, smoking-related or obesit\-related illnesses in
particular) in order to gauge how effective increased health-promotion efforts could be in
decreasing claims However as noted elsewhere in this report, our claims are actuall\
lower than the rest of Blue Cross/Blue Shield s book of business
Because the data and participation needed for an health promotion and disease prevention
programs can onl\ come from the employees themselves, gains can onl\ be made b\ a
combined effort of the Town and its employees A health risk assessment of Town
employees (and possibl` of dependents as well)would provide much needed data and might
help to build support within Town government and the employee population for needed
programs in these areas This would require funding from the Town.
Lexington Heath Benefits Review Committee Report 29
1 6. Develop a Clear Strategy to Expand Case and Disease Management
There is little data available to the Committee that would enable it to draw any conclusions
about savings that more aggressive case management might provide to the Town. Case
management activities are generally focused on two sets of individuals
The first group includes those who are in acute episodes For these, case management
concentrates on getting an individual out of expensive care such as hospitals into less
expensive services such as rehabilitation facilities or home care Although Blue Cross and
HPHC have little financial incentive to provide these services to Town employees and
dependents who are not insured by them, it is likely that they do because they provide such
services for those they insure There is evidence, however that Town staff provide
consumer education and certain case management services when they can.
The number of cases in which the reinsurance floor is reached indicates that there are
several cases within the Lexington insured group for whom acute episodes are costly
Aggressive case management might lower costs for these individuals Generally however
the most substantial savings are realized for cases where the annual claims level is in the
$10 000 to $50 000 range
Disease management is usually focused on those with chronic conditions who are not in a
health facility and may still be working. Although these individuals may have acute
episodes,their care is generally on an outpatient or ambulatory basis and drugs are usually
the most expensive part of such treatment. Conditions included in this group include
asthma, diabetes, coronary artery disease, heart failure, hypertension, and high cholesterol.
It is likely that some forms of case management for these individuals are done by the
practitioners who treat them, however there are no incentives for this
The evidence on savings from disease management for chronic conditions is not
encouraging, although it is clear that case management can result in better quality services
and improved patient satisfaction. Few entities providing case management report
significant savings One positive example is Asheville, NC which has a program for city
employees that concentrates on diabetes, asthma, hypertension, and high cholesterol. This
program, which is currently being tried in a few other places, uses specially trained
pharmacists to monitor participants It was reported that the city has saved four dollars for
every one dollar it invested in the program, mostly in reduced hospital costs
There is, unfortunately little data to estimate how much case or disease management is
being done for those with chronic conditions or whether savings can be attained. What is
clear is that the incentives are probably not aligned in ways that encourage aggressive
management of the chronic conditions of those Lexington covers
Express Scripts has some features which would support case management of
pharmaceutical use but these are probably not being applied aggressively to Lexington
enrollees at this time
Lexington Heath Benefits Review Committee Report 30
1 7 Continue to Consider Alternative Insurance Providers, Stop-loss Levels and Insurance
vs. Self-insurance as Part of Rebidding Process
1 71. Alternative Health Plans
Blue Cross/Blue Shield, Harvard Pilgrim, and Tufts Health Plans have the most
extensive networks in Massachusetts Rose Ducharme has indicated that the Town
has requested competitive quotes from Tufts Health Plan in the past and it was more
expensive than the programs currentl` offered. This cost comparison should
probabl` be repeated ever\ three to five years Penodicall` it ma` be worthwhile to
compare the networks offered b` United Health Care and CIGNA to the list of
providers used b` plan participants although neither network is currentl` as
extensive in Massachusetts as Blue Cross, Harvard Pilgrim, or Tufts,the\ have
apparentl` taken steps to improve their coverage within the state
1 7 2. Self-Insurance versus Full Insurance
Rose Ducharme has indicated that the Town requests quotes and compares self-
insured and full` insured programs on an annual basis This practice should
continue Self-insured and insured dental programs should also be evaluated.
In the long run,the cost of coverage for a large group is the total of claims paid,
administrative and claims processing costs,the cost of an risk transfer plus an
allowance for profit for the insurer or plan administrator Insurance ma` save mone`
over self-insurance in the short run, if the insurer underestimates claims or provides
an artificiall` low quote to 'bus the business, on the assumption that it will recoup
its first-year losses in future years In the long run, self-insurance (perhaps combined
with reinsurance or stop loss coverage) is likel` to be less costl` because the profits
or risk premiums assumed b` administrators are lower than those assumed b`
insurers In addition, state laws mandate certain benefits for insured plans self-
insured plans are not required to offer mans state-mandated benefits
1 7 3. Limit Entry or Reduce Employer Contribution for Blue Choice Plan
The out-of-state Blue Choice Plan does not require participants to have a pnmars
care physician. Man` believe that having a gate-keeper can help to keep medical
costs down. The in-state Blue Choice Plan requires a pnmars care physician, but
does allow participants to go out of network if the\ choose that is when the\ utilize
their out of pocket deductible If this is true,the premium structure used for the Blue
Choice Plan should include an employee contribution reflecting the additional cost of
the program. The Town could also consider not allowing new employees to select
the Blue Choice Plan.
However we cannot determine from the information available whether there is
adverse selection and whether or not it is costing the Town more when employees
elect the Blue Choice Plan. It would be interesting to review the demographics of the
employee selecting Blue Choice with those selecting HMO Blue Rose Ducharme
has indicated that in the past in-state employees who selected Blue Choice do not
often go out of the HMO network for care However the\ are willing to pa` a higher
Lexington Heath Benefits Review Committee Report 31
premium to reserve the right to go out of network. If providing incentives for them to
move to the HMO plan does not change their utilization of health care,the cost to the
Town might actuall` increase, since claims would remain the same and employee
contributions would decrease The Town should review the rate structure each year
to be sure that relative employee contributions for the Blue Choice and HMO
programs reflect the perceived value of the availabilit` of out of network care
1.8. Ensure that the Health Benefits Trust Fund is at the Recommended Level of Three
Months
In recent years the Town has used mone` designated for the Trust Fund for other
government expenses The Trust Fund has therefore fallen below the recommended three
months level.
The Committee believes that the Trust Fund should be allowed to accumulate up to the
four-month level. With the lower level,there is a larger possibilrt` that the Town might
have to appropriate additional mone` during a year should unusual expenses occur and the
Trust Fund run short.
1.9 Review Implementation of this report on an Ongoing, Perhaps Quarterly Basis
While the HBRC has no desire to indefinitel` perpetuate itself, it does believe that there
needs to be a specific group appointed b` the Selectmen,to contnuall` monitor health
benefits within the Town, and to provide pressure to move forward on recommended and
agreed upon changes The Committee understands that mans of its recommendations will
be subject to collective bargaining.
However the cost of health insurance is a ver serious problem for the Town, and will
become more so Therefore,there needs to be a mechanism to continue to focus on the
problem and to suggest actions that the Town can take
2. Longer-Term Recommendations
2.1 Consumer-Directed Healthcare; Health Savings Accounts, Flexible Spending
Accounts, Medical Savings Accounts, Health Reimbursement Arrangements
The Town should consider various options in the implementation of consumer directed
health care strategies, similar to the current trend in mans businesses Please see Appendix
F for a more detailed discussion of these options
2.2. Implement strategy for expanded case management and health promotion
See 2 1 5 above
2.3 Explore group purchasing in tandem with review of premium structure and plan
design
There are currentl` two major purchasing groups in Massachusetts—MetroWest and MIIA.
Lexington has participated in both groups in the past. At the time we were part of the
MetroWest Group we were one of the largest Towns in the group and each entit` had one
vote Lexington dropped out because the group elected to offer benefits that were more
Lexington Heath Benefits Review Committee Report 32
generous than the Town thought it could afford. With MIIA,the purchasing group did not
purchase the stop-loss insurance expected and the purchasing group was required to fund
several claims for Lexington employees which it had not anticipated. It ma` be worthwhile
to review the two groups again to see if the operating rules or the composition of the groups
have changed.
Should another group be formed, Lexington should consider whether it would be
advantageous to Join. Or the Town could participate in forming a new group The
advantage of belonging to a group is that the wider risk pool would reduce costs and risk,
but the disadvantage is the amount of administrative time and effort required. The
committee was also asked to explore pooling with local business, but were informed that
this was illegal.
2.4 Begin Funding Future Obligation for Health Benefits
Although this will take considerable fiscal constraint, it seems important to establish the
principle that this is a future obligation of the Town. Beginning to fund this obligation soon
will help to spread the burden over more years and prepare the Town for future regulator\
or legal requirements (such as the GASB standards) Bond-rating agencies have alread`
taken it into account in reviews of other towns, and it would be good to obtain such
agencies views of the how soon it is necessary to do this
Lexington Heath Benefits Review Committee Report 33
Appendix E
Review of Comparable Town Benefits Survey
To better understand the costs of Lexington health benefits and the health benefits marketplace
for eastern Massachusetts municipalities,the Committee conducted a surve` of comparable
local cities and cities We selected towns used b` unions for comparison purposes in wage
agreements and selected other cities and towns with similar demographics and financial status A
surve` instrument was developed and modified based upon feedback from town staff and
committee members Twent` nine towns were contacted b\ phone,the surve` was faxed and
phone follow up was conducted as needed. Twent` four towns responded with most of the
requested information. Information included health plans offered, benefit levels, employee
premiums, and questions about other benefits offered, including dental benefits, chiropractic
coverage and pharmac` benefits We appreciate the respondents' collaboration and will be
sending copies of the report to them.
Disclaimer. the data in these charts,although verified b\ each town, has not been independentl`
verified, misunderstandings and differences in accounting practices among towns ma` lead to
inconsistencies in the responses
Survey Results
The detailed findings of the surve` are contained in the charts below and the table that follows
Lexington offers a generall` similar set of traditional health plans as most of the towns Blue
Choice, HMO Blue and Harvard Pilgrim were the most frequentl` offered plans The Metro
Suburban Health Purchasing Collaborative also offers Tufts PPO Tufts POS and Fallon and a
NAA(Out of Area)plan.
For Medicare supplement retiree plans, virtuall` all towns offered Medex and most also offered
HPHC s First Seniorrt` product, a much less costl` Medicare HMO product with expanded
benefit.
Eighteen towns, including Lexington, offered$5 co-pays for physician and ambulator` services
Three towns have co-pays of$10 per visit; one town has an$8 co-pa` and the remainder are
mixed in their benefits Eleven towns have $25 Emergenc` Room co-pays Five towns have $50
ER co-pays five have $25-$50 co-pays and the remainder are mixed. With the exception of
Brookline and Sudburn Lexington and six other towns had the next lowest levels of pharmac`
co-pays - $5 generic/$10 brand/and$25 formularn Mail order rates for Lexington were similar
but generall` for a 90 da` suppl` Seven towns had similar rates
Of the 24 respondents, seven reported Annual Limits on out of pocket employee expenses
Lexington has a$1 000/$2,000 polic` one town(Newton)had a similar benefit. All others were
higher— such as $2,200/$4 400 in Concord and$1 600/$3,200 in Dover
Lexington offers some coverage and benefits that are not offered b` other Towns Chiropractic
services are covered b` Lexington with a$5 co-pa` for up to 20 visits This is similar to
Lexington Heath Benefits Review Committee Report 34
Brookline Fourteen towns reported offering the coverage but most of them onl` offered it in
certain but not all plans Woburn had a limit of 12 visits per year
Twent\ towns reported offering Dental insurance, but we onl` received rate sheets for thirteen.
Lexington picks up 50%of the premium for Delta Premier and Delta Care Ten of the other
towns did not contribute to the Dental coverage (100%employee premiums) Sudburn and
Wellesle` contributed 25%and 47%respectivel` for DeltaCare coverage, not Delta Premier
Eighteen towns offer life insurance
Figure 1 -Blue Choice benefits two do not. Of those that
50% offer the benefits, Lexington
45% I� offered what appeared to be the
2 40% I I I standard benefit of 50%of the
t 35% I I premium for$5 000 employees are
a) 30% I I responsible for the premium of
0 d 25% additional insurance up to $74K.
20%
a 15%
] 1ii• Three towns offered$10 000
E 1o% policies -onl`wreported optionalone addofitthoseional
0% F �� qa �a y 6 coverage (Wellesle`)
Lexington was the onl` Town that
Towns reported having used an Opt-Out
program, where cash benefits were
paid to employees who voluntaril`
Figure 2 -HMO Blue select their spouse s insurance plan.
50% Lexington s plan was one-time
45%
40% � I onl` however
t 35%
U) 30% As shown in Figures 1-3
&) 25% Lexington employees contribute a
0 20% different percentage of the
a 15% premium for each of the covered
1 _ _ -
w 0%5% 1If II IIlen plans 20%for Blue Choice 12%
0% BO
for HMO Blue, and, 15%for
' o � °af �so z0fm� o HPHC This compares to averages
mmo =_ Q � ` �
of 29%, 18%and 19%respectivel`
Towns for the towns also offering those
plans The distributions of
Figure 3 -HPHC employee shares for the three plans
50% are shown in the attached charts
45% 1
e 40% I Total premiums for the health plans
s 35% I offered b` Lexington were
y 30% generall` comparable to other
y 25%
0 25% towns (see Figures 4-6) Premiums
Q. 15% were shghth higher than average
LE 10500, I I - -
11 n -Lill- IL
for Blue Choice and HPHC and
0
lower than average for HMO Blue
0%
, m'�F o�oP Qo ��, _ ' ,..i,,�� • While the costs ma` be somewhat
z .7..,z � _ . _ . k- lower the Town has priced the
Towns
Lexington Heath Benefits Review Committee Report 35
HMO Blue premiums so as to
encourage enrollment in this plan.
The premiums van significantl`
Figure 4 HMO Blue Total Premiums
HMO Blue Total Premiums
$1 600-
0 Individual
O Family
$1 400-
$1,200- �w
$1 000-
Premiums ar
$800-
$600- — — — — — — — — — — — — — —
a
$400- _ .ffi —• _ _ -
$200-
$0 �. _.. _
Lex Arl And Brook Burl Carob Ded Dov Hing Nat Need Pea Sud Wat Way Wel Winch Wob
C Individual 384 391 375 395 448 329 415 415 377 415 535 379 422 424 415 415 454 378
D Family 992 1010 1005 1058 1201 842 1119 1119 1010 1119 1528 1017 1071 1182 1119 1119 1225 1006
Towns
Lexington Heath Benefits Review Committee Report 36
Figure 5—Blue Choice Total Premiums
Blue Choice Total Premium
$1,600-
.4ED. 14Z87,
$1 400- T
ASSSZ
$1,200-
i 49
$1 000- i _
Premiums $800-
$600- _
$400- _
$zoo-
$f " r '- "
o Individual
Lex Arl Brook Camb Hing Need Sudbury West Winch
o Family
lo Individual 551 625 423 432 520 551 509 436 523
to Family 1429 1564 1131 1100 1234 1429 1300 1175 1395
Towns
Of the fourteen towns reporting Medex premiums and contribution rates, Lexington had a vers.
competitive premium rate at$316 overall. Onl` Arlington was lower at $292 per month and
Needham was the same as Lexington. Medex premiums were as high as $423 in Burlington.
Most towns, with the exception of Hingham and Needham, offered at least one other plan for
seniors Members of the West Suburban Health Plan offered as mans as 8 different options At
20%, Lexington was one of the lower towns for the employee share of the premium for Medex
and Medicare related coverage Most towns had 25%or more of the premium being picked up b`
the retiree Man` required the retiree to pick up 100%of the premium.
Figure 6—HPHC Total Premiums
Lexington Heath Benefits Review Committee Report 37
HPHC Total Premium
$1 600-
$1 400-
$1,200-
$1000- 1
ACV
Towns $800-
❑Individual
$600- ❑Family
$400-
$200- - - — - - - - - _ - - -
L_ rl Eel Eurl enih !n E d E Hina ud Flat II-d udbur 3It iter it ell ,t h
Ind!!idual 4 44 4_ 4- 4 4_ 4i
F3m11! 104_ I{ FE! 11 It 4 L u` E Ir4 I0. Ili
Premiums
Other Reviews of Health Benefits
Of the eleven towns tracked as comparables b\ the Teachers Union for salarn and benefit
negotiations for FY'05 Lexington ranked fourth in overall health insurance benefits The total
compensation level was ranked lower however The benefit is calculated based upon famil\ plan
premiums for HMO Blue (the most frequentl` enrolled plan)
Another analysis of comparable towns was conducted b\ Town staff in the fall of 2004 looking
at health benefits as a percentage of total budgets In that analysis, Lexington ranked second,just
behind Arlington, with 10 7%of the budget devoted to health care costs
Blue Cross compared Lexington s renewal rate calculations to Blue Cross `book of business
For the HMO Blue plan, Lexington s projected claims were $2,717 692 vs Blue Cross claims at
$3,516 076 For the Medex plan, Lexington was $1 836 932 vs BCBS at$2,245,239
Lexington Heath Benefits Review Committee Report 38
Figure 7—Lexington Health Benefits Review Committee— Survey Data
Concord also C.on-Carlisle
Town Lexington Andover Arlington Brookline Burlington HS Dedham Dover Hingham
Name Rose DuCharm Kathleen Golini Anne Milici Kathy McGinnis Jayne Hyde Personnel Dept. Frank Karen Jelloe Leah Bleicken
Geishecker
Phone 781-861 2768 978-623-8534 781 316-3123 617 730-2117 781 270-1622 978-318-3025 781 751-9171 508-785-0032 781-804-2407
x237
Email rducharmeci.le kaolinieandoverm amilici( town.arlin kathy_mcginnis ihvde( burlmass. personnel( concordnet.ora faeisheckereto treasureredover bleickenlehinaham-
xinaton.ma.us a.aov aton.ma.us Otown.brookline.ora wn.dedham.ma. ma.ora ma.com
Rate Sheet Y Y Y Y Y Y Y Y
Average Co-Pays
Phy/Amb $5 $5 $5 $5 $5 $5-$10 $5 $5 $5
ER $25 $25 $25 $25 $25 $25-$50 $25 $25-$30 $25
Prescript
Retail Generic $5 $10 30 day $5 30 day $5 $10 $5 $5 $5 $10
(Brand $10 $20 30 day $10 30 day $10 $20 $10-$15 $10 $10-$15 $20
Form $25 $35 30 day All charges $10 $35 $25-$35 $25 $25-$35
Prescript Generic $5 $10 90 day $5 90 day $5 $10 $10 $10 90 day $5-$10 $2
Mail Order IBrand $10 $20 90 day $10 90 day $10 $20 $20-$30 $40 90 day $10-$30 $10
Form $25 $35 90 day All charges $10 $35 $50-105 $50 90 day $25-$105
Annual Limits
Prescription N/a None None None n/a n/a None
Inpatient N/a None None None n/a None
Out-of-Pocket $1000/$2000 None None None Only w/Tufts POS 1600 pre HPHC None
$200/$400 deduct& member per $1600/$3200/yr
$2200/$4400 max out of year POS only Tufts
pocket $1500/3000/yr
Other Relevant Cvg
Chiro (Coverage Y None N Y Y Y Y Y N
Describe $5 up to 20 20 Visits/CY$5 Some plans Discount only Only Fallon
Visits co-pay
Dental Coverage Y Y Y N/A Y Y Y Y Y
Describe Delta Premier Delta Premier Dental Blue paid BCBS Children Guardian Voluntary to Delta Dental
by employee under 12&Delta School Dept only
Premier
Life Ins. Coverage Y Y Y Y Y Y Y Y Y
Describe $5000 50%Pd- Boston Mutual Town pays 50% $5,000 term life $5,000 term life Guardian $5K 50%pd- $10,000 Boston Mutual,
up to$74K sup Basic Optional policy town pay 50% other ins Basic,Voluntary&
employee pd Voluntary voluntary Optional
Opt-out Program Yes No N/A No No n/a N No
Lexington Heath Benefits Review Committee Report DR4FT 39
Lincoln-Sudbury
Town Lexington High School Medford Natick Needham Newton Peabody Sudbury Waltham
Name Rose DuCharm Kimbrely Goodwin Ellen Baglio Linda Clark Sophie Paul Deschenes Elaine Crichton Deb Greeno Brenda Capello
Grintchenko
Phone 781-861 2768 978-440-8818 x2382 781 393-2531 508-647-6400 781-455-7530 617 796-1271 978-532 5721 978-443-8891 781 314-3355
x1439 x235 x348
Email rducharm( ci.le kim aoodwin( lsrhs. ebaalio( medford. Iclarkenatickma.or sarintchenkoetow Ddeschenes( newto areenod( town.su bcaDello( citv.walt
xinaton.ma.us net ora q n.needham.ma.us nma.anv elaine.crichton( Deab dburv.ma.us ham.ma.us
Rate Sheet Y N Y Y Y Y Y
Average Co-Pays
Phy/Amb $5 $10 $10 $5 $5 $15 $5-$25 $5 $5
ER $25 $50 $50 $25-$30 $25-$30 $50 $25 $25 $25
Prescript
Retail Generic $5 $5 $5 $5 $5 $5 $5-$10 $5
Brand $10 $10 $10/$25 $10-$15 10-$15 $20 $10-$15 $10
Form $25 $25 $10-$35 $25-$35 $30 $10
Prescript Generic $5 $10 $5 $5-$10 90 day $5-$10 $10 $5-$10 90 day $5
Mail Order Brand $10 $20 $10/$25 $20-$30 90 day $10-$30 $40 $10 90 day $10
Form $25 $50 $25-$105-90day $10-$105 $60 $10
Annual Limits
Prescription N/a N/A 0 n/a N/A $1,560 Max on None None
durable med equip
Inpatient N/a N/A 0 n/a N/A POS Plan$100 None None
yr
Out-of-Pocket $1000/$2000 N/A $1,200 Ind n/a N/A POS Plan None None
$2 400 Fam $1,000 Ind/$2,000
Family
Other Relevant Cvg
Chiro Coverage Y Y N Y Y Y Y N Y
Describe $5 up to 20 Tufts Fallon only Fallon Only Tufts not HPHC Blue Care Elect Only w/Blue Tufts&BCBS
Visits Choice Plan
Dental Coverage Y Y Y Y Y Y Y Y Y
Describe Delta Premier Fully paid by Children Adults Children except Delta Dental&Delta Preventive for Dental Blue $750 Delta Dental
employee included w/Fallon Fallon everyone in Premier Plan children-voluntary max w/Tufts or Harvard
family-Also Delta plan employee pd
Premier dental
offered
Life Ins. Coverage Y Y Y Y Y Y Y Y
Describe $5000 50%Pd- $10,000 AD&D $2K life 50/50 $5,000 for$9 45/mo Basic Life $15K 50%pd by
up to$74K sup 50/50 split $56/employee city-addt'I if pd by
employee pd town pays other employee Bstn
1/2-Bstn Mtl Mtl
Opt-out Program Yes No No No No No No
Lexington Heath Benefits Review Committee Report DR4FT 40
vvayiana vvayiana
Town Lexington Watertown EPO/HMO PPO/POS Wayland SR Wellesley Weston Winchester Woburn
Name Rose DuCharm Diane Ryan Donna Lemoyne Donna Lemoyne Donna Lemoyne Susan Adler Lisa Yanakakis Ellen Howard Elaine Pruyne
Phone 781-861 2768 617 972-6460 508-358-3612 508-358-3612 508-358-3612 781-431 1019 x240 781-893-7320 x331 781 721 7116 781 932-4478
Email rducharm2r�ci le drvan2r�ci watertow mdinaooli2r�wavlan susana2r�ci welleslev ma vanakakis 12r�weston ehoward2r�ci winch eoruvne2r�citvofwo
xinaton ma us n ma us d ma us us mass ora ester ma us burn com
Rate Sheet Y N Y Y Y Y Y Y Y
Average Co-Pays
Phy/Amb $5 $5 $5 $5 $8 $5 $5 $5 $10
ER $25 $25-$50 $25 $35 $40 $25-$30 $25-$50 $25-$50 $50
Prescript $5-$10&25%mgd
Retail Generic $5 $5 $5 $5 $9 $5 $5 blue $10
IBrand $10 $10 $10 $10 $17 10-$15 $10-$15 $15-$20&50% $20
Form $25 $25 $25 $25 $32 $25-$35 $10-$35 $35 $35
Prescript Generic $5 $5-$10 $10 $10 $14 $5-$10 $5-$10 $5-$10 $10
Mail OrderiBrand $10 $10-$20 $20 $20 $30 $10-$30 $10-$30 $20-$30 $20
(Form $25 $25-$75 $60 $65 $68 $10-$105 $10-$105 $35-105 $35
Annual Limits
Prescription N/a n/a n/a n/a-except Medex n/a None n/a None
$50 ded&Mgd
Inpatient N/a n/a n/a n/a-except Blue n/a None n/a None
Care 65$900
max/stay HP F S
$600/yr&Tufts SH
$200 one time
deductible
Out-of-Pocket $1000/$2000 n/a $1 550/mem n/a n/a None n/a None
$3 100/Family
Other Relevant Cvg
Chiro (Coverage Y N Y Y N Y N N Y
Describe $5 up to 20 Fallon Only Fallon Only 12 Visit/yr
Visits medically
necessary
Dental Coverage Y Y Y Y Y Y Y Y N
Describe Delta Premier DMS Dental- Children except Under 14 Blue Care 65-$50 Children except Fallon Preventive for Preventive for
Warwick,RI Fallon everyone in co/pay Fallon SR everyone in family-Also children children also
family only Dental Blue offered Delta Dental
Life Ins Coverage Y Y Y Y Y N
Describe $5000 50%Pd- Boston Mutual Life Active&Retiree $10K term life plus $2k state mandated- $4k basic life
up to$74K sup optional(employee paid) Employee optional 50/50&up to
employee pd addtl $74K optional
employee pd
Opt-out Program Yes No No No No No No No No
Lexington Heath Benefits Review Committee Report DR4FT 41
Figure 8-Lexington Health Benefits Review Committee-Review of Other Town's Rates
Lexington Employee Arlington Employee Andover Employee Belmont Employee
Town 15rplay_ee share Town 15rplay_ee share Town 15rplayee share Town 15rployee Share
BlueChoice
Individual $ 440.80 $ 110.20 20% $ 469.13 $ 156.36 25%
Family $ 1 143.20 $ 285.80 20% $ 1 172.74 $ 390.88 25%
BlueCare Elect
Individual
Family
HV10 Buie/Network sue
Individual $ 337.92 $ 46.08 12% $ 352.22 $ 39.12 10% $ 304.231$ 70.92 1 19%
Family $ 872.96 $ 119.04 12% $ 908.97 $ 101.00 10% $ 773.031$ 232.36 23%
HPHC
Individual $ 369.75 $ 65.25 15% $ 372.95 $ 41 44 10% $ 384.55 $ 42.73 10%
Family $ 885.70 $ 156.30 15% $ 985.51 $ 106.48 10% $ 1,045.98 $ 116.22 1 10%
HPHC PPO
Individual $ 545.87 $ 136.47 1 20%
Family $ 1484.77 $ 371 1920%
Tufts PPO or EPO
Individual
Family
Tufts POS
Individual
Family
Fallon SelectCare
Individual
Family
[Fallon DirectCare
Individual
I Family
BOBS Master Health Plus
Individual $ 447.53 $ 149.16 $ 466.80 I$ 25140 I 35%
Family $ 1160.08 $ 386.72 $ 1,056.961$ 569.16 35%
Master Medical
Individual $ 466.80 I$ 25140 I 35%
Family $ 1,056.96 I$ 569.16 I 35%
NAA(Outer Plan)
Individual
Family
NAA Carveout A
Individual
Family
NAA Caveout A&B
Individual
Family
Retirees
Medexlndividual $ 252.80 $ 63.20 20% $ 219.26 $ 73.09 25% $ 121.52 100%
Mid Blue for Seniors $ 253.27 $ 63.32 $ 256.60 0% $ 42.96 100%
Harvard First Seniority $ 153.60 $ 38A0 $ 172.80 0% $ 144.10 $ 65.90
Medicare Complement Tufts
Secure Horizons(Tufts)
Blue Care 65
Fallon Senor Ran
IHC Medicare Enhances $ 235.27 $ 157.06
Delta Premier Ind only $ 23.02 $ 23.02 $ $ 38.17 $ 25.00
Deltacare Ind only $ 13.64 $ 13.64 $ 30.00
Delta Blue Master Health Rus or Master Medical
Life and Vision also
Lexington Heath Benefits Review Committee Report 42
Brookline Employee Burlington Employee Cambridge I Employee Concord Employee I
Town I Employee Share Town I Employee Share Town I Employee 12%I Share Town I Employes 1 Share I
I Blue Chace
I Individual $ 31704 $ 105 68 25% $ 595 11 $ 595 11 50% $ 379 74 $ 51 78 I 12%
11
I Family $ 848 27 $ 282 76 25% $ 1 472 14 $ 1 472 14 50% $ 968 27 $ 132 04 I 12% I
Blue Care Elect
Individual
'Family 1 1 1 I
HMO Blue/Network Blue
Individual $ 296 25 $ 98 75 25% $ 340 67 $ 107 58 24% $ 289 50 $ 39 48 I 12%
11
'Family $ 793 90 $ 264 63 25% $ 901 01 $ 300 33 25% $ 741 06 $ 101 05 I 12% I
I HPHC
I Individual $ 347 78 $ 109 82 24% $ 283 46 $ 38 65 I 12% $ 214 20 I$ 125 80 I 37%
'Family $ 870 48 $ 290 16 25% $ 768 39 $ 104 78 I 12% $ 486 20 I$ 397 80 I 45%I
HPHC PPO
Individual $ 335 00 1$ 335 00
'Family 1 $ 885 50 $ 885 50 I I
Tufts PPO or EPO
Individual $ 292 67 $ 39 91 I 12% $ 225 10 I$ 143 90 I 39%
'Family $ 797 30 $ 108 72 I 12% $ 500 76 I$ 462 24 I 48%1
'Tufts POS
I Individual $ 327 00 I$ 327 00 I 50%
I Family $ 863 00 I$ 863 00 I 50%1
Fallon SelectCare
Individual $ 160 50 I$ 160 50 I 50%
'Family J $ 424 50 J$ 424 50 J 50%I
Fallon DirectCare
Individual $ 15050 I$ 15050 I 50%
'Family $ 399 00 I$ 399 00 I 50%1
IBC/BS Master Health Plus
I Individual I
'Family I I
(Master Medical
I Individual
Family
NAA(Out-of-area Plan)
I Individual
Family_
NAA Carveout A
I Individual
Family
NAA Carveout A&B
I Individual
I Family
Retirees
Medex Individual $ 266 11 $ 88 71 25% $ 211 51 $ 211 51 50% $ 24 30 $ 2 70 10%
Mcid Blue for Seniors $ 21644 $ 72 15 25% $ 33 51 $ 301 63 90% $ 255 78 $ 28 42 10%
Harvard First Seniority $ 21 00 $ 189 00 90% $ 172 80 $ 19 20 10% $ 105 00 $ 105 00
Medicare Complement Tufts $ 26010 $ 28 90 10% $ 144 50 $ 144 50
Secure Horizons(Tufts) $ 166 50 $ 1850 10% $ 87 50 $ 87 50
Blue Care 65
Fallon Senior Plan $ 99 00 $ 99 00
HPHC Medicare Enhances
Delta Premier Ind only
Deltacare Ind only
$5 co-pays No Dental $10 Co-Pay
Tufts EPO
Lexington Heath Benefits Review Committee Report 43
Dedham Employee Dover Employee Hingham Employee Linc/Sud Reg Sch Dist Employee
Town I Employee 1 Share Town I Employee 1 Share Town I Employee 1 Share Town I Employee Share
Blue Choice
Individual $ 26520 $ 25500 49%
Family $ 62920 I$ 60500 I 49%
Blue Care Elect
Individual
Family
HMO Blue/Network Blue
Individual $ 373 50 $ 41 50 1 10% $ 290 50 1$ 124 50 1 30% $ 192 40 1$ 185 00 1 49%
Family $ 1 007 10 $ 11190 10% $ 78330 $ 33570 30% $ 51480 $ 49500 49%
HPHC
Individual $ 331 20 $ 36 80 1 10% $ 257 60 1$ 110 40 1 30% $ 192 40 1$ 185 00 1 49% $ 255 00 $ 85 00 1 25%
Family $ 865 80 $ 96 20 10% $ 673 40 $ 288 60 30% $ 512 20 $ 492 50 49% $ 663 00 $ 221 00 25%
HPHC PPO
Individual $ 30600 $ 30600 I 50%
Family $ 67300 $ 67300 I 50%
Tufts PPO or EPO
Individual $ 346 50 $ 38 50 I 10% $ 714 00 I$ 306 00 I 30% $ 276 75 $ 92 25 I 25%
Family $ 909 90 $ 101 10 I 10% $1 570 33 I$ 673 00 I 30% $ 722 25 $ 240 75 I 25%
Tufts POS
Individual $ 306 00 $ 306 00 I 50% $ 269 50 I$ 115 50 I 30% $ 490 50 $ 163 50 I 25%
Family $ 67300 $ 67300 I 50% $ 70770 I$ 30330 I 30% $ 1,29450 $ 43150 I 25%
Fallon SelectCare
Individual $ 307 80 I$ 34 20 I 10% $ 239 40 I$ 102 60 I 30% $ 240 75 $ 80 25 I 25%
'Fa loDirectCarein $ 833 40 J$ 92 60 10% $ 648 20 $ 277 80 30% $ 636 75 $ 212 25 25%
Individual $ 28530 I$ 31 70 I 10% $ 221 90 I$ 9510 I 30% $ 22575 $ 7525 I 25%
Family $ 770 40 J$ 85 60 I 10% $ 599 20 I$ 256 80 I 30% $ 598 50 $ 199 50 I 25%
BC/BS Master Health Plus
Individual $ 34312 I$ 32600 I 49%
Family $ 81328 I$ 78200 I 49%
Master Medical
Individual
Family
NM(Out-of-area Plan)
Individual $ 337 00 $ 337 00 1 50%
Family $ 73500 $ 73500 50%
NM Carveout A
Individual
Family
NM Carveout A&B
Individual
Family
Retirees
Medex Individual $ 169 00 $ 169 00 50% $ 165 00 100% $ 248 25 $ 82 75 25%
MO Blue for Seniors $ 141 36 $ 141 36 50%
Harvard First Seniority $ 96 00 $ 96 00 50% $ 144 00 $ 48 00 25%
Medicare Complement Tufts $ 144 50 $ 144 50 50% $ 216 75 $ 72 25 25%
Secure Horizons(Tufts) $ 92 50 $ 92 50 50% $ 127 50 $ 42 50 25%
Blue Care 65 $ 119 80 $ 119 80 50%
Fallon Senior Plan $ 118 50 $ 118 50 50% $ 177 75 $ 59 25 25%
HPHC Medicare Enhances $ 185 00 $ 185 00 50%
Delta Premier Ind only I 1$ 25 00 1 100%
Deltacare Ind only
Tufts HMO Blue Care Elect PPO
Town is 50%for POS and PPO
Used Cobra Rates to calc Town
70%for HMO share
Lexington Heath Benefits Review Committee Report 44
Natick Employee Needham Employee Newton Employee Peabody Employee
Town I Employee Share Town I Employee Share Town I Employee 1 Share Town I Employee 1 Share
Blue Choice
Individual11$ 426 00 $ 109 06 20%
Family $ 1 140 00 $ 387 60 25%
Blue Care Elect
Individual $ 433 92 $ 48 21 10%
Family $ 1 153 45 $ 128 16 10%
HMO Blue/Network Blue
Individual $ 358 48 1$ 56 52 14% $ 316 94 $ 109 06 26% $ 340 74 $ 37 86 1 10%
Family $ 864 99 $ 254 01 23% $ 752 40 $ 387 60 34% $ 915 66 $ 101 74 10%
HPHC
Individual $ 312 65 I$ 55 35 15% $ 287 64 $ 88 36 24% $ 268 00 $ 67 00 I 20%
Family $ 737 95 I$ 224 05 23% $ 674 82 $ 303 18 31% $ 729 24 $ 182 31 I 20%
HPHC PPO
Individual $ 306 00 I$ 306 00 50% $ 306 00 $ 306 00 50%
Family $ 673 00 I$ 673 00 50% $ 673 00 $ 673 00 50%
Tufts PPO or EPO
Individual $ 341 61 I$ 43 39 11% $ 294 67 $ 100 33 25% $ 337 52 $ 84 38 I 20%
Family $ 786 05 I$ 224 95 22% $ 655 23 $ 371 77 36% $ 91412 $ 228 53 I 20%
Tufts POS
Individual $ 306 00 1$ 306 00 50% $ 306 00 $ 306 00 50% $ 485 88 $ 121 47 1 20%
Family $ 673 00 $ 673 00 50% $ 673 00 $ 673 00 50% $ 1 166 64 $ 291 66 20%
Fallon SelectCare
Individual $ 307 80 I$ 34 20 10% $ 261 63 $ 80 37 24%
Family $ 740 80 I$ 185 20 20% $ 638 94 $ 287 06 31%
Fallon DirectCare
Individual $ 285 30 I$ 31 70 10% $ 242 50 $ 74 50 24%
Family $ 684 80 I$ 171 20 20% $ 590 64 $ 265 36 31%
BC/BS Master Health Plus
Individual
Family
Master Medical
Individual
Family
NAA(Out-of-area Plan)
Individual $ 337 00 I$ 337 00 50%
Family $ 735 50 I$ 735 50 50%
NAA Carveout A
Individual
Family
NAA Carveout A&B
Individual
Family
Retirees
Medex Individual $ 172 00 $ 172 00 50% $ 341 86 $ 0%
Mgd Blue for Seniors $ 141 36 $ 141 36 50% $ 192 25 $ 90 47 32%
Harvard First Seniority $ 105 00 $ 105 00 50% $ 113 40 $ 96 60 46% $ 38 40 100%
Medicare Complement Tufts $ 144 50 $ 144 50 50% $ 196 52 $ 92 48 32% $ 63 14 100%
Secure Horizons(Tufts) $ 92 50 $ 92 50 50% $ 92 50 $ 92 50 50% $ 37 00 100%
Blue Care 65 $ 133 38 $ 133 38 50% $ 133 38 $ 133 38 50% $ 46 67 100% $ 445 98 $ 36 16 7%
Fallon Senior Plan $ 99 00 $ 99 00 50% $ 99 00 $ 99 00 50%
HPHC Medicare Enhances $ 185 00 $ 185 00 50% $ 204 00 $ 204 00 50%
Delta Premier Ind only $ 1$ 25 00 100% $ 13 33 1 100%
Deltacare Ind only
Senior Plans also include Mgd Blue
for Sr's &Harvard 1st Senority 80%city
Lexington Heath Benefits Review Committee Report 45
Sudbury Employee Waltham Employee Watertown Employee Wayland Employee
Town I Employee Share City I Employee Share Town I Employee 1 Share Town I Employee 1 Share
Blue Choice
Individual $ 38175 1$ 12725 25%
Family $ 975 00 1$ 325 00 25%
Blue Care Elect
Individual11$ 378 07 1$ 378 07 1 50%
Family $ 874 48 1$ 874 48 1 50%
HMO Blue/Network Blue $ 381 50 $ 42 39 10% $ 301 29 $ 113 71 27/°I
Individual $ 37980 $ 4210 10% 0
Family $ 963 90 1$ 107 10 10% $ 1 018 60 1$ 113 18 1 10% $ 74414 1$ 374 87 1 34%1
HPHC
Individual $ 449 60 1$ 11240 20% $ 743 67 $ 46 11 6% $ 394 79 1$ 43 87 1 10% $ 276 00 1$ 92 00 1 25%1
Family $ 1 162 40 1$ 290 60 20% $ 1 114 70 $ 115 31 9% $ 1 038 28 1$ 115 36 1 10% $ 668 59 1$ 293 41 1 31%1
HPHC O
Individual
PPO
$ 306 00 $ 306 00 50%I
Family $ 673 00 $ 673 00 50%I
Tufts PPO or EPO
Individual $ 409 20 $ 41 73 9% $ 384 80 1$ 42 76 1 10% $ 281 02 1$ 103 98 1 27%
Family $ 1 050 82 $ 106 60 9% $ 1 001 48 $ 111 28 10% $ 655 78 $ 355 22 35%I
Tufts POS
Individual $ 306 00 1$ 306 00 1 50%1
Family $ 673 00 $ 673 00 50%I
IFallon
nd i id uSelectCare l
$ 248 29 1$ 93 71 1 27%I
Family $ 615 79 $ 310 21 1 34%1
Fallon DirectCare
Individual $ 23014 1$ 8686 1 27%1
Family 1 $ 569 24 1$ 286 76 1 34%1
BC/BS Master Health Plus
Individual $ 713 88 $ 57 89 8%
Family $ 1 665 54 $ 135 07 8%
Master Medical
Individual
Family
NAA(Out-of-area Plan)
Individual $ 337 00 1$ 337 00 1 50%
Family 1 $ 735 50 1$ 735 50 1 50%
NAA Carveout A
Individual $ 260 00 1$ 260 00 I 50%
Family J
NAA Carveout A&B
Individual $ 206 00 1$ 206 00 1 50%
Family
Retirees
Medex Individual $ 191 36 $ 191 36 50% $ 169 00 $ 169 00 50%
Mqd Blue for Seniors $ 205 25 $ 77 47 27%
Harvard First Seniority $ 105 00 $ 105 00 50% $ 157 50 $ 52 50 25%
Medicare Complement Tufts $ 210 95 $ 78 05 27%
Secure Horizons(Tufts) $ 135 04 $ 49 96 27%
Blue Care 65 $ 193 66 $ 73 09 27%
Fallon Senior Plan $ 143 75 $ 54 25 27%
HPHC Medicare Enhances $ 185 00 $ 185 00 50%
Delta Premier Ind only I 1$ 25 00
Deltacare Ind only $ 20 02 1$ 6 68 25% 1$ 18 00 1 $ 100 00
DMS Dental
Lexington Heath Benefits Review Committee Report 46
Wellesley Employee Weston Employee Winchester Employee Woburn Employee
Town I Employee 1 Share Town I Employee Share Town I Employee 1 Share City I Employee 1 Share
Blue Choice
Individual $ 391 97 1$ 43 55 10% $ 261 66 $ 261 66 1 50%
Family 1 1 $1 057 13 $ 117 46 10% $ 697 57 $ 697 57 50%
Blue Care Elect
Individual $ 504 06 1$ 504 06 50% $ 395 77 $ 131 92 1 25%
Family 1 1 $1 320 11 $1 320 11 50% 1 $ 982 64 $327 55 25%
HMO Blue/Network Blue
Individual $ 345 28 1$ 69 72 1 17% $ 408 23 $ 45 36 1 10% $ 340 36 $ 37 82 1 10%
Family $ 862 75 $ 256 25 23% $ 869 54 $ 355 16 29% $ 905 35 $ 100 59 10%
HPHC
Individual $ 302 86 I$ 65 14 I 18% $ 378 15 I$ 42 02 10% $ 368 24 $ 40 92 I 10%
Family $ 762 87 I$ 199 13 I 21% $1 028 57 I$ 114 29 10% $ 892 51 $ 209 35 I 19%
HPHC PPO
Individual $ 306 00 I$ 306 00 I 50%
11
Family $ 67300 I$ 67300 I 50%
Tufts PPO or EPO
Individual $ 306 00 I$ 306 00 I 50%
Family $ 67300 I$ 67300 I 50%
Tufts POS
Individual $ 307 23 I$ 77 77 I 20%
Family $ 77645 I$ 23455 I 23%
Fallon SelectCare
Individual $ 277 70 I$ 64 30 I 19%
Family $ 71672 I$ 20928 I 23%
Fallon DirectCare
Individual $ 256 77 1$ 60 23 1 19%
Family $ 662 54 $ 193 46 23%
BC/BS Master Health Plus
Individual $ 983 81 $ 983 81 50%
Family $2,31197 $2,31197 50%
Master Medical
Individual
Family
NAA(Out-of-area Plan)
Individual I $ 490 92 $ 490 92 50%
Family I $1,217 97 $1,217 97 50%
NAA Carveout A
Individual
Family
NAA Carveout A&B
Individual
Family
Retirees
Medex Individual $ 169 00 $ 169 00 50% $ 182 65 $ 182 65 50% $ 198 06 $ 198 06 50% $ 241 42 $ 80 47 25%
Mgd Blue for Seniors $ 141 36 $ 141 36 50% $ 266 99 $ 29 67 10% $ 266 90 $ 29 65 10%
Harvard First Seniority $ 96 00 $ 96 00 50% $ 96 00 $ 96 00 50% $ 111 30 $ 98 70 47%
Medicare Complement Tufts $ 144 50 $ 144 50 50%
Secure Horizons(Tufts) $ 82 50 $ 82 50 50%
Blue Care 65 $ 119 80 $ 119 80 50% $ 117 17 $ 117 17 50%
Fallon Senior Plan $ 118 50 $ 118 50 50%
HPHC Medicare Enhances $ 185 00 $ 185 00 50%
Delta Premier Ind only
Deltacare Ind only $ 19 38 1$ 19 38 1 50% 1 $ $ 25 00 1 100% $ $ 25 00 1 100%
They pay 50%of med supl plans because they
give retiree credit for 50%of Medicare Part B
Dmde the full premium by 2,then deduct half of
Part B Premium Rates above do not include Surviving spose must pay full
Part B deduction premium Blue Care Elect Pref
VIP 2000 for non retirees outside
Different rates for surviving spouses area
Lexington Heath Benefits Review Committee Report 47
Appendix F
Consumer Directed Health Plans
HSAs, MSAs. HRAs and FSAs
Changing Individuals from Users of Health Care to Consumers of Health
Care
The Town of Lexington is faced with the challenge of determining the appropriate strategies to
contain the enormousl` fast growing costs of health care While such efforts are still earl` in
their development, mans large employers and healthcare experts believe that it necessary to
change the mindset of individuals from users of health care to consumers of health care
Although this appears to be fairl` far in the future for the Town, it is necessary to begin to think
about what this would mean for the Town and its employees
The first step in this process has been to shift more of the burden of cost from the employer to the
employee The following table, provided b` Hewitt Associates, shows the trend in place with
employers with more than 5 000 employees
Categories 1998 1999 2000 2001 2002 2003 200.1 1rr°o 2rr°o 3rr°o
Healthcare Costs $4100 $4400 $4700 $5000 $6000 $7000 $7800 11°o 30°o 56°o
Employers Pet 74 7°o 75 4°o 73 8°o 74 6°o 72.0°o 70°o 67 7°o
Employees(by payroll ded) 15 7°o 15.5°o 16 7°o 16 8°o 17 1°o 18.0°o 19.5°o
Employees(out of pocket) 9 6°o 9 1°o 9.5°o 8.6°o 10.9°o 12.0°o 12.8°o
Employers Cost $3062 $3318 $3468 $3730 $4320 $4900 $5280 8°o 22°o 41°o
Employees Cost $1038 $1082 $1232 $1270 $1680 $2100 $2520 20°o 50°o 98°o
While the growth in health care costs for large corporations has been 56%over the last three
years (16%per year) the cost to the employer has been 41%(12%per year) This has occurred
b` shifting some of the burden of health care costs to the employee from 25 4%in 2001 to 32 3%
in 2004 Employees of large corporations currentl` pa` an average of 19 5%of health care costs
through payroll deduction, usuall` in the form of insurance premiums, and 12 8%in out of pocket
costs, usuall` as co-pays and deductibles
Even with this effort,there has still been little sign of individuals acting as consumers of health
care instead of users As a result, stimulated b` government policies, large corporations have
started implementing the second step in the process b` shifting the perceived cost of health care
to individuals in the form of large deductibles rather than monthl` premiums and small co-pays
Thus a deductible of perhaps $3000 would be paid b` the employee and everything beyond that
b` the employer The goal is to make the employee aware of the cost of services and encourage
individuals to weigh their decisions about health care more carefull`
The following analog` summarizes wh` a high deductible approach seems appealing.
Imagine if a compam provided a food benefit plan to employees. Each month, employees would
have to pati $200 per month to the compam and each time theti shopped, theti would have to pati
$10 to the food store. This would allow a famih to purchase all the food theti needed throughout
the year with the exception of certain items that were exempt from the plan In this situation it is
liken that individuals will go to the store and barb whatever theti want doing little to search for
bargains because theti don to save anything bti buying more carefullti Their costs are fixed.
Manufacturers will notice this buying pattern and do little to offer bargains. The result will be
higher prices for food products. \ow imagine if the compam changes the plan and instead
Lexington Heath Benefits Review Committee Report 48
requires a$2400 deductible before the food plan conies into plati The result will be a more
careful shopper who will search for the better deals.
Some health care experts believe that changing to high deductible plan structures will cause
individuals to forego proper care so it is important that an health insurance plan pay for services
focused on prevention and earl` detection such as blood pressure checks and mammograms and
behavioral programs to help individuals quit smoking or control weight.
Health Savings Accounts
There are three types of Health Savings accounts (HSAs)that can be used to help fund employee
health care expenses flexible spending accounts, medical savings accounts, and health
reimbursement arrangements
Health Savings Accounts (HSAs) are high deductible plans which were part of the Medicare law
which was approved bs Congress in November 2003 and became effective in Januar\ 2004
well after most employers had settled on their health care arrangements for 2004
Although the number of people currently enrolled in HSAs is low mans of the largest insurance
companies have only recently introduced these products following enactment of the 2003
Medicare law Millions of people in government and in the private sector will be offered the
opportunity to select a high-deductible plan with a health savings account, and the 2005 survey bs
the American Health Insurance Plans will undoubtedly show that more individuals have chosen to
take the HSA option.
In a survey recently conducted jointls bs the Kaiser Family Foundation and the Health Research
and Educational Trust, 6%of all companies said the\ were very likely to offer some type of high-
deductible plan linked to a savings account in the next two years, while 21 percent said the\ were
"somewhat likely"to do so Big employers, with 5 000 or more workers, were more likely to
offer the option. 22%said very likely and 28 %somewhat likely If such plans are adopted first
bs large employers, and then smaller ones,their acceptability will become more widespread.
The table below illustrates the finances of these high deductible health plans
Description of HSA HDHP Policies Individual Market-Best Selling Product
Single Family
Average Annual Deductible $2,856 $5 425
Average Annual Out-Of-Pocket Limit $3 068 $5 781
Average Lifetime Maximum Benefit $3 8 million $3 8 mi
Of the three types of HSAs only one, Flexible Spending Accounts, is currently appropriate in
Lexington.
Flexible Spending Accounts
Health care flexible spending accounts are employer-established benefit plans The employee
contributes funds to the account through a salary reduction agreement and is able to withdraw the
funds set aside for medical bills which are paid bs the employer from the fund as the\ are
incurred. The salary reduction agreement means that any funds set aside in a flexible spending
Lexington Heath Benefits Review Committee Report 49
account escape both income tax and Social Security tax. Employers ma` contribute to these
accounts as well.
There is no statutory limit on the amount of money that can be contributed to healthcare flexible
spending accounts Once the amount of contribution has been designated during the open
enrollment period that occurs once each year the employee is not allowed to change the amount
or drop out of the plan during the year unless he or she experiences a change of family status B`
law the employee forfeits an unspent funds in the account at the end of the year There have
been proposals introduced in Congress to ease this "use it or lose it" rule b` allowing up to $500
to be carried over to the next year because it is thought that if individuals can save some of this
deductible for a future year the\ ma` become more careful consumers
Medical Savings Accounts(MSAs)
Medical savings accounts are available only to those who are self-insured or are
employed by a firm with 50 or fewer employees Therefore, Lexington and its employees
are not currently eligible for medical savings accounts
Health Reimbursement Arrangements (HRAs)
Health reimbursement arrangements, also known as "health reimbursement accounts" or
"personal care accounts," are a type of health insurance plan that reimburses employees for
qualified medical expenses
Health reimbursement accounts consist of funds set aside bs employers to reimburse employees
for qualified medical expenses,just as an insurance plan will reimburse covered individuals for
the cost of services incurred. One of the major advantages of HRAs is that employers qualify for
preferential tax treatment of funds placed in a health reimbursement account in the same was as
funding an insurance plan. This obviously would be of no advantage to the Town but the
principles on which the\ are based may be useful in controlling costs
Many employers look at an HRA as a vehicle to help them reduce, control and manage the costs
associated with their health insurance plan. One of the most common approaches is to combine
an HRA implementation with a change to a higher deductible major medical plan. The cost
savings result from reduced premiums for the higher deductible program. The HRA is used to
give back to employees some portion of the premium savings Also the new major medical plan
may eliminate co-pays for doctor visits, prescriptions, and other costs, so the employee has no
out-of-pocket expense until the HRA balance is gone At that time,the employee will incur out-
of-pocket expense only until the deductible is reached.
The advantage is that mans employees will not fully utilize their HRA balance, and will have no
out-of-pocket expense at all. For these employees, carryover of unused HRA balances can be
used in the future, which means the\ might have no out-of-pocket expense For employees who
have higher medical expenses,their costs are limited to the corridor between their HRA balance
and the established deductible In general, employers have found that this approach will provide a
better health plan(less out-of-pocket costs) for a significant majorrty of the workforce Also
mans companies have found that the growth in health care costs from year to year is slower when
a larger deductible is implemented, as employees get a sense of the cost of health care services
and become more careful consumers of medical services
Lexington Heath Benefits Review Committee Report 50
Appendix G
Resources for the Health Benefits Review Committee
Information from Lexington
1 `Group Health Insurance Funding Analysis reports from Group Benefits Strategies -
spreadsheets with costs, revenues and projections Fiscal Years 2002, 2003 2004 2005
and projections for 2006
2 Plan Summaries for Healthcare Plans offered b` Town. Blue Choice,Network Blue,
Harvard Communrt` Health Plan, Medex
3 RFQ response report from March 2003
4 Enrollment Breakdown b` Individual/Family/Total Subscribers
High cost claims for Harvard Pilgrim for 2003
6 Top 25 drug prescriptions b` dollar cost from HCHP
7 Town of Lexington—ER and Office Visit Utilization
8 Town of Lexington—Large Loss Report
9 Town of Lexington—Retail vs Mail ordering of drugs
10 Town of Lexington—Top Therapeutic Classes
11 Municipal and School Salam categories
12 Blue Cross/Blue Shield Disease/Condition Report for calendar year 2004
13 Blue Cross/Blue Shield `Health Risk Issue Report for calendar year 2004
14 7/1/04 Renewal Rate Calculation note of Comparison of Blue Cross/Blue Shield book of
business vs Lexington—email dated 11/30/04 from Kevin Walsh of Group Benefits
Strategies to Rose Ducharm, Benefits Manager for Town of Lexington.
15 `Health Insurance Comparables memo from Kern Evans, Management Intern, and
Michael Young, Budget Officer to Linda Vine, Acting Town Manager September 14
2004
16 Memorandum of Understanding between the Town of Lexington and the Public
Employee Bargaining Coalition of the Town of Lexington Jul` 1 2003 —June 30 2005
17 `Coalition of Town Employees Health Insurance Bargaining Histon provided b` Vito
LaMura, Lexington Education Association President
Lexington Heath Benefits Review Committee Report 51
18 List of comparable Towns and contract language regarding methods of comparison from
Teachers contract, email from Vito LaMura 12/1/04 and list of comparable Towns for
other departments in email from Rose Ducharm to Richard Doughert\ 12/1/04
19 Longevth payments, clarification, email from Rose Ducharm to Deborah Strod 12/1/04
20 Histon of health benefits Lexington Minuteman, Sunda` Ma` 02, 2004b\ Richard
White, Town Manager
21 FY05 Comparable Towns data from Lexington Education Association Website, accessed
1/19/05
22 Spreadsheet showing cost savings b\ increasing part-time employees payments for
healthcare, from Bill Kenneth
23 Information on School employees enrollment from Susan Bottan in email 11/19/04
24 Consultation with Kevin Walsh of Group Benefits Strategies, Januar\ 26 2005
25 Surve` carried out b\ the Health Benefits Review Committee
Articles on Health Benefits
1 Employers to shifting health costs Plans ease sting for those at lower end of pa` scale
Boston Globe November 25 2004 b` Kimberl` Blanton
2 A Perspective on US Drug Reimportation Niteesh K. Choudhn MD FRCPC Allan
S Detsk` MD PhD FRCPC JAMA 200 ,293 358-362
3 The rising cost of health care explained, Massachusetts Municipal Association, March
17 2004 B` Man DeLai, Membership Services Coordinator MIIA summan of speech
b\ Nanc\ Turnbull of Harvard s School of Public Health,the keynote speaker at an
MMA forum on health care held Feb 26 2004
4 `Total Benefits The Kitchen Sink') Managed care-induced entitlement mentaht` ma`
be mone` down the drain Ela`ne Demb` editorsiplansponsor com,NewsDash Januar\
5 2005 (NewsDash is a dail` on-line benefits newsletter sponsored b\ PlanSponsor com)
5 Ruling Could Force Boston to Pa` More for Health Care Boston Globe November 20
2004 b` Andrea Estes
6 Drugstores Fret as Insurers Demand Pills b\ Mail Milt Freudenheim, Published.
Januar\ 1 2005 New York Times
7 Employers Unite in Effort to Curb Prescription Costs New York Times Februan 3
2005 B` Milt Freudenheim
8 Your New Health Plan. Health savings accounts, like 401(k)s, will give employees more
choices --but also a greater share of the costs Business Week,November 8 2004
9 Howard Gleckman with Lorraine Woellert
Lexington Heath Benefits Review Committee Report 52
10 When Employers Fund Retiree Health Care b` Kathleen Jenks Harm, ICMA
Retirement Corporation,Washington, DC (KHarm,aIcmarc orn) as attachment to
information received from Brookline b` the Lexington 2020 Vision Budget Task Force
11 Working out at EMC—firm says getting employees to take more responsibilit\ for
health, costs paying off, Boston Globe August 5 2004b\ Diane E Lewis
12 `Towns Find Insurance Savings b` Sharing Plan Boston Globe September 26 2004b\
Alexander Reid
13 40 Percent in U S Use Prescription Drugs Associated Press Thursda\ December 2,
2004 b` Randolph E Schmid
14 Pharmacist Oversight Cuts Cost of Chronic Disease Business Insurance April 28
2003 b` Michael Prince
Lexington Heath Benefits Review Committee Report 53