HomeMy WebLinkAbout2005-09-12-HBRC-rpt Town Of Lexington
Report of Health Benefits Review Com lel ittee
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September 12, 2005
1. Introduction
The Health Benefits Review Committee(HBRC)was appointed by the Board of Selectmen in
October,2004,to review and analyze health benefits provided by 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 recently has experienced double-digit increases in healthcare costs annually.2
Lexington is projected to spend roughly$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 history 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 by Town Plans,by far the most(1994)are non-retirees
covered under the HMO Blue plan. Almost half that many(982)are covered under retiree
plans. Of those not under HMO Blue the remaining are mostly 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 pay the
same portion of the premium as full time employees. This is similar to coverage offered by
other towns. For Plan Descriptions a complete details of the health benefits offered by the
Town, see Appendix C.
With approximately 29%of school employees 55 years old or older,we will continue to see
the retiree population growing4. 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 majority of his or her career. The Town's Early Retirement
Initiative in fact added to our health costs disproportionately. When an employee retires,
we reap a short-term savings in salary if we replace them with a less experienced, lower
salaried employee. However,we also retain the responsibility for retiree health benefits and
have likely 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 many family members were added to
Lexington's coverage.
I Source.Group Benefits Strategies
2 Boston Globe,Nov.24,2004
3 Enrollment Breakdown Ind/Family/Total Subscribers covered by plans
4 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 by the Town are,
on the whole,richer and cost less to employees than those offered by other
employers. While the Committee was unable to obtain data on benefits offered by
private employers,a report by the Worcester Regional Research Bureau documented
that private employers spent a much smaller component of their compensation costs
on health benefits than did Worcester.S 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 by Lexington are better than those offered by other employers,Town
employees whose spouses work elsewhere usually choose to take the Town benefits,
thereby increasing costs to the Town. There may be increasing discomfort if citizens
find themselves paying for health benefits for Town employees that exceed what they
themselves receive,even though the benefits package is part of a larger picture and
may 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 only for that purpose. Wellesley has already
begun funding theirs and the bond-rating agencies have begun to use compliance
with these standards in their evaluations.
Additionally,Medicare Part D,the pharmaceutical benefit will become operational
on January 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 possibility of saving money 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 by GBS.
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
5 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 by their
spouse or partner's employer.
1.3.2. Legal Framework
• Chapter 32B of the Mass General Laws governs the provision of benefits
(http:llwww.mass.govllegisllawslmgllgl-32b-toc.htm). People eligible to receive
health benefits include: current employees,retirees,surviving spouses of
retirees,people who have left the employ 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 unilaterally.
1.3.3. Fiscal Components
The Town Days 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, currently$90,000)
■ Flu vaccine clinics
The Town receives or sets aside money in the Health Insurance Trust Fund to pay for
health benefits from:
• Appropriation of money from the Town budget
• Participant premiums
■ Reinsurance reimbursements
Lexington operates on the principle that insurance premiums(and re-insurance
premiums)are ultimately priced to include a risk premium or profit to the company.
Insurers may lose money 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 they receive their desired risk premium or profit
margin.
Historically,Lexington has realized savings through self-insurance as compared to
the fully insured rates quoted by the insurance companies in the various Requests for
Quotations conducted by the Town. These savings, as a result of other budget
pressures,have been passed directly 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 by an individual during a plan
year in excess of$90,000,thereby limiting the Town's exposure to catastrophic
claims.Town officials periodically review this level and price out the insurance costs
at various levels to make sure the cost is competitive and that the Town is properly
protected against undue risk.The reinsurance level has been raised periodically and
was recently 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
survey of"comparable"local cities and cities. We selected towns used by unionsfor
comparison purposes in wage agreements and selected other cities and towns with
similar demographics and financial status. A survey instrument was developed and
modified based upon feedback from town staff and committee members. Twenty-
nine towns were contacted by phone,the survey was faxed and phone follow up was
conducted as needed.Twenty-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 pharmacy benefits. Lexington offered to share the results
of the survey with respondents. The results of the survey 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 by the Town over the
years. As the Committee raised options it found that many had been tried previously,often in
partnership with the Coalition of Town Employees,the bargaining unit for health benefits. Claim
costs are low relative to other groups insured by Blue Cross/Blue Shield according to their own
calculations. Despite these positive aspects,the Town has a problem of costs growing beyond its
capacity to pay.
Based upon our review,we would agree with the general feeling that the benefits offered by the
Town are better than those provided by local industry;however employees may have foregone
pay 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
separately,but health benefits for all units are collectively 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 salary 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 by 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 by
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 pharmacy benefits,recommended by GBS,would establish a
separate administrator for all pharmacy 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 supply,contributing to the reduction in costs.
2.1.2. Strengthen Claims and Enrollment Audits
The effectiveness of the membership,claims and other audits currently being
performed by the town and its insurers, should be validated by an independent firm.
These audits,which can be done at a reasonable cost,help ensure that claims being
submitted are legitimate,potentially saving money. The Committee also
recommends that the Town review the capabilities of the town's accounting software
to support this activity 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 pay more and a standard dollar contribution by the Town.
Non-pharmaceutical co-pays are relatively low and should be reviewed periodically.
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 away at
college),the Town currently offers Blue Choice,the most expensive option. By
creating a separate plan solely for those living out-of-state,the Town could choose a
single and most cost-efficient plan for the great majority of enrollees who live within
Massachusetts.
2.1.5. Expand Health Promotion Locally
Among the most likely risks facing Lexington enrollees are smoking,high blood
pressure,high cholesterol and being overweight. Reducing risk factors means a
reduction or delay 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 effectively
and in the least costly 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 currently 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 periodically.
2.1.8. Ensure that the Health Benefits Trust Fund is at the Recommended Level of Three
Months.
The Town has periodically 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 Quarterly 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 PremiumStructure and
Plan Design
Although Lexington has not been successful in finding a satisfactory group in
previous attempts,group purchasing would,by increasing the size of the covered
group,reduce costs and spread risk. With effective leadership,Lexington may 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 actually cost. Currently,Blue
Cross does not provide this.
2.2.4. Begin Funding Future Obligations for Health Benefits
The Town will soon be required by GASB standards to account for its health benefits
more transparently. To maintain our bond rating and to ensure that we meet our
future obligations,it would be wise to fund these trust accounts adequately.
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-term solution,and not ■ Short term 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(EDBs)for all for Town enrollees. claims.
services • Increase awareness of the cost of services
and could therefore impact long-term
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 I 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 o 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
ut-ofout-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 promoti
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 'I 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.
Minuteman Nashoba This is a new group.
Health Group
MITA Tried in the past. Did not obtain stop loss • Lexington may not be allowed to re-enter the
coverage. group.
West 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
f
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
F
Appendix A
The Health Benefits Review Committee
Members were suggested by individual Board members and invited by the Chair. The Committee
met 9 times on November 3,November 17,December 1,December 15 (2004),January 5,January
19,January 26,February 2 and August 24(2005).
The charge to the Committee was:
"Description: Thoroughly review and analyze current components of health insurance
being mindful of employee privacy 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 Dougherty(Co-Chair),Tom Goodwin,Nancy
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 Kennedy 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 Kennedy
(Selectmen),Tom Griffiths(School Committee),Evelyn Silber(Personnel Advisory
Board). Update March 2005: Hank Manz was assigned as the Selectmen Liaison.
Meetings: Two per month
The Health Benefits Review Committee recognizes that many of its recommendations are subject to
collective bargaining. State law provides that the Town cannot unilaterally 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,Trilogy Advisors;Former Managing Director at Goldman
Sachs;Former Portfolio Manager at Fidelity 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 July 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 policy. He has assisted businesses and
government agencies in a range of development and change-oriented projects,involving managed
care implementation,quality 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 Enrich 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,annually 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 Advisory 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 technology 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 costly plan with more
aggressively 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 by double-digit amounts.
• 1997—Third party administration by 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 in anticipated cost increases.
• 2004—One time"opt-out"pilot plan implemented;Express Scripts implemented
(prescription by 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
unsatisfactory experience. In West Suburban,Lexington had the largest population but only one
non-weighted vote,and the others in the group chose plans too expensive for Lexington. In the
case of MITA,the group failed to provide promised re-insurance,which was only recovered after
a great deal of time passed.
It should be noted that the Coalition of Town Employees has repeatedly bargained with the Town
about ways in which to reduce health care costs.
7 See Lexington Minuteman,May 24,2004 by former Town Manager Richard White, Coalition of Town Employees:
Health Insurance Bargaining History,provided by 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.
Currently,the Blue Choice,Network Blue,HPHC,and Medex programs are self-insured and the
HPHC First Seniority,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 may never
qualify for Medicare unless they or their spouses have had jobs outside of state or local
government. The Committee understands that this currently involves only 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 1Pt Seniority Individual 40 80% $153.60 $38.40 $192.00
I
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 emergency room after deductible. emergency room emergency room
copay if not copay if not copay if 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-Pay 20%coinsurance $5 Co-Pay $5 Co-Pay
after deductible
1 Mental Health
General Hospital Covered m 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-Pay. Up to 20%coinsurance $5 Co-Pay Up to $5 Co-Pay. 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
facility to 30 days/year facility. 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 copay per after deductible. Up year,$5 copay per $500 in benefit
visit to 8visits per year visit value,whichever is
greater. $5 copay for
first 8 visits,$25
thereafter $5 copay
for group therapy
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
pharmacy.
Up to a 30 day Up to a 30 day Up to a 30 day $10/$20/$75 mail
supply from a supply from a supply from a order.
pharmacy or 90 day pharmacy or 90 day pharmacy or 90 day
supply mail order supply mail order supply mail order Up to a 30 day
supply from a
pharmacy or 90 day
supply mail order
Medicare Supplement Plans(Plan coverage plus Medicare)
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 emergency emergency room copay 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-Pay 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 facility 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-Pay visit 1-8,$25
Alcohol copay per visit visits or$500 per year for 9-20,then 50%. $15
for group visit 1-20,then
50%
I Home Health Care Covered in Full. Covered in Full. Covered in Full.
Prescription Drugs $50 deductible,then full 25%copay generic,50% $10 generic/$20 preferred
coverage for generics and preferred brand,75%brand brand/$35 non preferred
80%for brands at pharmacy $201$40/$105
pharmacy Mail order$51$30/$50 for mail order
90 day supply
Mail order$2/$10 for 90 Up to a 30 day supply from
day supply a pharmacy or 90 day
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 pay 20%less
diagnostic and preventative diagnostic and preventative than it would have paid for
services once every 6 services once every 6 services in network
months months
Combined Deductible for $50 Individual/$100 Not applicable
Basic&Major Family
Restorative
Basic Restorative Covered at 80%after Copayment schedule by The Plan will pay 20%less
deductible type of service. $1,000 than it would have paid for
maximum per calendar services in network.
year for oral surgery,
endodontics,&
periodontics.
Major Restorative Covered at 50%after Copayment schedule by The Plan will pay 20%less
deductible type of service. $1,000 than it would have paid for
maximum per calendar services in network.
year for oral surgery,
endodontics,&
periodontics.
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
Pharmacy Benefit Management(PBM)companies have grown considerably in recent
years by offering strategies for clients to lower pharmaceutical costs.One way in
which this is done is through management of the drug formulary. A drug formulary
lists the pharmaceuticals that will be covered by insurance,often in three-tiers with
generic drugs costing the least and drugs not on the formulary the most.PBMs also
use retail drug card programs,encourage the use of mail order and provide other
clinical management programs. Maintenance drugs dispensed by mail tend to be
cheaper because the distributor can negotiate lower prices because of volume.
Express Scripts currently provides some pharmacy benefit management services for
Lexington enrollees.The consensus of the Committee and GBS consultants was that
significantly more savings could be realized through more aggressive benefit
management procedures. For a number of its municipal clients, GBS intends to
develop a pharmacy carve-out plan,where pharmacy benefits are separately
administered from the health benefits,providing a higher level of attention to benefit
management,improved reporting and increased transparency of costs. GBS estimates
that pharmaceutical cost growth could be reduced by about one-third if the most
aggressive plans are implemented. These savings are obtained by increased
incentives for enrollees to order drugs for delivery by mail and by 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 company 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
only network pharmacies or mandatory mail delivery 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 positively influence medical outcomes and reduce overall medical costs.
Express Scripts identifies patients who may 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 directly 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 company
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 pharmacy 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 formulary compliance issues. It
is not clear that this is done for Lexington enrollees.
In conclusion,Express Scripts provides a fairly comprehensive set of strategies to
control the cost of prescription drugs. Lexington may 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 try 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 study concerning the potential to reimport drugs from
Canada into the US to save money. Currently,it is estimated that the reimportation
business from Canada is over$1 billion because many drugs can be as much as 50%
cheaper than in the US. There are many who claim that this will grow considerably
in the next few years. While the FDA has not approved the reimportation of drugs
from Canada,many 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 publicly their intention if necessary to defy the FDA which
believes that such importation is illegal.
To date the FDA has not approved reimportation primarily due to safety concerns.In
recent testimony,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 testimony on this subject,William Hubbard, Senior Associate
Commissioner for Policy,Planning,and Legislation at the U.S.Food and Drug
Administration(FDA),stated: "Currently,new drugs marketed in the United States
must be approved by FDA based on demonstrated safety and efficacy.... This
"closed"regulatory system has been very 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,
particularly where those routes routinely 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 security of our nation's drug supply." Similar concerns
have been echoed by former Bush administration Health and Human Services(HHS)
Secretary Tommy Thompson and former Clinton Administration HHS Secretary
Donna Shalala.
Representatives of the Canadian government have recently clarified their position by
stating that they could not guarantee the safety and effectiveness of drugs exported
from their country This is especially troublesome as counterfeit drugs entering the
U.S.pose genuine risks both in lack of efficacy and in adulteration with unknown
substances. There are also many who claim that the safety issue is just a way to
politically protect pharmaceutical profits.
Eventually,mechanisms may 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 likely that the discounts available to US consumers will
disappear,most likely 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 any surplus sold to Canada or to stop selling their products to
Canada altogether. There does not seem to be any reason why Canada should put its
own discounts at risk to supply customers in the US.
The probability 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 unlikely at this time.
Therefore,while there may be some short-term savings available from Canadian drug
reimportation,it is likely that reimportation will not lead to intermediate or long term
discounts and would always face the possibility of being cut off suddenly by Canada,
the drug manufacturers or the FDA.
1.2. Strengthen Claims and Enrollment Audits
A significant cost containment opportunity lies in making sure that the Town pays only for
services provided to those who should be covered by the Town and that all claims are
legitimate and for services that are covered.
First the Town needs to be extremely timely 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 promptly 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,probably quarterly. They would review the
data base of employee and dependent information and carefully monitor cut off information
to make sure that any claims paid subsequent to a termination are the result of services
performed prior to the end of the coverage period. They would also review all large claims
paid to make sure that there were no overcharges and that the services were appropriately
covered(i.e.not excluded services). It is also important that covered services be fully
understood and monitored carefully.
The auditor would also review significant claims for a dependent spouse to make sure that
no other coverage was available from another source to pay 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 flexibility there is in determining plan design. For
example,if Lexington requests a different benefit structure than the standard programs
offered by 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 may 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
previously 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 family)and three-tier
structure for dental coverage(individual,individual plus one,and family). We understand
that a three-tier structure was considered for medical coverage and rejected because the
family 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 family premium to the individual premium varies
by plan between 2.40---2.59. This weighting should be reviewed to determine if it is
appropriate. It may 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 any 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 may be an opportunity to significantly change behavior by 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 they are paying 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 efficiently and with equal quality in a community 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 generally do not receive explanation of benefits forms from Blue Cross
Blue Shield when claims are paid,so they are totally 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$57$14/$25 copay structure for prescription drugs is also somewhat low.
Once again,there is no incentive to compare prices charged by participating
pharmacies or to compare the costs of different generics.
1.3.5. Change the ratio of Premium Contributions
The Town currently pays 80%of the total cost for Blue Choice,Medex,and HPHC
First Seniority, 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 family coverage),whichever Plan
the employee elects and have the employee pay the remaining percent of premium.
Another way to reduce costs would be to make the Lexington benefits less attractive
by 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 by the Town. This could detract from the town's ability to attract new
employees.
Employee contributions could also vary based on pay,with those over a certain
salary contributing more to their own health care. When the Committee examined
the salary structure of the Town,it did not seem that this would result in any
significant savings.
The committee discussed the possibility of recommending that part time employees
pay 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 annually according to one estimate.It appears that this
may 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 major hiring incentive.
In addition,the Committee was told that many part time jobs within the schools don't
work well as full time positions. There has been some effort to keep as many part
time jobs as possible below the 20 hours that qualifies the individuals for benefits,
but that often is not feasible. For many,the availability of the Town's health care
program is the reason they are willing to take the jobs at relatively 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
family where the employee did not smoke,but the spouse or dependent child did?
How would the Town obtain the information and ensure its confidentiality?
1.4. Consider Separate Plan for Out-of-state Enrollees
Because the Blue Choice Plan is the only one allowing participants to go out of the network
for services, it may be the only 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 may be
appropriate. It is also possible that the Town can find an insurer that could provide
coverage to this group separately 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 many other potential problems with eliminating Blue Choice. In addition to the need to
collectively bargain over this,there is the fact that Blue Choice enrollees pay more,but may
not use more expensive services. This is because few actually do go out of network for
services. Thus, if Blue Choice were eliminated,premium contributions would decrease,
possibly without an accompanying decrease in costs.
1.5. Expand health promotion and disease prevention locally
There is little systematic attention currently being paid to health promotion and disease
prevention activities within the Lexington employee and dependents population.
Health promotion encourages the adoption of healthy 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. Early 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 early detection. Early
detection and disease prevention,because they more clearly fall within the scope of practice
of medical practitioners,are more likely 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 unlikely 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 costly and
require the cooperation of Town employees. This is beyond the current scope
and capacity of Town government.
• Within the employee population,there are likely to be individuals at high risk
and broad-based programs aimed at the general population may not reach them.
High-risk individuals pose a particular threat to health care expenses because of
their effect on the community experience and future costs. Methods by which an
employer may identify and reach these individuals so as to reduce risk are only
just being developed and may be difficult to implement,particularly with HIPAA
(the Health Information Portability and Accountability 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 certainly would not be identifiable as
deriving from such efforts.
Simply 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 only the health of the individual but of his or her family as
well. The effects of second hand smoke on household incidence of lung cancer,upper
respiratory infections and asthma,for example,have been documented. However,we do
not know how many 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 obesity-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 actually
lower than the rest of Blue Cross/Blue Shield's book of business.
Because the data and participation needed for any health promotion and disease prevention
programs can only come from the employees themselves,gains can only be made by a
combined effort of the Town and its employees. A health risk assessment of Town
employees(and possibly 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
1.7.1. 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 currently offered. This cost comparison should
probably be repeated every three to five years. Periodically,it may be worthwhile to
compare the networks offered by United Health Care and CIGNA to the list of
providers used by plan participants;although neither network is currently as
extensive in Massachusetts as Blue Cross,Harvard Pilgrim,or Tufts,they have
apparently 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 fully 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 any risk transfer,plus an
allowance for profit for the insurer or plan administrator. Insurance may save money
over self-insurance in the short run,if the insurer underestimates claims or provides
an artificially low quote to"buy"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 likely to be less costly because the profits
or risk premiums assumed by administrators are lower than those assumed by
insurers. In addition,state laws mandate certain benefits for insured plans; self-
insured plans are not required to offer many 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 primary
care physician. Many believe that having a"gate-keeper"can help to keep medical
costs down.The in-state Blue Choice Plan requires a primary care physician,but
does allow participants to go out of network if they choose;that is when they 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,they are willing to pay 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 actually 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 availability 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 money 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 possibility that the Town might
have to appropriate additional money 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 indefinitely perpetuate itself,it does believe that there
needs to be a specific group,appointed by the Selectmen,to continually monitor health
benefits within the Town,and to provide pressure to move forward on recommended and
agreed upon changes. The Committee understands that many of its recommendations will
be subject to collective bargaining.
However,the cost of health insurance is a very 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 many 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 currently 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 entity had one
Lexington Heath Benefits Review Committee Report 32
vote. Lexington dropped out because the group elected to offer benefits that were more
generous than the Town thought it could afford. With MITA,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 may 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 regulatory
or legal requirements(such as the GASB standards). Bond-rating agencies have already
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 survey of"comparable"
local cities and cities. We selected towns used by unions for comparison purposes in wage
agreements and selected other cities and towns with similar demographics and financial status. A
survey instrument was developed and modified based upon feedback from town staff and
committee members. Twenty nine towns were contacted by phone,the survey was faxed and
phone follow up was conducted as needed.Twenty 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 pharmacy benefits. We appreciate the respondents'collaboration and will be
sending copies of the report to them.
Disclaimer: the data in these charts,although verified by each town,has not been independently
verified;misunderstandings and differences in accounting practices among towns may lead to
inconsistencies in the responses.
Survey Results
The detailed findings of the survey are contained in the charts below and the table that follows.
Lexington offers a generally similar set of traditional health plans as most of the towns.Blue
Choice,HMO Blue and Harvard Pilgrim were the most frequently 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,virtually all towns offered Medex and most also offered
HPHC's First Seniority product,a much less costly Medicare HMO product with expanded
benefit.
Eighteen towns,including Lexington, offered$5 co-pays for physician and ambulatory services.
Three towns have co-pays of$10 per visit;one town has an$8 co-pay and the remainder are
mixed in their benefits. Eleven towns have$25 Emergency 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 Sudbury,Lexington and six other towns had the next lowest levels of pharmacy
co-pays-$5 generic/$10 brand/and$25 formulary. Mail order rates for Lexington were similar
but generally for a 90 day supply. 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 policy;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 by other Towns. Chiropractic
services are covered by Lexington with a$5 co-pay for up to 20 visits. This is similar to
Brookline. Fourteen towns reported offering the coverage but most of them only offered it in
certain but not all plans. Woburn had a limit of 12 visits per year.
Twenty towns reported offering Dental insurance,but we only received rate sheets for thirteen.
Lexington Heath Benefits Review Committee Report 34
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). Sudbury and
Wellesley contributed 25%and 47%respectively for DeltaCare coverage,not Delta Premier.
Eighteen towns offer life insurance
Figure 1 -Blue Choice benefits;two do not. Of those that
offer the benefits Lexington
45%-.r :n."--- -- = s, offered what appeared to be the
40% . t _ standard benefit of 50%of the
co _ .. .,...-. . :J premium for$5,000;employees are
�, Y I-- responsible for the premium of
d Y - - 3 €- t i'
a► 20%- -£ . � ft
,, t.„. ° _ additional insurance up to$74K.
a 15I�- , -: i_ Three towns offered$10,000
w - _ policies only one ofthose
t
: 7. • ir.4 - ; reported optional additional
o% kott-PF4'i'r e e ..-cb .1) 6' coverage(Wellesley).
m. CO �
Lexington was the only Town that
Towns reported having used an Opt-Out
program,where cash benefits were
Figure Z-HMO Blue a paid to employees who voluntarily
select their spouse's insurance plan.
50% Lexington's plan was one-time
45%-
_._ °. only,however.
.c 35%--
_,,,, ft As shown in Figures 1-3,
a 25%- , - ., Lexington employees contribute a
20% _ different percentage of the
- - premium for each of the covered
11:1-.: -ItT:f Hi.x 1:
plans:24%for Blue Choice; 12%
a'' - '!I..s- ::.^ %}:°-fz, 77'-' for HMO Blue and; 15%for
7,�°co 47❑�o° .i.,��0 Q�co�,..er I �o HPHC. This compares to averages
of 29%, 18%and 19%respectively
Towns for the towns also offering those
plans. The distributions of
Figure 3 -HPHC employee shares for the three plans
504/0- .,- r,t are shown in the attached charts.
45%
g
40414 ,.,,,�,�...w.� -:� ,�.
4 ,.,. Total premiums for the health plans
� 35/a � `",`F
-� offered by Lexington were
generally comparable to other
0>+ 20%-. - 1 I=a= ;; -- 1 towns(see Figures 4-6). Premiums
�„ 5% 5: 1,....„
--- ;: I- _- r-
. • Pi -- . = were slightly higher than average
wE 10%- = Pjr,_ .. __ � r'_' for Blue Choice and HPHC and
,z r
•
- !-, lowerthanforHMO Blue.
�� � �a�� � � average
While the costs may be somewhat
Si.'''''CI ';': e e P, ct.? ,i .1?tz, fcf 1 z .,-? ;.--ii---i-, / !if lower,the Town has priced the
Towns HMO Blue premiums so as to
encourage enrollment in this plan.
The premiums vary significantly
Lexington Heath Benefits Review Committee Report 35
Figure 4 HMO Blue Total Premium s
HMO Blue Total Premiums
$1,500- �
, ,:i;..,:,
p IndlVidual
:it -4..,:::-_,
$1,400 ,y..,,-s
x Faff$y
::,,:, :icji _
$1,200 W
, : ii 1:4 ,,,,,:::::-,,,. ..-,.,:
,,, :,
Premiums ` _ _
.
s
„,,01,-_i 4 - -,::'
:xe-:- ,'<; », .'r = Ali._,
c
i
:.___
c
I ;,
_ 3'
ir: ::11_-- ;;:,_ _, ,,_.
r,..-
,, .i:z, ,..i,
't'"*.4 1 ---;; , E.
• ,w
�,ac;. - 'tom_ F�i:: '- �•tea' ;3'k ee"'Q r _ i 1,,,,•• w g...<a.,•_ 4i...it'
.•.Y�' �F' � '_.KL': � �- �� / \ - __gyp, _ � :%...?• _,400
_ - YiJ,^ ��- _ 4.4.' -:i£:
,fr: ' .c-^ Vin. `s. , i 4” x e ff �• air- :-;.:4 • l-
a = €°
, _
Len •
An And 'Brook Burl Comb Ded Don Hing Nat Need Pea Sud Wet Way Wel Winch Web
a individual 384 391 375 395 448 329 4'5 4'1G 377 4'15 535 379 422 424 415 4'15 454 378
a Family 992 #490 1005 7958 1204 842 1479 1119 1010 1119 1528 #017 1071 1192 1119
1149 1225 7095
Towns
Figure 5--Blue Choice Total Premiums
Blue Choice Total Pretmum
$1,40°-- _"_ ``�«€ •` • -• .w��
s ;=' .scams..::: .:.:::. �'.:::
': E'%_� - nib's:
__c-�, Vis°• /' %C = '::" t 1
_,,,,,,, , .i:
ir!• •:S .C:;rr...L�•: ��-�" h :�i vra���.i
v,. ": A t.-,. wry' ......,�
4
$1,0 00 €%..
Premiums $500 *' '" 2
it:,
$600 ,-;:,4 .,4. ..: : .:...
:I
. _.`,,4.:1'
Cie Ti.,:„i/4,,,
;��--`C:�'- ,.E=-:l•:; art3' err�t'•.. •µ "�.y, . - F4"tlGY .. `.. � ?�''� ••,".K. f.:,,IZI:
,:,_,. fa,fil
. 4.
1,00-1
-x » :"
•::5. _ :.,,_'.%?�. - tt�:'�.:: r�. :r'''''41.--.
'�°'µ'ms.-..`.; ..-�3.'.=>i��';..
$200-11
"f 1i :��a:x� waCte. �•;.. :.: -�D' .%
...:: , '�,_" r (';sem::
:lit,-
,4._.
[,,$7,::
: :• ' :G :...:6'4'1;4''''''''''
Lex Art Brook Comb Hing Need Sodbury West Winch
®Family
a individual 551 625 423 432 520 551 509 435 523
®Family 1429 1554 113[ 1100 1234 1429 1300 1175 1395
Towns
Lexington Death Benefits Review Committee Report 36
Of the fourteen towns reporting Medex premiums and contribution rates,Lexington hada very
competitive premium rate at$316 overall. Only Arlington was louver 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 many 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 by
the retiree. Many required the retiree to pick up 100%of the premium.
Figure 5—HPHC Total Premiums
HPHC Total Premium
$1,600_-ir _
f
$1,400
$1, 00
1.
$"1,0x0- :. : 1 , i
1 -,: ,,, i - - _;-,,,. ',: : ,.,. it --4 .., t • ..: :: Ei In im.
- M r
'':-i' '.: `; i i -1'- ,-,' ,' _---- .., _ ,:::-,:', --'--.:' - --.'i : ,, '
Towns $800-- '' w
,:,..
r
.v•• ,.: i: : , :
z
Family
1..
--' a_:': ':;11111,,,i, i._:: :i .* ;
.:-= : !I' - '1,,,:,_! ----4 '' '-_.- -, ' 'i : _ ..,' i :-..',. '.:.--;‘ ,..:, - =
$600-,-i.,-, ., i 1 ;.?„ t : _. _,. ',_, _ ,I.-:- )- ' 7:
,,,, :,,,.,„ _..4-, --',.,
n•
- ,,
':_„:1 IL.zi__sT I_
9
I ._...-e: ---.� —
„,00_er . ,
- .
..✓. ._ __ :" -f. •'-,: _ gym. `<. _ `•
. . ,z-,.,
r ,
, 21 :--_,-,. 1 ; .. ;
9
$200-1! -::: ,,--'.!:';, - -:':4 J�w.w
;F,, -ti , '
a _ :�: _ 1 1. :�� ""sem:
E'
lex AS Bek Burl Cae,b Cesu Cad 006 }fling LinucdlS Nat Need Newt Sudbur Watt Water yy y3 Wet West Winch
k�dle/duel 435 414 427 458 322 328 368 368 377 340 368 376 335 562 790 439 _396692.
69 369 420 409
1 Family V42 '092 1162 61 673 808 962 962 'W5 884 962 978 I 912 17453 1230 7154 962 962 1743 7112
Premiums
Other Reviews of Health Benefits
Of the eleven towns tracked as comparables by the Teachers' Union for salary and benefit
negotiations for FY'05,Lexington ranked fourth in overall health insurance benefits. The total
compensation level wasranked lower however. The benefit is calculated based upon family plan
premiums for HMO Blue(the most frequently enrolled plan).
Another analysis of comparable towns was conducted by 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$2,717,592 vts Blue Cross' claims at
$3,516,076. For the Medex plan,Lexington was $1,836,932 vs.BOBS at$2,245,239.
Lexington Heath Benefits Review Committee Report 37
Figure 7--Lexington Health Benefits Review Committee—Survey Data
concord also Lon-Larlhsle
Town Lexington Andover Arlington Brookline Burlington HS Dedham Dover Hingham
Name Rose DuCharm Kathleen Galin' 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 rducharmici le kuolink andoverm amilick town arlin kathy mcginnis ihvdeaburlmass personnelOconcordnet.orq faeisheckereto treasurers dover bleickenlehinaham-
Rate Sheet
inaton ma us aaov cyton ma us #own broolcline ora yin dedham ma. a ora ma.com
Y Y V Y Y
AVerace. a-Pay`s '
Phy/Amb $5 w $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 Brand $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
AirinualLIMIIS
Prescription N/a None 4 None None nia 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 P05 only Tufts
pocket $1500/3000/yr
Other Rt'CVe eVan 1: ,
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 38
Lincoln-Sudbury
Town Lexington High School Medford Natick Needham Newton Peabody Sudbury Waltham
Name Rose DuCharm Kimbrely Goodwin Ellen BaglioLinda 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 rducharmt ci.le kim aoodwint lsrhs ebaaliotmedford lclark(S natickma.or sarintchenkoc5 tow odeschenesiha newto areenod town su bcaoellobcity wait
jnatan ma us N ora g Y needham ma.us fma.aov elaine.crichton�a7oeab ctbury ma us l��m ma us
Rate SheetY Y
A=verage, opays
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 L4m its
Prescription Nla N/A 0 n/a N/A $1,560 Max on None None
durable med equip
Inpatient N/a NIA 0 nla N/A-POS Plan$100 None None
yr
Out-of-Pocket $10001$2000 N/A $1,200 Ind- nla N/A-POS Plan None None
$2,400 Fam $1,000 ind/$2,000
Family
ot
bOr elev ,
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'l 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 39
i F
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 rducharm ftci.le drvanC6 ci.watertow mdinanoiit6 wavlan susanaf6 ci welleslev ma vanakakis k6 weston ehowarth6 ci winch epruyne8cityofwo
xlnaton ma us p,ma_us cl,ma us AS mass ora Aster ma us burn corn
Rate Sheet Y N Y V Y Y Y Y Y
Average o-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
Brand $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 Order Brand $10 $10-$20 $20 $20 $30 $10-$30 $10-$30 $20-$30 $20
Form $25 $25-$15 $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 nla $1,550/mem- n/a nia None n/a None
$3,100/Family
er a evsnt Cvg = ,,
Chiro Coverage Y N Y V N Y N N Y
Describe $5 up to 20 Fallon Only Fallon Only 12 Visitlyr-
Visits medically
necessary
Dental Coverage Y Y Y Y Y Y V 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 V 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 40
f
Figure 8-Lexington Health Benefits Review Committee--Review of Other Town's Rates
Lexington Employee( Aril ernpto ee Andover Er*liee Belmont Era oyee
Town I En-rio snare Town I Errfloyee I Share Tovur j Enployee share Town j Enyloyee Share
sue cri(g00. ii
1 Indvidual $ 440.80 1$ 110.20 1 20% $ 46913 $ 156.36 1 25%
IFamily $ 1,143.20 $ 285 80 20% $ 1,17274 $ 390.88 25%
Blue=s glad.: l
Family
=BueINirk Blue
Incividual $ 337 92 I$ 46 08 I 12% $ 352.22 $ 3912 10°/a $ 304.23 1$ 70.92 19%-
1 Farnily $ 87296 $ 11904 Is 12%s$ 908.97 $ 101 00 10°/4$ 773.03 $ 232.36 23%
$ 369.75 $ 65.25: 151a�..,
lividuai 1 .;.
tx $ 372.95 $ 4144 10% $ 384 55 $ 4273 10%
Family $ 885.70 $ 156 30 15% $ 985,51,$ 106.48 10°/a $ 1,045.98 $ 116.22 10%
liVHCPPOj, „ ,. ., ., . S
Incividual .. $ 545.87' $ 136.47 20%
Family I $ 1,484 77 $ 371 19 20%
m'us:por _
Incividual
Family 1. I
r S -Z
ii
Inthidual
!Family
FaIk SeleCtCare i
Inciividual I
Family 1 --1- I i- I,1
Foci,Diteotcare, `
.,.
I Incividual
Family
BMS Master Health Ply ._- z
Incividuai ..,.. $ 447 53 $ 14916 i $ 466.80 1$ 25140 35%
1 Familyy $ 1,160.08 $ 386 72 $ 1,056.96 $ 56916 35%
M rMed
Inciividual $ 466.80 $ 25140 35%
[Family $ 1,056.9656916 35°1°
$ I ,
INAANut-ot-areaP1 *
lnclividual ..
I.
Family
I ndvidual
Family
.I :CartieoulA3
i
Ind idual
Farrily
Retirew ,I,
Medex In ividuai $ 25280 $ 63.20 20°/a $ 219.26 $ 73.09 25% $ 12152 100°1°
Mgd Blue for Seniors $ 253.27 $ 63 32 $ 256.60 0°/° $ 42.96 100%
Harvard First Seniority $ 153.60 $ 38.40 $ 172.80 0°/° $ 144 10 $ 65.90
1 Medicare Complement Tufts
Secure Horizons(Tufts)
Blue Care 65
I Fallon Senior Plan
I l-PHC Mecicare Enhances $ 235.27 $ 157 08
Delta Premier-Ind only $ 23.02($ 23 02 $ - $ 38.17 $ 25.00
I Deltacare-Ind only $ 13.64 $ 1364, 30.00
Lexington Heath Benefits Review Committee Report 41
Brookline Employee Burlington Employee Cambridge ( Employee Concord Employee
Town I Employee Share Town I Employee Share Town Employee 12°%a sure Town � Emplo ee Share
BluO Cho P Yom '
Individual ,$ 31704 $ 105.68 25% $ 59511 I r•r595.11 50% $:r.379 74 $ 51 78 12%
I Family - $ 848.27 $ 282.76 25% $ 1,472.14 $ 1,47214 50% $ 968.27 $ 132.04 12%
Blue-Care=Elect~ . .
Individual ..,.._r.,.._.._r
Family1
fMQluelNetwork:Blue _... 1
Individual $ 296.25 I$ 98.75 I 25% $ 340.67 $ 107 5824°/0 289 50 3948 12% _
'Family $ 793 90 $ 264 63 25% $ 901 01 $ 300 33 I 25% $ 741 06 I$ 101 05 12%
HPHC _ __ -
I Individual $ 347 78 $ 109 82 I 24% $ 283.46 $ 38.65 12% $ 214.20 $ 125.80 37%
I Family I $ 87048 $ 29016 25% $ 768.39 I$ 104 78 12% $ 486.20 $ 397 80 45%
HPHc Fro
r _
Individual $ 335.00 $ 335.00
I
Family I I$ 885.50 $ 885 50
Tufts PPO or-EPO- 1 .........,........: :, _____-______"_____ ______----,,---.,......, - if
.
'Individual
r EPO-
Individual $ 292.67 $ 39 91 12% $ 225.10 $ 143 90 39%
!Family II
12% $ 500.76 $ 462.24 48%
1 � $ 108.72
$ 797 30
l"ul -E-.O=
Individual $ 327 00 $ 327 00 1 50%
Family I i .,1 iJ $ 863.00 $ 863.00 j 50%
Falion:Belectaare- -
Individual1 i i I I $ 160 50 $ 160.50 50%
Family $ 424 50 $ 424 50 50%
Faller Direct_Car_e I
1
Individual $ 150 50 $ 150.50 50%
Family $ 399.00 $ 399 00 50%
I
BCJBS Masten Health---Plus
1
Individual
Family Y I I I I
IMaster`Mecicaa
1
_.._ .__._
Individual
Family
IN tt�-cf-area-plan) 1 -
iirrr.ir
!Individual
.r .m.r,
Family
N A OanleoUt A
Individual ._..
Family I
N-R#.:Gameout-A&B=
Individual
Family I 1 1 I 1
I:Retir ! ' •¢ 1`
IMedex Individual $ 266.11 $ 88.71 I 25% $ 211 51 $ 211 51 50% $ 24.30 $ 2.70 10%
Mqd Blue for Seniors $ 216.44 $ 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 $ 260.10 $ 28.90 10% $ 144 50 $ 144 50
Secure Horizons(Tufts) $ 166.50 $ 18.50 10% $ 87 50 $ 87 50
Blue Care 65
Fallon Senior Plan $ 99 D0 $ 99 00
HPHC Medicare Enhances
Delta Premier-Ind only I i
Deltacare-Ind only f i
Lexington Heath Benefits Review Committee Report 42
Dedham Employee 1 Dover Employee HinghamEmployee Linc/Sud Reg Soh Dist Employee
Town .1 Employee Share Town Employee Share Town t Employee I Share Town � Employee I Share
I 't h4Yc* _
Individual �.,,
$ 265.20 $ 255 00 49%
I Family i 1 $ 629.20 i$ 605 00 49%
Btt °crO EI-ect
Individual
Family IJ I
1) Blue/NetworkBluo _.
Individual $ 373 501.$ '.�-41 50 .:_.. 10%1$ 290.50 $ 124 50 30% $ 192.40 $ 185.00 1 49%
Family $ 1,00710 $ 111 90 10%,$ 783 30 $ 335 70 30% $ 51480 $ 495 00 j 49%
-HPHC
Individual $ 331.2017 36 80 10% $ 257 60 $ 11040 30% $ 192.40 $ 185 00 1 49% $ 255 00 $ 85 0025%
Family $ 865.80 f$ 96 20 10% $ 673 40 $ 288.60 30% $ 512.20 I$ 492.50 l
49% $ 663 00 $ 221 00 25%
-HPIHC PC
..
Individual50%
$ 306.00 $ 306 00 50/° I
Family $ 673 00 $ 673.00 50%
Tt PPO or'EPO
Individual $ 346 50 $ 38 50 1 10% $ 71400 $ 306 00 30% $ 276 75 $ 92.25 25%
Family $ 909 90 $ 101 10 10% $1,570 33 $ 673 00 30%I $ 722.25 $ 240 75 25%
T 'O I - -
I Individual $ 306 $ 305 00 50% $ 269 5D $ '11550 30% $ 490 50 $ 163 50 25%
I Family $ 673 00 $ 573 00 50% $ 707 70 $ 303 30( 30% 1,294 50 431.50 25%
Fa1100 Sem are j.
Individual I$ 307 80 $ 34.20 10% $ 239 40 $ 102.60 30% $ 240 75 $ 80.25 25%
Family $ 833 40 I$ 92 60( 10% $ 648.20($ 27780 30% $ 636 75 $ 212.25 25%
Fallon Directtare: ., , I
Individual $ 285 30 $ 31 70 10% $ 221 90 $ 95 10 30% $ 225.75 $ 75.25 25%
Family $ 770 40 $ 85 60 10% $ 599.20 $ 256.80 30% $ 598.50 $ 199.50 25%
BOBS:Master Health Plus I
.j.
Individual f$ 34312 $ 326.00 1 49%
Family j$ 813.28 $ 782.00 j 49%
Master-IIledical- I t-
Individual
/ 1 I ,
Family I
INAAJOtit,of,areaTian}
Individual $ 337 00 1$ 337 00 50%
1
Family $ 735 00 1$ 735 00 50%
[ :Car eout A
I Individual
1Family
arvaQutBI
Individual I I I I I I I I
Family
Rotit:evu .
Medex Individual $ 169 00 $ 159 00 50% $ 165 00 100% $ 248.25 $ 82.75 25%
Mqd 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 onlyI $ 25.00 I 100%
I Deltacare-Ind only ! I
Lexington Heath Benefits Review Committee Report 43
Natick Employee Needham Employee Newton Employee Peabody Employee
Town j Employee Share Town j Employee Share Town J Employee II Share Town I Employee I Share
Blue Chcice - .,,..,..,..-„,.,,.,,....
lIndividual I$ 426 00 I$ 109 06 I 20%
Family $ 1,140 00 I$ 387 60 I 25%
Bl0aire°Elect
ue -,
Individual $ 433 92 $ 48 21 I 10%
Family I ( $ 1,153 45 $ 12816 10%
HM B ue(Net rror;Blue<
Individual I$ 358 48 I$ 56 52 I 14% $ 316 94 I$ 109 06 1 26% $ 340 74 $ 37 86 I 10%
Family $ 864 99 $ 254 01 23% $ 752 40 I$ 387 60 34% $ 915 66 $ 101 74 I 10%
HPHC t
Individual $ 312.65 f$ 55 35 1 15% $ 287 64 I$ 88 36 I 24% $ 268 00 $ 67 00 I 20%
Family $ 737 95 I.,$ 224 05 i 23% $ 674 82 j$ 303 18 J 31% $ 729 24 $ 182 31 j 20%
HPHC=PPO is
Individual $ 306 00 I$ 306 00 1 50% $ 306 DO 1. 306 00 I 50%
I i ,1
Family $ 673 00 $ 673 00 j 50% $ 673 00 $ 673 00 I 50%
T)if-PPC)or-EPt_ f°
Individual $ -341 61 I$ 43 3911% $ 294 67 I$ 106'33 1 25% $ 337 52 $ 84 ,. 20%
20%
y
Famil $ 786 05 $ 224 95 I 22% $ 655 23 $ 371 77 36% $ 91412 $ 228 53 20%
Tuft/R-0S
Individual $ 306 6171-$ 306 00 50% $ 306 00 $ 306 00 50% $ 485 88 $ 121 47 20%
Family $ 673 0 $ 673 00 50% $ 673.00 $ 673 00 50% $ 1,166 64 $ 291 66 20%
Pallor$electCare l r,
Individual $ 307 80 $ 34.20 10% $ 261 63 $ 80 37 24°/0
Family $ 740 80 $ 185 20 20% $ 638 94 $ 287 06 31%
Fal[ort-Dir-ectCare ;
Individual 1$ 285 30 I$ 31 70 I 10% $ 242.50 $ 74 50 24%
Family $ 684 80 $ 171 20 20% $ 590 64 I$ 265 36 I 31%
BOBS-VOW Health PIUS, ”
Individual
Family I 1,
I 1 1 I I
[water Medical
Individual I
Ir
Family I
=NAA f Out cf area Plan)
Individual I$ 337 00 I$ 337 00 j 50% Ir ".-
1
Family $ 735 50 j$ 735 50 50% 1
NAkCaive0UtA-
Individual
FamiI I 1 1 I ly I Ii I I
:NAA Carveout A&B
_
Individual
Family 1 I I I I I
Retirees i
Medex Individual $ 172.00 $ 172 00 50% $ 341 86 $ - 0%
Mqd 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%
IBlue Care 65 $ 133 38 $ 133 38 50% $ 133 38 $ 133 38 50% $ 46 67 100% $ 445 98 $ 3616 7%
Fallon Senior Plan $ 99 00 $ 99 00 I 50% $ 99 00 $ 99 00 50%
HPHC Medicare Enhances $ 185 00 $ 185 00 50% $ 204 00 $ 204 00 50%
I Delta Premier-Ind only $ - I$ 25 00 I 100% $ 13 33 100%
1Deltacare-Ind only I I I I I
Lexington Heath Benefits Review Committee Report 44
Sudbury Employee Waltham Employee Watertown Employee Wayland Employee
Town
Employee snare City ',Employee) share 1 Town 1 Employee Share i Town Employee 1 Share 1
Blore-choice
Individual $ 381 75 i$ 127.25 I 25%
Family $ 975 00 $ 325.00 25% I
Blue Care Elect
Individual I $ 378 07 $ 378 07 1 50%
y
Famil I I $ 87448 i$ 874 48 I 50%
HMV ueiNetwoc-Blue
individual $ 379 80 I$ 42.10 I 10% $ 381 50 1$ 42.39 10% $ 301.29 $ 113 71 I 27%
Family $ 963.90 $ 10710 10% 1 $ 1,018.60 $ 11318 10% $ 74414 $ 374 87 34%
HPHC-
Individual ----. $ 449 60 i$ 112.40 I 20% $ 743 67 I$ 4611 I 6%.$ 394 79 $ 43 87 10% $ 276 00 $ 92 00 I 25%
Family $ 1,162.40 $ 290 60 I 20% $ 1,114 70 $ 115 31 9% $ 1,038.28 $ 115 36 10% $ 668 59 $ 293 41 j 31%
HPHC PPCA __ i-
Individual $ 306.00 $ 306 00 i 50%
Family 1 I 1 I i $ 673 00 $ 673 00 50%
Tuft.t;PPO or:EPO I
Individual _ $ 409.20 $ 41 73 9% $ 384 80 $ 42.76 10%v $ 281 02 $ 103 98 27%
'Family $ '1,050 82 $ 106 60 9% $ 1,001 48 j$ 111.28 10%I$ 655 78 $ 355.22 35%
ITS-IES ,
Individual I$ 306 00 $ 306 00 1 50%
Family1 I 1 1 $ 673 00 $ 673 00 50%v
Fallab =Seli ctCare 1 i
IndividualI II.... $ 248.29 $ 93 71 27%
Family $ 615 79 $ 310.21 34%
l Pal loDirectcar
Individual $ 23014 $ 86 86 27%
Family i - I I i 1 1 1 $ 569.24 $ 286 76 34%
BC/BS Master-Healti Plus,--
Individual $ 713 88 I$ 57 89 I 8%
Family $ 1,665 54 1$ 135 07 1 8%
Master Medicat
Individual i
Family j I
;MAiA:QUa€rea Pla ., .,., .__,._,,.,.,, ., ., .,,.., ..,.,.
Individual $ 337 00 $ 337 00 50%
Family 1 $ 735.50 $ 735 50 50%
NAA=CarveoutA.
Individual 1$ 260.00 $ 260 00 50%
Family .1 I 1 1 1 )
NAA Carveout A&B'
Individual $ 206.00 $ 206 00 50%
Familyli. 1 1
I
laetlree-
Medex Individual $ 191 36 $ 191 36 50% $ 169 00 $ 169 00 1 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 I
HPHC Medicare Enhances I $ 185 00 $ 185 00 50%
I
I Delta Premier-Ind only I $ 25 00
I Deltacare-Ind only $ 20 02 $ 6 68 25%1I 1$ 1800 $ 10000
Lexington Heath Benefits Review Committee Report 45
Wellesley Employee Weston Employee Winchester Employee Woburn Employee
Town J Employee Share Town Employee Share Town Employee I Share !! City I Em loyee Share
J J p 1
BIuecho's- i,
Individual - $ 391 97 $ 43551-- 10% $ 261.66 $....261 66 50%
Family $1,057 13 $ 117 46 10% $ 697.57 $ 697 57 j 50% i I
Blue- are::Elect- -i: I . . .- .
Individual $ 504 06 $ 504 06• .50% $ 395 77 $131 92 25%
Family $1,32011 $1,320 11 50% $ 982.64 $327 55 I 25%
:HIVIQ°BiueiNNetwork'Blu .
Individual $ 345 28 $ 69 72 ,., •.1.7% $ 408.23 $ 45 36 10% $ 340 36 $ 37 82 10%
Family $ 862 75 $ 256.25 I 23% $ 869.54 $ 355 16 j 29% 905.35 100 59 °
$ $ 10/o
HPHC .. ,,. l
_
Individual $ 302.86 $ 65 14 I 18% $ 378 15 •$ 42 02 I 10% $ 368.24 $ 40 92 I 10%
I I
Family $ 762 87 $ 19913 21% $1,028 57 $ 114 29 j 10% $ 892.51 $ 209 35 19%
KPI-Ic Ippe ._ ..,
Individual $ 306 Co $ 306 00 I 50%
l
Family $ 673 00 $ 673.00 I 50%
Tufts°PPO carr=BPO ;j -
Individual $ 306 00 I$ 306.00 I 50%
Family $ 673 00 j$ 673 00 I 50%
-TUB POB= = ;
Individual I$ 307 23 $ 77 77 20%
Family $ 776 45 I$ 234 55 I 23%
FallorvSelectCare
Individual $ 277 70 j$ 64 30] 19%
Family $ 716 72 $ 209 28) 23%
Fallon liirectalrer J.
.. ............ ___ ., .. _.i
Individual $ 256 77 I$ 60 23 I 19%
'Family $ 662 54 j$ 193 46 I 23%
BC/BS Master ftealt Plus
Individual $ 983 81 $ 983 81 I 50%
Family I 1 I $2,311 97 $2,311 97 j 50% I i
Master Medical -
'Individual
F
'Family
t Out of-area Plant' €
j.
Individual $ 490 92 $ 490 92 50%
Family _.
$1,217 97 $1,217 97 50% 1
t CarvoOut-A,
J
individual
Family1 I I ,...
NAA.00,gout-fie&B, ._....
Individual
Family I I [
Retirees.
ori.r. .r......ru...... ir.....w....�_.-r..-.. - -- - .----.-.-... ... -----•----- g
Medex Individual $ 169 00 $ 169 00 50% $ 182 65 $ 182.65 50% $ 198 06 $ 198 06 50% $ 241 42 $ 80 47 25%
Mqd 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 I$ 19 38 i 50% I I $ - 1$ 25 00 I 100% $ - 1$ 25 00 f 100%
Lexington Heath Benefits Review Committee Report 46
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 enormously fast growing costs of health care. While such efforts are still early in
their development,many 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 fairly 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 by Hewitt Associates,shows the trend in place with
employers with more than 5,000 employees.
Categones 1998 1999 2000 2001 2002 2003 2004 lyr% 2yr% 3yr%
HealthCare Costs $4100 $4400 $4700 $5000 $6000 $7000 $7800 11% 30% 56%
Employers Pet 74 7% 75 4% 73 8% 74 6% 72 0% 70% 67 7%
Employees(by payroll ded) 15 7% 15 5% 16 7% 16 8% 17 1% 18 0% 19 5%
Employees(out of pocket) 9 6% 9 1% 9 5% 8 6% 10 9% 12 0% 12 8%
Employers Cost $3062 $3318 $3468 $3730 $4320 $4900 $5280 8% 22% 41%
Employees Cost $1038 $1082 $1232 $1270 $1680 $2100 $2520 20% 50% 98%
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
by 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 currently pay an average of 19.5%of health care costs
through payroll deduction,usually in the form of insurance premiums,and 12.8%in out of pocket
costs,usually 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 by government policies,large corporations have
started implementing the second step in the process by shifting the perceived cost of health care
to individuals in the form of large deductibles rather than monthly premiums and small co-pays.
Thus a deductible of perhaps$3000 would be paid by the employee and everything beyond that
by 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 carefully.
The following analogy summarizes why a high deductible approach seems appealing.
Imagine if a company provided a food benefit plan to employees Each month, employees would
have to pay$200 per month to the company and each time they shopped, they would have to pay
$10 to the food store. This would allow a family to purchase all the food they needed throughout
the year, with the exception of certain items that were exempt from the plan. In this situation, it is
likely that individuals will go to the store and buy whatever they want, doing little to search for
bargains because they don'to save anything by buying more carefully 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. Now imagine if the company changes the plan and instead
Lexington Heath Benefits Review Committee Report 47
requires a$2400 deductible before the ffood plan comes into play 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 any health insurance plan pay for services
focused on prevention and early 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 by Congress in November,2003,and became effective in January,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,many 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 by
the American Health Insurance Plans will undoubtedly show that more individuals have chosen to
take the HSA option.
In a survey recently conducted jointly by the Kaiser Family Foundation and the Health Research
and Educational Trust,6%of all companies said they 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 they 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
by 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 TISAIHDHP 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 by the employer from the fund as they are
incurred. The salary reduction agreement means that any funds set aside in a flexible spending
Lexington Heath Benefits Review Committee Report 48
account escape both income tax and Social Security tax.Employers may 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.By
law,the employee forfeits any 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 by 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,they may 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 by 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 way as
funding an insurance plan. This obviously would be of no advantage to the Town but the
principles on which they 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 many 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 they 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 majority of the workforce. Also,
many 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 49
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 by Town:Blue Choice,Network Blue,
Harvard Community Health Plan,Medex
3. RFQ response report from March 2003
4. Enrollment Breakdown by Individual/Family/Total Subscribers
5. High cost claims for Harvard Pilgrim for 2003
6. Top 25 drug prescriptions by 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 Salary 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 Ducharrn,Benefits Manager for Town of Lexington.
15. "Health Insurance Comparables"memo from Kerry 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 July 1,2003---June 30,2005
17. "Coalition of Town Employees:Health Insurance Bargaining History"provided by Vito
LaMura,Lexington Education Association President
Lexington Heath Benefits Review Committee Report 50
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 Dougherty, 12/1/04
19. Longevity payments,clarification,email from Rose Ducharm to Deborah Strod 12/1/04
20. History of health benefits Lexington Minuteman, Sunday,May 02,2004 by Richard
White,Town Manager
21. FY05 Comparable Towns data from Lexington Education Association Website,accessed
1/19/05
22. Spreadsheet showing cost savings by increasing part-time employees' payments for
healthcare,from Bill Kennedy
23. Information on School employees' enrollment from Susan Bottan in email 11/19/04.
24. Consultation with Kevin Walsh of Group Benefits Strategies,January 26,2005.
25. Survey carried out by the Health Benefits Review Committee.
Articles on Health Benefits
1. "Employers try shifting health costs;Plans ease sting for those at lower end of pay scale"
Boston Globe,November 25,2004,by Kimberly Blanton
2. "A Perspective on US Drug Reimportation" Niteesh K. Choudhry,MD,FRCPC;Allan
S.Detsky,MD,PhD,FRCPC JAMA.2005;293:358-362.
3. "The rising cost of health care explained,"Massachusetts Municipal Association,March
17,2004 By Mary DeLai,Membership Services Coordinator,MIIA summary of speech
by Nancy 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 mentality' may
be money down the drain"Elayne Demby editors2plansponsor.com,NewsDash January
5,2005 (NewsDash is a daily on-line benefits newsletter sponsored by PlanSponsor.com)
5. "Ruling Could Force Boston to Pay More for Health Care"Boston Globe,November 20,
2004 by Andrea Estes
6. "Drugstores Fret as Insurers Demand Pills by Mail"Milt Freudenheim,Published:
January 1,2005,New York Times
7. "Employers Unite in Effort to Curb Prescription Costs"New York Times,February 3,
2005.By 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 51
10. "When Employers Fund Retiree Health Care"by Kathleen Jenks Harm,ICMA
Retirement Corporation,Washington,DC( Harm(,Icmarc.ora)as attachment to
information received from Brookline by the Lexington 2020 Vision Budget Task Force
11. "Working out at EMC—firm says getting employees to take more responsibility for
health,costs paying off,"Boston Globe,August 5,2004 by Diane E.Lewis
12. "Towns Find Insurance Savings by Sharing Plan"Boston Globe, September 26,2004 by
Alexander Reid
13. "40 Percent in U.S.Use Prescription Drugs"Associated Press,Thursday,December 2,
2004,by Randolph E. Schmid
14. "Pharmacist Oversight Cuts Cost of Chronic Disease" Business Insurance, April 28,
2003 by Michael Prince
Lexington Heath Benefits Review Committee Report 52