13615
GROUP INSURANCE COMMISSION
Charles F. Hurley Building
19 Staniford Street
Boston, MA 02114
MINUTES OF THE MEETING
NUMBER: Six Hundred Twenty-five
DATE: January 4, 2017
TIME: 9:00 A.M.
PLACE: 19 Staniford Street, Boston, MA 02114
Members Present:
Gary Anderson, Designee for Daniel Judson, Commissioner of Insurance
Katherine Baicker (Health Economist), Chair
Edward Tobey Choate (Public Member)
Christine Hayes Clinard, Esq. (Public Member)
Robert J. Dolan (Massachusetts Municipal Association)
Kevin Drake (Council 93, AFSCME, AFL-CIO)
Bobbi Kaplan (NAGE)
Melvin A. Kleckner (Massachusetts Municipal Association)
Kristen Lepore, Secretary of Administration and Finance
Eileen P. McAnneny (Public Member)
Anne M. Paulsen (Retiree Member), Vice Chair
Timothy D. Sullivan (Massachusetts Teachers Association)
Valerie Sullivan (Public Member)
Margaret Thompson (Local 5000, SEIU, NAGE)
Jean Yang (Public Member)
Members Absent:
Theron R. Bradley (Public Member)
Edward A. Kelly (President, PFFM)
The Executive Director introduced the new Commissioner, who had just in been sworn in to fill the previously vacant Public Member seat. Ms. Christine Hayes Clinard, Esq. was a member of the Oregon and Massachusetts state bar associations. She had served ten years in house for the Portland Trailblazers NBA team with a focus on business torts. Ms. Clinard stated that she was happy to join the Commission.
Commissioner Yang arrived at this point.
Approval of Minutes
The Executive Director stated that the minutes of the meeting held on December 15, 2016 had been sent to the Commissioners for review.
On a motion by Commissioner McAnneny, seconded by Commissioner Choate, the minutes were unanimously approved.
Commissioner Drake arrived at this point.
Rate Renewal Update
The Executive Director stated that today’s specially-scheduled meeting would focus exclusively on rate renewal discussion and serve as in-depth preparation for the January 19 vote. The agency was facing very large raw increases, potentially as high as 10 percent. Staff would provide some context for the numbers and then discuss options and recommendations.
The Executive Director distributed the “FY18 Financial Discussion Presentation” from Mercer Health & Benefits, LLC, as well as the FY17 “At-A-Glance” brochures.
The Executive Director provided an overview of national trends. She stated that the biggest drivers of cost increases were a spike in pharmacy costs and utilization of high-cost providers. The agency would like to address those two drivers, especially where its benefit structure was an outlier compared with a peer group of other employers.
The Executive Director provided a strategic framework of what the agency aimed for. This included correction of items within the plan structure that were significant outliers compared to benchmarks. Other aims were to correct unwarranted variations between its plans; focus on pharmacy; when possible, address the plans’ contracted rates with providers and pharmacies before changing member choice or benefits; spread any “pain” as equitably as possible; and conceptualize next-generation possibilities for the tiering initiative.
The Executive Director presented a graph displaying national trends in changes in total health benefit cost per employee, employee earnings, and overall inflation from 1993 through 2017. She stated that in the small and merged markets, premiums were increased six to eight percent before benefits were cut.
The Executive Director described a chart comparing 2012 – 2015 small, mid-sized, large, and jumbo group; GIC; and individual premiums to 2012 small group premiums. She stated that the GIC’s premiums had been relatively stable.
The agency would like to keep its premiums below those of the standard commercial market. The health care cost growth benchmark set by Chapter 224 of the Acts of 2012 was 3.6% for 2013 through 2015. The agency should aim for 3.6% cost growth and not settle for more than 5%. She would appreciate feedback as to whether this goal was considered reasonable.
There was a discussion about the potential change of the state’s benchmark. There were no further Commission comments on the target increase.
The Executive Director stated that the Administrative Services Only (ASO) plans accounted for 80% of the agency’s business. She stated that the net result of final negotiations should represent at least a point for final rates translating into an 8.8% overall increase.
The Executive Director stated that staff was considering potential medical benefit changes. The current employee annual deductible of $300 for an individual, $600 for a two-person family, and $900 for a family of three or more, was lower than a peer group of other state agencies’, listed in the presentation’s Appendix.
Commissioner Paulsen asked if the benchmark comparisons considered employee salaries and cost of living. The Executive Director stated that there was no perfect comparison, and then listed the states the agencies in the peer group represented. Commissioner Kaplan stated that of the states listed, aside from California, Massachusetts had the highest housing and healthcare costs in the country. She was concerned about what the comparisons were being made against because such comparisons were not “apples to apples.” The Executive Director stated that the only data the agency had access to were Mercer’s, which were two years old, and MA Health Connector’s, which were used as a benchmark across the country. If the agency were to aim for the Gold Connector plan, there was room to increase the plan deductible.
The Executive Director stated that the state continued to be an outlier in offering retiree health benefits, which was not to suggest that it should stop doing so. 70% of Mercer’s custom peer group but fewer than 20% of commercial employers offered such benefits. Among employers that did, 64% of such programs required the retiree to pay the full premium. 24% shared premium costs and 9% had premiums paid by the employer.
Commissioner Paulsen asked if retirees of the other employers in Mercer’s custom peer group were eligible for Social Security, as many Massachusetts state retirees were not. The Executive Director stated that the agency did not have that information.
The Executive Director stated that Medicare copays had not been changed since 2004. There were discrepancies between the GIC plans in office visit and Emergency Room copays. Perhaps these should be equalized.
The Executive Director stated that staff recommended increasing active employees’ deductibles to $500 for an individual and $1,000 for a family. This would save the agency $42.2 million.
Staff also proposed setting all Medicare plans’ PCP copays to $20. The UniCare OME deductible would be eliminated and the ER copay would be increased to $50. This would save the agency $8.3 million.
There was a discussion of the waiving of the ER copayment in the case of member admission to the hospital.
The Executive Director asked for reactions and alternative suggestions to the above.
Commissioner Paulsen stated that she appreciated that the agency was trying to spread cost increases equitably and that a premium contribution change would be a fairer approach to spreading the cost.
Commissioner Valerie Sullivan stated that the proposed changes were thoughtful, methodical, and sensitive to the needs of members and the state.
Commissioner McAnneny asked what the rationale was for raising deductibles from $300/$600/$900 to $500/$1,000. The family deductible was not increasing very much. The Executive Director stated that $1,500 had been considered for the family deductible but staff thought that since families generally had higher medical costs, this approach would be fairer.
Commissioner Paulsen asked why the agency’s proposed deductibles were not similar to the peer group’s. The Executive Director stated that the agency should aim for deductibles in the middle of the peer group’s, and similar to the Connector’s Gold plan.
Commissioner Thompson stated that employees signed contracts believing they knew what to expect. They accepted low wages in anticipation of generous benefits. This was the choice these employees made so she was concerned about such cost shifting. She stated that retirees were on fixed income and these changes would have a large financial impact on them. The Executive Director stated that the agency had to tread lightly with retirees, but that in the bigger picture, it was trying to ensure it could continue to offer them benefits and have a tenable structure.
Commissioner Kaplan stated that the majority of Massachusetts state employees were not eligible for Social Security and their incomes were very fixed, so these increases would have a big impact on them. Even though there is equity in an employer paying 75% or 80%, the employee was now being asked to face premium, deductible, and copay increases. This meant that the employee was facing a larger percentage cost increase than the state. The Executive Director stated that the current proposals were the most modest changes the agency had examined given the data available. Staff had tried to be sensitive to retirees, but had been unable to find a path that did not “spread pain” across every category.
Commissioner Thompson repeated the Executive Director’s assertion that the two largest cost drivers were high-cost providers and pharmacy costs. She looked forward to seeing how the agency’s plan addressed those issues.
Commissioner Yang stated that the correct approach was a multi-year vision. She understood the sensitivity of the agency’s approach and its desire to maintain generosity in its benefits. But she would like to know how this plan would continue going forward. The Executive Director stated that strategy would be determined through the upcoming health plan and consultant procurements. The Agency had not planned to make changes at this time. Changes had become necessary due to constraints in the current environment. Once the current strategic exercise was completed, further changes may come.
The Executive Director provided an overview of pharmacy cost trends (forecasts of per capita claims cost increases that take into account price inflation, utilization, government-mandated benefits, and new treatments, therapies and technology) and specialty cost drivers by an array of conditions. She stated that pharmacy cost sharing had not kept pace with rising pharmacy costs. The Budget Director stated that members had had 7% to 10% out-of-pocket pharmacy costs over the past few years. The Executive Director stated that a measure of health costs minus the pharmacy component showed that member cost share had actually decreased over the past few years.
The Executive Director stated that the health plans had recommended a fourth tier for specialty drugs. Most GIC members currently using specialty drugs paid the tier 3 30-day supply copay of $65, which was low compared to industry standards for specialty drugs.
Another staff recommendation was to move the Harvard Pilgrim plans to a closed formulary, in alignment with all of the other plans. This would save the agency approximately $9 million. A discussion about what constituted a closed formulary took place. Commissioner Valerie Sullivan asked how many members would be affected. The Executive Director stated that staff would find out. She stated that most members would have alternatives available to any drugs excluded from the new formulary.
The Executive Director stated that the agency had an opportunity to reopen the CVS Caremark contract, which was expected to save $21.3 million. This would represent a small percentage of $360 million in total drug spend, but it would be achievable.
The Executive Director stated that the Employer Group Waiver Plan (EGWP) had been implemented for the UniCare OME plan (Medicare Extension) the previous year. Staff felt confident it could implement EGWP for non-Medicare Advantage plans for July. She asked, if there was no objection, if the Commissioners could approve of this idea now.
Commissioner Kleckner stated that EGWP implementation entailed tons of work but there had not been much negative feedback. He asked why it had only been done for the OME plan initially. The Director of Operations said this approach had produced the most savings, as 70,000 members were in that plan.
The Commission approved of the idea to implement EGWP for non-Medicare Advantage plans.
The Executive Director recommended a $150 copay for a new fourth tier for specialty drugs. In response to a question from Commissioner Timothy Sullivan, she stated that this would be for a 30-day supply. In response to a question from Commissioner Kaplan, she stated that an early estimate indicated that 6,000 members were currently taking specialty drugs, not all of which would be moved to the fourth tier. The average member impact of implementing the fourth tier would be $700 annually. She reminded the Commission that there was an out-of-pocket maximum, but that it was substantial. She stated that she recognized that the people taking specialty drugs were very sick. Commissioner Thompson stated that she would like to see a list of specialty drugs at the next meeting that would be moved to the fourth tier.
The Executive Director stated that separate pharmacy deductibles existed in the market. An introduction of a $100 or $200 pharmacy deductible could achieve an estimated $16.4 million in savings, but staff did not recommend this action at this time. Commissioner Yang stated that this idea might be more attractive than the fourth tier for specialty drugs.
Commissioner Lepore asked if there were more savings opportunities available by reopening the CVS Caremark contract. The Executive Director stated that consolidating EGWP would create a larger market share for CVS Caremark, which strengthened the agency’s negotiating position and more would be known about the savings when this negotiation process was complete. The General Counsel stated that the contract could be reopened because it was in its third year.
The Executive Director stated that she would like to introduce GIC-specific provider rates. The Administration was working with the agency to file legislation to this end. If this succeeded, it would take some time, so the Commission should not expect it to be in place for July 2017.
The Executive Director reiterated that high-cost providers were a major cost driver. Limited network and tiered plans helped steer members to more cost-efficient providers.
The Executive Director noted a correction to an assertion made by Mr. David Chamberlain of Mercer at the previous meeting, pointed out by Commissioner Yang. Neighborhood Health Plan was the only ConnectorCare plan that offered Partners physicians as in network, but other ConnectorCare plans offered those physicians as out of network.
The Executive Director stated that the agency’s Clinical Performance Improvement Initiative (CPII) and Integrated Risk Bearing Organization (IRBO) initiative were a little bit in conflict with each other. One suggestion was to put physicians, including PCPs, not participating in ACOs in the most expensive tier. She recommended replacing the current plan design of Harvard’s and Tufts’ wide-network plans with group performance-based tiered products, something both Harvard and Tufts both already had in development. All PCPs would be tiered as well. This would produce an estimated $21.3 million in savings.