Health Care Plan - Cost Management Recommendations

Executive Summary
AsafollowuptolastyearsBoardmeetingwhereweagreedthatwewouldconductfurtheranalysisof
our health care plan costs, we have completed a review of the medical insurance plan in order to
developalternativestoreducefuturecostswhilemaintainingacompetitiveprogramcomparedtoother
notforprofit organizations. The following summarizes the key medical plan cost issues and our
recommendationsforreducingcosts,aswellasstrategiesforfuturecostmanagementofourmedical
expensesundertheplan.
Background
For the 2011 calendar year, medical costs per employee rose 55% over the 2010 costs. Although the
Foundationspriorclaimexperiencewasquitelow,thelawofaveragesmorethancaughtupwithusin
2011.Thisclaimexperiencewascausedbyasignificantincreaseinclaimsbetween$20Kand$100Kplus
a few large claims. For 2011, our average annual cost per employee was $11,673 compared to a
national average of $10,621 for other employers with similar plans. For 2012, our costs are trending
about6.9%overforecastbasedonclaimsthroughJuly,sowearestillexperiencingahighlevelofclaims.
Wehaveidentifiedthreemaindriversforthisincreaseincosts:

Noemployeecontributionsarerequiredfordependentcoverage.Employeeshaveno
incentivenottocovertheirspouse/dependentunderourplanbecausecoverageisfree
evenwhencoverageisavailablethroughaworkingspousesplan.Asaresult,almostall
employees elect to cover their entire family under the Foundation plan so we end up
with an adverse selection. Approximately onethird of employees have dependent
coverage.NonprofitbenchmarkinginformationforinternationalNGOsshowsthatthe
average monthly contributions for covering a spouse, child(ren) or a family are $250,
$200and$350,respectively,sowearesignificantlybelowthecommonpractice.

We maintain a generous plan design compared to the competitive market. Certain

featuresoftheplan(e.g.,copays)havenotbeenadjustedtocompetitivenorms.The
keyplancoverageprovisionscomparedto2011benchmarkingdatashowthatourplan
provisions,exceptforpreventativecare,aresignificantlymoregenerousthanthenorms
asfollows:

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ClintonFoundationMedicalPlanProvisionsvs.BenchmarkingData

Deductibles
NetworkProviders
NonNetworkProviders

CurrentPlan
Individual/Family
$250/$500
$500/$1,000

Market
Individual/Family
$500/$1,000
$750/$1,500

OutofPocketMaximums
NetworkProviders
NonNetworkProviders

$1,000/$2,000
$2,500/$5,000

$1,500/$3,000
$3,000/$6,000

$15forchargesupto$300

$25forchargesupto$300

$5
$20
$30

$10
$25
$50

Subjecttodeductibles,co
paysandcoinsurance

Payat100%

OfficeVisitCoPays
NetworkProviders

PrescriptionDrugCoPays
Generic
PreferredBrand
NonPreferredBrand

PreventativeCare

We use regional provider networks and have allowed providers in our network that
provide lower or no discounts. The provider discounts obtained by using smaller,
regional networks are substantially less than using a national network (e.g., CIGNA or
Aetna). We also have the legacy of a past practice where we allowed employees to
include any doctor they nominated in the network even when we did not obtain a
discount. Based on a recent analysis we conducted using the CIGNA and Aetna
networks,92%oftheLittleRockand84%oftheNewYorkproviderscurrentlyusedby
our employees participate in these national networks, presenting an opportunity to
achievecostsavingswithafairlymoderatelevelofdisruption.

Recommendations
Based on the total compensation strategy we adopted last year, which targets our
compensation and benefit programs at the average level provided by other similar
organizations,werecommendthefollowingapproachforaddressingtheseissues:

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MedicalPlanCostManagementRecommendations

Recommendations

1. ChangeProvider
Network
2. BringPlanDesignupto
Market

3. Chargeemployeesfor
dependentcoverage
(Phase1)

Details

Effective
Date

Replacethecurrentlocalnetworkwitha 07/01/13
newnationalnetwork

01/01/14
Increasedeductibles
IncreaseOutofPocketMaximums
IncreaseOfficeVisitCoPays
IncreaseDrugCopays
ImprovePreventativeCareBenefits

Employee&Spouse/Partner$125/mo. 01/01/14
Employee&Child(ren)$100/mo.
Employee&Family$175/mo.

Est.
Annual
Savings
$400,000

$90,000

$110,000

4. Chargeemployeesfor
dependentcoverage
(Phase2)

Employee&Spouse/Partner$250/mo.
Employee&Child(ren)$200/mo.
Employee&Family$350/mo.

01/01/15

$110,000

Collectively,theabovechangesareprojectedtoyieldanannualcostsavingsof$710,000.We
arerecommendingaphasedapproachso:

Wehaveadequatetimetoimplementthechanges;
We can provide employees who may want to change theirphysician to an innetwork
providerwithseveralmonthsnotice;and
Employees have sufficient time to make their coverage decisions and budget
accordingly.

Benefits

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