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Public Safety Enterprise Health Risk Management
Case Study
Juan Kelly
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SUMMARY
Public Safety Enterprise Health Risk Management
Case Study A - INTRODUCTION B -
METHODOLOGY Public Safety
Enterprise Health Risk Management Case Study A -
DISCUSSION B - RESULTS Public Safety
Enterprise Health Risk Management Case Study A -
CONCLUSIONS AND RECOMMENDATIONS B -
APPENDICES
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Public Safety Enterprise Health Risk Management
Case Study

• Introduction
• Health plan sponsors in the United States have
  fiduciary duty to examine creative
  cost-containment alternatives
• Due diligence options with respect to risk
• Avoid
• Transfer
• Reduce

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Public Safety Enterprise Health Risk Management
Case Study

• Introduction (continued)
• Background
• Historically, entire risk transferred from plan
  sponsor to health insurance carrier
• Locking in of costs did nothing to dampen
  volatility at renewal (monthly cost trend)
• Double digit annual percentage increases in cost
  per employee force employers to shop or cut
• Difficult in light of tight labor market
• and retention difficulties generally preclude
  employers from cancelling healthcare benefits
• Case study examines large police department
  experience in Southeast United States

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Public Safety Enterprise Health Risk Management
Case Study

• Introduction (continued)
• Transferring and reducing risk only viable
  alternatives
• Emphasis on managed health after managed care
  organizations signed up majority of providers
• Risk management tools
• Medical excess stop loss insurance purchased from
  specialty carriers
• Prophylactic health risk appraisals performed by
  competent health professionals

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Public Safety Enterprise Health Risk Management
Case Study

• Introduction (continued)
• Principles in the use of these tools
• Health care consumer/provider encounters
  triggered by medical necessity based on best
  practices and recognized
• Health care guidelines
• Adequate oversight and formal peer review at each
  step of the health care delivery system

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Public Safety Enterprise Health Risk Management
Case Study

• Methodology
• First and foremost, cost-containment initiatives
  not to stifle productivity and creativity of
  enterprise members
• Financial decision maker looks at large recent
  credible claims adjudicated and paid by party
  responsible for paying claims (carrier, third
  party administrator or internal source)
• Simultaneously, communications campaign launched
  to schedule voluntary personal medical interviews

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Public Safety Enterprise Health Risk Management
Case Study

• Methodology (continued)
• Designed as early intervention for employees in
  need of immediate treatment (e.g., very high
  blood pressure such as 180/120)
• Individual shock (over 25,000 net of employee
  cost-sharing) claims incurred and paid over ten
  month period laddered up to 500,000 using actual
  distribution

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Public Safety Enterprise Health Risk Management
Case Study

• Methodology (continued)
• Interviews, also referred to as Health Risk
  Assessments (HRAs) done as follows
• Top management of enterprise must strongly
  endorse
• voluntary  program for it to be successful 
•  
• 25-30 minutes per individual
• At work site
• During duty hours

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Public Safety Enterprise Health Risk Management
Case Study

• Methodology (continued)
• Medical history questionnaire
• Four tests
• Blood pressure
• Heart rate
• Blood sugar
• Cholesterol
• Follow-up consults if warranted

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Public Safety Enterprise Health Risk Management
Case Study

• Methodology (continued)
• Steps taken after HRAs completed
• High health risks identified
• Summary deidentified report to financial
  decision-maker and human resources
  representatives providing baseline on
  wellness/morbidity of work force
• Savings associated with early intervention
  identified

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Public Safety Enterprise Health Risk Management
Case Study

• Discussion on transferring risk
• Should the enterprise be protected from the cost
  of shock claims in the aggregate (e.g.,
  recoveries beginning when actual claims have
  exceeded 125 of expected claims) through
  reinsurance?
• Which healthcare claims will be insured (e.g.,
  medical, surgical, dental, vision, prescription
  drugs, mental health, substance abuse)?
• Will surcharges imposed by county and state
  governments as means of subsidizing cost of
  indigent care be covered?
• How will immature first year claims and runout
  from prior periods be recognized?

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Public Safety Enterprise Health Risk Management
Case Study

• Discussion on transferring risk (continued)
• Most importantly, how much risk is the enterprise
  willing to absorb (up to 500,000) as result of
  self-insuring individual specific healthcare
  risk?
• Will an intermediate layer of risk, referred to
  as aggregating specific, be retained by the
  enterprise?
• Which medical excess stop loss reinsurers offer
  creative pooling in setting premiums as well as
  providing early intervention case management
  services?

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Public Safety Enterprise Health Risk Management
Case Study

• Discussion on transferring risk (continued)
• Does the medical excess stop loss reinsurer pay
  the providers treating the shock claimants
  directly or must the policyholder wait for
  reimbursement?
• What are the associated fixed costs (per capita)
  associated with the respective risk transfers?

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Public Safety Enterprise Health Risk Management
Case Study

• Discussion on reducing risk
• What are the associated fixed costs (per capita)
  associated with the respective risk reductions
  achieved by the voluntary HRAs?
• Evaluation of HRA vendors
• Charges including travel and vaccine (e.g.,
  influenza) administration
• References of medical professionals
• Savings by similar enterprises offering HRAs
• Feedback from employees undergoing HRAs
• Sufficient staffing for multiple sites in
  multiple states

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Public Safety Enterprise Health Risk Management
Case Study

• Results in transferring risk
• Studied population (over 10 months) including
  retired employees and dependents numbered about
  3,700
• 64 shock claims across gamut of Physicians Desk
  Reference
• Malignant neoplasms number one diagnosis
• Multiple diagnoses for bone fractures,
  cellulitis, coronary atherosclerosis, knee
  sprains, osteoarthrosis, renal failure and spinal
  meningitis

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Public Safety Enterprise Health Risk Management
Case Study

• Results in transferring risk (continued)
• Example at 250,000 annual individual specific
  attachment point
• Net stop loss premium on paid basis 176,125
• Net stop loss premium on incurred basis
  326,375
• Mean 251,250
• Comparison with actual quote from carrier
• 60,000 aggregating specific layer of risk
  retention
• Profit and administrative expense components
• Price equals 269,438 (7.24 more)

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Public Safety Enterprise Health Risk Management
Case Study

• Results in reducing risk
• 362 HRAs conducted over 3 month period (38 of
  active membership)
• 15 of examinees deemed high risk prompting
  immediate physician referral
• Net savings with respect to imminent heart
  failure, diabetes and cardiac arrests
  approximately 1,000,000

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Public Safety Enterprise Health Risk Management
Case Study

• Conclusions and Recommendations
• Early HRA results encouraging
• HRA team continuity and follow-up visits should
  push up voluntary participation in light of care
  shown by employer, building trust by employees,
  improving productivity and reducing absenteeism
• Goal of raising annual individual medical excess
  specific healthcare retention to 500,000 by
  2010, saving 250,000 in fixed costs currently

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Public Safety Enterprise Health Risk Management
Case study

• Appendix 1 Demographics
• 323 active members without dependents on
  healthcare coverage
• 637 active members with dependents on healthcare
  coverage
• 305 retired members without dependents on
  healthcare coverage
• 315 retired members with dependents on healthcare
  coverage

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Public Safety Enterprise Health Risk Management
Case Study

• Appendix 2 Extract from Actual Shock Claim
  Distribution
• Retinal detachment claim incurred March 2004,
  paid 84,119 through November 2004, projected
  102,812 through January 2005
• Malignant neoplasm colon claim incurred March
  2004, paid 298,955 through November 2004,
  projected 365,390 through January 2005

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Public Safety Enterprise Health Risk Management
Case Study

• Appendix 2 Extract from Actual Shock Claim
  Distribution (continued)
• Malignant neoplasm bone claim incurred March
  2004, paid 115,493 through November 2004,
  projected 141,158 through January 2005
• Recurrent depression claim incurred March 2004,
  paid 37,397 through November 2004, projected
  45,708 through January 2005
• Renal failure claim incurred March 2004, paid
  377,170 through November 2004, projected
  460,985 through January 2005

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Public Safety Enterprise Health Risk Management
Case Study

• Appendix 3 Extract from Per Employee Per Month
  (PEPM)
• Specific Stop Loss Rate Development for Paid
  Claims
• At 200,000 annual threshold, shock claims in
  excess were 276,125 PEPM rate 17.48
• At 250,000 annual threshold, shock claims in
  excess were 176,125 PEPM rate 11.15
• At 300,000 annual threshold, shock claims in
  excess were 77,170 PEPM rate 4.89

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Public Safety Enterprise Health Risk Management
Case Study

• Appendix 4 Extract from Per Employee Per Month
  (PEPM)
• Specific Stop Loss Rate Development for Incurred
  Claims
• At 200,000 annual threshold, shock claims in
  excess were 481,356 PEPM rate 25.39
• At 250,000 annual threshold, shock claims in
  excess were 326,375 PEPM rate 17.21
• At 300,000 annual threshold, shock claims in
  excess were 226,375 PEPM rate 11.94

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Public Safety Enterprise Health Risk Management
Case StudyMerci Beaucoup