Benefit Options Annual Report 2007

              State of Arizona
2007 Annual
Check-Up
Benefit Options
William Bell
Director, Department of Administration
Janet Napolitano
Governor
FORWARD
Benefit Options is the name for the various insurance benefits offered to Arizona State
employees by the State of Arizona. This report was prepared to give a broad overview of Benefit
Options.
The information provided in the report was gathered from contractors 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).
Any questions relating to the contents of this report should be addressed to:
Benefit Options
Department of Administration
100 N. 15th Avenue
Suite 103
Phoenix, Arizona 85007
Telephone: 602-542-5008
Fax: 602-542-4048
Contents
Executive summary 1
Glossary of terms 2
Health insurance trust fund summary 5
Enrollment in Benefit Options medical plans 6
Networks for active employees and non-Medicare-eligible retirees 7
Networks for Medicare-eligible retirees 8
Expenses vs. premiums for active and retired members 9
Expenses for Benefit Options self-funded plans 10
Medical expenses associated with medical diagnoses 11
Hospital care 12
Emergency room visits 14
Physician visits 14
Urgent care visits 14
Generic and name-brand prescription use 15
Prescription use by therapeutic class 15
Prescription use by type of drug 16
Annual prescription use 17
Annual pharmacy expenses by age 17
Benefit Options dental plans 18
Dental rates 19
Life, disability, vision insurance and flexible spending accounts premiums 20
Health insurance vendor performance standards 21
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
1
Executive summary
The purpose of this document is 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 State’s Benefits Options programs fall into two major categories. The first of these provides
medical and pharmaceutical benefits; the second is comprised of various health benefits
programs including dental, vision, disability insurance, life insurance and a flexible spending
account plan.
The health benefit programs, except for the flexible spending account plan, are fully insured. The
medical and pharmaceutical programs fall into one of two types—fully-funded and self-funded.
The self-funded medical plan began on October 1, 2004. As a part of the design, two distinct
options were created: the “integrated” and “non-integrated” options. The differences between
these options are discussed below:
The Integrated Option: Currently, UnitedHealthcare (UHC) provides this integrated option.
UHC combines the functions of claims review and payment, contracting and administering a
network of medical providers, utilization review, and disease management, all in one contract
with the State of Arizona.
The Non-Integrated Option: Under this model, the basic functions of the plan are contracted
out to numerous service providers. The Non-Integrated Option allows the State greater flexibility
in contracting since service providers can be replaced, if necessary, without radically affecting
the Benefit Options members.
Schedules of premiums received, incurred and paid medical/drug claims, and expenses related to
self-funded plans are included within this document. It also contains information regarding
enrollment and the distribution of self-funded medical and pharmacy expenses.
Although not related to the Health Insurance Trust Fund, a summary of premiums collected and
paid for life insurance, vision insurance and flexible spending accounts has also been included.
Additionally, per A.R.S. §38-658 (B), the performance guarantees embedded in contracts
between the Arizona Department of Administration and the vendors providing services shall be
reported at least semiannually. Performance guarantees carry penalties for failure to meet
specified criteria. Those penalties are reported herein.
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
2
Executive summary (continued)
All data provided herein is for the active employee plan year 2006-2007 (October 1, 2006 –
September 30, 2007). Except where noted, data related to the fully-funded Blue Cross Blue
Shield and Secure Horizons plans is excluded.
Glossary of terms
The following terminology will be used in this report:
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.
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.
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
3
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-funded – insurance wherein Benefit Options collects premiums and transfers the
premiums to commercial insurers who take the risk of revenue to expense.
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.
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.
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
4
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 – October 1 through September 30 for employees; January 1 through December 31 for
retirees.
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
a 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 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.
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 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 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
5
Health insurance trust fund summary
Table 1 provides a summary of receipts,
expenses, and enrollment.
Fiserv refers to the Arizona Foundation,
Beech Street, RAN+AMN, and Schaller
Anderson networks. UHC refers to the
UnitedHealthcare network. Both the Fiserv
and UHC programs are self-funded. Secure
Horizons, Blue Cross Blue Shield (BCBS),
and all dental programs are fully-funded.
In general, state, university, and political
subdivision employees and retirees choose
from one of the self-funded networks.
However, Secure Horizons is the only fully-funded
option available to Medicare-eligible
retirees and Blue Cross Blue Shield is the
only fully-funded option available to NAU
employees and retirees.
The Medicare Part D Subsidy is paid to
employers who provide pharmacy insurance
to Medicare-eligible retirees. Rebates &
Recoveries consist of rebates paid by drug
manufacturers and stop-loss payments.
Reserve (IBNR) is the amount of money that
must be “reserved” 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
$500,000 with a lifetime maximum of $2
million.
The difference between receipts and expenses for Plan Year 2006-2007 was $11.1 million.
Table 1: Health Insurance Trust Fund Summary
Receipts (accrual basis)
Fiserv, UHC 579,995,347
SecureHorizons 8,122,332
BCBS 32,398,069
Dental 44,296,625
Total 664,812,372
Expenses
Medical Claims (accrual basis) 420,133,173
Drug Claims (accrual basis) 91,414,992
Medicare Part D Subsidy (1,747,224)
Rebates & Recoveries (10,629,727)
Reserve (IBNR) 39,912,651
Secure Horizons expense 7,961,816
BCBS Payments 32,398,069
Administration Fees 22,353,777
Stop-Loss Premiums 3,439,590
Appropriated Expenses 4,205,835
Dental Costs 44,296,625
Total 653,739,577
Difference 11,072,795
Enrollment
Subscribers 66,490
Members 131,496
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
6
Enrollment in Benefit Options medical plans
The Benefit Options group medical plan is available to all:
• eligible state or university employees
• retirees receiving pension benefits through any of the state retirement systems
• state or university employees accepted for long-term disability benefits
• employees of participating political subdivisions of the State of Arizona
• state or university employees eligible for COBRA benefits
The table below shows how enrollment is distributed between networks and between active,
retired, and university members. Network availability varies by region. The following pages
show the networks available in each county.
Table 2: Average Monthly Enrollment
Network Plan Type Subscribers Members
AFMC Active PPO 584 1,052
Retirees PPO 735 1,000
University PPO 561 1,038
Beech Street Active PPO 121 357
Retirees PPO 290 351
University PPO 97 182
RAN+AMN Active EPO 7,841 18,709
Retirees EPO 928 1,233
University EPO 2,304 4,177
Schaller Anderson Active EPO 9,108 19,840
Retirees EPO 1,312 1,701
University EPO 3,962 7,793
UnitedHealthcare Active EPO 18,575 41,696
Retirees EPO 3,503 4,821
University EPO 9,753 21,029
UnitedHealthcare Active PPO 700 1,834
Retirees PPO 203 268
University PPO 658 1,211
Blue Cross Blue Shield NAU employees/retirees only PPO 2,860 not available
SecureHorizons Medicare eligible retirees only HMO 2,318 3,034
Political Subdivisions EPO/ PPO 77 175
Total 66,490 131,496
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
7
Networks for active employees and non-Medicare-eligible retirees
Mohave
Coconino
Navajo
Apache
La Paz
Yuma
Yavapai
Maricopa
Pima
Pinal
Gila
Graham
Cochise
Greenlee
Santa Cruz
RAN+AMN EPO,
Schaller Anderson EPO,
AZ Foundation PPO
RAN+AMN EPO, Schaller
Anderson EPO, United
EPO/PPO, AZ Foundation PPO
Out of State: Beech Street PPO
NAU employees/retirees: Blue Cross Blue Shield of AZ PPO
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
8
Networks for Medicare-eligible retirees
Out of State: Beech Street PPO
NAU retirees: Blue Cross Blue Shield of AZ PPO
Mohave
Coconino
Navajo
Apache
La Paz
Yuma
Yavapai
Maricopa
Pima
Pinal
Gila
Graham
Cochise
Greenlee
Santa Cruz
RAN+AMN EPO, Schaller Anderson
EPO, AZ Foundation PPO, Secure
Horizons High/Low Option
RAN+AMN EPO, Schaller Anderson
EPO, United EPO/PPO, AZ
Foundation PPO, Secure Horizons
High/Low option
AZ Foundation PPO
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
9
Expenses vs. premiums for active and retired members
The figure below shows how the average monthly premiums compare to the average monthly
cost for active and retired members.
In 2001, ADOA developed a contribution strategy that provided affordable health insurance to
all state and university employees. The EPO plan was offered to employees for $25 single
coverage and $125 family coverage. PPO monthly premiums were determined from actual
experience and the true cost of the coverage.
The 2007 contribution strategy allowed employees to pay only 10% of the total premium, while
the State absorbed the remaining 90%.
Pursuant to A.R.S. §38.651.01(B.), retiree and active medical expense shall be grouped together
to “obtain health and accident coverage at favorable rates.” This requirement results in retiree
premium rates lower than their experience would otherwise dictate.
$-
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
Active
Premium
Active
Expense
Retiree
Premium
Retiree
Expense
Figure 1: Average monthly premiums and
expenses per member
Subscriber Paid
State Paid
Drugs
Medical
Administrative
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
10
Expenses for Benefit Options self-funded plans
The tables below show how self-funded plan expenses are distributed between active/retired and
EPO/PPO members. The average annual cost to insure each type of subscriber/member is also
provided.
Table 3: Self-funded expenses by active, retiree, EPO, and PPO subscribers and members
Expenses Active Retiree EPO PPO
Medical Claims (accrual basis) 420,133,173 376,218,358 43,914,815 389,089,541 31,043,633
Drug Claims (accrual basis) 91,414,992 70,953,280 20,461,713 80,690,238 10,724,754
Medicare Part D Subsidy (1,747,224) - (1,747,224) (1,634,547) (112,677)
Rebates & Recoveries (10,629,727) (9,419,638) (1,210,089) (9,944,224) (685,503)
Reserve (IBNR) 39,912,651 35,368,990 4,543,661 37,338,714 2,573,937
Administration Fees 22,353,777 19,809,020 2,544,757 20,912,198 1,441,579
Stop-Loss Premiums 3,439,590 3,048,026 391,563 3,217,773 221,817
Appropriated Expenses 4,205,835 3,727,042 478,793 3,934,604 271,231
Total $ 569,083,068 499,705,079 69,377,989 523,604,298 45,478,770
Enrollment in self-funded plans
Subscribers 61,235 54,264 6,971 57,286 3,949
Members 128,288 118,915 9,373 120,998 7,290
Annual cost per Subscriber $ 9,293 9,209 9,952 9,140 11,517
Annual cost per Member $ 4,436 4,202 7,402 4,327 6,238
Table 4: Self-funded expenses by active, retiree, EPO, and PPO subscribers and members
Expenses Active/ EPO Active/ PPO Retiree/ EPO Retiree/ PPO
Medical Claims (accrual basis) 420,133,173 352,761,336 23,457,022 36,328,205 7,586,611
Drug Claims (accrual basis) 91,414,992 64,945,959 6,007,321 15,744,280 4,717,433
Medicare Part D Subsidy (1,747,224) - - (1,439,436) (307,788)
Rebates & Recoveries (10,629,727) (8,947,302) (472,336) (996,922) (213,167)
Reserve (IBNR) 39,912,651 33,595,457 1,773,534 3,743,257 800,404
Administration Fees 22,353,777 18,815,722 993,298 2,096,477 448,280
Stop-Loss Premiums 3,439,590 2,895,187 152,839 322,586 68,977
Appropriated Expenses 4,205,835 3,540,154 186,888 394,449 84,343
Total $ 569,083,068 467,606,513 32,098,566 56,192,896 13,185,093
Enrollment in self-funded plans
Subscribers 61,235 51,543 2,721 5,743 1,228
Members 128,288 113,242 5,673 7,755 1,618
Annual cost per Subscriber $ 9,293 9,072 11,797 9,785 10,737
Annual cost per Member $ 4,436 4,129 5,659 7,246 8,150
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
11
Medical expenses associated with medical diagnoses
The table below shows how medical expenses are distributed among different diagnoses. More
dollars are spent on treating conditions related to the musculoskeletal system than on any other
type of disorder.
1The ill-defined category is a technical term including symptoms, laboratory results and disorders which cannot be
categorized elsewhere. Examples of ill-defined diagnoses are: adult convulsions not related to epilepsy, laboratory
analysis of blood with findings not related to cellular abnormality, and senility associated with old age.
Table 5: Medical expenses by diagnosis –actives & retirees
Diagnosis Actives % of Total Retirees % of Total Total
% of
Total
Musculoskeletal System 48,404,003 12.9% 6,450,831 14.7% 54,854,834 13.1%
Ill-defined1 40,993,724 10.9% 3,579,330 8.2% 44,573,054 10.6%
Neoplasms (tumors) 35,145,703 9.3% 6,257,158 14.2% 41,402,862 9.9%
Injury/Poisoning 35,778,135 9.5% 3,014,874 6.9% 38,793,009 9.2%
Health Status (lab tests, etc.) 34,288,904 9.1% 2,694,741 6.1% 36,983,645 8.8%
Circulatory System 30,059,960 8.0% 5,558,127 12.7% 35,618,087 8.5%
Digestive System 26,924,499 7.2% 3,026,555 6.9% 29,951,054 7.1%
Genitourinary System 25,065,288 6.7% 3,243,038 7.4% 28,308,326 6.7%
Nervous System 18,711,239 5.0% 3,184,354 7.3% 21,895,593 5.2%
Respiratory System 18,602,273 4.9% 2,482,195 5.7% 21,084,468 5.0%
Pregnancy/Childbirth
Complications 17,691,889 4.7% 4,551 0.0% 17,696,440 4.2%
Endocrine 12,303,887 3.3% 1,210,906 2.8% 13,514,792 3.2%
Mental Health 11,903,113 3.2% 1,217,034 2.8% 13,120,148 3.1%
Infectious/Parasitic 7,438,136 2.0% 1,081,337 2.5% 8,519,473 2.0%
Skin 6,833,640 1.8% 657,144 1.5% 7,490,784 1.8%
Congenital Anomalies 4,075,896 1.1% 251,039 0.6% 4,326,936 1.0%
Perinatal 1,972,019 0.5% 1,220 0.0% 1,973,239 0.5%
External Causes of
Injury/Poisoning 26,049 0.0% 381 0.0% 26,430 0.0%
Total $376,218,358 100.0% $43,914,815 100.0% $ 420,133,173 100.0%
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
12
Hospital care
The figures below show how active/retired members and EPO/PPO members compare with
regards to their number of admissions and their average lengths of stays. Inpatient hospital care
represents a significant portion of total medical expenses; 35% and 40% for active and retired
members, respectively.
Figure 2: Admissions per 1,000 members
Active
67.7
Retiree
148.9
EPO
71.2
PPO
87.6
0
20
40
60
80
100
120
140
160
Admissions
Figure 3: Average length of stay
Active
4.3
Retiree
6.7 EPO
4.5
PPO
5.7
0
1
2
3
4
5
6
7
8
Days
Mental health, substance abuse, and maternity admissions are included.
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
13
Hospital care (continued)
The figures below show how active/retired members and EPO/PPO members compare with
regards to their collective number of hospital days and average cost per admission. As a group,
retirees spent 3.4 times as many days in the hospital as active members. They also had a 47%
higher average cost per admission. In general, PPO members spent more days in the hospital
than did EPO members and their average cost per admission was $7,458 higher.
Figure 4: Days per 1,000 members
Active
291.3
Retiree
997.6
EPO
320.4
PPO
497.7
0
200
400
600
800
1000
1200
Days
Figure 5: Average cost per admission
Active
$12,385
Retiree
$18,200 EPO
$12,376
PPO
$19,834
$-
$5,000
$10,000
$15,000
$20,000
$25,000
Mental health, substance abuse, and maternity admissions are included.
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
14
Emergency room visits
During plan year 2006-2007, there were approximately 231.8 emergency room visits per 1,000
members of the self-funded plan. Each emergency room visit cost the plan $867.79 on average.
These figures include facility claims and exclude professional fees.
Physician visits
During plan year 2006-2007, there were approximately 3,834 office visits per 1,000 members of
the self-funded plan. Each office visit cost the plan $83.66 on average.
Urgent care visits
During plan year 2006-2007, there were approximately 178.9 urgent care visits per 1,000
members of the self-funded plan. Each urgent care visit cost the plan $85.54 on average.
The figures below compare how total active and retiree medical expenses are distributed by type
of care. 4% of medical expenses for active employees was spent for emergency room care while
4% of medical expenses for retired members was spent for home care.
Figure 6: Active employee medical expense
by type of care
Inpatient
Physician hospital 35%
visits 27%
Outpatient
hospital 21%
Ambulatory
surgical
center 5%
Emergency
room 4% Other 8%
Figure 7: Retiree medical expenses
by type of care
Other 7%
Home 4%
Outpatient
hospital 19%
Ambulatory
surgical
center 4%
Physician
visits 26%
Inpatient
hospital 40%
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
15
Generic and name-brand prescription use
The table below shows how total pharmacy expenses were distributed between generic,
preferred, and non-preferred types of drugs.
Table 6: Claim distribution for 3-tier formulary
Total
Prescriptions Percent
Tier 1 Generic ($10 copay) 939,708 61.30%
Tier 2-Preferred ($20 copay) 469,088 30.60%
Tier 3-Non-Preferred ($40 copay) 124,170 8.10%
Total 1,532,966
Prescription use by therapeutic class
The table below shows the top ten most used classes of drugs according to total expense. More
dollars were spent on antihyperlipidemics, cholesterol-lowering drugs, than on any other
therapeutic class.
Table 7: Top therapeutic classes by total expense
Therapeutic class Total Cost Percent
antihyperlipidemics 10,808,276 9.22%
antidepressants 8,601,033 7.34%
ulcer medications 8,203,568 7.00%
antihypertensives 7,945,493 6.78%
antiasthmatic/bronchodilator agents 7,310,141 6.24%
antidiabetics 6,602,123 5.63%
analgesics – opioids 5,798,144 4.95%
analgesics – anti-inflammatory 4,709,545 4.02%
antivirals 4,510,848 3.85%
anticonvulsants 4,156,683 3.55%
Total $ 68,645,854 58.58%
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
16
Prescription use by type of drug
The table below shows the top ten most used drugs according to total expense. Lipitor exceeded
last year’s top drug, Prevacid, during plan year 2006-2007.
Table 8: Top drugs by total expense
Drug Name Therapeutic class
Total Gross
Cost Percent
Lipitor antihyperlipidemics 3,983,758 3.40%
Prevacid anti-ulcer/gastrointestinal 3,806,801 3.25%
Advair diskus bronchial dilators 2,323,748 1.98%
Enbrel antiarthritics 2,121,802 1.81%
Effexor XR
psychostimulants-antidepressants
2,000,796 1.71%
Singulair bronchial dilators 1,911,904 1.63%
Vytorin antihyperlipidemics 1,575,980 1.34%
Nexium anti-ulcer/gastrointestinal 1,512,909 1.34%
Lexapro
psychostimulants-antidepressants
1,436,242 1.23%
Oxycodone analgesics-opioid 1,357,592 1.16%
Total $ 22,031,532 18.85%
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
17
Annual prescription use
The figure below shows how active and retired members compare with regards to the average
number of prescriptions they had filled last plan year.
Figure 8: Average number of prescriptions
per member per year
Active
10.6
Retiree
29.7
0
5
10
15
20
25
30
35
Annual pharmacy expenses by age
The figure below shows how pharmacy expenses increase with age among plan members.
Figure 9: Pharmacy expense per utilizer
19-39 yrs
$639
40-64 yrs
$1,624
65+ yrs
$2,758
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
18
Benefit Options dental plans
Prepaid Plans – Employers Dental Services and Assurant
• 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 Employers Dental Services and Assurant.
• No claim forms (except for emergency services under Employers Dental Services).
Indemnity/PPO Plans – Delta Dental and MetLife Dental
• 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 figures below show how active employee and retiree dental enrollments are distributed
between plans.
Figure 10: Active employee
dental enrollment
MetLife
Dental
15%
Employers
Dental
Group
13%
Delta Dental
63%
Assurant
Dental
9%
Figure 11: Retiree dental enrollment
MetLife
Dental
7%
Employers
Dental
Group
7% Delta Dental
74%
Assurant
Dental
12%
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
19
Dental rates
The table below summarizes monthly dental rates for active and retired members.
Table 9: Summary of Monthly Dental Rates
Active Employees
Single Coverage Family Coverage
Employee State Total Employee State Total
Assurant Dental 4.68 6.18 10.86 18.02 11.50 29.52
Delta Dental 14.56 17.88 32.44 54.14 51.75 105.89
Employers Dental group 4.02 6.18 10.20 18.16 11.50 29.66
MetLife Dental 12.90 15.40 28.30 45.00 43.50 88.50
Retirees
Single Family
Coverage Coverage
Assurant Dental 10.86 29.52
Delta Dental 32.44 105.89
Employers Dental group 10.20 29.66
MetLife Dental 28.30 88.50
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
20
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).
Table 10: Summary of Premiums
Vendor
Premium
type
Premiums
collected Premiums paid
Standard
Basic Life $ 2,370,063
Sup Life 9,153,730
Dep Life 1,428,241
STD 8,947,462
LTD 4,064,335
Total $ 25,963,831
Avesis - Vision $ 5,145,120
ASI - FSA $ 68,142
Total $ 31,177,093
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
21
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 liquidated damages. This percentage is allocated
among the more critical measures of the contract.
The following is a report of the penalties incurred by Health Plan vendors for their non-performance
during the during the plan year ending September 30, 2007. The details of each
assessment are set forth in the exhibit specified by the same letter that identifies the vendor
below. In each case below, the final member satisfaction survey and the Benefits Division
Vendor Survey for FY 2006-2007, to be completed on or before May 1, 2008, may result in
additional penalties.
A. Fiserv Harrington (Claims Administrator) – penalties to date of $8512.84, equaling
0.194% of the vendor’s annual administrative fee
MEASURE Annual Percent of Fees
at Risk
Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
Written appeals resolved
within 15 calendar days
after receipt of
participant's request for
review in the case of Pre-
Service claims
0.33%
• 0.084%: WHICH EQUALS 3 MONTHS
MISSED OUT OF 12 MONTHS MEASURED
• Corrective Action: Fiserv Harrington provided
reinforcement training to their processing staff.
Written appeals resolved
within 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: Fiserv Harrington provided
reinforcement training to their processing staff.
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
22
Health insurance vendor performance standards (continued)
B. UnitedHealthcare (All components of the health plan) – penalties to date of $25,612.50,
computed on a fixed dollar, rather than percentage basis
C. Schaller Anderson (Utilization Review / Utilization Management) – penalties to date of
$8,092.45, equaling 0.75% of the Vendor’s annual administrative fee
MEASURE Maximum Dollars Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
Average speed to answer -
60 seconds or less (Care
Coordination Team only)
$25,612.50
The total amount at risk
for all of the Care
Coordination measures
2% of the total base
admin fee, which equates
to $204,900. The ASA
for Care Coordination
metric that was missed is
.25% of the 2% or
$25,612.50.
• $25,612.50: WHICH EQUALS .25% OF
UHC’S PENALTY DOLLARS AT RISK.
• Corrective Action: UHC initiated the following
to address the missed measurement work-load
balancing, training classes, implementing
overtime, provided additional staff &
communication to providers who used UHC
website for submission. Subsequently, UHC
met measure for the remaining of the plan year.
MEASURE Annual Percent of Fees
at Risk
Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
Percent of calls answered
in 30 seconds or less 1%
• 0.75%: WHICH EQUALS 3 MONTHS
MISSED OUT OF 4 QUARTERS
MEASURED
Benefit Options 2007 Annual Report
Data contained herein is for Oct. 1, 2006 – Sep. 30, 2007
23
Health insurance vendor performance standards (continued)
D. Walgreens Health Initiative (Pharmacy Management) - penalties to date of $55,706.60,
equaling 10.38% of the vendor’s annual administrative fee
E. Successfully met performance guarantees
Table 11: Successful Performance Guarantees
Vendor At risk Guarantees Met
Fiserv Harrington 13.34% Appeals (1/3 of measure), Call Center, Eligibility Administration, Claims Statistics
UnitedHealthcare $2,330,487.05
Account Management, Telephone Service, Claims Statistics, Eligibility
Administration, Network Management, Care Coordination Guarantees (6 of 7)
Schaller Anderson 1% Disease Management, Customer Service (3/4 of measure)
Walgreens Health $480,831.50 Data & Eligibility Requirements, Claims, Customer Service Center (1/3 of measure),
Initiatives Reports (1/2 of measure), Account Service, Network Pharmacy Management,
Network Access, Mail Order Service, Retail Paper Claims Processing Time,
Network Pharmacy POS Compliance (1/2 of measure)
MEASURE Annual Percent of Fees
at Risk
(Max $600 k)
Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
Average speed to answer
for all calls made to the
WHI Member Service
Center
20%
• 15.02%: WHICH EQUALS 4 QUARTERS
MISSED OUT OF 4 QUARTERS
MEASURED
• Corrective Action: Staffing issues during
evening hours have been addressed.
First call resolution
10%
• 7.5%: WHICH EQUALS 3 QUARTERS
MISSED OUT OF 4 QUARTERS
MEASURED
• Corrective Action: A system change made it
appear that some calls were being transferred
when they were not. This problem was
corrected.
Standard management
monthly reports series
available on FTP site
within 15 days of month
end
20% • 10.02%: WHICH EQUALS 3 QUARTERS
MISSED OUT OF 4 QUARTERS
MEASURED
• Corrective Action: To address this issue WHI
has been upgrading the database to improve the
daily load process and performance.
Percent of transactions
within three (3) seconds
8% • 8%: WHICH EQUALS 4 QUARTERS
MISSED OUT OF 4 QUARTERS
MEASURED
• Corrective Action: WHI has a server re-engineering
in process that is addressing server
response time.