The REEP Report

R.M. Robertson

The latest REEP (Riverside County Employer/Employee Partnership for Benefits) meeting was held in Calimesa, this last Tuesday. Ceci Garcia attended, on behalf of the classified staff; I attended on behalf of the faculty.

This report will be fairly short, because I want to emphasize three things: a) REEP’s solid finances; b) a lower renewal rate on Blue Cross than was anticipated; c) a way we could lower the renewal rate even further.

To begin, then, the first thing you need to know is that the REEP JPA (Joint Powers Association—it’s a “buyer’s group,” that consists of schools and colleges organized to get the benefits of buying in bulk that corporations and other large organizations enjoy) is more than solvent. It’s in good shape, as far as I can see. We’ve got money in reserve with them, in fact, and all the different Plan designs are doing reasonably well. The only blip seems to be that there were large numbers of claims this past December and January, which (just like with your auto insurance) raised costs. But it all looks manageable.

I’ve included more details in the last REEP Report, so you might want to check that; additionally, Ms. Garcia and I both have copies of the books. By the way, REEP’s books are audited, regularly, by an independent company: the IRS and government regulations for JPAs mandate such audits.

One thing you might be interested in is a technical term: “stop-loss insurance.” Insurance groups don’t just pay out whatever claims come in; they can’t, actually (nobody has that much money: think about paying all the claims on Hurricane Katrina), so they spread the risk among other re-insurers. In other words, big insurance companies take out insurance on themselves.

That’s what, “stop-loss insurance,” is: a group like REEP takes out insurance, so that claims past a certain point (in this case, it’s $200, 000) are paid by another insurer. The trick is to balance out how much insurance you need, against how much risk you’re taking. REEP just had its first million-dollar claim (that’s right, folks: ONE person needed a million dollars worth of medical care), so it looks as though the stop-loss insurance was a good idea. Of course you have to pay for such insurance, so REEP last year switched to a company that offered better service. Things seem good at the moment; we’ll keep you posted, since the stop-loss stuff gets rechecked yearly.

NOW--on to the renewal rate. If you remember the last staff meeting, the renewal rate we were given on our Blue Cross PPO was 10. 54%. That was a projection: typically, insurance companies project costs conservatively and a bit on the high side. I know that if I were doing insurance, I’d a lot rather tell a customer that they were getting a cheaper rate than they thought they would at first—not the other way around.

Our basic renewal rate for REEP will be 9. 28% on Blue Cross. That’s the first time we’ve been in single digits in--well, I think in this century, but check that for yourself. Note: this may or may not be the exact renewal rate for PVC. There’s a general calculation for REEP as a whole--but different colleges and schools have different populations and different plans, so each one gets a slightly different renewal rate. But 9. 28% is the ballpark figure, and it’s excellent.

There have been some questions--often quite appropriate questions--about whether or not medical insurance rates have really been climbing as much as they have been climbing. I’ve put together a bibliography that you can have for the asking, if you’d like to check that for yourself. You might also Google the topic, or check the NEA/CTA journals, to get started.

What seem to be the reasons for the improved renewal rates? a) nationally, the increases in medical rates have slacked off a bit this year; b) the plan design changes at REEP seem to be working; c) the switch by some members to CDHPs (Consumer-Directed Health Plans) are having an effect on overall rates; d) members have accepted increased co-pays and deductibles in ways that help cut costs.

One specific reason you should know about: the IAC (REEP’s Insurance Advisory Committee, on which Ceci Garcia and I sit) voted almost unananimously to start a Disease Management Plan through Blue Cross. This cut the renewal rate by .1% all on its lonesome.

What the heck is a Disease Management Plan? First off, it’s pretty common in the industry: we just didn’t have one. Second, it’s based on two realities: a) in any insurance pool, 20% of the people incur 80% of the costs; b) often, people with chronic illnesses don’t manage their illness very well--and this leads to hospitals, and that leads to dollars. So the basic idea is to focus on the folks who are the sickest, and try to educate them about managing their care.

Blue Cross is going to look at prescription information gathered from ExpressScripts, and focus on five categories: a) asthma; b) diabetes; c) CHF (congestive heart failure), d) CAD (coronary artery disease) and e) COPD (chronic obstructive pulmonary disease). If your medications--say you’re taking a diuretic, or some sort of beta-blocker, or a bronchodilator--indicate that you fall into one of those five categories, you’ll get some added attention.

It works like this: first, you get a postcard. If you don’t respond, you’ll get a phone call. If you don’t call back, Blue Cross will contact your doctor. What they’re trying to do is simply to provide education, and maybe noodge you a little: are you taking your meds as prescribed? do you have a diet and exercise program? can we help you with one? did you know...? are you aware of this new development in managing your disease? are you familiar with the Internet assistance that’s available? do you need a referral to some local agency?

NO SALESMAN WILL VISIT YOUR HOME. YOU MAY OPT OUT--TELL THEM TO GET LOST--AT ANY TIME. YOUR INDIVIDUAL INSURANCES ARE NOT CHANGED ONE WAY OR THE OTHER.

One member concern that got raised had to do with privacy, and security of records. People had concerns about having their information spread around, and about having records circulated to other insurance companies and other employers.

The short answer is that they can’t do they, legally speaking. Under HIPAA (the recent Health Insurance Portability and Protection Act), my understanding is that a company can’t even release records to your spouse, except in emergencies, let alone another employer. Can there be problems? Sure. But remember--the guys issuing your prescriptions already know who you are and what you’re supposed to be taking.

At any rate, the Disease Management Program should cost REEP around $280K for the first year; estimated minimum savings are around $460K, so the program should pay for itself. Many people who get contacted find that they really prefer the added help; if you don’t, feel free to tell them (politely) to get lost. After all, it’s your health.

WE ARE NOT PAYING ANYTHING EXTRA FOR THIS SERVICE.

The last thing I want to report on is an option--a choice--we could make to cut that renewal rate a further 3%, to around 6.28%. (By the way, the Kaiser HMO renewal rate is 5.1%.) It involves adopting what ExpressScripts calls a, “Preferred Formulary,” plan.

Now a formulary is when a prescription plan only pays for certain drugs: if it’s not on the list, the, “formulary,” they don’t pay nothing. THIS IS NOT THE SAME as that. In this, “preferred formulary,” you could get ANY drug or medication that was prescribed. AND EXPRESSSCRIPTS WOULD STILL PICK UP MOST OF THE COST, just as they do now. It’s just that the co-pay would go up quite a bit.

Presently, we have a, “two tier,” rate structure for drug co-pays. If it’s generic, the co-pay’s the lowest; brand-name, highest co-pay. Mail order--and we hope you’re all using mail order? It’s cheaper--has the same structure.

The “Preferred Formulary,” would have a three-tier co-pay. Generic cheapest; brand next; any drug not on the formulary, the co-pay goes up to $60. YOU STILL GET THE DRUG, and the benefit beyond the co-pay.

The trick is, of course, to know what’s on the list and what’s not. Ms. Garcia and I both have lists; we’ve asked REEP for lists of the most-used drugs that aren’t on the formulary.

The decision would have to be, a) considered by our own Insurance Committee; b) negotiated by both unions; c) a campus-wide choice.

In recent years, insurance companies have shifted co-pay and deductible costs onto employees. You would need to decide if this is one shift too many.

In recent years, health insurance has become a national disaster. You would need to decide if this change was worth getting our renewal rate down to 6.28% or thereabouts.

Full disclosure time. Just so you know, the “preferred formulary,” change would not affect me directly. I’m on a Kaiser Plan (you can be too, if you live in Indio or northwards); the rates are much, much cheaper because it’s managed care. They have their own in-house pharmacies, and they just switch everybody onto generics whenever possible: for most people, most of the time, it makes absolutely no difference whether you take a brand-name or a generic drug. My interest is in providing information--though of course since I also happen to be CTA President, I do have some concerns about what happens to faculty and staff.

That’s the REEP Report for Tuesday, Feb. 27, 2007. As always, please contact me, or Ms. Garcia, with questions.

R.M. Robertson
X5521

P.S. A correction is in order. In reporting on health care to the staff meeting a week or so ago, I wrote that REEP had around 45 total Districts and 250, 000 employees. The comment was idiotic, as I may have said at the time—I believe the REEP people offered a polite correction, in fact. The actual numbers are around 25 Districts total, and around 25, 000 people using their offered medical benefits.

Thankx,
Robert