What’s the “real” employee rate for TRS ActiveCare? Will TRS ActiveCare compete in the voluntary benefits market next year? Will the government health plan morph into a high risk pool by acting as a stop loss carrier?
An excellent report by Segal was presented to TRS ActiveCare Board of Trustees yesterday. This is a must read for those interested in keeping up with health care trends and market alternatives. The report contains a wealth of information worth reading about.
Of interest to TRS ActiveCare members concerned about costs and benefits, and brokers seeking opportunities in the Texas school market next year, are some golden nuggets to be gleaned from the report.
We have to attribute many of the recommendations and suggestions within the report to competitive pressures in the school market since passage of Senate Bill 1444. This legislation allows TRS ActiveCare member school districts the option to exit the program, something they were not allowed to do during the past 20 years. This has unleashed a competitive gold rush among the insurance brokerage community and has pressured TRS ActiveCare to perform better by competing for business.
The report is a long read but worth the time. Here are some highlights:
What Are The Real Rates For Employee Health Insurance Coverage?
“If additional funding was allocated to make up the 20-year gap, the total state and employer contribution would be approximately $600 per employee per month, with the split between the state and public school employers needing to be decided by the legislature.”
TRS ActiveCare Should Consider Competing With Cafeteria Plan Vendors
We saw this coming a long time ago. “You’re screwing us so we’ll screw you back!”
FBS, First Financial, Baybridge Administrators and others active in the voluntary benefits business should be worried. Look for legislation to be introduced next year to allow TRS ActiveCare to compete in the voluntary benefits market.
FBS, First Financial and all the others can’t complain. That would go against their pitch “Open up TRS ActiveCare to allow everyone to compete!” They can’t take the opposite stance – it would be immoral.
For TRS, there are several things to consider as it relates to offering voluntary benefits to employees, including:
TRS is in a unique position to secure many of these benefits at attractive rates that would not be available to districts on their own or replace the need for districts to secure on their own. This would serve as an additional selling point around the benefits of participating in the TRS- ActiveCare program.
Many of these benefits pair well with high deductible health plans like those that are offered as part of the TRS-ActiveCare program.
These benefits are often highly valued by employees, which would help to improve satisfaction rates in the program, and further the draw to TRS.
There are also some complexities to consider relating to offering voluntary benefits under TRS- ActiveCare, including:
The introduction of these benefits would require a change in legislation, as TRS-ActiveCare was created specifically to offer health insurance to districts. Voluntary benefits are currently outside the purview of TRS.
The addition of these benefits would require some additional administration, which would generate some costs to set up. Further, there would be costs related to negotiating the rates and renewals of these benefits annually. However, the costs associated with this administration could be passed on in the cost of each benefit.
Options To Consider Next Year
One of the options below is to turn TRS ActiveCare a “stop loss carrier” for all intents and purposes. Districts retain risk up to a certain point, ceding additional risk to the TRS ActiveCare pool.
In future years, other underwriting options may be considered with approaches that account for the specific risks and claims experience of each district, while retaining the benefits of the large risk pool and the efficiencies that it creates. There are several possibilities available to TRS to move in this direction, including:
Rating by district – a more granular approach to regional rating would be to rate each district individually. Groups could be rated based on their specific experience, credibility blended with a manual rate from the larger group based on size of the district. This approach allows the larger districts to be more impacted by their individual experience and the cost of care in their area. The most likely scenario would be to rate districts over a certain size individually and rate the others regionally. This could be accomplished under this option by pegging 100% manual credibility to the desired group size. Note that rating all 1,000 districts individually would be administratively burdensome and would also not be feasible from a risk standpoint for small districts.
Self-insuringeachdistrict-themostaggressiveapproachwouldbetoalloweachdistricttoself- insure their claims with TRS. The districts would have the opportunity to benefit from the negotiating power of the larger TRS program for administrative fees but would retain all other risks associated with self-insurance. While this approach could potentially benefit some larger districts, it is unlikely to be a suitable approach for the majority of the TRS system.
Minimum premium – a hybrid approach to district level funding would be a plan where TRS and districts agree that the individual district will be responsible for paying all claims up to an agreed upon level, with TRS responsible for the excess. TRS would also be responsible for processing claims and administrative services. In general, the district is exposed to this maximum aggregate level, effectively having overall aggregate stop loss insurance.
In a flexible carrier approach, there are two main ways to vary the carrier lineup. The first would be to create a network of carriers, on a regional basis, that would only offer one carrier per region, based on the lowest discounts in that area. Currently Blue Cross Blue Shield is the only carrier that is offered through the TRS-ActiveCare program (Baylor Scott & White HMO and Blue Cross Blue Shield HMO are also offered regionally), which provides the best overall discount on a Texas- wide basis. This approach would diversify the number of carriers offered, taking advantage of the network strength of various carriers regionally. For example, if Aetna is more cost effective in Region A, they might replace Blue Cross Blue Shield in that region, while CIGNA may be more cost effective than Blue Cross Blue Shield in region B, making them the carrier offered. This network would incorporate multiple carriers, but only offer one per region. TRS-ActiveCare could decide how granular the regional structure would be created, potentially selecting a carrier by MSA, ESC, or broader geography. While the approach would be more cost effective on a discount basis, TRS would need to consider member disruption, as well as the impact on ASO fees and benefits administration costs associated with a multi-carrier environment.
TRS ActiveCare was blindsided by competitors offering better coverage and lower rates for member districts. These vendors, particularly FBS/Caprock, employed proven risk management strategies including specialty drug risk transfer to manufacturer assistance program. “If we can’t beat them maybe we should join them” seems to be a growing sediment here:
In addition to manufacturer copay assistance, there are charitable organizations, government grants, and other non-profit foundations that work to help patients cover the cost of their high-cost medications. These organizations cover the highest-cost specialty medications for patients with and without insurance. Unlike the manufacturer copay assistance, these organizations cover the entire cost of the medication.
There are a handful of third-party vendors that have developed programs to help plan sponsors enroll their members in these programs. These programs are robust and work to essentially eliminate the entire specialty drug benefit. Third-party vendors that sponsor these programs retain a fee of roughly 20-30% of the savings realized. This means that the savings available to plan sponsors can be up to 70-80% of their entire specialty drug costs.
Reference Based Pricing
Whoa! Reference Based Pricing in it’s truest form is kryptonite to Blue Cross’s business model. It will never happen. But, a limited application of Reference Based Pricing, i.e., for specified medical encounters such as knee surgery, is a possibility. If implemented on a limited basis Blue Cross will tout “Yes, we do Reference Based Pricing too” when they really don’t.
Reference based pricing – While this may not be achievable at the entire network level, it may be available in certain types of services or in certain areas. This is useful to decrease variability in pricing for the plan. It would incent members to use the lower cost providers but would require information be available for members to shop. If the members used providers that were above the reference price, the additional cost would be shifted to the member.
Individual Health Insurance Market Is Cheaper For Spousal Coverage
As noted, spouse coverage through the TRS-ActiveCare program is currently very expensive for participants. In the individual market, there are comparable plans available that could be procured at lower cost to the spouse in many areas, across many ages and salary levels throughout the state due to federal subsidies. As a result, it may be worth considering revising the way spouse coverage is offered to participants, by giving districts the option to eliminate it or increasing state/district subsidy levels to current group coverage for spouses.