State of Nevada Public Employees’ Benefits Program CDHP and Dental Trend Review January 24 th , 2019 Stephanie Messier, ASA, MAAA Assistant Vice President Stephen Caulk, FSA, MAAA Senior Vice President
Agenda – PEBP’s Historical Trend – National Comparator Trends – PY20 Trend Projections Experience Trend + Pricing Trend = Rate Action Aon | U. S. Health & Benefits 2 Proprietary & Confidential
Experience Trend + Pricing Trend = Rate Action Trend for 18 months CLAIM EXPERIENCE ▪ Most Recent Paid Claims Experience Base Rates for (paid through Jan 2019) PY20 ▪ Adjust Paid Claims via Completion Factors to Incurred Claims (Dec 2018) ▪ Adjustments for Plan Design changes July 18 July 19 Dec 19 Dec 18 June 20 Start of PY20 Start of PY19 End of PY20 • Pricing Trend is the per capita increase applied to experience period • Base Rates for PY20 will change as a result of: • Claim Experience compared to Base Rates for PY18/PY19 • Any Plan Design Changes • Pricing Trend Aon | U. S. Health & Benefits 3 Proprietary & Confidential
Historical Plan Design Changes PY15-PY17 PY18-PY19 Plan Benefit Enhancement Enhancement Budget +$400 Primary +$200 Preventive Program HSA/HRA Funding Projection +$100 Dependent (Max 3) Contribution Primary Only $1,500 Individual $1,500 Individual CDHP Deductible $3,000 Family $3,000 Family Actuarial CDHP Coinsurance 20% 20% Claim Annual Vision Exam 100% Plan Paid $25 Copay Projection Dental Annual $1,500 $1,500 Maximum Note: Actual trend reflects claims costs paid by PEBP excluding HSA/HRA funding and Rx rebates Aon | U. S. Health & Benefits 4 Proprietary & Confidential
Base Rates Compared to Claims Experience Actual Claims PY2015 PY2016 PY2017 PY2018 Medical/Rx/Dental Claims Annual $164,995,653 $171,739,492 $178,354,947 $186,201,672 Medical/Rx/Dental Claims PEPM $636 $626 $625 $638 Experience Trend -1% 0% 2% Base Rate Budget Medical/Rx/Dental Base Rate Annual $148,936,372 $173,593,957 $181,484,766 $189,661,830 Medical/Rx/Dental Base Rate PEPM $575 $637 $639 $652 Pricing Trend 6% 4% 5% Experience Trend True Up 5% -4% -3% Plan Design and Other Changes 0% 0% 0% 11% 0% 2% Rate Action Net Total (Base Rate Budget - Actual Claims) ($16,059,281) $1,854,465 $3,129,819 $3,460,158 Medical/Rx/Dental Gain/(Loss) Annual Medical/Rx/Dental Gain/(Loss) PEPM ($61) $11 $14 $13 111% 98% 98% 98% Medical/Rx/Dental Loss Ratio 11% -2% -2% -2% Actual Difference from Budget ▪ Compare Projected Base Rates to Actual Claims Experience for State and Non-State ▪ Expected claims trend is applied to the 18-month projection period; actual claims trend is year/year Experience Trend + Pricing Trend = Rate Action Aon | U. S. Health & Benefits 5 Proprietary & Confidential
Historical Pricing Trends vs. Actual Experience – Medical/Rx/Dental Medical, Pharmacy and Dental Combined Expected Trend Actual Trend 10% 5.9% 4.6% 4.2% 5% 2.1% 0% -0.2% -1.5% -5% PY16 PY17 PY18 • Actual trend is calculated from HealthScope provided CDHP incurred claims with runout through November 2018 • PY18 incurred claims are still immature. Aon actuaries have completed PY18 incurred claims through best estimates. PY18 estimated incurred claims may change with future data Aon | U. S. Health & Benefits 6 Proprietary & Confidential
Historical Pricing Trends vs. Actual Experience – Medical Medical Expected Trend Actual Trend 10% 6.0% 4.5% 4.0% 5% 0% -1.4% -1.9% -2.1% -5% PY16 PY17 PY18 • Actual trend is calculated from HealthScope provided CDHP incurred claims with runout through November 2018 • PY18 incurred claims are still immature. Aon actuaries have completed PY18 incurred claims through best estimates. PY18 estimated incurred claims may change with future data Aon | U. S. Health & Benefits 7 Proprietary & Confidential
Historical Pricing Trends vs. Actual Experience – Pharmacy Pharmacy Expected Trend Actual Trend 25% 20.4% 20% 15% 8.0% 10% 7.0% 7.0% 4.8% 5% 0% -0.7% -5% PY16 PY17 PY18 • Actual trend is calculated from HealthScope provided CDHP gross incurred claims with runout through November 2018 – therefore these do NOT include any rebates that PEBP receives • PY18 incurred claims are still immature. Aon actuaries have completed PY18 incurred claims through best estimates. PY18 estimated incurred claims may change with future data Aon | U. S. Health & Benefits 8 Proprietary & Confidential
Historical Pricing Trends vs. Actual Experience – Dental Dental Expected Trend Actual Trend 10% Active/Pre-65 Medicare Exchange 6.4% 6.7% 5% 3.2% 2.8% 2.0% 2.0% 1.6% 1.0% 0.4% 0.3% 0% -0.2% -1.6% -5% PY16 PY17 PY18 • Actual trend is calculated from HealthScope provided CDHP incurred claims with runout through November 2018 • PY18 incurred claims are still immature. Aon actuaries have completed PY18 incurred claims through best estimates. PY18 estimated incurred claims may change with future data. Aon | U. S. Health & Benefits 9 Proprietary & Confidential
PEBP Actual Results vs. Published Net Medical/Rx Trends Aon (HVI) Towers Watson / NBGH Mercer Kaiser Family Foundation 10% PwC PEBP 5% 0% -5% 2015-2016 2016-2017 2017-2018 3 Year CAGR 3 Year • Trend surveys reflect actual data from 2015 – 2017 and 2015-2016 2016-2017 2017-2018 CAGR estimated costs for 2018 Aon (HVI) 3.1% 3.9% 4.5% 3.8% • PEBP reflects data through PY18, paid through November Towers Watson/NBGH 4.0% 4.6% 5.5% 4.7% • PEBP trend is based on CDHP plan Medical/Rx per capita Mercer 2.4% 2.6% 4.3% 3.1% incurred claims cost year over year change Kaiser Family Foundation 3.0% 2.5% 4.6% 3.4% • Trends over 2015-2018 period range from 3.1%-4.9%, with PwC 3.6% 5.5% 5.5% 4.9% PEBP at 0.1%, a 2.4% decrease from last year due to dropping high trend year 2014-2015 from the average PEBP -1.7% -0.3% 2.1% 0.1% Aon | U. S. Health & Benefits 10 Proprietary & Confidential
S&P Medical and Rx Index Trend – National and Nevada Specific S&P Healthcare Claims Indices based 60M lives Nevada Indices based on 300k lives PY18 Trends S&P National 3.7% S&P Nevada 4.4% PEBP 2.1% PY17 Trends S&P National 3.4% S&P Nevada 3.0% PEBP -0.3% PY16 Trends S&P National 5.8% S&P Nevada 3.5% PEBP -1.7% PEBP trend is based on CDHP plan Medical/Rx per capita incurred claims cost year over year change Aon | U. S. Health & Benefits 11 Proprietary & Confidential
Healthcare Cost Drivers Component Driven by Mitigated by Optimize Provider Performance and Value Lifestyle Price Risks Wellbeing Mix Economy Adaptive Design and Experience Technology Utilization Regulation Navigation and Guided Advocacy Plan Design M&A Aon | U. S. Health & Benefits 12 Proprietary & Confidential
Healthcare Trends are Driven by Price Price “ It’s The Prices, Stupid ”, Uwe Reinhardt Health Care Cost Institute, Jan 2018 Aon | U. S. Health & Benefits 13 Proprietary & Confidential
Price Growth – Reno, NV Overall Inpatient Outpatient Professional Source: Aon | U. S. Health & Benefits 14 Proprietary & Confidential
Price Growth – Las Vegas, NV Overall Inpatient Outpatient Professional Source: Aon | U. S. Health & Benefits 15 Proprietary & Confidential
Technology / Mix: Gene Therapy Mix Gene Therapy Biologics Traditional ▪ Bone Marrow Transplant Allogenic - ~$925k ▪ Autologous - ~$375k ▪ ▪ Liver transplant - $735k ▪ Kidney transplant - $330k ▪ Hemophiliacs - $100k+ ▪ Elelyso - $150k/ year Specialty medicine for Gaucher’s ▪ disease ▪ Strimvelis (2016) - ~$700K Kymriah CAR-T (2017) - ▪ $475K ▪ Luxturna (2018) - $850K Mandal MDDA. What is Gene Therapy? News-Medical.net. https://www.news- Cellular & Gene Therapy Products. U S Food and Drug Administration Home Page. https://www.fda.gov/BiologicsBloodVaccines/CellularGeneTherapyProducts/default.htm medical.net/health/What-is-Gene-Therapy.aspx. Published January 14, 2014 Accessed August 15, 2017 Accessed August 15, 2017 Aon | U. S. Health & Benefits 16 Proprietary & Confidential
PY20 Pricing Trend Projections • Aon’s client base indicates trend of 4% - 6% • Insurance carrier surveys indicate trend of 6% - 9% • Additional market surveys project trend of 4.5% - 7% PY20 Pricing Trend Projection* Med/Rx = 4 - 7% Dental = 1 - 3% • This is not indicative of PY20 Rate Action, remember: Experience Trend + Pricing Trend = Rate Action *Any further plan design changes for PY20, may provide additional downward pressure on trend rates, Cost Saving measures created for PY19 (after rates were set for that plan year) may also provide some pricing relief for PY20 when experience is updated during the rate setting process this March Aon | U. S. Health & Benefits 17 Proprietary & Confidential
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