Benefit Options Annual Report 2010

              State of Arizona
Arizona Department of Administration
Benefit Services Division
Scott A. Smith
Director
Arizona Department of Administration
Janice K. Brewer
Governor
Annual Report
Benefit Options
October 1, 2009 through
September 30, 2010
FOREWORD
Benefit Options is the program name for the various 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 October 1, 2009 through September 30,
2010. 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 4
Enrollment in Benefit Options Medical Plans 5
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
Generic and Name-Brand Prescription Use 14
Prescription Use by Therapeutic Class 14
Prescription Use by Type of Drug 15
Annual Prescription Use 16
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
Audit Services 32
Glossary of Terms 33
Appendix A - Plan Year Cash Flow Reconciliation 36
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
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, 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 and
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 two options for the medical plan, integrated or non-integrated.
The integrated option combines the functions of claims review and payment,
network access, and utilization review and utilization management (URUM) which
includes case management and disease management. The non-integrated option is
similar, but the URUM function is carved out to a separate contract.
Schedules of premiums received; incurred and paid medical/drug claims; expenses
related to the medical and dental plans; and distribution by enrollment are included
within this document as accounted for in fund 3015. 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 timing
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 2009-2010 (October 1, 2009 – September
30, 2010). Notable administrative changes for Plan Year 2009-2010 include; new
medical, pharmacy, short term and long term disability, and life insurance contracts; a
new Health Savings Account Option (HSAO); the inclusion of a fourth premium tier
option under medical coverage; and termination of the UHC Secure Horizons contract
effective December 31, 2009. The medical contracts require a nation-wide network
giving members greater choice and access to providers in their local area.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
2
Executive Summary
During Plan Year 2009-2010, the Benefit Services Division (BSD) Health Plan offered a
comprehensive insurance package to over 129,900 members consisting of active State
employees, University staff, retirees, and their qualified dependents. The benefit
options include; medical, pharmaceutical, dental, flexible spending, vision, life, and
disability insurance.
To ensure the efficiency and effectiveness of the State Health Plan, BSD Audit Services
developed a multi-directional audit plan which includes; contract compliance auditing,
quality management reviews, process improvement, and plan design evaluation. Audits
scheduled and completed this plan year consist of: dependent eligibility, vendor
operating transactions, vendor internal operating standards, and vendor execution of
benefit design. The audit plan has been strategically developed to identify potential loss
and facilitate corrective action, in continuing efforts to improve plan performance and
cost effectiveness.
For the 2009-2010 Plan Year, the total premiums expected were $739,472,570 with
total expenses for the plan of $681,833,972, resulting in an expected net operational
gain of $57,638,598.
The 2009-2010 contribution strategy for medical resulted in employees paying 10.61%
of the average monthly total premium, while the State paid the remaining 89.39%.
However, the contribution strategy for dental resulted in employees paying 84.21% of
the average monthly total premium, while the State paid the remaining 15.79%.
Retirees are fully responsible for payment of their premiums, but typically receive a
subsidy through the respective retirement system to offset a portion of the cost.
COBRA is offered to terminated employees at 102% of the total premium. However, if
qualified under the American Recovery and Reinvestment Act (ARRA), a COBRA
member would pay only 35% of the total COBRA premium with the remaining 65%
COBRA Premium Assistance portion to be collected through a reduction of employer
paid payroll taxes.
The analysis of expenses for Plan Year 2009-2010 indicated the average cost to insure
each member was $4,899. However, when analyzed by type of subscriber; the active
members average cost was $4,667 compared to the average retiree cost of $7,666.
This difference in average cost between active and retired members is a common trend.
There is a direct relationship between the age of an insured member and their cost for
health care. Senior members usually require an increased amount of medical care,
including additional pharmaceuticals, to maintain their quality of life.
Medical claims expenses accounted for $442,328,375 of the total cost the health plan
during 2009-2010. When analyzed by cost, the five leading diagnosis categories are:
musculoskeletal system (muscles and joints), injury and poisoning (accident), neoplasm
(cancers), circulatory system (heart), and genitourinary system (kidneys and
reproductive organs). Musculoskeletal system was the leading category with
$57,502,689 or 13.00% of total claims paid.
Examination of hospital care reveals that inpatient care represents a significant portion
of the total medical expenses: 34% and 35% for active and retired members
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
3
respectively. Analysis by the type of medical care visit reveals there were 180
emergency room, 150 urgent care, and 4,270 physician visits per 1,000 members
covered under the self-insured plan; which indicates members are seeking the care of a
physician or specialist for the majority of their medical needs.
The annual cost of prescription drug claims for 2009-2010 totaled $104,245,795 and a
reported 1.4 million prescriptions were filled. The top five most expensive drugs classes
are described as maintenance drugs used to control and prevent chronic diseases.
Cholesterol-lowering drugs lead the list with 10 million dollars or 10.76% of total
pharmacy costs. In fact, the most prescribed drug according to total expense is Lipitor,
typically prescribed for treating and preventing high cholesterol. Other leading
categories were diabetes, asthma, behavioral health (anti-depressants), and
inflammatory disease.
Retirees on the State health plan filled an average of 30 prescriptions per year, while
active members averaged 10 per year. Similar to medical cost per member, the
pharmaceutical expense per member increases as the members age increases.
Analysis indicates that the 40-64 age group annual prescription drug cost is $1,439 per
member compared to the 65+ age group cost of $2,270 per member. As a result the
smaller population of insured retirees attributes the majority of prescription expenses.
In addition to managing the volume statistics and expenses of the Program, the State
manages performance measures with specific financial guarantees. These financial
guarantees are tied to the contracted performance of the vendors providing services. If
a vendor fails to meet any of the measures, a percentage of the annual administrative
fee is withheld by ADOA as performance penalties. During the 2009-2010 Plan Year,
ADOA collected penalties totaling $110,901.88 for the prior plan year. An assessment
of vendor performance for the 2009-2010 Plan Year is provided in the Health Insurance
Vendor Performance Standards section of this report.
In review, the 2009-2010 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 accomplishment
can be reviewed herein.
The passing of the new Health Care Reform by the Federal Government initiated a
review of the plan year cycle. It was determined that the plan year should be moved to
a calendar year for tax reporting purposes effective January 1, 2011 and a mini-plan
year was offered from October 1, 2010 through December 31, 2010. An amendment
covering the period of October 1, 2010 through December 31, 2010, will be provided in
April 2011.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
4
Health Insurance Trust Fund Summary
Table 1 provides a summary of receipts, expenses, and enrollment incurred during the
2009-2010 Plan Year and paid through December 2010.
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 $500,000 with a lifetime maximum of $2 million.
Table 1: Health Insurance Trust Fund Summary*
2009-2010 2008-2009
Receipts (accrual basis)
ADOA Benefit Options 664,852,967 627,294,082
UHC Secure Horizons 1,839,423 8,434,781
BCBS (NAU) 30,718,640 34,272,496
Dental 42,061,540 47,330,983
Total 739,472,570 717,332,341
Expenses
Medical Claims (accrual basis) 442,328,375 500,098,992
Drug Claims (accrual basis) 104,245,795 114,299,093
Medicare Part D Subsidy (1,249,718) ( 2,518,939)
Rebates & Recoveries (12,994,654) ( 16,688,279)
Reserves for future benefits 36,270,927 41,255,326
Secure Horizons expense 2,260,434 7,687,528
BCBS Payments 30,714,058 34,342,197
Administration Fees 29,092,948 23,750,954
Stop-Loss Premiums 6,470,888 3,509,198
Appropriated Expenses 3,846,185 4,342,510
Dental Costs 40,848,736 47,269,155
Total 681,833,972 757,347,735
Difference 57,638,598 ( 40,015,394)
Enrollment
Subscribers 63,814 65,557
Members 129,959 134,918
*The data is for the incurred period October 2009 through September 2010 and
paid through December 2010.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
5
Enrollment in Benefit Options Medical Plans
The Benefit Options group medical plan is available to all:
• 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
The table below shows how enrollment was distributed between networks and between
active, retired, and university members.
Network Plan Type Subscribers Members ** Subscribers Members **
AETNA
Active EPO 1037 2338 - -
Retiree EPO 278 354 - -
University EPO 981 1767 - -
COBRA EPO 21 32
Active PPO 75 123 - -
Retiree PPO 72 90 - -
University PPO 116 191 - -
COBRA PPO 2 3
Active HSAO 109 194 - -
Retiree HSAO - - - -
University HSAO 136 256 - -
COBRA HSAO 3 5 - -
AmeriBen/BCBC of AZ
Active EPO 5528 13516 - -
Retiree EPO 1104 1459 - -
University EPO 1524 3161 - -
COBRA EPO 60 88
Active PPO 205 360 - -
Retiree PPO 220 267 - -
University PPO 250 460 - -
COBRA PPO 7 11 - -
AZ Foundation*
Active PPO - - 494 945
Retiree PPO - - 453 599
University PPO - - 444 849
Beech Street*
Active PPO - - 127 386
Retiree PPO - - 235 280
University PPO - - 114 222
Continues on next page
Table 2: Average Monthly Enrollment
2009-2010 2008-2009
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
6
*AZ Foundation, Beech Street, and RAN+AMN medical networks were not offered during the 2009-2010 Plan
Year.
Network Plan Type Subscribers Members ** Subscribers Members **
CIGNA
Active EPO 2688 6398 - -
Retiree EPO 688 900 - -
University EPO 1127 2209 - -
COBRA EPO 25 37 - -
RAN+AMN
Active EPO - - 8888 21755
Retiree EPO - - 1386 1808
University EPO - - 2927 5775
UnitedHealthcare
Active EPO 23337 53633 25726 58660
Retiree EPO 4838 6318 4531 5982
University EPO 12340 26505 13051 27894
COBRA EPO 402 588 - -
Active PPO 645 1145 920 1699
Retiree PPO 178 233 193 253
University PPO 761 1429 984 1909
COBRA PPO 26 39 - -
Blue Cross Blue Shield
NAU only PPO 2809 2961 2859 3016
SecureHorizons *
Medicare only HMO 2223 2890 2225 2886
Political Subdivisions EPO/ PPO - - - -
Total 63814 129959 65557 134918
Continuation Table 2: Average Monthly Enrollment
2009-2010 2008-2009
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
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.
$-
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
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
2009-2010 2008-2009
ADOA developed a contribution strategy that provided affordable health insurance to all
State and University employees. The EPO plan was offered to employees for single
coverage, employee plus adult, employee plus child, and family coverage at the cost of
$39, $97, $79 and $178. PPO monthly premiums were determined from actual
experience and the true cost of the coverage.
The 2009-2010 contribution strategy for medical resulted in employees paying 10.61%
of the average monthly total premium, while the State paid the remaining 89.39%. The
contribution strategy for dental resulted in employees paying 84.21% of the average
monthly total premium, while the State paid the remaining 15.79%.
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.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
8
Expenses for Benefit Options Self-Funded Plans
The tables below show the distribution of the self-funded expenses. Table 3 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 4 below shows the distribution of expenses by benefit plan.
Table 3: Self-funded expenses by active, retiree, EPO, and PPO subscribers and members*
Expenses Overall Active Retiree EPO PPO HSAO
Medical Claims (accrual basis) 442,328,375 400,260,956 4 2,067,419 4 19,204,308 2 2,608,425 515,642
Drug Claims (accrual basis) 104,245,795 79,116,099 25,129,696 9 6,923,304 7 ,264,520 57,970
Medicare Part D Subsidy (1,249,718) (1,249,718) (1,170,108) (79,611)
Rebates & Recoveries (12,971,260) (11,376,543) ( 1,594,717) (12,248,704) (708,943) (13,613)
Reserve (IBNR) 36,270,927 31,811,694 4 ,459,233 3 4,250,478 1 ,982,383 38,065
Administration Fees 29,092,948 25,441,420 3,651,528 27,704,694 1,265,513 122,740
Stop-Loss Premiums 6,470,888 5,658,711 812,177 6,162,111 281,477 27,300
Appropriated Expenses 3,846,185 3,363,441 482,744 3,662,653 167,305 16,227
Total $ 608,034,139 534,275,777 73,758,362 574,488,737 32,781,070 764,332
Enrollment in self-funded plans
Subscribers 58,783 51,405 7,378 55,978 2,557 248
Members 124,109 114,488 9,621 119,303 4,351 455
Annual cost
Per subscriber $ 10,344 10,393 9 ,997 1 0,263 1 2,820 3,082
Per member $ 4,899 4,667 7 ,666 4 ,815 7 ,534 1,680
*The data is for the incurred period October 2009 through September 2010 and paid through
December 2010.
Table 4: 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) 442,328,375 379,577,409 20,167,905 515,642 39,626,900 2,440,519
Drug Claims (accrual basis) 104,245,795 73,814,606 5,243,522 57,970 23,108,698 2,020,998
Medicare Part D Subsidy (1,249,718) (1,170,108) (79,610.68)
Rebates & Recoveries (12,971,260) (10,759,867) (603,062) ( 13,613) (1,488,837) (105,880)
Reserve (IBNR) 36,270,927 30,087,314 1,686,315 38,065 4,163,165 296,068
Administration Fees 27,352,957 22,833,296 971,125 115,400 3,214,437 218,701
Stop-Loss Premiums 6,470,888 5,401,672 229,739 27,300 760,439 51,738
Appropriated Expenses 3,846,185 3,210,661 136,553 16,227 451,992 30,752
Total $ 606,294,148 504,165,090 27,832,096 756,991 68,666,685 4,873,286
Enrollment in self-funded plans
Subscribers 58,783 49,070 2,087 248 6,908 470
Members 124,109 110,272 3,761 455 9,031 590
Annual cost
Per subscriber $ 10,314 10,274 13,336 3 ,052 9,940 10,369
Per member $ 4,885 4,572 7,400 1 ,664 7,603 8,260
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
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 type of disorder.
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.
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, and laboratory analysis of blood with findings not related to cellular abnormality.
Table 5: 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 12.75% 15.41% 13.00% 12.90% 12.70% 12.89%
Health Status (lab tests, etc.) 9.99% 8.03% 9.80% 0.01% 0.00% 0.01%
Ill-defined1 9.77% 8.26% 9.63% 10.29% 8.63% 10.15%
Injury/Poisoning 9.32% 5.85% 8.99% 7.86% 12.17% 8.23%
Neoplasm (tumors) 8.45% 12.76% 8.86% 8.58% 14.35% 9.08%
Circulatory System 8.07% 12.93% 8.52% 8.58% 6.20% 8.38%
Genitourinary System 7.47% 9.73% 7.68% 7.86% 8.80% 7.94%
Digestive System 7.32% 5.51% 7.15% 7.60% 7.40% 7.59%
Nervous System 5.67% 8.00% 5.89% 5.16% 6.16% 5.24%
Respiratory System 4.94% 4.41% 4.89% 5.16% 5.14% 5.16%
Pregnancy/Childbirth Complications 4.43% 0.03% 4.02% 4.27% 0.02% 3.91%
Endocrine 3.55% 3.38% 3.53% 3.58% 3.94% 3.61%
Mental Health 2.42% 1.64% 2.35% 2.50% 1.36% 2.40%
Infectious/Parasitic 1.94% 1.18% 1.87% 1.89% 1.44% 1.85%
Skin and Subcutaneous Tissue 1.56% 1.71% 1.57% 1.53% 2.20% 1.59%
Congenital Anomalies 1.04% 0.22% 0.96% 1.23% 0.65% 1.18%
Blood and Blood Forming Organs 0.95% 0.95% 0.95% 0.70% 0.00% 0.64%
Conditions in the Perinatal Period 0.37% 0.00% 0.33% 0.85% 1.45% 0.91%
External Causes of Injury/Poisoning 0.00% 0.00% 0.00% 9.45% 7.39% 9.27%
Grand Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2009-2010 2008-2009
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
10
Hospital Care
Inpatient hospital care represents a significant portion of total medical expenses: 34%
and 35% for active and retired members, respectively. The figures below show how
active/retired members and EPO/PPO/HSAO members’ hospital admissions compared
based on the number of admissions and the average length of stay.
Note: Mental health, substance abuse, and maternity admissions are included.
Active
67.5
Retiree
189.2
EPO
77.3
PPO
85.2 HSAO
27.0
Active
72.9
Retiree
149.9
EPO
75.2
PPO
94.0
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
Admissions
2009-2010 2008-2009
Figure 2: Admissions per 1,000 Members
Active
4.1
Retiree
6.4
EPO
4.6
PPO
5.7
HSAO
2.0
Active
4.5
Retiree
5.7
EPO
5.1
PPO
6.1
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Days
2009-2010 2008-2009
Figure 3: Average Length of Stay
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
11
Hospital Care (continued)
The figures below show how active/retired members and EPO/PPO/HSAO members
compared statistically in collective number of hospital days and average cost per
admission. As a group, retirees spent 4 times as many days in the hospital as active
members. Also, PPO members spent 1.7 times as many days in the hospital as EPO
members. On average, PPO members cost per admission was $4,937 higher than
EPO members.
Note: Mental health, substance abuse, and maternity admissions are included.
Active
279.8
Retiree
1,209.9
EPO
352.3
PPO
486.0
HSAO
53.0
Active
327.5
Retiree
859.9
EPO
340.8
PPO
524.6
-
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
Days
2009-2010 2008-2009
Figure 4: Days per 1,000 Members
Active $14,546
Retiree $12,311
EPO $13,983
PPO $18,920
HSAO $7,334
Active $15,120
Retiree $17,141
EPO $15,007
PPO $19,253
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
2009-2010 2008-2009
Figure 5: Average Cost per Admission
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
12
Emergency Room Visits
During Plan Year 2009-2010, there were approximately 180 emergency room visits per
1,000 members of the self-funded plan. The average plan cost per emergency room
visit was $932.04. These figures include facility claims and professional fees.
Urgent Care Visits
During Plan Year 2009-2010, there were approximately 150 urgent care visits per 1,000
members of the self-funded plan. The average plan cost per urgent care visit was
$101.00.
Physician Visits
During Plan Year 2009-2010, 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 $94.86.
Figures 6 and 7 show how total active and retiree medical expenses were distributed by
type of care. 7.80% of medical expenses for active employees were spent for
emergency room care while 6.33% of medical expenses for retired members were spent
for home care.
Figure 6: Active Employee Medical Expense by Place of Service
Inpatient Hospital,
33.57%
Office, 23.18%
Outpatient
Hospital, 16.48%
Ambulatory
Surgical Center,
10.77%
Emergency Room,
7.80%
Home Health,
2.64%
Independent
Laboratory, 2.68%
Ambulance, 2.32%
Urgent Care
Facility, 0.46%
Other, 0.11%
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
13
Figure 7: Retiree Medical Expenses by Place of Service
24.94%
Home Health 6.33%
Emergency Room
3.79%
Independent
Laboratory 2.04%
Ambulance, 2.75%
Other 1.21%
Urgent Care Facility
0.12%
Inpatient Hospital
35.36%
Outpatient Hospital
16.25%
Ambulatory Surgical
Center 7.22%
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
14
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.
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 "Cardiovascular Disease – Lipid", than on any
other therapeutic class.
Table 7: Top therapeutic classes by total expense
Therapeutic class Total Cost Percent Total Cost Percent
Cardiovascular Disease - Lipid $10,065,596 9.10% 12,303,047 10.76%
Diabetes $9,602,335 8.70% 8,709,123 7.62%
Asthma $7,705,106 7.00% 7,053,179 6.17%
Behavioral Health - Antidepressants $7,431,696 6.70% 9,158,047 8.01%
Behavioral Health - Other $7,078,441 6.40% - -
Inflammatory Disease $6,527,936 5.90% 5,605,012 4.90%
Pain Management - Analgesics $5,965,851 5.40% 6,081,523 5.32%
Upper Gastrointestinal Disorders - Ulcer $5,549,570 5.00% 9,023,718 7.89%
Cardiovascular Disease - Hypertension $5,450,331 4.90% 8,063,741 7.05%
Infectious Disease - Viral $5,214,141 4.70% 4,882,905 4.27%
Anticonvulsants - - 5,074,361 4.44%
Total $70,591,003 63.80% $75,954,656 66.45%
2009-2010 2008-2009
Table 6: Claim distribution for 3-tier formulary
Total Prescriptions Percent Total Prescriptions Percent
Tier 1 Generic ($10 copay) 980,591 68.0% 974,094 63.5%
Tier 2-Preferred ($20 copay) 361,208 25.0% 476,648 31.1%
Tier 3-Non-Preferred ($40 copay) 101,173 7.0% 83,455 5.4%
Total 1,442,972 100.0% 1,534,197 100.0%
2009-2010 2008-2009
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
15
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.
Table 8: Top ten drugs by total expense
Drug Name Total Gross Cost Percent Drug Name Total Gross Cost Percent
Lipitor 3 ,440,283 3.30% Prevacid 4,561,623 3.99%
Enbrel 2 ,289,241 2.20% Lipitor 4,272,540 3.74%
Advair diskus 2 ,063,084 1.98% Enbrel 2,547,216 2.23%
Humira 2 ,062,801 1.98% Oxycontin 2,363,851 2.07%
Crestor 2 ,000,769 1.92% Crestor 2,311,852 2.02%
Singulair 1 ,921,456 1.84% Effexor XR 2,212,614 1.94%
Plavix 1 ,769,859 1.70% Advair diskus 2,160,881 1.89%
Cymbalta 1 ,663,635 1.60% Singulair 2,102,215 1.84%
Actos 1 ,566,236 1.50% Humira 2,036,027 1.78%
Oxycontin 1 ,461,868 1.40% Plavix 1,832,702 1.60%
Total $20,239,230 19.41% Total $26,401,521 23.10%
2009-2010 2008-2009
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
16
Annual Prescription Use
The figure below compares the average number of prescriptions filled last plan year by
active and retired members.
Active
10.1
Retiree
30.1
Active
10.5
Retiree
30.4
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2009-2010 2008-2009
Figure 8: Average Number of Prescriptions per
Member per Year
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
17
Annual Pharmacy Expenses by Age
The figure below shows how pharmacy expenses increase with age among plan
members.
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.
407
614
1,439
2,270
421
767
1,840
3,060
0
500
1000
1500
2000
2500
3000
3500
2009-2010 2008-2009
Figure 9: Pharmacy Expense per Utilizer per Year
(in dollars)
0-18 yrs
19-39 yrs
40-64 yrs
65+ yrs
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
18
Benefit Options Dental Plans
Prepaid Plan – Total Dental Administrators (TDA)
• 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
• 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 figures show how active employee and retiree dental enrollments were
distributed among plans.
Figure 10: Active Employee Dental Enrollment
Delta Dental 69%
Total Dental 31%
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
19
Dental Rates
The table below summarizes monthly dental rates for active and retired members.
Figure 11: Retiree Dental Enrollment
Delta Dental 82%
Total Dental 18%
Table 9: Summary of Monthly Dental Rates
Active Employees
Employee State Total Employee State Total Employee State Total
Delta Dental $29.86 $4.96 $34.82 $67.93 $9.92 $77.85 $118.12 $13.70 $131.82
Total Dental Admin. $5.00 $4.96 $9.96 $9.00 $9.92 $18.92 $14.00 $13.70 $27.70
Retirees
Delta Dental $34.82 $77.85 $131.82
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
October 1, 2009 to September 30, 2010
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 Earned Premiums
Vendor Collected Paid Collected Paid
Standard*^
Basic Life $1,538 $2,533,453
Supp Life $2,438 $10,796,632
Dep Life $463 $1,652,664
STD $2,927 $10,073,067
LTD $4,961 $4,472,699
Total $12,328 $2,246,000 $29,528,516 $29,533,536
Hartford*
Basic Life $2,353,728
Supp Life $11,569,012
Dep Life $2,635,373
STD $7,538,133
LTD $2,744,220
Total $26,840,466 $23,930,135
Avesis* - Vision $4,728,106 $5,676,977
ASI - FSA $5,861,366 $5,687,416
Total $36,765,607 $40,897,929
2009-2010 2008-2009
* Per contract, vendors paid 55 days in arrears.
^ Collected amounts for Standard are residual collections due to timing of
receipts from universities and members in leave without pay status.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
21
Health Insurance Vendor Performance Standard
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
for their non-performance during the Plan Year ending September 30, 2010. 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 Benefit Services Division Vendor Survey for FY 2009-2010, may result in
additional penalties.
A. UHC (Claims Administrator) – penalties to date of $65,948.04, equaling .77% of the
vendor’s annual administrative fee.
MEASURE Annual Percent of
Fees at Risk
Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
Average Speed to
Answer <30
seconds
.50% • 0.04%: WHICH EQUALS 1
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: Customer care
was in a training ramp up period in
October to meet 1/1 staffing needs
and this metric was missed for
October 2009. Appropriate staffing
and training has since taken place
to resolve this issue.
Written appeals
resolved in 15
calendar days after
receipt of
participant’s request
for review in the
case of pre-service
claims.
0.25% • 0.06%: WHICH EQUALS 3
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: Each of the
missed appeals were unique
analyst errors. Appropriate
feedback and training was given to
the analyst associated with the
appeals triage team. Appeals
supervisory continue to monitor our
triage teams.
•
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
22
97% of all fully
documented claims
received will be
completely
processed within 10
calendar days after
they are received.
0.75% • 0.12%: WHICH EQUALS 2
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: This metric was
missed for October and November
2009 since our Transaction team
was incorrectly managing this policy
to 94% into workday versus 97%
percent in 10 calendar days. The
change was made with our teams
and we have successfully managed
to 97% in 10 calendar days the rest
of the plan year.
99.3% of claims
dollars submitted for
payment will be
accurately
processed and paid.
2% • 0.33%: WHICH EQUALS 2
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: This metric was
missed due to one claim in October
2009 where our Transaction
Operations team requested
information when it was not needed
to process the claim. For the metric
that was missed in March, there
were two errors that caused the
missed metric. On the first error,
the processor had the
incorrect other insurance allowable
on the claim, which caused an
overpayment. On the second error,
the processor did not split the claim
correctly for accurate repricing. The
Transaction Operations analysts
received appropriate feedback and
training to prevent further issues.
97% of al claims will
be process
accurately.
Accurate
processing includes
payment amount;
communication to
claimant or
provider; data entry
errors affecting
current or future
benefit
determinations and
management
reports.
1% • 0.17%: WHICH EQUALS 2
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: This metric was
missed in October 2009 due to one
claim where our Transaction
Operations team requested
information when it was not needed
to process the claim. The
Transaction Operations analyst
received appropriate feedback and
training to prevent further issues.
• The December 2009 metric was
missed due to one claims where an
incorrect remark code was used.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
23
The Transaction Operations analyst
received appropriate feedback and
training to prevent further issues.
Contractor will
deliver its monthly
reports to the ADOA
within 30 calendar
days from the end
of the month.
Reports to be
provided: Total
billed claims sorted
by type of claim;
Total number of
claims; Provider
discounts; Ineligible
charges broken
down as follows:
over UCR or
allowable amount,
no plan benefit or
plan provision, not
eligible for
coverage; Total
allowable expenses,
Deductible dollars,
COB payments
broken down as
follows: other plan
payments, total
claims paid sorted
by type of claim;
Total members’ co-insurance
payments; IBNR;
Demographic report
(by age, gender,
plan selected, tier of
coverage and
county); Direct pay
member delinquent
report; Utilization
reports (including
inpatient
admissions per
1,000 members,
inpatient days per
1,000 members,
ALOS, emergency
.50% • .04%: WHICH EQUALS 1 MONTHS
MISSED OUT OF 12 MONTHS
MEASURED
• Corrective Action: Target was
missed by one day no corrective
action request as the measure was
met for the rest of the year.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
24
room visits/1,000,
and outpatient
surgeries/1,000);
and any additional
reporting as
specified in the
implementation
plan.
Contractor will
provide a detailed
provider report
which identifies
providers by TIN
number.
No fees at Risk • 0.%: WHICH EQUALS 1 MONTHS
MISSED OUT OF 12 MONTHS
MEASURED
• Corrective Action: Target was
missed by one day no corrective
action request as the measure was
met for the rest of the year.
B. AmeriBen (Claims Administrator) – penalties to date of $9,298.60, equaling
0.33% of the vendor’s annual administrative fee.
MEASURE Annual Percent of
Fees at Risk
Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
First Call Resolution
>90%
0.30% • 0. 08%: WHICH EQUALS 4
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: AmeriBen
implemented quality controls
subsequently met the measure for
the rest of the year.
Contractor will
acknowledge within
2 working days and
resolve 95% or
more of all
correspondence
(inquiries and
requests) within 30
calendar days of
receipt.
0.10% • 0.008% WHICH EQUALS 1
MONTHS MISSED OUT OF 12
MONTHS MEASURED Corrective
Action: AmeriBen implemented
quality controls subsequently; met
the measure for the rest of the year.
Processing of a
claim will be
completed when it
has been approved
for payment, denied
or pended with a
request for further
information. 97% of
all fully documented
claims received will
be completely
.75% • 0.25% WHICH EQUALS 4
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: AmeriBen
implemented five action items:
Insure claims are properly
segregated into unique files for
priority electronic registration.
Daily inventory of ADOA file
receipts into the adjudication
system.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
25
processed within 10
calendar days after
they are received.
Allocate additional resource to
pre-adjudication queues where
claims are routed for manual
intervention.
Review use of internal routing
specifically:
Precertification
confirmations
Provider credentialing
confirmations
C. Cigna (Claims Administrator) – penalties to date of $5,806.05, equaling .49% of
the vendor’s annual administrative fee and .37% of the nurse line administrative fee.
MEASURE Annual Percent of
Fees at Risk
Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
Average
Speed to
Answer
<30
seconds
.50% • .08%: WHICH EQUALS 2
MONTHS MISSED OUT OF 12
MONTHS MEASURED Corrective
Action: New "OneView" tracking
system introduced to AZ market,
learning curve issues slowed ASA
during transition. CIGNA introduced
24/7 customer service access and
staffing level needs were
underestimated at during roll out.
All Reps now acclimated to
OneView and staffing issue
shortfalls corrected.
Written appeals
resolved in 45
calendar days after
receipt of
participant’s request
for review in the
case of post-service
claims.
.33% • .028%: WHICH EQUALS 1
MONTH MISSED OUT OF 12
MONTHS MEASURED Corrective
Action: This target was missed due
to additional information not being
submitted to consider the appeal by
the provider.
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.
.75% • .18%: WHICH EQUALS 3
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: Based on audit
results Cigna will be implementing
several system enhancements in
2011. In addition a specialized
team has been created to process
specific claim types.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
26
D. Aetna (Claims Administrator) – penalties to date of $7,307.31, equaling.50% of the
vendor’s annual administrative fee.
MEASURE Annual Percent of
Fees at Risk
Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
Contractor will
resolve 95% or
more of all "normal"
correspondence
within 15 calendar
days of receipt.
Normal
correspondence is
1% • .08%: WHICH EQUALS 1 MONTHS
MISSED OUT OF 12 MONTHS
MEASURED
• Corrective Action: The
correspondence TAT was missed
due to one of the five items
received was not resolved until the
17th day. The delay was a result of
97% of al claims will
be process
accurately.
Accurate
processing includes
payment amount;
communication to
claimant or
provider; data entry
errors affecting
current or future
benefit
determinations and
management
reports.
.50% • .208%: WHICH EQUALS 5
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: Based on audit
results Cigna will be implementing
several system enhancements in
2011. In addition a specialized
team has been created to process
specific claim types.
Nurse line- Average
Speed to Answer 45
seconds or less
2% • .16%: WHICH EQUALS 1
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: Higher than
expected call volume across
country. HIL monitors for increased
call volume and adjusts staffing
appropriately
Nurse line-
Abandonment Rate
<5%
2.5% • .20%: WHICH EQUALS 1
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: Abandonment
rate is a component of total calls
received. 1 - 2 abandoned calls is
normal for this account, but
because call volume is low (37 for
Sept) the abandonment rate shows
higher. ASA for that month was 26
seconds indicating no issues with
hold times.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
27
defined as: plan
descriptive
materials requests;
and premium and/or
coverage
verification.
needing additional time to confirm
that a member was eligible for a
review under the plan. This was an
isolated issue that did not require
additional corrective action.
98% of all fully
documented claims
received will be
processed within 30
calendar days
.50% • .04%: WHICH EQUALS 1 MONTHS
MISSED OUT OF 12 MONTHS
MEASURED
• July 2010 TAT was missed due to a
claim rework project based upon a
plan clarification. This was an
isolated issue that did not require
additional corrective action.
92% of all fully
documented claims
received will be
completely
processed within 12
calendar days after
they are received.
.50% • .04%: WHICH EQUALS 4 MONTHS
MISSED OUT OF 12 MONTHS
MEASURED
• Corrective Action: As result of
missing the November/December
TAT Aetna set up a custom
process, including a designated
team of claims processors, to
process all ADOA claims. Aetna
also incorporated additional
reporting metrics to better monitor
performance results. March and
July 2010 TAT were missed due to
large claim rework projects based
upon a plan clarification and
updated provider rates. These
were isolated issues that did not
require additional corrective action.
98.2% of claims
dollars submitted for
payment will be
accurately
processed and paid.
1% • .25%: WHICH EQUALS 3 MONTHS
MISSED OUT OF 12 MONTHS
MEASURED
• Corrective Action: The Target was
missed due to the mis-interpretation
of pricing instructions. There
were a total of four individual
processors involved. Analysis of all
errors are performed by the Quality
Analyst. One-on-one educational
sessions occur with each individual
processor involved. A follow
up discussion with the Claim
Supervisor also occurs to
assure the processor understands
their error. All errors identified in
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
28
the auditing process
are educational opportunities that
are discussed and addressed
during our monthly meetings with
the designated ADOA Claim
Processing Team.
96% of al claims will
be process
accurately.
Accurate
processing includes
payment amount;
communication to
claimant or
provider; data entry
errors affecting
current or future
benefit
determinations and
management
reports.
1% • .17% WHICH EQUALS 2 MONTHS
MISSED OUT OF 12 MONTHS
MEASURED
• Corrective Action: Total claim
accuracy was missed due coding
and procedural errors. There were
a total of two individual processors
involved. Analysis of all errors are
performed by the Quality Analyst.
One-on-one educational sessions
occur with each individual
processor involved. A follow
up discussion with the Claim
Supervisor also occurs to
assure the processor understands
their error. All errors identified in
the auditing process
are educational
opportunities that are discussed
and addressed during our
monthly meetings with the
designated ADOA Claim
Processing Team.
Nurse line- Average
Speed to Answer 45
seconds or less
No fees at Risk • 0% WHICH EQUALS 2 MONTHS
MISSED OUT OF 12 MONTHS
MEASURED
• Corrective Action: Aetna
constantly evaluates performance
results and adjusts staffing,
resources and workflows to ensure
a high quality service experience -
this includes additional employee
training, auditing and investment in
technology.
Nurse line-
Abandonment Rate
<5%
No fees at Risk • 0% WHICH EQUALS 2 MONTHS
MISSED OUT OF 12 MONTHS
MEASURED
• Corrective Action: Aetna
constantly evaluates performance
results and adjusts staffing,
resources and workflows to ensure
a high quality service experience -
this includes additional employee
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
29
training, auditing and investment in
technology.
E. MedImpact (Pharmacy Management) - penalties to date of $6,250.00, equaling of
the .30% vendor’s annual fee at risk.
F. Avesis (Vision) - penalties to date of $14,500.00, equaling 1% of the vendor’s
annual fee at risk.
MEASURE Annual Fees at
Risk
(Max
$2,090,000.00)
Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
Total mail service
prescriptions with
available generics
shall be dispensed
with a generic
product. 97% of
potential
$25,000
• $6,250.00: WHICH EQUALS 1
QUARTERS MISSED OUT OF 4
QUARTERS MEASURED
• Corrective Action: The first quarter
PG was missed regarding Generic
Substitution/Utilization but moving
forward has not been missed. The
plan design for ADOA is set up so
as to best promote generic
utilization which is why overall, for
the year in aggregate, we have met
this PG.
MEASURE Annual Percent of
Fees at Risk
Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
95% of claims will
be processed within
two working days
$12,000 • $2,000: WHICH EQUALS 2
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: The target was
missed due to eligibility loading
issues. The eligibility issues where
resolved by Avesis subsequently;
met the measure for the rest of the
year.
90% of all calls
requesting a
member services
representative will
be answered in 30
seconds or less.
$30,000 • $12,500: WHICH EQUALS 5
MONTHS MISSED OUT OF 12
MONTHS MEASURED
• Corrective Action: Avesis hired
additional staff to support the call
volume.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
30
G. ASI (Flexible Spending) - penalties to date of $324.95, equaling .25% of the
vendor’s annual fee at risk.
H. Successfully Met Performance Guarantees
Table 11: Successful Performance Guarantees
Vendor At risk Guarantees Met
UHC 18.55% Total
Administration Fee
25% Medical
Management Fee
Customer Service (met 71 out of 72 targets),
Appeals (met 44 out of 48 targets), Open
Enrollment, Implementation, Claims
Adjudication (met 53 out of 60 targets),
Administration, Account Management Meeting,
Reports (met 28 out of 29 targets, Network
Management (met 22 out of 24 targets),
Medical Management, Case Management,
Disease Management, Nurse Line
AmeriBen 15% Total
Administration Fee
Customer Service (met 80 out of 84 targets),
Appeals, Open Enrollment, Implementation,
Claims Adjudication (met 55 out of 60 targets),
Administration, Account Management Meeting,
Reports, Finance Accounting, & Network
Management
Cigna 26% Total
Administration Fee
27% Medical
Management Fee
Customer Service (met 82 out of 84 targets),
Appeals (met 47 out of 48 targets), Open
Enrollment, Implementation, Claims
Adjudication (met 66 out of 72 targets),
Account Management Meeting, Administration,
Reports, Finance Accounting, Network
Management (met 22 out of 24 targets),
MEASURE Annual Percent of
Fees at Risk
Total Percent Assessed Vendor
(BASED ON MISSED MEASURE)
Timeliness of claims
processing
(turnaround time) as
90% of clean claims
processed (pay or
deny) within 10
calendar days of
receipt of claim.
Clean claims are
defined as requiring
no intervention to
process. For
enrollment greater
than 10,000 this
measure
1% • 0.25%: WHICH EQUALS 1
QUARTER MISSED OUT OF 4
QUARTERS MEASURED
• Corrective Action: The 3rd Quarter
target was missed due to high claim
volume in April 2010. In April,
72,846 claims were processed. We
have added additional personnel to
accommodate for the claims
fluctuation so hopefully we can
avoid the same situation next plan
year.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
31
Medical Management, Case Management,
Disease Management, & Nurse Line (met 22
out of 24 targets).
Aetna 23% Total
Administration Fee
20% Medical
Management Fee
Customer Service, Appeals, Open Enrollment,
Implementation, Claims Adjudication (met 67
out of 72 targets), Administration, Account
Management Meeting, Reports, & Network
Management, Medical Management HIPPA
Compliance, Case Management, & Nurse Line
(met 32 out of 36 targets)
American
Health
Holding
Total Administration
Fee 7.8%
Case Management Fee
7.5%
Disease Management
Fee 5%
Nurse line Fee 5%
Implementation, Utilization Management, Case
Management, Disease Management,
Reporting, Systems, Nurse & Other Call
Center Activity.
MedImpact 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 (met 14 out of 16 targets).
Delta Dental 5% Total Administration
Fee
Implementation, Reporting, Network
Management, Claims Administration, Appeals,
Quality of Service and Responsiveness to
Members
TDA 3% Total Administration
Fee
Implementation, Reporting, Network
Management, Appeals, Quality of Service and
Responsiveness to Members
Hartford 10% Total
Administration Fee
Conversion/Implementation/Annual Open
Enrollment, Report Timeliness, Quality of
Service and Responsiveness to Members,
Appeals/Grievance, Claims Administration
Avesis $309,000.00 Total Fees
at Risk
Implementation, Reporting, Networking,
Claims (met 34 of 36 targets), Appeals, & Call
Center (met 31 of 36 targets).
ASI Flex 5% Total Administration
Fee
Claims Turnaround (met 7 out of 8 targets),
Claims Adjudication Financial Accuracy, Web
Availability, & Phone Response Time
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
32
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 2009-2010 plan year, BSD Audit Services completed various types of audits
to ensure that the health plan’s 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, but were
not limited to the following four functional areas:
Functional Area Audit Methodology
Vendor operating transactions Statement on Auditing Standard No. 70 (“SAS 70”)
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 plans contracted vendors that pay claims are required to provide a
third-party assessed operational audit (SAS 70) annually. SAS 70 audits evaluate
operational process of the vendor’s transactions and determine if identified deficiencies
were appropriately addressed. Audit services reviewed the SAS 70 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 dependant 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 audits, reviews and evaluations list above, Audit Services performed
operational standards testing related to vendor performance guarantees, quality
management standards, and reporting structure for each of the newly implemented
medical vendors.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
33
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.
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.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
34
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.
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 Annual Report
October 1, 2009 to September 30, 2010
35
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 October 1 through September 30.
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.
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
October 1, 2009 to September 30, 2010
36
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.
BEGINNING CASH PER AFIS $ 58,542,766.10
REVENUE $ 753,305,139.91
EXPENDITURES $ 660,261,467.96
VENDOR ADMIN FEES PERF PENALTIES
AZ FOUNDATION $ 5 ,460.00
BEECH STREET $ 1 ,464.66
HMA $ 3 3,486.22 $ -
HARRINGTON $ 954,466.28 $ 1 ,715.63
AHH UR/UM $ 1,030,152.75 $ -
AETNA $ 1,235,431.58 $ -
CIGNA $ 2,880,173.64 $ -
UHC $ 12,428,020.70 $ 8 5,792.00
AMERIBEN $ 2,760,650.99 $ -
WHI $ 9 6,528.30 $ -
MEDIMPACT $ 1,064,676.97 $ -
OTHER FEES** $ 178,845.62
ATTORNEY GENERAL $ 741.69
NET ADMIN FEES^ $ 22,670,099.40 $ 87,507.63 $ 22,582,591.77
MEDICAL CLAIMS RECOVERIES*
HARRINGTON $ 31,081,661.77 $ 2 ,509,356.90
AETNA $ 15,003,486.28 $ -
CIGNA $ 27,886,871.41 $ -
UHC $ 329,370,391.91 $ 7 6,013.70
AMERIBEN $ 67,923,081.02 $ 2 01,125.41
WHI $ 1,248,951.62 $ 7 ,049,984.23
MEDIMPACT $ 104,823,774.05 $ 3 ,047,271.86
RDS SUBSIDY $ 1 ,249,718.22
OTHER WELLNESS $ 553,948.00
NET MEDICAL CLAIMS $ 577,892,166.06 $ 1 4,133,470.32 $ 5 63,758,695.74
STOP LOSS PREM CLAIM REIMB
SYMETRA $ 3,396,801.60 $ 7 ,519,971.48 $ (4,123,169.88)
SELF INSURED EXPENDITURES $ 582,218,117.63
FULL SVC PREM
BCBS $ 30,664,726.00
PACIFICARE $ 2,260,433.67
TOTAL FS INS PREMS^ $ 32,925,159.67 $ - $ 3 2,925,159.67
DENTAL PREM PERF PENALTIES
DELTA $37,692,017.18 $ 2 3,394.25
TDA $3,603,382.95 $ -
NET DENTAL PREM $ 41,295,400.13 $ 2 3,394.25 $ 41,272,005.88
HITF APPROP EXP $ 3,846,184.78 $ 3 ,846,184.78
TOTAL EXPENDITURES $ 682,025,811.64
TOTAL RECOVERIES* $ 2 1,764,343.68
NET EXPENDITURES $ 660,261,467.96
ENDING CASH BALANCE PER AFIS $ 151,586,438.05
Table A: 3015 FUND PLAN YEAR 10/1/2009 - 9/30/2010
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
37
*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.
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
38
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.
BEGINNING CASH PER AFIS $ 4,133,542.11
REVENUE $ 37,333,824.91
VENDOR INSURANCE AMOUNT
STANDARD BASIC LIFE $ 1,538.14
SUPP LIFE $ 2,438.26
DEP LIFE $ 463.03
STD $ 2,926.98
LTD $ 4,961.26
TOTAL STANDARD $ 12,327.67
HARTFORD BASIC LIFE $ 2,353,727.67
SUPP LIFE $ 11,569,011.51
DEP LIFE $ 2,635,373.39
STD $ 7,538,133.36
LTD $ 2,744,220.40
TOTAL HARTFORD $ 26,840,466.33
AVESIS VISION $ 4,657,317.95
ASI AMRA $ 4,426,995.32
DCRA $ 1,396,727.82
TOTAL FLEX SPENDING $ 5,823,723.14
PAYROLL CLEARING $ ( 10.18)
TOTAL REVENUE $ 37,333,824.91
EXPENDITURES $ 36,769,807.15
VENDOR INSURANCE AMOUNT
STANDARD BASIC LIFE $ 202,411.77
SUPP LIFE $ 804,342.26
DEP LIFE $ 123,582.34
STD $ 762,942.85
LTD $ 352,720.54
TOTAL STANDARD $ 2,245,999.76
HARTFORD BASIC LIFE $ 1,276,155.96
SUPP LIFE $ 10,710,483.34
DEP LIFE $ 2,437,622.10
STD $ 6,977,592.13
LTD $ 2,528,281.64
TOTAL HARTFORD $ 23,930,135.17
AVESIS VISION $ 4,728,106.40
ASI AMRA $ 4,372,168.62
DCRA $ 1,359,497.29
ADMIN FEES $ 129,699.91
TOTAL FLEX SPENDING $ 5,861,365.82
GAO AFIS COST $ 4,200.00
TOTAL EXPENDITURES $ 36,769,807.15
ENDING CASH BALANCE PER AFIS $ 4,697,559.87
PLAN YEAR 10/1/2009 - 9/30/2010
Benefit Options Annual Report
October 1, 2009 to September 30, 2010
39
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