Annual check-up benefit options annual report

              25
2011
Annual Report
Benefit Options
January 1, 2011 through
December 31, 2011
Janice K. Brewer
Governor
Scott A. Smith
Director
Arizona Department of Administration
State of Arizona
Arizona Department of Administration
Benefit Services Division
FOREWORD
Benefit Options is the program name for the benefits offered to State of Arizona
employees and retirees. This report was prepared to give a broad overview of Benefit
Options.
The information provided in the report was gathered from contracted vendors
participating in the Benefit Options insurance programs. This report was compiled to
meet the requirements of A.R.S. §38-652 (G) and A.R.S. §38-658 (B).
The data shown is presented for the period January 1, 2011 through December 31,
2011. The active and retiree plans were concurrent for this period.
Any questions relating to the contents of this report should be addressed to:
Benefit Options
Arizona Department of Administration,
Benefit Services Division
100 N. 15th Avenue, Suite 103
Phoenix, Arizona 85007
Telephone: 602-542-5008
Fax: 602-542-4744
Contents
Report Background 1
Executive Summary 2
Health Insurance Trust Fund Summary 3
Enrollment in Benefit Options Medical Plans 4
Medical Premiums 6
Expenses vs. Premiums for Active and Retired Members 7
Expenses for Benefit Options Self-Funded Plans 8
Medical Expenses Associated with Medical Diagnoses 9
Hospital Care 10
Emergency Room Visits 12
Urgent Care Visits 12
Physician Visits 12
Annual Prescription Use 14
Generic and Name-Brand Prescription Use 15
Prescription Use by Therapeutic Class 15
Prescription Use by Type of Drug 16
Annual Pharmacy Expenses by Age 17
Benefit Options Dental Plans 18
Dental Rates 19
Wellness 20
Life, Disability, Vision Insurance and Flexible Spending Accounts Premiums 22
Health Insurance Vendor Performance Standards 23
Audit Services 34
Glossary of Terms 35
Appendix A - Plan Year Cash Flow Reconciliation 39
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
1
Report Background
This document has been assembled to report the financial status of the Employee
Health Insurance Trust Fund pursuant to A.R.S. §38-652 (G), which reads:
G. The department of administration shall annually report the financial status of
the trust account to officers and employees who have paid premiums under one
of the insurance plans from which monies were received for deposit in the trust
account since the inception of the health and accident coverage program or since
submission of the last such report, whichever is later.
The Benefit Options program is accounted for in two different funds. The Special
Employee Health Fund, also known as fund 3015 or the Health Insurance Trust Fund
(HITF), encompasses the medical and dental programs and the appropriated
expenditures for ADOA Benefit Services operations. The ERE/Benefits Administration
Fund or fund 3035, is primarily a “pass through” fund for other benefits including vision,
disability insurance, life insurance and flexible spending accounts.
The benefits offered through the program fall into one of two types — self-funded or
fully-insured. The health benefit plan is self-funded; whereas the dental plans, vision
plan, disability insurance, and life insurance plans are fully-insured.
The State’s self-funded medical plan began on October 1, 2004, and consists of a
carved out pharmacy plan with integrated or nonintegrated options for the medical plan.
The integrated option combines the functions of; claims review and payment, network
access, and utilization review and utilization management (URUM), and case
management and disease management. The non-integrated option is similar, but the
URUM function is carved out to a separate contracted vendor.
Schedules of premiums received and accounted for in fund 3015; incurred and paid
medical/drug claims; expenses related to the medical and dental plans; and distribution
by enrollment are included within this Annual Report. A summary of premiums collected
and paid for life insurance, vision insurance and flexible spending accounts has also
been included for fund 3035. The Cash Flow Reconciliation charts for the two funds can
be found in Appendix A. The difference in the values presented in Appendix A and the
Health Insurance Trust Fund (HITF) Summary on page 4 is a result of the difference
between when premiums and/or services are incurred and when they are paid.
Appendix A was prepared on a cash basis, where as, the HITF Summary was prepared
on an accrued and paid basis.
All data provided herein is for the Plan Year 2011 (January 1, 2011 – December 31,
2011).
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
2
Executive Summary
During the 2011 Plan Year, the Benefit Services Division (BSD) Health Plan offered a
comprehensive insurance package to over 128 thousand members consisting of active
State and University employees, retirees, and their qualified dependents. The benefits
include medical, pharmaceutical, dental, flexible spending, vision, wellness, life, and
disability insurance.
Premiums
Based on the 2011 Contribution Strategy, the total premiums expected were $810
million with total expenses for the plan of $702 million, resulting in an expected net
operational gain of $108 million.
Medical Expenses
Medical claims expenses accounted for $455 million of the total health plan cost during
2011. The average cost to insure each member was $5,065.50.
• Average active member cost was $4,795.78
• Average retiree cost was $8,452.79
The leading diagnosis category when analyzed by cost was the musculoskeletal
system, accounting for $56 million or just over 12% of total claims paid.
Medical Utilization
Claims showed members are seeking the care of a physician or specialist for the
majority of their medical needs. There were 192 emergency room visits, 194 urgent
care visits, and 4,270 physician visits per 1,000 members on the plan indicating
appropriate care.
Pharmacy Expenses
Total pharmacy expense was $115 million. The five most expensive drug classes are
maintenance drugs used to control and prevent chronic diseases. Diabetes drugs were
the highest cost with 11 million dollars or 15% of the total pharmacy expenses.
Pharmacy Utilization
A reported 1.5 million prescriptions were filled during the 2011 plan year.
• Retirees filled an average of 25.1 prescriptions per year
• Active members averaged 10.4 per year
Performance Measures
Financial guarantees are in place to manage the performance of the contacted Health
Plan vendors. Penalties collected for the prior plan year totaled over $201,000.
Review
The 2011 Plan Year demonstrated a balance of expenses and premiums that allowed
the State to offer members comprehensive and affordable insurance coverage. The
State effectively controlled the rise in health care costs through quality benefit design,
administrative oversight, strategic planning and auditing, and effective contract
management. Detailed evidence of the State’s Health Plan accomplishments can be
reviewed herein.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
3
Health Insurance Trust Fund Summary
Table 1 provides a summary of receipts, expenses, and enrollment incurred during the
2011 Plan Year and paid through March 2012.
ADOA Benefit Options
refers to the self-funded
medical program and
includes Aetna, Blue
Cross Blue Shield of
Arizona administered
by AmeriBen, CIGNA,
and United Healthcare
networks. UHC Secure
Horizons, BCBS (NAU),
and all dental plans are
fully-insured.
State and University
employees and retirees
choose coverage from
one of the self-funded
networks. However,
Blue Cross Blue Shield
is a fully-insured option
available only to NAU
employees and NAU
retirees. UHC Secure
Horizons is a fully-insured option that was available to Medicare-eligible retirees until
the contract terminated December 31, 2009.
The Medicare Part D Subsidy is available to employers who provide a qualified
pharmacy plan to Medicare-eligible retirees. Rebates & Recoveries consist of rebates
paid by drug manufacturers, performance penalties assessed to contractors for not
achieving performance guarantees, overpayment recoveries, and stop-loss reinsurance
payments. Reserve (IBNR) is the amount of money that must be held in reserve for the
purpose of paying claims that have been incurred but have not been reported. Stop-loss
is a “-catastrophic claim-” reinsurance program that covers individual medical/drug
plan expenses over $500 thousand with a lifetime maximum of $2 million.
*The data is for the incurred period October 2009 through September
2010 and paid through December 2010.
Table 1: Health Insurance Trust Fund Summary
2011 2009-2010*
Receipts (accrual basis)
ADOA Benefit Options $733,523,433.75 $664,852,966.76
UHC Secure Horizons $1,839,423.23
BCBS (NAU) $34,511,692.27 $30,718,640.22
Dental $42,927,763.06 $42,061,539.64
Total $810,962,889.08 $739,472,569.85
Expenses
Medical Claims (accrual basis) $455,227,059.25 $442,328,374.53
Drug Claims (accrual basis) $115,534,293.24 $104,245,794.65
Medicare Part D Subsidy ($2,651,407.78) ($1,249,718.22)
Rebates & Recoveries ($10,606,711.75) ($12,994,653.98)
Reserve for Unreported Claims $38,007,320.98 $36,270,926.71
Secure Horizons expense $2,260,433.67
BCBS Payments $34,320,311.68 $30,714,058.44
Administration Fees $27,016,754.23 $29,092,947.64
Stop-Loss Premiums $6,470,888.20
Appropriated Expenses $4,190,980.95 $3,846,184.78
Dental Costs $41,767,766.83 $40,848,735.78
Total $702,806,367.63 $681,833,972.20
Difference $108,156,521.45 $57,638,597.65
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
4
Enrollment in Benefit Options Medical Plans
The Benefit Options group medical plan is available to the following:
 Eligible State employees and University staff, officers, and elected officials
 State retirees receiving pension benefits through any of the State retirement
systems
 State employees or University staff accepted for long-term disability benefits
 employees of participating political subdivisions
 State employees or University staff eligible for COBRA benefits
There are three medical plans offered to active participants under Benefit Options.
They are the Exclusive Provider Organization (EPO), the Preferred Provider
Organization (PPO), and the Health Savings Account Option (HSA).
The EPO Plan
If the employee chooses the EPO plan under Benefit Options, services must be
obtained from a Network provider. Out-of-Network services are only covered in
emergency situations. Under the EPO plan, the employee will pay the monthly premium
and any required copay at the time of service. The EPO plan is available with all four
Networks: Aetna, Blue Cross Blue Shield of Arizona Network administered by
AmeriBen, CIGNA, and UnitedHealthcare.
The PPO Plan
If the employee chooses the PPO plan under Benefit Options, services can be provided
in-Network or out-of-Network, but there will be higher costs for out-of-Network services.
Additionally, there is an in-Network and out-of-Network deductible that must be met.
Under the PPO plan, the employee will pay the monthly premium and any required
copay or coinsurance (percent of the cost) at the time of service. The PPO plan is
available with Aetna, Blue Cross Blue Shield of Arizona Network administered by
AmeriBen, and UnitedHealthcare.
The High Deductible Health Plan (HSA Option)
If the employee chooses to enroll in the High Deductible Health Plan (HSA Option), the
employee will be eligible to open a Health Savings Account (HSA), which is a special
type of account that allows tax-free contributions, earnings, and healthcare-related
withdrawals.
If the HSA Option is chosen, the employee can use in-Network and out-of-Network
providers. Members pay the copay and/or coinsurance after the deductible is met.
The premiums for the HSA Option are lower, qualified preventative services are free,
and members pay coinsurance and/or copays.
The table on page 5 shows how enrollment was distributed between networks and
between active, retired, university, and COBRA members.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
5
* The data is for the incurred period October 2009 through September 2010.
**UHC Secure Horizons plan was not offered during the 2011 Plan Year.
Network Plan Type Subscribers Members ** Subscribers Members **
AETNA
Active EPO 1,273 2,865 1,037 2,338
Retiree EPO 261 342 278 354
University EPO 1,230 2,246 981 1,767
COBRA EPO 20 30 21 32
Active PPO 81 146 75 123
Retiree PPO 51 62 72 90
University PPO 142 231 116 191
COBRA PPO 0 1 2 3
Active HSAO 146 285 109 194
Retiree HSAO - - - -
University HSAO 194 347 136 256
COBRA HSAO 1 1 3 5
AmeriBen
Active EPO 5,839 14,441 5,528 13,516
Retiree EPO 1,098 1,443 1,104 1,459
University EPO 1,705 3,558 1,524 3,161
COBRA EPO 35 47 60 88
Active PPO 240 428 205 360
Retiree PPO 147 181 220 267
University PPO 256 468 250 460
COBRA PPO 3 4 7 11
CIGNA
Active EPO 2,942 6,913 2,688 6,398
Retiree EPO 624 803 688 900
University EPO 1,134 2,283 1,127 2,209
COBRA EPO 9 11 25 37
UnitedHealthcare
Active EPO 22,059 51,942 23,337 53,633
Retiree EPO 4,735 6,126 4,838 6,318
University EPO 11,683 25,938 12,340 26,505
COBRA EPO 158 206 402 588
Active PPO 520 948 645 1,145
Retiree PPO 131 168 178 233
University PPO 630 1,165 761 1,429
COBRA PPO 10 12 26 39
Blue Cross Blue Shield
NAU only PPO 2,821 4,391 2,809 2,961
SecureHorizons
Medicare only HMO - - 2,223 2,890
Total 60,177 128,029 63,814 129,959
Table 2: Average Monthly Enrollment
2011 2009-2010*
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
6
Medical Premiums
The tables below summarize medical rates by pay period for active and retired
members.
*University of Arizona has 24 pay period deductions; please refer to your Human Resources website for
more information.
**Blue Cross Blue Shield of Arizona Network administered by AmeriBen.
Table 3: Pay Period Medical Premiums (26 pay periods)*
Plan Tier Employee
Premium
State
Premium
Total
Premium
Agency HSA
Contribution
Emp only $18.46 $253.85 $272.31 -
Emp+adult $54.92 $522.92 $577.84 -
Emp+child $46.62 $497.54 $544.16 -
Family $102.00 $648.46 $750.46 -
Emp only $71.54 $342.00 $413.54 -
Emp+adult $161.54 $695.08 $856.62 -
Emp+child $152.77 $667.85 $820.62 -
Family $224.31 $890.31 $1,114.62 -
Emp only $12.00 $232.15 $244.15 $27.70
Emp+adult $47.08 $466.15 $513.23 $55.39
Emp+child $37.38 $450.92 $488.30 $55.39
Family $89.08 $583.85 $672.93 $55.39
EPO
(Aetna,
BCBSAZ/AmeriBen**,
CIGNA,
UnitedHealthcare)
PPO (Aetna,
BCBSAZ/AmeriBen**,
UnitedHealthcare)
HSA (Aetna)
Tier Premium
Payment
Retiree only $593
Retiree +1 $1,387
Family $1,869
Retiree only $943
Retiree +1 $2,219
Family $3,074
PPO
(Aetna,
BCBSAZ/AmeriBen**,
UnitedHealthcare)
EPO
(Aetna,
BCBSAZ/AmeriBen**,
CIGNA,
Table 4: Medical Premiums (Without Medicare)
Premium
Payment
$442
$878
$1,024
$1,166
$789
$1,576
$1,740
$1,980
Tier
PPO
(Aetna,
BCBSAZ/AmeriBen**,
UnitedHealthcare)
Retiree only
Retiree +1 (Both Medicare)
Retiree +1 (One Medicare)
Family (Two Medicare)
Retiree only
Retiree +1 (Both Medicare)
Retiree +1 (One Medicare)
Family (Two Medicare)
EPO
(Aetna,
BCBSAZ/AmeriBen**,
CIGNA,
UnitedHealthcare)
Table 5: Monthly Medical Premiums (With Medicare)
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
7
Expenses vs. Premiums for Active and Retired Members
The figure below shows how the average monthly premiums compared to the average
monthly cost for active and retired members.
* The data is for the incurred period October 2009 through September 2010.
ADOA developed an employee/employer cost strategy that provided affordable health
insurance to all State and University employees. The EPO plan was offered to
employees for an employee contribution of $39 for single, $97 for employee plus adult,
$79 for employee plus child, and $178 for family coverage. Monthly premiums were
determined from actual experience and the true cost of the coverage.
The 2011 contribution strategy for the self-insured medical plan resulted in employees
paying 11% of the average monthly total premium, while the State paid the remaining
89%. The contribution strategy for the dental plans resulted in employees paying 85%
of the average monthly total premium, while the State paid the remaining 15%.
Pursuant to A.R.S. §38.651.01(B.), retiree and active medical expenses shall be
grouped together to “obtain health and accident coverage at favorable rates.” This
requirement results in retiree premium rates lower than what their experience would
otherwise dictate.
$-
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
$800.00
Active Premium
Active Expense
Retiree Premium
Retiree Expense
Active Premium
Active Expense
Retiree Premium
Retiree Expense
Figure 1: Average Monthly Premiums and
Expenses per Member
Subscriber Paid
State Paid
Drugs
Medical
Administrative
2011 2009-2010*
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
8
Expenses for Benefit Options Self-Funded Plans
The tables below show the distribution of the self-funded expenses. Table 6 shows the
expenses distributed between active/retiree and EPO/PPO members. The average
annual cost to insure each type of subscriber/member is also provided.
Table 7 below shows the distribution of expenses by benefit plan.
Expenses Overall Active Retiree EPO PPO HSAO
Medical Claims (accrual basis) $455,227,059 $410,610,823 $44,616,236 $434,664,778 $19,859,588 $702,693
Drug Claims (accrual basis) $115,534,293 $87,652,031 $27,882,262 $106,481,018 $9,000,169 $53,105
Medicare Part D Subsidy ($2,651,408) ($2,651,408) ($2,527,836) ($123,571)
ERRP Reimbursement ($429,413) ($374,869) ($33,567) ($327,021) ($14,941) ($529)
Rebates & Recoveries ($10,606,712) ($9,259,440) ($1,347,272) ($10,056,353) ($536,314) ($14,045)
Reserve (IBNR) $38,007,321 $33,179,605 $4,827,716 $36,035,204 $1,921,788 $50,329
Administration Fees $27,016,754 $23,697,480 $3,319,274 $25,815,127 $1,040,727 $160,900
Stop-Loss Premiums $0 $0 $0 $0 $0 $0
Appropriated Expenses $4,190,981 $3,676,078 $514,903 $4,004,578 $161,443 $24,960
Total $626,288,876 $549,181,709 $77,128,144 $594,089,496 $31,308,889 $977,414
Enrollment in self-funded plans
Subscribers $57,355 $50,309 $7,047 $54,804 $2,209 $342
Members $123,638 $114,513 $9,125 $119,193 $3,812 $632
Annual cost
Per subscriber $10,919 $10,916 $10,945 $10,840 $14,171 $2,861
Per member $5,066 $4,796 $8,453 $4,984 $8,213 $1,546
Table 6: Self-funded Expenses by Active, Retiree, EPO, and PPO Subscribers and Members
Expenses (in dollars) Overall
Active/
EPO Active/ PPO
Active/
HSAO Retiree/ EPO
Retiree/
PPO
Medical Claims (accrual basis) $455,227,059 $391,642,686 $18,265,444 $702,693 $43,022,092 $1,594,144
Drug Claims (accrual basis) $115,534,293 $80,190,719 $7,408,207 $53,105 $26,290,300 $1,591,962
Medicare Part D Subsidy ($2,651,408) ($2,532,053) ($119,355)
ERRP Reimbursement ($429,413) ($354,985) ($13,742) ($529) ($32,368) ($1,199)
Rebates & Recoveries ($10,606,712) ($8,768,290) ($477,105) ($14,045) ($1,288,063) ($59,209)
Reserve (IBNR) $38,007,321 $31,419,653 $1,709,623 $50,329 $4,615,551 $212,165
Administration Fees $27,016,754 $22,650,551 $886,029 $160,900 $3,164,576 $154,698
Stop-Loss Premiums $0 $0 $0 $0 $0 $0
Appropriated Expenses $4,190,981 $3,513,673 $137,446 $24,960 $490,906 $23,998
Total $626,288,876 $520,294,007 $27,915,902 $977,414 $73,730,941 $3,397,203
Enrollment in self-funded plans
Subscribers $57,355 $48,086 $1,881 $342 $6,718 $328
Members $123,638 $110,479 $3,402 $632 $8,714 $411
Annual cost
Per subscriber $10,919 $10,820 $14,841 $2,861 $10,975 $10,344
Per member $5,066 $4,709 $8,207 $1,546 $8,461 $8,271
Table 7: Self-funded Expenses by Benefit Plan
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
9
Medical Expenses Associated with Medical Diagnoses
The table below shows how medical expenses were distributed among different
diagnoses. More dollars are spent on treating conditions related to the musculoskeletal
system than on any other diagnosis.
* The data is for the incurred period October 2009 through September 2010.
Note: Some statistics may vary slightly from previous annual reports due to the late receipt of program
data following the completion of the previous annual report. In no case does the variation represent a
substantive change in trend or comparative values.
Table 8: Medical Expenses by Diagnosis – Actives & Retirees
Actives Retirees
All
members Actives Retirees
All
members
Diagnosis % of Total % of Total % of Total % of Total % of Total % of Total
Musculoskeletal System and Connective Tissue 12.25% 14.23% 12.31% 12.65% 14.57% 12.83%
Supplementary Classification of Factors Influencing
Health Status and Contact With Health Service 10.23% 9.73% 10.21% 10.16% 8.38% 9.99%
Neoplasms 9.88% 17.39% 10.09% 8.22% 12.73% 8.64%
Symptoms, Signs, and Ill-Defined Conditions 9.69% 7.92% 9.64% 9.92% 8.16% 9.75%
Circulatory System 7.89% 8.28% 7.90% 8.05% 13.47% 8.56%
Injury and Poisoning 7.65% 5.70% 7.60% 9.44% 6.14% 9.13%
Digestive System 6.95% 5.69% 6.92% 7.32% 5.34% 7.14%
Genitourinary System 6.85% 8.55% 6.90% 7.32% 9.78% 7.55%
Nervous System and Sense Organs 6.39% 9.36% 6.48% 5.63% 7.95% 5.85%
Respiratory System 4.90% 3.77% 4.87% 4.92% 4.40% 4.87%
Pregnancy, Childbirth, and The Puerperium 4.26% 0.00% 4.14% 4.37% 0.02% 3.96%
Endocrine, Nutritional and Metabolic Diseases, and
Immunity Disorders 3.77% 3.97% 3.78% 3.51% 3.56% 3.52%
Mental Disorders 2.55% 1.36% 2.52% 2.30% 1.46% 2.22%
Infectious and Parasitic Diseases 2.24% 1.91% 2.23% 1.90% 1.22% 1.84%
Skin and Subcutaneous Tissue 1.59% 1.24% 1.58% 1.53% 1.65% 1.54%
Congenital Anomalies 1.52% 0.14% 1.48% 1.49% 0.20% 1.37%
Blood and Blood-Forming Organs 0.99% 0.77% 0.99% 0.92% 0.96% 0.93%
Certain Conditions Originating In The Perinatal Period 0.38% 0.00% 0.37% 0.35% 0.00% 0.32%
Supplementary Classification Of External Causes of
Injury and Poisoning 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Grand Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2011 2009-2010*
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
10
Hospital Care
Inpatient hospital care represents a significant portion of total medical expenses: 36%
for active members and 33% for retired members. The figures below show a
comparison of hospital admissions and the average length of stay for active and retired
members and EPO, PPO, and HSA members.
Active
71.8
Retiree
165.1
EPO
76.1
PPO
93.6
HSAO
112.0
Active
67.5
Retiree
189.2
EPO
77.3
PPO
85.2
HSAO
27.0
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
Admissions
2011 2009-2010*
Figure 2: Admissions per 1,000 Members
* The data is for the incurred period October 2009 through September 2010
Active
4.1
Retiree
5.0
EPO
4.2
PPO
4.6
HSAO
2.8
Active
4.1
Retiree
6.4
EPO
4.6
PPO
5.7
HSAO
2.0
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Days 2011 2009-2010*
Figure 3: Average Length of Stay
* The data is for the incurred period October 2009 through September 2010
Note: Mental health, substance abuse, and maternity admissions are included.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
11
Hospital Care (continued)
The figures below show how active/retired members and EPO/PPO/HSAO members
compared statistically in number of hospital days and average cost per admission. As a
group, retirees spent 2.8 times as many days in the hospital as active members. Also,
PPO members spent 1.3 times as many days in the hospital as EPO members. On
average, PPO members cost per admission was $1,930 higher than EPO members.
Active
294.3
Retiree
827.4
EPO
318.8
PPO
433.3 HSAO
313.6
Active
279.8
Retiree
1,209.9
EPO
352.3
PPO
486.0
HSAO
53.0
-
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
Days
2011 2009-2010*
Figure 4: Days per 1,000 Members
Active $13,895
Retiree $10,960
EPO $13,595
PPO $15,526
HSAO $7,005
Active $14,564
Retiree $12,311
EPO $13,983
PPO $18,920
HSAO $7,334
-
2,000.0
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
14,000.0
16,000.0
18,000.0
20,000.0
2011 2009-2010*
Figure 5: Average Cost per Admission
*The data is for the incurred period October 2009 through September 2010.
*The data is for the incurred period October 2009 through September 2010.
Note: Mental health, substance abuse, and maternity admissions are included.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
12
Emergency Room Visits
During Plan Year 2011, there were approximately 193 emergency room visits per 1,000
members of the self-funded plan. The average plan cost per emergency room visit was
$1,139.26. This cost is indicative of proper utilization of emergency room visits. These
figures include facility claims and professional fees.
Urgent Care Visits
During Plan Year 2011, there were approximately 194 urgent care visits per 1,000
members of the self-funded plan. The average plan cost per urgent care visit was
$98.43.
Physician Visits
During Plan Year 2011, there were approximately 4,270 physician visits per 1,000
members (or each member of the self-funded plan visited a physician approximately 4.3
times). The average plan cost per office visit cost was $95.66.
Figures 6 and 7 show how total active and retiree medical expenses were distributed by
type of care. 2.25% of medical expenses for active employees were spent for
emergency room care while 1.25% of medical expenses for retired members were spent
for emergency room care.
Figure 6: Active Employee Medical Expense
by Place of Service
Office, 26.69%
Outpatient Hospital,
23.76%
Emergency Room, 2.25%
Home H ealth, 2.35%
Independent Laboratory,
2.71%
Ambulatory Surgical
Center, 4.15%
Ambulance, 1.42%
Inpatient Hospital,
35.64%
Urgent Care Facility,
0.37%
Other, 0.68%
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
13
Figure 7: Retiree Medical Expense by Place of Service
Office, 30.15%
Inpatient Hospital,
32.58%
Urgent Care Facility,
0.10%
Outpatient Hospital,
22.25%
Ambulatory Surgical
Center, 4.06%
Emergency Room,
1.25%
Other, 2.30%
Independent Ambulance, 1.19%
Home Health, 3.84% Laboratory, 2.29%
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
14
Annual Prescription Use
The figure below compares the average number of prescriptions filled last plan year by
active and retired members.
Active
10.4
Retiree
25.1
Active
10.1
Retiree
30.1
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2011 2009-2010*
Figure 8: Average Number of Prescriptions per
Member per Year
*The data is for the incurred period October 2009 through September 2010.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
15
Generic and Name-Brand Prescription Use
The table below shows how total pharmacy expenses were distributed among generic,
preferred, and non-preferred types of drugs.
*The data is for the incurred period October 2009 through September 2010.
Prescription Use by Therapeutic Class
The table below shows the ten most utilized classes of drugs according to total
expense. More dollars were spent on "Diabetes", than on any other therapeutic class.
*The data is for the incurred period October 2009 through September 2010.
Table 10: Top Therapeutic Classes by Total Expense
Therapeutic Class Total Cost Percent Total Cost Percent
Diabetes $11,135,835 15.17% $9,602,335 8.70%
Cardiovascular Disease - Lipid $11,067,035 15.08% $10,065,596 9.10%
Behavioral Health - Other $8,742,497 11.91% $7,078,441 6.40%
Asthma $8,291,055 11.30% $7,705,106 7.00%
Inflammatory Disease $7,446,035 10.15% $6,527,936 5.90%
Behavioral Health - Antidepressants $6,327,975 8.62% $7,431,696 6.70%
Infectious Disease - Viral $5,377,764 7.33% $5,214,141 4.70%
Pain Management - Analgesics $5,168,510 7.04% $5,965,851 5.40%
Upper Gastrointestinal Disorders - Ulcer $4,947,846 6.74% $5,549,570 5.00%
Cardiovascular Disease - Hypertension $4,884,327 6.66% $5,450,331 4.90%
Anticonvulsants
Total $73,388,879 100.00% $70,591,003 63.80%
2011 2009-2010*
Table 9: Claim Distribution for 3-tier Formulary
Total Prescriptions Percent Total Prescriptions Percent
Tier 1 Generic ($10 copay) 1 ,058,605 72.1% 9 80,591 68.0%
Tier 2-Preferred ($20 copay) 3 02,013 20.6% 361,208 25.0%
Tier 3-Non-Preferred ($40 copay) 1 07,477 7.3% 101,173 7.0%
Total 1,468,096 100.0% 1,442,972 100.0%
2011 2009-2010*
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
16
Prescription Use by Type of Drug
The table below shows the ten most utilized drugs according to total expense. Lipitor, a
cholesterol controlling medication, is the leading prescription for the plan year.
*The data is for the incurred period October 2009 through September 2010.
Table 11: Top Ten Drugs by Total Expense
Drug Name Total Gross Cost Percent Drug Name Total Gross Cost Percent
Lipitor $3,945,794 3.42% Lipitor $3,440,283 3.30%
Crestor $2,753,127 2.38% Enbrel $2,289,241 2.20%
Humira $2,664,647 2.31% Advair diskus $2,063,084 1.98%
Singulair $2,494,553 2.16% Humira $2,062,801 1.98%
Enbrel $2,220,952 1.92% Crestor $2,000,769 1.92%
Cymbalta $2,093,297 1.81% Singulair $1,921,456 1.84%
Plavix $2,073,300 1.79% Plavix $1,769,859 1.70%
Carbaglu $1,877,138 1.62% Cymbalta $1,663,635 1.60%
Copaxone $1,789,746 1.55% Actos $1,566,236 1.50%
Lexapro $1,666,472 1.44% Oxycontin $1,461,868 1.40%
Total $23,579,026 20.41% Total $20,239,230 19.41%
2011 2009-2010*
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
17
Annual Pharmacy Expenses by Age
The figure below shows how pharmacy expenses increase with age among plan
members.
$341
$554
$1,291
$2,094
$407
$614
$1,439
$2,270
$0
$500
$1,000
$1,500
$2,000
$2,500
2011 2009-2010*
Figure 9: Pharmacy Expense per Utilizer per Year
0-18 yrs
19-39 yrs
40-64 yrs
65+ yrs
*The data is for the incurred period October 2009 through September 2010.
Note: Some statistics may vary slightly from previous annual reports due to the late receipt of program
data following the completion of the previous annual report. In no case does the variation represent a
substantive change in trend or comparative values.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
18
Benefit Options Fully-Funded Dental Plans
Benefit Options offers two different dental plan types: a Prepaid Plan provided by Total
Dental Administrators and an Indemnity Plan provided by Delta Dental.
Prepaid Plan – Total Dental Administrators (TDA)
Key components of Prepaid Plan include:
 See a Participating Dental Provider (PDP) to provide and coordinate all dental
care
 No annual deductible or maximums ($200.00 maximum reimbursement for non-contracted
emergency services) under Total Dental Administrators
 No claim forms (except for emergency services)
Indemnity/PPO Plan – Delta Dental
Key components of Indemnity/PPO Plan include:
 May see any dentist. Deductible and/or out-of-pocket payments apply
 A maximum benefit of $2,000 per person per plan year for dental services
 $1,500 per person lifetime for orthodontia
 May need to submit a claim form for eligible expenses to be paid
 Benefits may be based on reasonable and customary charges
The following table show how active employee and retiree dental enrollments were
distributed among plans.
Delta TDA TOTAL
Actives 34,088 16,179 50,267
Retirees 10,479 2,184 12,662
Table 12. Average Monthly Enrollment
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
19
Dental Rates
The table below summarizes monthly dental rates for active and retired members.
Table 13: Summary of Monthly Dental Rates
Active Employees
Employee State Total Employee State Total Employee State Total
Delta Dental $30.98 $4.96 $35.94 $70.87 $9.92 $80.79 $123.12 $13.70 $136.82
Total Dental Admin. $5.00 $4.96 $9.96 $9.00 $9.92 $18.92 $14.00 $13.70 $27.70
Retirees
Delta Dental $35.94 $80.79 $136.82
Total Dental Admin. $9.96 $18.92 $27.70
Single Coverage Family Coverage
Single Coverage Family Coverage
Employee +One Coverage
Employee +One Coverage
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
20
Wellness
Worksite wellness services are available to State employees as part of the employer
benefits through the Benefit Options Program. Employees have access to preventive
health screenings, annual flu vaccines and Employee Assistance Program (EAP)
benefits.
The table below shows the total utilization of the health screening benefit during the
2011 Plan Year and the number of at-risk employees referred to follow up care.
* The basic Mini Health Screening includes; full lipid panel, fasting blood glucose, blood pressure, BMI,
and body composition.
** Optional tests offered as a package with the basic Mini Health Screening.
*** Participants are not unique.
The table below shows the total utilization for the 2011 Annual Flu Vaccine Program
held October through December. Wellness provided a total of 14,039 vaccines.
Employees had access to the flu vaccine at a total of 477 locations, and 89% of
members received shots at a worksite clinic.
Table 14: Plan Year 2011 Screenings
Events Participants*** Referrals
Mini Health Screening* 79 2,994 499
Osteoporosis Screening** 1,308 12
Prostate Specific Antigen (PSA)** 273 20
Facial Skin Analysis** 1,769 N/A
Mobile Onsite Mammography 63 1,168 33
Prostate Onsite Projects 23 517 63
Total 165 8,029 627
Locations Participants
State Agency Worksite 178 7,668
University Worksite 38 3,108
Combined Worksite (Wesley Bolin) 6 1,690
Open Enrollment Clinics 4 163
Public Clinics 251 1,410
Total 477 14,039
Table 15: Plan Year 2011 Flu Vaccines
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
21
The table below shows the utilization for the Employee Assistance Program (EAP) and
support services offered to agencies covered under the Arizona Department of
Administration. EAP counseling and FamilySource consultation are the two most
utilized services both telephonically and online.
A three year Wellness strategic plan was put into place midway through 2011 to
enhance the services offered to Benefit Options members. The major strategic plan
achievements for the 2011 Plan Year included wellness rebrand and revised
communications, improved integration with health plan vendors, assignment of quarterly
health topics, and the implementation of health management educational series.
During the third and fourth quarters wellness targeted heart disease and diabetes and
organized 18 health management classes, 16 weight management and, 2 cholesterol
management series. A total of 353 participants utilized the new health management
series and lost on average 11 pounds.
Table 16: Plan Year 2011 EAP Utilization
Eligible
Population Users Utilization
Rate
Live Telephonic Access 1153 5.5%
EAP 894 4.3%
FamilySource 54 0.3%
FinancialConnect 42 0.2%
LegalConnect 163 0.8%
Online Access 3637 17.5%
EAP 568 2.7%
FamilySource 1025 4.9%
FinancialConnect 443 2.1%
GlobalConnect 6 0.0%
Health & Wellness 712 3.4%
LegalConnect 883 4.2%
Critical Incident Stress Debriefing 19 0.1%
Trainings 68 0.3%
Overall Utilization 20,807 4,877 23.4%
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
22
Life, Disability, Vision Insurance and Flexible Spending
Accounts Premiums
The table below shows the amount of premiums collected and paid for life insurance,
disability insurance, vision insurance, and flexible spending accounts (FSA).
*Per contract, vendors paid 55 days in arrears.
Table 17: Summary of Earned Premiums
Vendor Collected Paid Collected Paid
Hartford**
Basic Life $1,380,353 $1,391,396 $2,353,728
Supp Life $11,251,701 $11,249,172 $11,569,012
Dep Life $2,537,922 $2,537,759 $2,635,373
STD $7,505,119 $7,504,655 $7,538,133
LTD $2,830,391 $2,829,702 $2,744,220
Total $25,505,485 $25,512,684 $26,840,466 $23,930,135
Avesis** - Vision $4,703,866 $4,689,082 $4,728,106
ASI - FSA $4,576,280 $4,876,516 $5,861,366
Total $34,785,632 $35,078,282 $36,765,607
2011 2009-2010*
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
23
Health Insurance Vendor Performance Standards
Pursuant to A.R.S. § 38-658(B), the Arizona Department of Administration (ADOA) shall
“...report to the Joint Legislative Budget Committee at least semiannually on the
performance standards for health plans, including indemnity health insurance, hospital
and medical service plans, dental plans, and health maintenance organizations.”
Among the terms of the self-funded health insurance contracts are a number of ADOA-negotiated
performance measures with specific financial guarantees tied to the
contracted performance of the vendors providing various services for the health plans.
If a vendor fails to meet any of the measures within the specified performance range, a
percentage of the annual administrative fee is withheld by ADOA as performance
penalties. This percentage is allocated among the more critical measures of the
contract.
The following is a report of the performance penalties incurred by health plan vendors
not meeting agreed upon performance standards during the year starting January 01,
2011, ending December 31, 2011. In each case below, the final member satisfaction
survey and the Benefit Services Division Vendor Survey for FY 2011 may result in
additional penalties.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
24
A. UnitedHealthcare (Claims Administrator) – penalties to date of $48,105.65,
equaling .33% of the administrative fee and .50% of the vendor’s medical management
fee.
Measure Percent of
Fees at
Risk
Total Percent Assessed Vendor
(Based on Missed Measure)
Written appeals
resolved in 15 calendar
days after receipt of
participant’s request for
review in the case of
pre-service claims.
0.25%  0.10%: Which equals 5 months missed out of 12
months measured.
 Corrective Action: Feedback and coaching was
provided to the team member who misdirected or
caused delay in appeal processing.
97% of all fully
documented claims
received will be
completely processed
within 10 calendar days
after they are received.
0.75%  0.06%: Which equals 1 month missed out of 12
months measured.
 Corrective Action: During the month of May
overall claim receipts were higher than anticipated.
As a result, turn around times increased causing
claims to flow to transaction claim queues later in
the cycle than normal resulting a claims processing
metric of 96.76% against the goal of 97% at the end
of the month. We have made appropriate
adjustments to our cycle so claims will not be
delayed in our queues when we have heightened
claims in the future. In addition, we are currently
back on track and currently sitting at a 98.17% turn
around time in 10 days.
99.3% of claims dollars
submitted for payment
will be accurately
processed and paid.
2%  0.17%: Which equals 1 month missed out of 12
months measured.
 Corrective Action: The measure was missed due
to two errors during the month of February resulting
in a metric of 99.06% against the goal of 99.3%:
o The first was due to a copay error made
by a processor. This person has been
coached on their mistake.
o The second error was due to the wrong
provider suffix paid. The processor had a
revenue code on the claim and should
have changed the suffix from physician to
facility. This processor has also been
coached.
90% of DM members
identified will receive
follow-up outreach and
assessments according
to the program
specifications.
2%  0.50%: Which equals 1 quarter missed out of 4
quarters measured.
 Corrective Action: This metric was missed for Q1
2011. This metric was missed due to the timing of
our mailing since they go out 3 times a year.
Mailings do not go out for Q1, this caused the
metric to drop.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
25
B. AmeriBen (Claims Administrator) – penalties to date of $19,443.92, equaling
0.64% of the vendor’s administrative fee.
Measure Percent of
Fees at
Risk
Total Percent Assessed Vendor
(Based on Missed Measure)
Written appeals
resolved in 45
calendar days after
receipt of participant’s
request for review in
the case of post-service
claims.
0.50%  0.04%: Which equals 1 month missed out of 12
months measured.
 Corrective Action: AmeriBen created an appeal
open log reports that are monitored daily by the
Appeals Supervisor. Logs exceeding 25 days are
reviewed by the Manager of Customer and Network
Relations.
Contractor will process
98% or more of
enrollments within 1
calendar day of receipt
of the file load. This
standard will not apply
during the open
enrollment or option
selection period.
1.25%  0.10%: Which equals 1 month missed out of 12
months measured.
 Corrective Action: To ensure 100% of
enrollments are processed within 1 calendar day
receipt of the file load, AmeriBen established a
backup plan in the event that the primary ADOA
Eligibility Specialist is unavailable due to scheduled
or unscheduled absence.
ID card release report
noting number of ID
cards required and
number released each
day for new hire
enrollments.
0.25%  0.13%: Which equals 2 quarters missed out of 4
quarters measured.
 Corrective Action: All ID card files will continue to
be reviewed by the Account Management Team
prior to release to the print vendor to minimize any
print delays.
97% of all fully
documented claims
received will be
completely processed
within 10 calendar
days after they are
received.
0.75%  0.06%: Which equals 1 month missed out of 12
months measured.
 Corrective Action: AmeriBen identified that claims
were worked in the maintenance queue without
priority. AmeriBen implemented the following action
items:
o A daily report has been prepared, which
identifies explicitly each of the ADOA
claim extracts.
o The Provider Relations Team Lead
receives and reviews the report daily,
assigning ADOA files.
o Transmit claim files with ‘ADOA’ in the file
name standard, to ensure visibility to
ADOA files with or without
reporting/monitoring of extracts.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
26
C. Cigna (Claims Administrator) – penalties to date of $16,642.82, equaling .86% of
the vendor’s administrative fee.
Measure Percent of
Fees at
Risk
Total Percent Assessed Vendor
(Based on Missed Measure)
Average Speed to
Answer <30 seconds.
0.50%  0.08%: Which equals 2 months missed out of 12
months measured.
 Corrective Action: Increased Call Handle Time:
Average call handle time increased more than
expected (almost 10%) as we increased agent
focus on staying on the phone with the customers to
fully resolve their issues. In order to truly "take the
customer out of the middle", our agents began to
conference in the 3rd parties and providers with the
customer on the line instead of just giving them an
800# or directing them to contact their providers.
We expected an increase to handle time, but our
estimates fell short.
 Staffing levels: Staffing levels dropped slightly
below plan due to agent attrition and call volumes.
Planned staffing increases (hiring plan) and will
continued to increase by more than 280 agents in
2011. Note call ASA is based on 24/7 members
services availability, not just dedicated team results.
First Call Resolution
90% or greater.
0.50%  0.04%: Which equals 1 month missed out of 12
months measured.
 Corrective Action: Cigna implemented 2 hours of
Open Call time per Customer Service Associate per
week. This initiative allows the CSA's time off
phones to follow up on outstanding issues and
make customer contacts timely.
Monthly appeal
statistic reports.
0%  0.0%: Which equals 2 months missed out of 12
months measured.
 Corrective Action: Reporting measure only no
corrective action requested.
Written appeals
resolved in 45 calendar
days after receipt of
participant’s request
for review in the case
of post-service claims.
0.33%  0.11%: Which equals 4 months missed out of 12
months measured.
 Corrective Action: Supervisor provided additional
training and check daily appeal reports to ensure
that days are being tracked more closely.
Processor has been given additional training and
Supervisor will work closely with the processor on
an ongoing basis.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
27
Continued C. Cigna (Claims Administrator)
Measure Percent of
Fees at
Risk
Total Percent Assessed Vendor
(Based on Missed Measure)
Contractor will deliver
quarterly reports to the
ADOA within 45
calendar days from the
end of the quarter.
0.25%  0.11%: Which equals 4 months missed out of 12
months measured.
 Corrective Action: Account Manager was using
55 day delivery rule for in person meetings in error.
 Account Manager is aware that reports to be
delivered via email 45 days after close of quarter
and 55 days for in-person meeting. Calendar alerts
and reminders set up so that all required reports will
be received from reporting areas in advance of each
quarterly deadline. Supervisor provided additional
training and check daily appeal reports to ensure
that days are being tracked more closely.
97% of all fully
documented claims
received will be
completely processed
within 14 calendar
days after they are
received. Will be
calculated by counting
the number of days
from the day the claim
is received.
0.75%  0.11%: Which equals 4 month missed out of 12
months measured.
 Corrective Action: Jan – Apr claim payment
delays due to claim diverts for Health Care Reform
required Audits. Further impacted as first in is first
out rule once the hold was released.
 Better planning and staffing for any known HCR
audits that will need to take place in the future.
 In the last quarter of the year, team placed
additional focus on aging claims and pended claims
so that they could be paid by year’s end, which
impacted monthly time to process, but we followed
up on all claims to ensure all claims were paid.
 Will ensure appropriate staff for 2012 year end
focus on aging and pended claims and ensure the
training and skill set is appropriate.
Network Management-
Change to Primary
Provider Count.
0%  0.0%: Which equals 1 month missed out of 12
months measured.
 Corrective Action: Reporting measure only no
corrective action requested.
Contractor will provide
a detailed provider
report which identifies
providers by TIN
number.
0%  0.0%: Which equals 1 month missed out of 12
months measured.
 Corrective Action: Reporting measure only no
corrective action requested.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
28
D. Aetna (Claims Administrator) – penalties to date of $9,455.55, equaling .63% of
the vendor’s administrative fee.
Measure Percent of
Fees at
Risk
Total Percent Assessed Vendor
(Based on Missed Measure)
Abandonment Rate 3% or
less.
1%  0.08%: Which equals 1 month missed out of 12 months
measured.
 Corrective Action: Higher than expected call volume
occurred within the ADOA designated Member Services
Team due to open enrollment calls. Call routing volume
adjustments were made subsequently the target was
met in December.
Average Speed to
Answer <30 seconds.
1%  0.08%: Which equals 1 month missed out of 12 months
measured.
 Corrective Action: Higher than expected call volume
occurred within the ADOA designated Member Services
Team due to open enrollment calls. Call routing volume
adjustments were made subsequently the target was
met in December.
97% Telephone Call
Quality.
1%  0.17%: Which equals 2 months missed out of 12
months measured.
 Corrective Action: Feedback and coaching was
provided to the team member identified as causing the
error.
Contractor will resolve
95% or more of all
"normal" correspondence
within 15 calendar days
of receipt. Normal
correspondence is
defined as: plan
descriptive materials
requests; and premium
and/or coverage
verification.
1%  0.17%: Which equals 2 month missed out of 12 months
measured.
 Corrective Action: (December) Aetna identified
correspondence tasks that were internally mis-routed
causing a delay in reaching the Correspondence Team
for handling. The Correspondence Team worked the
tasks as quickly as possible once identified. Feedback
and coaching was provided to the team member that
caused the delay.
 Corrective Action: (November) Written
Correspondence Rate - There was one correspondence
task that was opened in error by a Member Services
Representative in which the Representative failed to
follow correct handling workflow. This caused this
guarantee to be missed. The Member Representative
involved has been re-educated on the correct workflow
and a reminder has been sent to the Member Services
Team.
92% of all fully
documented claims
received will be
completely processed
within 12 calendar days
after they are received.
0.50%  0.08%: Which equals 1 month missed out of 12 months
measured.
 Corrective Action: The PG was missed due to larger
than expected claim inventory and the TAT was
missed in the first week of January. ADOA Claim Team
resources were focused on reducing the inventory and
was able to recover the plan TAT guarantee for the
month of February.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
29
E. ASIFLEX (Flexible Spending) - penalties to date of $510.92, equaling .50% of the
vendor’s fee at risk.
Measure Percent of
Fees at
Risk
Total Percent Assessed Vendor
(Based on Missed Measure)
95% of claims will be
processed within two
working days.
1%  0.25%: Which equals 1 quarter missed out of 4
quarters measured.
 Corrective Action: ASIFLEX hired 17 additional
claims/customer service representatives to address
the increase in claims in the first quarter.
100% of claims will be
processed within five
working days.
1%  0.25%: Which equals 1 quarter missed out of 4
quarters measured.
 Corrective Action: ASIFLEX hired 17 additional
claims/customer service representatives to address
the increase in claims in the first quarter.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
30
F. Avesis (Vision) - penalties to date of $3,500, equaling 1.05% of the vendor’s fee at
risk.
Measure Fees at
Risk
Total Percent Assessed Vendor
(Based on Missed Measure)
Monthly reports
provided within 30
calendar days after the
close of month.
$12,000.00  $1,000: Which equals 1 month missed out of 12
months measured.
 Corrective Action: As a result of Avesis’
performance falling outside of the monthly reporting
requirement of 30 calendar days after the close of
the month for the February 2011 monthly report,
Avesis has crossed trained additional staff to ensure
that the monthly reports are provided within 30
calendar days.
90% of all calls
requesting a member
services representative
will be answered in 30
seconds or less.
$30,000
 $2,500: Which equals 1 month missed out of 12
months measured.
 Corrective Action: As a result of Avesis’
performance falling below the requirement for the
month of December 2011 additional resources were
put in place to support unexpected spikes in call
volume. Additional staff was added to ensure
coverage during spike times. Contingent staff has
also been identified to assist during spikes in call
volume.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
31
G. MedImpact - penalties to date of $13,750.00, equaling 2.63% of the vendor’s fee at
risk.
Measure Fees at
Risk
Total Percent Assessed Vendor
(Based on Missed Measure)
99% Percent of time
internal on-line system
available.
$5,000.00  $1,250.00: Which equals 1 quarter missed out of 1
quarter measured.
 Corrective Action: MedImpact will ensure
improvements have been made since 2Q11.
MedImpact commits to periodic system
improvements and updates in order to reach the
99.9% mark for this item.
3 Business Days
Number of days for a
response to a written
inquiry.
$50,000.00  $12,500.00: Which equals 1 quarter missed out of 4
quarters measured.
 Corrective Action: MedImpact completed review
of timely responses to all ADOA inquiries, and will
make a concerted effort to respond quickly and
effectively to meet the target.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
32
Successfully Met Performance Guarantees
Table 18: Successful Performance Guarantees
Vendor At risk Guarantees Met
UHC 18.55% Total
Administration
Fee
25% Medical
Management
Fee
Customer Service, Appeals (met 79 out of 84
targets), Open Enrollment, Claims Adjudication (met
57 out of 60 targets), Administration, Account
Management Meeting, Network Management,
Medical Management, Case Management, Disease
Management (met 9 out of 10 targets), and Nurse
Line.
AmeriBen 15% Total
Administration
Fee
Customer Service, Appeals (met 26 out of35
measures), Open Enrollment, Claims Adjudication
(met 71 of the 72 targets), Administration (met 29 of
the 32 targets), Account Management Meeting (met
3 out of the 4 targets), Reports (met 16 out of17
targets), & Finance Accounting.
Cigna 15.20% Total
Administration
Fee
25% Medical
Management
Fee
Customer Service (met 81 out of 84 targets),
Appeals (met 42 out of 48 targets), Open Enrollment,
Claims Adjudication (met 52 out of 60 targets),
Account Management Meeting, Administration ,
Reports (met 25 out of 29 targets), Network
Management (met 20 out of 24 targets), Finance
Accounting, and Case Management.
Aetna 23% Total
Administration
Fee
20% Medical
Management
Fee
Customer Service (met 65 out of 73 targets),
Appeals, Open Enrollment, Claims Adjudication (met
72 out of 73 targets), Administration, Account
Management Meeting, Reports, Network
Management & Nurse Line (met 1 out of 3 targets).
American Health
Holding
Total
Administration
Fee 1.95%
Case
Management
Fee 1.87%
Disease
Management
Fee 1.25%
Nurse Line
Fee 1.25%
Implementation, Utilization Management, Case
Management, Disease Management, Reporting,
Systems, Nurse & Other Call Center Activity.
MedImpact $522,500.00
Total Fees at
Risk
Data & Eligibility Requirements, Claims, Customer
Services, Account Services, Reports, Network
Access, Network Pharmacy Management, Mail Order
Service, Retail Paper Claims Processing Time,
Network Pharmacy POS Compliance.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
33
Continued Table 18: Successful Performance Guarantees
Vendor At risk Guarantees Met
Delta Dental 1.25% Total
Administration
Fee
Reporting, Network Management, Claims
Administration, Appeals, Satisfaction, and Quality of
Service and Responsiveness to Members.
TDA 1% Total
Administration
Fee
Reporting, Network Management, Appeals,
Satisfaction, Quality of Service & Responsiveness to
Members.
Hartford 10% Total
Administration
Fee
Open Enrollment, Report Timeliness, Quality of
Service and Responsiveness to Members,
Appeals/Grievance, Claims Administration, Claimant
Notification, and Financial Payment Accuracy.
Avesis $332,000.00
Total Fees at
Risk
Implementation, Reporting (met 16 out the 17
targets), Networking, Claims, Appeals, and Call
Center (met 35 out of the 36 targets).
ASIFlex 5% Total
Administration
Fee
Claims Turnaround (met 6 out of 8 targets), Claims
Adjudication Financial Accuracy, Web Availability,
and Phone Response Time.
ComPysch 20% Total
Administration
Fee
Implementation, Account Management, Customer
Service, Reporting, Program Administration, and
Surveys.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
34
Audit Services
The Benefit Services Division (BSD) Audit Services Unit provides assurances that add
value and improve the operations of the BSD. Audit Services performs systematic
evaluations of contract compliance, operational controls, risk management, and the
implementation of best practices to support BSD objectives.
During the 2011 plan year, BSD Audit Services completed audits to ensure the health
plan vendors appropriately provided contracted services. The audit schedule for the
plan year was developed using a combination of contract elements and risk analysis.
Individual audit objectives were developed with the consideration of dollar value,
complexity of operations, changes in personnel or operations, loss exposure, and
previous audit results. Audits were completed in, but were not limited to the following
four functional areas:
Functional Area Audit Methodology
Vendor operating transactions Statement on Standards for Attestation
Engagements No. 16 Audits (“SSAE 16”)
Vendor internal operating standards Quality Management Review (“QMR”)
Vendor execution of benefit design Plan Allowance/Exclusion Audit (“A&E”)
ADOA accuracy of shared data Dependent eligibility audit
All of the health plan’s contracted vendors that pay claims are required to provide BSD
a copy of an independently assessed operational audit (SSAE 16) annually. SSAE 16
audits evaluate the internal control of the vendor’s processing systems utilized to
process claims and identify deficiencies to be addressed. Audit services reviewed the
SSAE 16 reports provided by each of the vendor’s external auditors. There were no
instances of significant operating failure noted and no corrective action was required.
QMRs ensure the vendor’s internal audit teams were effectively measuring operating
standards, identifying and correcting errors, and providing sufficient training for claims
processing, customer service, and clinical reviews. QMR results indicated that vendors
were either meeting or exceeding internal standards and that claims processors were
appropriately trained. A&E Audits ensure that the vendor’s systems were set up
correctly to service the health plan’s benefit design. A&E Audit findings for the plan year
indicated that plan limitations and restrictions were processed accurately with few
exceptions and members received the benefits allowed to them as defined in the plan
description.
A dependent eligibility audit was also performed on the health plan’s membership. The
results of the eligibility audit indicated that only eligible individuals were enrolled in the
plan and receiving benefits. Additionally, dependent eligibility is effectively monitored to
minimize the risk of claims paid on behalf of ineligible dependents.
In addition to the regularly scheduled audits, reviews, and evaluations listed above,
Audit Services performed operational standards testing related to vendor performance
guarantees, quality management standards, and reporting structure for each of the
contracted vendors.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
35
Glossary of Terms
Active member – an employee, other than one excluded by the Arizona Administrative
Code, who works for the State of Arizona or a State University and is enrolled in one of
the health plan options offered by the State. Also referred to as “Actives.”
Administrative fees – fees paid to third-party vendors for plan administration, network
rental, transplant network access fees, shared savings for negotiated discounted rates
with other providers, COBRA administration, direct pay billing, additional reporting
billing, State fees (MA and NY), and bank reconciliation fees.
Case management – a collaborative process that facilitates recommended treatment
plans to ensure that appropriate medical care is provided to disabled, ill, or injured
individuals.
Claim – a provider’s demand upon the payer for payment for medical services or
products.
Claim appeal – a request for a review of the denial of coverage for a specific medical
procedure contemplated or performed.
COBRA Consolidated Omnibus Budget Reconciliation Act of 1985 – a federal law
that requires an employer to allow eligible employees, retirees, and their dependents to
continue their health coverage after they have terminated their employment or are no
longer eligible for the health plan - COBRA enrollees must pay the total contribution, in
addition to an administrative fee of 2%.
Contribution strategy – a premium structure that includes both the employer’s
financial contribution and the employee’s financial contribution towards the total plan
cost.
Copayment – a form of medical cost sharing in the health plan that requires the
member to pay a fixed dollar amount for a medical service or prescription.
Deductible – a fixed dollar amount during the plan year that a member pays before the
health plan starts to make payments for covered medical services.
Dependent – an unmarried child of the employee or spouse who meets the conditions
established by the relevant plan description.
DHMO/PrePaid Dental – a dental plan that offers members dental services with no
annual maximums, no claim forms, and services are based on a discounted rate. Total
Dental is the prepaid dental vendor.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
36
Disease management – a comprehensive, ongoing, and coordinated approach to
achieving desired outcomes for a population of patients - These outcomes include
improving members’ clinical condition and quality of life as well as reducing
unnecessary healthcare costs. These objectives require rigorous, protocol-based,
clinical management in conjunction with intensive patient education, coaching, and
monitoring.
Eligibility appeal – a request for a review of the denial of coverage relating to a
claimant’s entitlement to benefits under a plan.
Employee – a person, other than one excluded by the Arizona Administrative Code,
who works for the State of Arizona or a State University.
Exclusive Provider Organization (EPO) – an exclusive provider organization or
network - Enrollees are limited to use only those providers on the exclusive list. Any
exceptions require prior authorization.
Flexible spending account (FSA) – an account that can be set up through the State’s
Benefit Options program – An FSA allows an employee to set aside a portion of his/her
earnings to pay for qualified medical and dependent care expenses. Money deducted
from an employee's pay into an FSA is not subject to payroll taxes.
Formulary – a list of preferred medications covered by the health plan - The list
contains generic and name brand drugs. The most cost-effective name brand drugs are
placed in the “preferred” category and all other name brand drugs are placed in the
“non-preferred” category.
Fully-Insured – an insurance model wherein Benefit Options collects premiums and
transfers the premiums to commercial insurers who take the risk of revenue to expense.
Health Savings Account Option (HSAO) – an account that allows individuals to pay
for current health expenses and save for future health expenses on a tax-free basis.
Only certain plans are HSA-eligible.
Indemnity/PPO – a dental plan that offers members choice to visit any dentist with an
in-network and out-of-network co-insurance structure. There is a maximum annual
benefit of $2,000 per member per year for dental services. The vendor for the PPO
plan is Delta Dental.
Integrated – health plan operations that are provided by one entity - These operations
include: claims processing and payment, a network of medical providers, utilization
management, case management, and disease management services.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
37
Medicare – the federal health insurance program provided to those who are age 65 and
older or those with disabilities who are eligible for Social Security benefits - Medicare
has four parts: Part A, which covers hospitalization; Part B, which covers physicians and
medical providers; Part C, which expands the availability of managed care
arrangements for Medicare recipients; and, Part D, which provides a prescription drug
benefit. Retirees signing up for ADOA insurance should enroll in Parts A and B, but not
C or D.
Member – a health plan participant - This individual can be an employee, retiree,
spouse or dependent.
Network – an organization that contracts with providers (hospitals, physicians, and
other health care professionals) to provide health care services - Contract terms include
agreed upon fee arrangements for services and performance standards.
Non-integrated – health plan operations that are provided by multiple entities - These
operations include claims processing and payments, a network of medical providers,
and disease management services.
Payer – the entity responsible for paying a claim.
Pharmacy benefit manager – an organization that provides a pharmacy network,
processes and pays for all pharmacy claims, and negotiates discounts on medicines
directly from the pharmaceutical manufacturers - These discounts are passed to the
employer payer in the form of rebates and reduced costs in the formulary.
Plan year – the period January 1 through December 31.
Preferred Provider Organization (PPO) – an organization that offers a broad selection
of providers and the ability to choose a non-PPO provider as well - This non-PPO
provider requires greater copay from the enrollee and a deductible to be paid.
Premium – agreed upon fees paid for medical insurance coverage - Premiums are paid
by both the employer and the health plan member.
Retiree – a former State or State University employee, officer or elected official who is
retired under a State-sponsored retirement plan - For analytical purposes, this term
encompasses both actual retirees and their dependents.
Self-funded – insurance program wherein Benefit Options collects premiums, pays
claims, and assumes the risk of revenues to expenses.
Self-insured – a plan that is funded by the employer who is financially responsible for
all medical claims and administrative expenses.
Spouse – one legally married—as defined by the Arizona Revised Statutes—to an
employee or a retiree.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
38
Stop-loss – a form of insurance for self-insured employers that limits the amount the
employer as primary insurer will pay for medical expenses.
Subscriber – employee, officer, elected official, or retiree who is eligible and enrolls in
the health plan.
Third party administrator – an organization that handles all administrative functions of
a health plan, including: processing and paying medical claims, compiling and
producing management reports, and providing customer service.
Utilization management – a process whereby an insurer evaluates the quantity
(duration) and quality (level) of the delivery of medical services.
Utilization review – a process whereby an insurer evaluates the appropriateness,
necessity, and cost of services provided.
Utilizer – a member who receives a specific service.
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
39
Appendix A
The HITF Fund-3015 established under A.R.S. 38-654-A is used to pay medical claims, dental premiums,
and administrative and operating costs of the Wellness Program and the Benefits Services Division.
*Recoveries include Medicare Part D Retiree Drug Subsidy reimbursement, prescription drug rebates,
stop loss claim reimbursements, overpayment recoveries (including stop payments and voids),
subrogation recoveries, etc.
**Other fees include HSA Administration, NYHCR, MA, and legal fees.
^Vendor administrative fees and fully insured premiums are paid 55 days in arrears per contract.
Table A: 3015 Fund Plan Year 01/1/2011 - 12/31/2011
BEGINNING CASH PER AFIS $ 189,162,971.16
REVENUE $ 801,029,668.34
EXPENDITURES $ 720,822,356.42
VENDOR ADMIN FEES PERF PENALTIES
AHH UR/UM $ 1,023,116.40 $ 1,556.77
AETNA $ 2 ,150,991.12 $ 13,835.66
CIGNA $ 2 ,142,910.89 $ 13,724.52
UHC $ 2 2,849,050.42 $ 146,937.80
AMERIBEN $ 3 ,321,299.14 $ 9 ,822.91
MEDIMPACT $ 1 ,015,992.25 $ 6,250.00
OTHER FEES** $ 2 41,035.25
AG COLLECTION FEES $ 321.99
NET ADMIN FEES^ $ 3 2,744,717.46 $ 192,127.66 $ 32,552,589.80
MEDICAL CLAIMS RECOVERIES*
HARRINGTON $ 1 11,772.98 $ 3,370,051.61
AETNA $ 2 3,397,906.52 $ 2,480.62
CIGNA $ 3 9,771,480.75 $ -
UHC $ 3 22,424,880.35 $ 77,972.29
AMERIBEN $ 8 3,644,333.28 $ 7 89,320.23
WHI $ 14,044.99
MEDIMPACT $ 1 10,799,552.44 $ 6,075,443.64
ERRP REIMBURSEMENT $ 429,413.25
RDS SUBSIDY $ 2,651,407.78
OTHER WELLNESS $ 7 50,543.77
NET MEDICAL CLAIMS $ 5 80,900,470.09 $ 13,410,134.41 $ 567,490,335.68
STOP LOSS PREM CLAIM REIMB
SYMETRA $ 2 80,305.60 $ 85,270.71 $ 195,034.89
SELF INSURED EXPENDITURES $ 600,237,960.37
FULL SVC PREM
BCBS (NAU ONLY) $ 3 4,376,006.00 $ 34,376,006.00
DENTAL PREM PERF PENALTIES
DELTA $37,908,686.44 $ -
TDA $3,782,278.06 $ 9,355.40
NET DENTAL PREM $ 4 1,690,964.50 $ 9,355.40 $ 41,681,609.10
FULLY INSURED EXPENDITURES $ 76,057,615.10
HITF OPERATING EXP $ 4 ,190,980.95 $ 4,190,980.95
FUND TRANSFERS OUT $ 4 0,335,800.00 $ 40,335,800.00
TOTAL EXPENDITURES $ 7 34,519,244.60
TOTAL RECOVERIES* $ 13,696,888.18
NET EXPENDITURES $ 720,822,356.42
ENDING CASH BALANCE PER AFIS $ 269,370,283.08
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
40
Fund 3035 is established under A.R.S. 38-651.05. to pay premiums for other insurance
products offered to State employees including Vision, Flexible Spending, Supplemental
and Dependent Life, Short Term Disability, Non-ASRS Long Term Disability, and Basic
Life insurance.
Table B: 3035 Fund Plan Year 01/1/2011 - 12/31/2011
BEGINNING CASH PER AFIS $ 4 ,284,020.85
REVENUE $ 3 4,787,566.22
VENDOR INSURANCE AMOUNT
HARTFORD BASIC LIFE $ 1,380,352.52
SUPP LIFE $ 1 1,251,700.51
DEP LIFE $ 2,537,921.75
STD $ 7,505,118.63
LTD $ 2,830,391.11
TOTAL HARTFORD $ 25,505,484.52
AVESIS VISION $ 4,703,866.15
ASI AMRA $ 3,443,290.79
DCRA $ 1,132,989.39
TOTAL FLEX SPENDING $ 4,576,280.18
PAYROLL CLEARING $ 1 ,935.37
TOTAL REVENUE $ 34,787,566.22
EXPENDITURES $ 3 4,648,429.04
VENDOR INSURANCE AMOUNT
HARTFORD BASIC LIFE $ 1,394,221.27
SUPP LIFE $ 1 1,260,169.68
DEP LIFE $ 2,546,554.91
STD $ 7,478,916.02
LTD $ 2,827,526.09
TOTAL HARTFORD $ 25,507,387.97
AVESIS VISION $ 4,687,702.45
ASI AMRA $ 3,243,924.24
DCRA $ 1,110,217.00
ADMIN FEES $ 97,097.38
TOTAL FLEX SPENDING $ 4,451,238.62
GAO AFIS COST $ 2 ,100.00
TOTAL EXPENDITURES $ 34,648,429.04
ENDING CASH BALANCE PER AFIS $ 4 ,423,158.03
Benefit Options Annual Report
January 1, 2011 to December 31, 2011
41
Benefit Options
Arizona Department of Administration,
Benefit Services Division
100 N. 15th Avenue, Suite 103
Phoenix, Arizona 85007
Telephone: 602-542-5008
Fax: 602-542-4744